Key Individual Tax Changes Under the 2025 Tax Law
July 10, 2025
On July 4, 2025, the President signed Pub. L. No. 119-21 into law. This legislation extended or made permanent several tax provisions, including individual income tax rates under the Tax Cuts and Jobs Act, the 20% deduction for qualified business income, the elimination of personal exemptions and the limitation for excess business losses. It also introduced or significantly altered many tax provisions that will affect individuals. Here’s a breakdown of these most notable provisions:
SALT Cap
The state and local tax (SALT) deduction cap increases from $10,000 to $40,000 in 2025, with a 1% annual increase from 2026 through 2029. However, this benefit phases out for taxpayers with modified adjusted gross income over $500,000.
Mortgage Interest
The $750,000 mortgage interest deduction, originally set to expire after 2025, is made permanent and expanded to include mortgage insurance premiums.
Charitable Giving
Non-itemizers will be allowed a new charitable deduction—$1,000 for single filers and $2,000 for joint filers—starting in 2026. However, itemizers will face a new limitation: only contributions exceeding 0.5% of their adjusted gross income will be deductible.
Gambling Losses
Gambling losses are further restricted—only 90% of losses can be deducted, and only up to the amount of winnings after 2025.
Miscellaneous Itemized Deductions
The bill permanently eliminates miscellaneous itemized deductions, with one exception: unreimbursed educator expenses are restored as deductible.
Standard Deduction Boost
The standard deduction is permanently increased starting in 2025 to:
- Single or married filing separately: $15,750
- Head of household: $23,625
- Married filing jointly: $31,500
Seniors aged 65 and older may also qualify for a $6,000 bonus deduction from 2025 through 2028, subject to income phaseout.
Income-Based Deductions for Workers
Two new deductions aim to support working Americans:
- Up to $12,500 of overtime pay can be deducted per taxpayer.
- Up to $25,000 of reported tip income can also be deducted.
Both are subject to income phaseouts and are effective 2025-2028.
Car Loan Interest
For the first time in decades, interest on new car loans (up to $10,000) will be deductible from 2025 to 2028, provided the vehicle is U.S.-assembled and used as loan collateral. Income phaseout applies.
Introducing “Trump Accounts”
A new tax-exempt savings vehicle called “Trump Accounts” will be created. A pilot program will offer a one-time $1,000 federal credit for each qualifying child born from 2025 through 2028.
Child Tax Credit
The child tax credit is permanently increased to $2,200 per child, with $1,700 refundable, indexed for inflation.
Estate & Gift Tax
The estate and gift tax exemption, currently $13.99 million for 2025 and previously scheduled to drop to around $7 million after 2025, will instead increase to $15 million in 2026, be indexed for inflation, and is made permanent.