Big Beautiful Bill, What it means

Summary of key provisions

The headline changes

Here are the big-ticket items that may change what you owe or your refund in 2025.

Highlights

SALT cap increases: Deductible state & local taxes cap rises to $40,000 in 2025, with a phase-out beginning above $500,000 of income and small annual increases through 2029.
Tip income deduction: Temporary deduction for qualified tips — up to $25,000 (2025–2028), with phase-out above $150,000 income.
Overtime deduction: Temporary deduction for qualified overtime — up to $12,500 (2025–2028), phasing out above $150,000 income.
Auto loan interest: New deduction up to $10,000/year for qualified U.S.-assembled personal vehicles (income limits apply).
Child Tax Credit: Permanently increased to $2,200 per child under 17 starting in 2025 (inflation-adjusted yearly).
Seniors’ deduction: Enhanced deduction up to $6,000 for age 65+ (phases out at $75k single / $150k MFJ) for 2025–2028.
QBI deduction: 20% deduction for qualified business income is made permanent, with higher phase-in thresholds.
Energy credits: Several efficiency and EV credits sunset or are capped beginning in 2025 (details below).

Effective dates

When do the new rules apply?

Most changes kick in for tax year 2025 (the return you file in 2026). A handful apply in 2026, and a few niche provisions are retroactive to 2024.

What this means

Plan your 2025 withholding and estimates with these updates in mind.
Some 2017-era rules that were expiring have been made permanent (see small business & deductions below).

Workers

Temporary deductions for tips and overtime

If you receive tips or log lots of overtime, you may get new above-the-line deductions for 2025–2028 (subject to income limits).

Tip income

Deduct up to $25,000 of qualified tip income (phases out above $150,000 income).
Reduces taxable income — your actual tax savings depend on your bracket.

Overtime

Deduct up to $12,500 of qualified overtime pay (also phases out above $150,000 income).
Applies for 2025–2028; records and employer documentation matter.

Families

Child Tax Credit gets a boost

Beginning in 2025, the Child Tax Credit increases to $2,200 per child under 17, with annual inflation adjustments.

Eligibility notes

A valid Social Security number is required for the child; for joint returns, at least one spouse must have an SSN.
Phase-outs by income still apply; your exact benefit depends on your AGI.

Homeowners

Higher SALT cap, bigger possible deduction

The state & local tax (SALT) deduction cap rises to $40,000 for 2025, helping filers in high-tax states — with income-based phase-outs.

Key details

Cap increases again in 2026 and then by ~1% annually through 2029.
Phase-out begins above $500,000 of income.
Still limited by whether you itemize and your state/property tax totals.

Seniors

Enhanced deduction for 65+

A temporary add-on deduction up to $6,000 is available for tax years 2025–2028, with phase-outs at $75k (single) and $150k (MFJ).

Small businesses & self-employed

QBI made permanent, equipment expensing, and more

Self-employed and pass-through businesses keep major breaks; unreimbursed employee expenses remain non-deductible.

What’s in

20% QBI deduction is permanent, with higher phase-in ranges (up to ~$75k single / $150k MFJ).
100% equipment expensing for assets placed in service after Jan 19, 2025.
Home office and other self-employed deductions continue when eligible.

What’s out

Unreimbursed employee expenses remain non-deductible.

Energy & EV credits

Several credits sunset or are capped

Select efficiency and EV incentives roll off beginning in 2025. Confirm timing before committing to upgrades or purchases.

Examples

Some home-improvement energy credits (e.g., windows/doors/solar) end after 2025.
Federal EV credits end for purchases after Sept 30, 2025 (per current law).

Permanent changes

What stayed eliminated or extended

Continuing rules

Lower individual tax brackets and the nearly doubled standard deduction continue.
Personal and dependent exemptions remain eliminated.
Miscellaneous itemized deductions like unreimbursed employee expenses remain eliminated.

Want a quick read on your 2025 impact?

We’ll translate these changes to your real life and help you optimize withholding, deductions, and credits.

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Important: This page is a general overview and not legal or tax advice. Rules change and can vary based on your situation. Confirm eligibility and amounts on current IRS guidance.