Summary of the New 2025 Tax Law – Key Provisions and Planning Considerations

Major Individual Tax Provisions

1. Permanent Lower Individual Tax Rates

• The lower individual tax rates enacted by the Tax Cuts and Jobs Act (TCJA) are made permanent for tax years after 2025. The scheduled expiration of these rates is repealed, so the lower rates continue indefinitely.

  
  

2. Increased Standard Deduction

• The increased standard deduction is made permanent and further increased to $23,625 for heads of household and $15,750 for singles (effective after 2024).

  
  

3. Senior Deduction

• A new $6,000 deduction is allowed for seniors (age 65+) through 2028, phased out at higher incomes. This is in addition to the existing additional standard deduction for seniors.

  
  

4. Expanded Child Tax Credit

• The child tax credit is increased to $2,200 per child, made permanent, and indexed for inflation. Stricter Social Security Number (SSN) requirements apply for both taxpayer and child.

  
  

5. Qualified Business Income Deduction (199A)

• The phase-in threshold for the 20% deduction is increased to $75,000 ($150,000 joint), and a $400 minimum deduction is established for active business income, with inflation adjustments.

  
  

6. Estate and Gift Tax Exemption

• The exemption is permanently increased to $15 million (indexed), effective for estates/gifts after 2025.

  
  

7. Alternative Minimum Tax (AMT)

• The increased AMT exemption and phaseout thresholds are made permanent, with modifications to inflation adjustments and phaseout rates.

  
  

8. State and Local Tax (SALT) Deduction

• The SALT deduction cap is increased to $40,000 ($20,000 MFS) for 2025, indexed for inflation, with a phase-down for high incomes, reverting to $10,000 after 2029.

  
  

9. New Deductions for Working Americans (2025–2028)

• No Tax on Tips: Up to $25,000 in qualified tips per year can be deducted (phased out at high incomes).

• No Tax on Overtime: Up to $12,500 ($25,000 joint) in qualified overtime pay per year can be deducted (phased out at high incomes).

• No Tax on Car Loan Interest: Up to $10,000/year deduction for interest on loans for new U.S.-assembled passenger vehicles (phased out at high incomes).

  
  

10. Trump Accounts for Children

• New tax-advantaged savings accounts for children under 18, with a $5,000 annual contribution limit and a $1,000 government-funded pilot for newborns (2025–2028).

  
  

Business and International Tax Provisions

1. Full Expensing for Business Property

• 100% bonus depreciation for qualified business property is made permanent.

  
  

2. Full Expensing of Domestic R&D

• Domestic research and experimental expenditures can be fully expensed immediately; foreign R&D remains amortized over 15 years.

  
  

3. Business Interest Limitation

• EBITDA add-back is restored permanently, increasing allowable business interest deductions.

  
  

4. Section 179 Expensing

• The Section 179 expensing limit is increased to $2.5 million, with a phaseout at $4 million, and inflation adjustments.

  
  

5. International Tax Reforms

• Numerous changes to the foreign tax credit, GILTI (now "net CFC tested income"), FDII, BEAT, and CFC rules, including increased foreign tax credit percentages and new rules for "foreign controlled U.S. shareholders."

  
  

Family, Education, and Community Provisions

1. Employer-Provided Child Care Credit

• Credit increased to 40% (50% for small businesses), up to $500,000 ($600,000 for small businesses), with inflation adjustments and expanded eligibility.

  
  

2. Adoption Credit

• Up to $5,000 of the adoption credit is refundable, with inflation adjustments.

  
  

3. Dependent Care Assistance

• Exclusion limit increased to $7,500 ($3,750 MFS).

  
  

4. Child and Dependent Care Tax Credit

• Percentage is 50%, phased down to 35% at $15,000 AGI, then to 20% at $75,000 AGI ($150,000 joint).

  
  

5. Charitable Contributions

• Above-the-line charitable deduction increased to $1,000 ($2,000 joint) and made permanent.

  
  

• New 0.5% AGI floor for individuals and 1% floor for corporations on charitable deductions.

  
  

6. Opportunity Zones, Low-Income Housing, and New Markets Tax Credits

• Opportunity Zones, Low-Income Housing Tax Credit, and New Markets Tax Credit are made permanent and enhanced.

  
  

Energy and Green Tax Provisions

1. Termination of Clean Energy Credits

• Credits for new and used clean vehicles, alternative fuel refueling property, energy efficient home improvements, residential clean energy, and others are terminated for property acquired or placed in service after specified dates in 2025 or 2026.

  
  

2. Modifications to Other Energy Credits

• Restrictions on credits for zero-emission nuclear, clean hydrogen, clean electricity, advanced manufacturing, and carbon oxide sequestration, especially for foreign-influenced entities.

  
  

Other Notable Provisions

1. Excess Business Loss Limitation

• The limitation on excess business losses of noncorporate taxpayers is made permanent.

  
  

2. Excise Tax on Remittance Transfers

• A new 1% excise tax is imposed on certain cash remittance transfers outside the U.S.

  
  

3. Health and Social Program Changes

• Numerous changes to Medicaid, Medicare, and premium tax credit eligibility, including new work requirements for Medicaid expansion adults, stricter eligibility verification, and limitations on coverage for certain non-citizens.

  
  

4. Debt Limit

• The statutory debt limit is increased by $5 trillion.

  
  

5. Unemployment Payments to Millionaires

• Federal funds are prohibited for unemployment compensation to individuals with $1 million or more in base period wages.