New Tax Legislation: Key Changes You Need to Know
On July 4, 2025, sweeping new tax legislation was signed into law with the approval of the One Big Beautiful Bill Act (“OBBBA”), enacting the most extensive tax and budget overhaul since 2017. The new tax law makes permanent many provisions from the 2017 Tax Cuts and Jobs Act, while also introducing changes, rollbacks, and new tax breaks that will reshape the financial planning landscape starting in 2026.
Below we summarize some key tax policy changes that will impact individuals and families and offer planning strategies to be considered during the remaining months of 2025 and beyond.
Permanent Extension of the 2017 Tax Cuts
One of the cornerstone features of the new tax legislation is the permanent extension of the 2017 tax cuts, including:
- Lower marginal tax brackets for individuals and families
- Increased standard deduction: now $31,500 for joint filers and $15,750 for individuals
This permanence creates some longer-term certainty when planning around income timing, considering Roth IRA conversions, and mapping out charitable giving strategies.
Increased “SALT” Deduction Cap
The state and local tax (SALT) deduction cap has been a sticking point for many taxpayers in states with high income tax. The new law raises the deduction cap to $40,000, with a built-in 1% annual increase starting in 2026. The expanded cap phases out for taxpayers earning $500,000 (married filing jointly) or $250,000 (single) and will revert back to $10,000 after 2029, unless renewed.
This gives individuals a few years to maximize the benefit of the higher cap through thoughtful deduction timing and multi-year planning.
Child Tax Credit Enhancements
The Child Tax Credit increases to $2,200 per child, and will now be indexed to inflation annually. While phaseouts still apply for higher earners, families with taxable income under $400,000 may see a direct benefit.
This could enhance planning for taxpayers navigating dual-career households or supporting younger children through school.
Seniors’ Deduction
For individuals over age 65, there’s a new $6,000 additional deduction, intended to reduce the impact of income tax on Social Security benefits and required minimum distributions (RMDs) from retirement savings. [This may also help offset Medicare premium increases or other healthcare-related costs.]
Expanded “Above-the-Line” Deductions
For the first time, taxpayers can annually deduct certain expenses directly “above the line”, or before calculating taxable income —which means not needing to itemize deductions in order to benefit from:
- Charitable contributions: Up to $2,000 a year
- Tips and overtime: Up to $25,000 per household with income phaseouts (2025–2028)
- Auto loan interest: Up to $10,000 per year for qualified vehicle (vehicle weight, business use) loan interest
While these “above the line” deductions may not impact every taxpayer, they could be useful when planning for family members, employees, or other dependents.
Continued Small Business & Investment Incentives
Business owners and investors benefit from the following:
- Section 199A pass-through deduction (20%) is now permanent
- Section 179 expensing increased to $2.5 million
- Full expensing for capital investments and domestic R&D remains in place
- Permanently renews and expands Qualified Opportunity Zones
This may open the door for eligible taxpayers for accelerated depreciation strategies, entity restructuring, and reinvestment planning—especially for those nearing retirement or liquidity events.
New Savings Account for Children
A new savings vehicle called “Trump Accounts” allows families to contribute up to $5,000 a year per child born between 2025–2028, with an initial $1,000 government-funded seed or contribution. While still in early rollout, this could provide a supplemental savings path for children, grandchildren or other future legacy gifting.
Clean Energy Credit Rollbacks
Starting this year, many of the current clean energy credits will expire:
- EV credit ends for acquisitions after September 30, 2025
- Solar/home energy credits expire after December 31, 2025
- EV charger credit sunsets in mid-2026
These changes reduce or eliminate deductions for electric vehicles, home chargers, and solar power, which could impact individuals who have previously benefited from these incentives. As a result, they may need to plan ahead to identify other potential income offsets.
While many provisions of the OBBBA offer some new planning opportunities, it’s important to review those that come with expiration dates or income-based phaseouts. Given the complexity of this kind of review and planning, we are here to support the discussion and evaluation of various planning strategies with our clients and their tax advisors. Some of these strategies may include reassessing income timing, considering Roth IRA conversions while tax rates are favorable, accelerating charitable giving or gifting within expanded deduction windows, and eventually planning proactively for the 2029 sunset of several key provisions.
If you would like to discuss your personal situation and how this legislation may affect you and your tax planning, please reach out to your Litman Gregory Wealth Management advisor, in coordination with your tax advisor.