A brand-new tax year often means a fresh batch of updates to the tax code. However, the 2025 tax changes are a bit bigger than those of recent years, thanks to the Working Families Tax Cut Act (also known as the One Big Beautiful Bill or OBBB), which became law on July 4, 2025.
Below, you’ll find a clear breakdown of the most important IRS tax changes for 2025 and how they might affect your tax return, your paycheck, or your long-term tax planning. While many are the result of new tax laws, we’ll also cover some updates from regular IRS inflation adjustments, as well as some brand-new tax laws and temporary provisions that will sunset before the 2026 tax year filing season.
So, let’s look at what’s new, what’s disappearing, and whether you might qualify for a brand new tax benefit.
2025 federal tax bracket changes
U.S. income tax ranges determine how much of your earnings fall under each tax rate, depending on your filing status. For 2025, there are still seven individual income tax rates ranging from 10% to 37%, but the income ranges within each bracket have changed.
2025 income tax brackets
| Tax rate | Single filer | Joint filers / surviving spouse | Married filing separately | Head of household |
| 10% | $0 to $11,925 | $0 to $23,850 | $0 to $11,925 | $0 to $17,000 |
| 12% | $11,926 to $48,475 | $23,851 to $96,950 | $11,926 to $48,475 | $17,001 to $64,850 |
| 22% | $48,476 to $103,350 | $96,951 to $206,700 | $48,476 to $103,350 | $64,851 to $103,350 |
| 24% | $103,351 to $197,300 | $206,701 to $394,600 | $103,351 to $197,300 | $103,351 to $197,300 |
| 32% | $197,301 to $250,525 | $394,601 to $501,050 | $197,301 to $250,525 | $197,301 to $250,500 |
| 35% | $250,526 to $626,350 | $501,051 to $751,600 | $250,526 to $375,800 | $250,501 to $626,350 |
| 37% | Over $626,350 | Over $751,600 | Over $375,800 | Over $626,350 |
Tax Tip: Not sure which tax bracket you’re in? Give our tax bracket calculator a try.
2025 standard deduction updates
If you don’t itemize your deductions, the standard deduction helps reduce your taxable income automatically. Here are the 2025 standard deduction amounts compared with 2024:
| Tax filing status | Standard deduction 2025 | Standard deduction 2024 |
| Single | $15,750 | $14,600 |
| Head of Household | $23,625 | $21,900 |
| Married filing jointly and surviving spouse | $31,500 | $29,200 |
| Married filing separately | $15,750 | $14,600 |
If you are blind or age 65 and up, you can claim an additional standard deduction:
| Age and filing status | 2025 additional standard deduction | 2024 additional standard deduction |
| 65+ OR blind (single and head of household) | $2,000 | $1,950 |
| 65+ AND blind (single and head of household) | $4,000 | $3,900 |
| 65+ OR blind (married filing jointly or separately) | $1,600 | $1,550 (per qualifying individual) |
| 65+ AND blind (married filing jointly or separately) | $3,200 | $3,100 (per qualifying individual) |
New extra standard deduction for seniors
Starting in 2025, seniors (age 65+) can claim an extra $6,000 standard deduction due to a provision in the Working Families Tax Cut Act.
This enhanced deduction is temporary, applying only to tax years 2025 through 2028. It also begins to phase out once your adjusted gross income (AGI) exceeds $75,000 for single filers or head of household filers and $150,000 for married couples filing jointly.
For example, if you are an eligible single filer over age 65 (and not blind) in 2025, you could combine all three standard deductions, for a total of $23,750.
Here’s the math:
$15,750 (single standard deduction) + $2,000 (65+ additional deduction) + $6,000 (temporary extra senior deduction) = $23,750
Working Families Tax Cut Act (One Big Beautiful Bill) changes for 2025 tax year
Next, let’s walk through the highlights of the Working Families Tax Cut Act and how its many tax provisions might impact your taxes this year.
Child Tax Credit (CTC) increases
The new tax bill also raises the Child Tax Credit to $2,200 per qualifying child for the 2025 tax year (up from $2,000 in 2024). Additionally, more of the credit is refundable, meaning some families may see a larger tax refund even if their tax liability drops to $0.
The income thresholds for the CTC remain the same — the credit still phases out based on your filing status and modified adjusted gross income (MAGI). For a full walkthrough of eligibility, phase-outs, and how this compares to prior years, check out our complete Child Tax Credit Guide.
No tax on overtime pay
A new deduction for qualifying overtime pay is now available, effective in the 2025 tax year. You can deduct up to $12,500 if you’re a single filer or up to $25,000 if you’re married filing jointly. The deduction begins to phase out once your MAGI hits $150,000 for single filers or $300,000 for joint filers.
You can claim the overtime deduction even if you claim the standard deduction. It is a temporary deduction, available only from 2025 to 2028. Read our full No Tax on Overtime Guide.
No tax on tips for 2025
The Working Families Tax Cut Act also creates a new deduction for certain tip income for 2025 through 2028. You can deduct up to $25,000 in qualifying tips per tax return, and the deduction begins to phase out once your MAGI reaches $150,000 for single filers or $300,000 for joint filers.
Only certain occupations qualify; check out our No Tax on Tips Guide for all the details.
Car loan interest deduction
There is another temporary deduction for car loan interest for tax years 2025 through 2028. You can deduct up to $10,000 of interest paid on a qualifying vehicle loan each year through 2028. This tax break begins to phase out once your MAGI exceeds $100,000 (or $200,000 for married couples filing jointly).
Your vehicle must meet specific requirements (including U.S. final assembly and a valid VIN) to qualify. If you financed your car, read our Car Loan Interest Deduction Guide to see if you qualify to deduct your interest payments.
SSNs required for certain tax benefits
The bill limits which tax benefits can be claimed with an Individual Taxpayer Identification Number (ITIN). Many popular credits and new deductions — including the Child Tax Credit, Earned Income Tax Credit, education credits, as well as the new tips deduction, new overtime deduction, and the new senior deduction — now require a valid Social Security number (SSN).
ITINs remain fully valid for filing tax returns, and certain benefits are still available to ITIN filers. However, this change is likely to cause confusion this tax season, particularly for mixed-status families. For a full breakdown of which credits changed and who still qualifies, check out our full article: OBBB Limits Tax Credits for ITIN Filers Without SSNs.
SALT deduction cap increase
Another tax bill provision temporarily raises the SALT deduction cap beginning in the 2025 tax year. This increase gives some taxpayers in high-tax states more room to deduct state and local tax payments.
The SALT cap rose to $40,000 (up from $10,000) in 2025 and will increase each year slightly through tax year 2029. If your MAGI exceeds $500,000 ($250,000 for those married filing separately), your SALT cap gradually reduces, but it will never be less than $10,000.
This is a particularly useful change if you live in a state or city with higher tax rates. Read our full SALT Deduction Guide for more info.
1099-K reporting thresholds
For the 2025 tax year, the Working Families Tax Cut Act resets the Form 1099-K reporting threshold to $20,000 in payments and at least 200 transactions. This change means far fewer taxpayers will receive a 1099-K for occasional sales, marketplace listings, or smaller side gigs.
If you only sell items casually or earn minimal side income, you likely won’t hit the threshold — though you still need to report taxable earnings on your income tax return. Check out our Guide to the New 1099-K Reporting Thresholds for more details on how these tax law changes affect small sellers and gig workers.
Clean energy credits eliminated
The Working Families Tax Cuts Act didn’t just create new tax benefit opportunities — it also got rid of a few existing tax savings opportunities. The big one that has already ended is the electric vehicle (EV) credit. Only qualifying vehicles acquired on or before Sept. 30, 2025, will qualify for the EV credit. Some states may continue offering their own incentives, but at the federal tax level, this credit no longer applies for vehicles purchased after Sept. 30, 2025.
In addition, several other clean energy and energy-efficient tax credit programs will expire after Dec. 31, 2025, meaning home upgrades you make in tax year 2026 may no longer qualify for a federal tax credit.
Adoption Credit
The Adoption Credit increases to $17,280 for 2025 and is fully available to taxpayers with a MAGI below $259,190 (the credit begins phasing out above that amount). The Working Families Tax Cut Act also made the credit partially refundable for the first time, meaning eligible taxpayers can receive up to $5,000 as a refund even if they owe no tax.
Updates for small business owners
QBI deduction made permanent
The qualified business income (QBI) deduction is now permanent for small business owners and self-employed taxpayers. The deduction stays at 20% of your qualified business income, and the phase-out thresholds for specified service trades or businesses (SSTBs) increase to $197,300 for single filers and $394,600 for married couples filing jointly.
100% bonus depreciation returns
The new tax bill also restores 100% bonus depreciation for qualifying property placed in service beginning Jan. 20, 2025. That means eligible small business owners can deduct the full cost of equipment or improvements upfront rather than spreading it across several years.
No updates to withholding tables in 2025
The IRS announced that it would not update the withholding tables for 2025, despite the extensive tax changes brought about by the Working Families Tax Cuts Act. That means some workers may over-withhold and potentially see a larger tax refund when filing for the 2025 tax year — especially if your tip income or overtime compensation ends up being deductible.
No matter your situation, TaxAct® will walk you through each credit and deduction you qualify for and calculate your refund or balance due accordingly, so you won’t have to guess how these changes affect your return.
2025 Earned Income Tax Credit (EITC) amounts
The EITC is a popular tax credit for low- to moderate-income working taxpayers. The amount you can claim depends on your income, filing status, and the number of children you have.
The maximum EITC you can claim for 2025 is $8,046. Here are the 2025 income limits for the credit:
2025 EITC income limits
| Number of children | Maximum EITC | Max income: Single / head of household | Max income: Married joint filers |
| 0 | $649 | $19,104 | $26,214 |
| 1 | $4,328 | $50,434 | $57,554 |
| 2 | $7,152 | $57,310 | $64,430 |
| 3+ | $8,046 | $61,555 | $68,675 |
Tax Tip: Want an easy way to estimate your EITC for 2025? Try our Earned Income Tax Credit calculator.
Retirement plan contribution changes for 2025
Some significant retirement updates took effect in 2025 thanks to the SECURE 2.0 Act of 2022 (also called SECURE 2.0). The main thing? New “super catch-up” contributions are available depending on your age and whether your employer plan allows it. We broke everything down for you below.
401(k) contribution limits 2025
If your employer’s 401(k) plan allows it, workers who turn age 60, 61, 62, or 63 by the end of the 2025 calendar year can make a larger catch-up contribution than is typically allowed:
- Regular contribution limit: $23,500.
- Standard catch-up contribution (age 50+): $7,500.
- New super catch-up: $11,250. This is available to workers aged 60 to 63 who have already contributed the maximum regular deferral amount.
Once you turn 64, the catch-up limit returns to the standard 50+ catch-up limit ($7,500 in 2025).
SIMPLE IRA contribution limits (2025)
SIMPLE IRAs also receive a new super catch-up limit, similar to 401(k) rules:
- Regular contribution limit: $16,500
- Standard catch-up contribution (age 50+): $3,500
- New super catch-up: $5,250. This is available only if you are age 60 to 63 by year-end and have already maxed out the regular SIMPLE IRA limit.
Once you turn 64, the limit reverts to the standard $3,500 allowed catch-up amount.
Other 2025 contribution limit increases
- Health flexible spending accounts: In 2025, you can contribute up to $3,300 in employee salary reductions to fund your health flexible spending arrangement. Up to $660 may be carried over to the following year if your employer’s plan allows it.
- Health savings accounts (HSAs): Those with self-only coverage can contribute up to $4,300 to their HSA in 2025, while those with family coverage can contribute up to $8,550. Those age 55 and older can contribute an extra $1,000 per eligible individual.
- Medical Savings Accounts (MSAs): Deductible ranges and out-of-pocket expenses for MSAs also increased in 2025. For individuals with self-only coverage, the plan must have an annual deductible of at least $2,850 but no more than $4,300, with an out-of-pocket expense limit of $5,700. For family coverage, the annual deductible must be at least $5,700 but no more than $8,550, with an out-of-pocket expense limit of $10,500.
New Form 1099-DA for digital asset reporting
Starting in 2025, the IRS rolled out Form 1099-DA, a new information return designed to improve reporting for digital asset transactions (like cryptocurrency). Brokers and platforms that handle digital asset sales will use Form 1099-DA to report proceeds (and eventually cost basis) from transactions to both taxpayers and the IRS.
While this form doesn’t create a new tax, it does standardize crypto and digital asset reporting, similar to how Form 1099-B works for stocks. If you buy, sell, or trade digital assets, you may receive Form 1099-DA beginning in 2026.
Student loan collections resume in 2025
For the first time since the pandemic, defaulted federal loans can trigger a refund offset. This means if you’re behind on your student loan payments, the federal government can garnish your federal tax refund or state refund to cover unpaid balances.
Read our full update on student loan debt collections, including how offsets work and ways to avoid them.
IRS paper check update
If you opt for a paper refund check in 2026, be prepared for delays. In 2025, the IRS announced that it would phase out the use of paper checks. Those who request a paper check by mail will need to wait 6 weeks or longer to receive their payment. For this reason, the IRS is recommending that taxpayers choose direct deposit or another secure electronic method when deciding how to receive their tax refund this year. Limited exceptions will be available for those without access to bank accounts, such as prepaid debit cards or digital wallets.
Other IRS tax changes 2025
- Social Security tax limit: For 2025, the maximum earnings subject to the Social Security payroll tax increased to $176,100, up from $168,600 in 2024. This means both employees and employers pay 6.2% on wages up to that amount, with a maximum Social Security tax withheld of about $10,918.20 per worker in 2025.
- Alternative minimum tax (AMT): The AMT exemption amount for 2025 rose to $88,100 for single filers and $137,000 for married couples filing jointly, with phase-out thresholds beginning at approximately $626,350 (single) and $1,252,700 (joint).
- Fringe benefits: The monthly limit for tax-free qualified transportation and parking fringe benefits increased to $325 in 2025 (up from $315 in 2024).
- Gift tax exclusions: The annual gift tax exclusion increased to $19,000 per recipient for 2025 (up from $18,000 in 2024), meaning you can gift this amount to each person per year without needing to file a gift tax return or reduce your lifetime exemption.
- Foreign earned income exclusion: For 2025, the FEIE exclusion available to expats is $130,000 per taxpayer (up from $126,500 in 2024). If you qualify, you can exclude foreign earnings from your income up to this amount.
What has NOT changed for 2025?
Even with several tax law updates in 2025, some familiar rules remained unchanged from 2024. Here are a few things you can still count on this year:
- Individual IRA contributions: The annual contribution limit for IRAs in 2025 is still $7,000 ($8,000 for those 50 and older).
- Individual income tax rates: While the tax brackets were adjusted for 2025 due to inflation, the seven federal income tax rates remain unchanged, still ranging from 10% to 37%.
- Corporate tax rate: The flat corporate tax rate is still 21%.
- No overall limit on itemized deductions: Taxpayers who itemize can still deduct eligible expenses without an overall dollar cap.
- Medical expense deduction: The threshold for deducting unreimbursed medical expenses remains unchanged, meaning you can only deduct qualified expenses that exceed 7.5% of your AGI in 2025.
FAQs: Tax law changes 2025
The bottom line
With so many new tax rules and tax law changes taking effect in 2025, you might be feeling unsure about how new credits, deductions, and reporting rules apply to you. But you don’t need to be a tax professional to get it right. TaxAct® will walk you through the 2025 tax changes step by step, help you claim every credit and deduction you qualify for, and make sure your return is calculated accurately based on your tax situation. Whether you’re dealing with new deductions, updated income limits, or unfamiliar tax forms, you can file with confidence knowing TaxAct has your back.
This article is for informational purposes only and not legal or financial advice.
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The OBBB is now also being referred to by lawmakers as the Working Families Tax Cut Act. You may see one or both names used here, but they refer to the same set of tax changes.
