2025 Tax Law Changes: What You Need to Know
Tax law never stays still for long, and 2025 is no exception. Some pandemic-era provisions have now become permanent, while brand-new deductions and credits are rolling out over the next few years. At the same time, certain popular tax breaks, like clean energy incentives, are on their way out.
With so much shifting at once, it’s easy to feel overwhelmed. But don’t worry — we’ve gathered the most relevant updates for our clients, broken down by how they’re most likely to affect you, your family, and your business.
Everyday Taxes & Deductions
Good news: tax brackets and the double standard deduction are now permanent, and the deduction will increase slightly each year with inflation. That means fewer taxpayers will need to itemize moving forward.
Seniors will see an additional benefit between 2025–2028: an extra $6,000 deduction per taxpayer age 65 or older. Keep in mind, this phases out for higher incomes and doesn’t apply if you file separately.
And starting in 2026, even if you don’t itemize, you can deduct up to $1,000 ($2,000 for joint filers) in charitable contributions — a small but welcomed perk for generous givers.
Family & Future Planning
Families with children will notice two key changes. The Child Tax Credit increases to $2,500 in 2025 and will continue to adjust with inflation, while the Dependent Care Credit is being restructured in 2026. At the same time, employees can begin contributing more — up to $7,500 — to dependent care accounts through their employers.
Education planning also gets a boost. Starting in 2026, 529 plans can be used more broadly, covering not just college but also trade schools, credential exams, and some continuing education. And for children born between 2025 and 2028, new “Trump Accounts” will offer $1,000 per child, though details on distributions and contributions are still being developed.
Work & Income
Workers in industries that rely on tips will see a major change in 2025: tips will no longer be taxed (up to $25,000, with some income limits). This applies to both employees and certain self-employed individuals in service professions. The IRS will provide a list of qualifying industries eligible for this deduction by October 2, 2025.
Overtime pay is also getting favorable treatment. Starting in 2025, you can deduct up to $12,500 in qualifying overtime pay ($25,000 for joint filers), though this deduction phases out at higher income levels.
Between 2025-2028, individuals can also deduct up to $10,000 in car loan interest if certain conditions are met, including vehicle eligibility and load structure.
Credits Going Away
Not all the changes are positive. Several clean energy credits are being eliminated between 2025 and 2026, including those for new and electric vehicles, solar, and energy-efficient home improvements. If you’ve been considering upgrades in these areas, you’ll want to act sooner rather than later.
Other reductions include stricter limits on gambling deductions (capped at 90% of winnings) and the permanent elimination of moving expense deductions, except for military families.
Small Business Owners
If you own a business or side hustle, there are a couple of updates worth noting. Starting in 2026, you won’t need to issue a 1099-NEC unless you pay a contractor $2,000 or more. That threshold will adjust for inflation in future years.
The rules around business meal deductions are also changing, with deductions likely limited to meals during travel. We’re keeping an eye on this one as the IRS provides more clarity.
Your Next Steps
Tax law changes can be confusing, but you don’t have to navigate them on your own. The most important takeaway? Many of these updates could work in your favor — whether that’s through higher deductions, expanded credits, or smarter planning opportunities.
At Personal Financial Services, we’re here to help you make sense of it all and adjust your strategy as needed. If you’d like to talk through how these updates affect your personal situation, let’s schedule a review.