Tax breaks and other support measures in Trump’s “Big, Beautiful Bill” that will apply from 2025

The controversial tax reform known as the One Big Beautiful Bill Act, signed into law by former President Donald Trump on July 4, will radically transform the way Americans file their taxes starting in the 2025 tax year. Although based on the Tax Cuts and Jobs Act (TCJA) of 2017, this new legislation introduces a combination of expanded deductions, new tax benefits, and the elimination of some credits, which will affect families, workers, retirees, and small business owners. Here are some of the most important points for the next tax year.

Higher standard deduction

One of the most notable changes in the law is the increase in the standard deduction:

• $15,750 for single taxpayers
• $23,625 for heads of household
• $31,500 for those filing jointly

This represents an increase of up to $1,500 from 2024 levels and will continue to be adjusted for inflation.

SALT cap: temporary relief for high-tax states

Those who still choose to itemize their deductions will also see changes. Trump’s law temporarily raises the cap on state and local tax (SALT) deductions. It goes from $10,000 to $40,000 in 2025. This change could benefit taxpayers in high-tax states.

However, this deduction begins to phase out at $500,000 of modified adjusted gross income (MAGI) and disappears completely at $633,333. As with many benefits under the law, there are income-based phase-outs.

New deductions for workers with tips or overtime

The law introduces two relevant deductions for low- and middle-income wage earners:

• Tips: Workers in eligible sectors will be able to deduct up to $25,000 in annual tips, whether in cash or by card. This benefit is phased out between $300,000 and $550,000 MAGI for joint returns (less for singles).
• Overtime: up to $12,500 in overtime pay may also be deducted. Here, reductions begin at $150,000 for singles and $300,000 for couples, and disappear completely at $275,000 and $550,000, respectively.

Although these deductions do not apply to everyone, they represent significant relief for millions of workers, especially those who do not itemize their deductions.

Additional benefits for seniors

The law grants an extra deduction of $6,000 per person over the age of 65, up to $12,000 per couple. This benefit seeks to reduce or eliminate the tax on Social Security income.

However, it is also limited by income level: it begins to phase out at $150,000 MAGI for couples and $75,000 for single taxpayers, and disappears completely at $250,000 and $175,000, respectively. Thus, the measure will benefit low-income retirees more than those with large IRA or 401(k) withdrawals.

Charitable deductions

Starting in 2026, a popular provision during the pandemic will be permanently reinstated: taxpayers who do not itemize will be able to deduct up to $1,000 (individuals) or $2,000 (couples) in qualified charitable donations. The measure seeks to encourage altruism (which is increasingly common among individuals) and reduce the tax base of those who use the standard deduction.

Tax experts suggest carefully planning year-end donations, especially for those close to income thresholds, as other benefits could be lost.

Deduction for car loan interest

Between 2025 and 2028, up to $10,000 in interest on personal loans for the purchase of automobiles will be deductible, provided the vehicle is new, was assembled in the United States, and is purchased (not leased).

This benefit is only available to those who do not itemize, and it also has income limits: it begins to phase out at $250,000 MAGI for couples and $150,000 for singles. In addition, it is a temporary provision, unless Congress establishes an extension.

Additional support for families

There are also changes to some key family benefits:

• FSA accounts: The flexible spending account limit for dependent care rises from $5,000 to $7,500, allowing for greater tax savings for child care or elder care.
• Child and dependent care credit: Starting in 2026, the credit percentage increases to 50% for low-income families, and the thresholds for accessing the 20% minimum are expanded. According to the First Five Years Fund, nearly 4 million families will benefit.
• Trump Savings Account: Allows parents to save up to $5,000 per year (not tax deductible) for expenses related to children born between 2025 and 2028. The federal government will contribute an initial bonus of $1,000 per child.

Many advantages... but with an expiration date

Although the “Big, Beautiful Bill” offers multiple tools to reduce the tax burden, most of the benefits are temporary: almost all expire in 2028 if an extension is not approved. In addition, many are income-restricted, meaning that higher-income taxpayers may receive fewer benefits than they expect.