Most of the changes in the One Big Beautiful Bill take effect on January 1, 2026, but some are retroactive and could impact 2025 tax returns. Many of the changes have certain requirements, such as adjusted gross income limits, and some are temporary. Changes that might affect most 2025 tax returns include:

– Additional Senior Deduction

Temporarily adds a senior deduction of $6,000 for each qualifying individual for both itemizers and non-itemizers, which phases out When the modified adjusted gross income exceeds $75,000, it is available from 2025 through 2028.

– Increased State and Local Tax (SALT) Itemized Deduction

Temporarily increases the cap on the itemized deduction for state and local taxes (SALT) to $40,000 for 2025, and increases the cap by one percent each year from that level through 2029, subject to a phaseout for taxpayers with incomes above $500,000, then reduces the cap to a flat $10,000 thereafter.

– Increase in the Standard Deduction

Makes the standard deduction increase permanent with an enhancement, starting in 2025 at $31,500 for joint filers, $23,625 for head of household, and $15,750 for all other filers, inflation-adjusted thereafter.

-No Tax on Tips

Temporarily makes up to $25,000 of tip income deductible for individuals in traditionally and customarily tipped industries for tax years 2025 through 2028; deduction phases out at a 10 percent rate when adjusted gross income exceeds $150,000 ($300,000 for joint filers).

-No Tax on Overtime

Temporarily makes up to $12,500 ($25,000 for joint filers) of the premium portion of overtime compensation deductible for itemizers and non-itemizers for tax years 2025 through 2028. The deduction phases out at a 10 percent rate when adjusted gross income exceeds $150,000 ($300,000 for joint filers).

-Deduction for Interest Payments on Certain Vehicles

Temporarily makes auto loan interest deductible for itemizers and non-itemizers for new autos with final assembly in the United States for tax years 2025 through 2028; deduction limited to $10,000, and phases out a a 20 percent rate when income exceeds $100,000 for single filers and $200,000 for joint filers.

More good news to come! Al Minor, COO, L. Lopez CPA and Associates