2025 Tax Law Changes: What to Know Before You File

The 2025 tax law brought some of the most meaningful changes we’ve seen in years. As you prepare to file your 2025 return, these updates could lower your tax bill—or increase your refund—if you know where to look. Below is a plain-English breakdown of the most important provisions and who they may benefit.

1. Higher Standard Deduction (But Itemizing May Now Make Sense)

For 2025, the standard deduction increased to:

$15,750 for single filers
$31,500 for married couples filing jointly

That’s on top of normal inflation adjustments. Nearly 90% of taxpayers still use the standard deduction—but this year, more people may benefit from itemizing, especially homeowners in higher-tax areas.

Key note: If you’re 65 or older, you still get the additional age-based standard deduction ($2,000 single / $1,600 per spouse), which stacks with the regular standard deduction.

2. SALT Deduction Jumped to $40,000

One of the biggest changes: the state and local tax (SALT) deduction cap increased from $10,000 to $40,000.

This includes:

State and local income taxes (or sales taxes), plus
Property taxes

This change alone can make itemizing worthwhile for many taxpayers.

Important fine print: The SALT deduction begins phasing back down to $10,000 once modified adjusted gross income (MAGI) exceeds $500,000, regardless of filing status. The phaseout is steep, so high-income households need careful planning.

3. New $6,000 Senior Deduction (Age 65+)

Taxpayers age 65 or older now qualify for a new $6,000 deduction, even if they itemize.

Married couples (both 65+) can deduct $12,000
This is in addition to the existing age-based standard deduction

This provision is the basis for the “no tax on Social Security” messaging—but in practice, it reduces taxable income rather than fully eliminating tax on benefits.

Phaseout begins at:

$75,000 MAGI (single)
$150,000 MAGI (joint)

4. Expanded Child Tax Credit + New “Trump Accounts”

The Child Tax Credit increased to $2,200 per child
Phaseouts still apply at higher income levels

The law also introduced Trump Accounts, a new tax-advantaged savings account for children:

Children born 2025–2028 are eligible for a $1,000 government contribution
Parents can elect the account at tax time (Form 4547)
Accounts may later receive private or local government contributions

These accounts won’t be fully operational until mid-2026, but elections begin now.

5. New Deductions for Workers (Even If You Take the Standard Deduction)

Several above-the-line deductions now apply whether you itemize or not:

✔ Overtime Pay Deduction

Up to $12,500 (single) or $25,000 (joint)
Applies only to the “half” portion of time-and-a-half pay under federal law
Likely not shown on your W-2—you may need employer documentation

✔ Tips Income Deduction

Up to $25,000
Limited to certain occupations (bartenders, servers, taxi drivers, etc.)
Mandatory service charges do not qualify

Both deductions phase out at higher income levels.

6. Auto-Loan Interest Deduction (New Cars Only)

You can now deduct up to $10,000 of interest paid on a loan for a new vehicle purchased in 2025.

Requirements:

Vehicle must be assembled in the U.S.
Deduction applies even if you don’t itemize
Phases out at $100,000 MAGI (single) / $200,000 (joint)

7. Crypto Investors: New IRS Reporting Form

If you sold cryptocurrency or other digital assets in 2025, expect a new Form 1099-DA from your broker.

This is the crypto equivalent of Form 1099-B
Brokers report sales proceeds to the Internal Revenue Service, but not your cost basis
You must still track your original purchase price

Cost-basis reporting won’t begin until the 2026 tax year.

8. Other Notable Changes

EV tax credit eliminated for vehicles purchased after Sept. 30, 2025
Paper refund checks are being phased out—direct deposit is strongly encouraged
IRS Direct File has been shut down; taxpayers must use Free File partners or commercial software
New Form 1040 checkbox for deceased taxpayers, streamlining final returns

What This Means for You

This year’s tax return is more complex—but also full of opportunity. The biggest risk isn’t owing more tax; it’s missing deductions you’re entitled to.

If you:

Are retired or nearing retirement
Own a home in a high-tax state
Earn overtime or tips
Bought a car, had a child, or sold crypto

…then a second look at your tax strategy is well worth it.

If you’d like help understanding how these new rules apply to your situation—or how they fit into a broader financial plan—I’m happy to help.

By James Blue, Fee-Only Advisor | Blue Advisors

James Blue is the founder of Blue Advisors, a fee-only financial planning and investment management firm based in Columbus, Ohio.

This content is provided for informational and educational purposes only and should not be construed as personalized investment, tax, or legal advice. The views expressed are those of the author as of the date published and are subject to change without notice. Blue Advisors is a fee-only registered investment advisory firm. Advisory services are offered only pursuant to a written advisory agreement and to clients in the State of Ohio, the Commonwealth of Pennsylvania, and other jurisdictions where Blue Advisors is properly registered or exempt from registration. Past performance is not indicative of future results. Readers should consult with their financial advisor, tax professional, or attorney before making financial decisions.