What’s New in Tax Law for 2025: 10 Key Changes You Need to Know
The One Big Beautiful Bill Act (OBBBA), signed into law in July 2025, is the most sweeping tax legislation since the Tax Cuts and Jobs Act (TCJA). While the name might sound playful, the changes are serious — and they affect millions of taxpayers, from individual filers to small business owners.
If you’re wondering how your tax situation may look different this year, here are the 10 key changes for 2025 that you should know about.
1. No Tax on Qualified Tips (Up to $25,000)
One of the most surprising provisions in OBBBA is the exclusion of certain tips from taxable income. Eligible workers in industries (those dealing with food or those providing beauty services) where tipping is customary — like restaurants, salons, and hospitality — may be able to exclude up to $25,000 in tips from taxable income. So unfortunately, no deduction for professional services, manufacturing, and the various other industries out there. Additionally, business owners and those considered high income earners will be excluded from this deduction.
Example: A server who earns $40,000 in gross wages of which $20,000 is in tips will report the $40,000 gross wage and take a $20,000 deduction for tips earned. After we factor in the standard deduction, only $4,250 would be considered taxable–a huge tax savings for an individual who would otherwise be paying a lot more.
Key Takeaway: Only those in eligible service industries where tipping is common can take this deduction. Those outside of the eligible service industries, high-income earners, and business owners are all excluded.
2. TCJA Tax Rates and Brackets Made Permanent
Maybe you were aware and maybe your weren’t, but the TCJA brackets were set to expire after 2025, however, that’s no longer the case. OBBBA makes the individual tax brackets permanent, with annual inflation adjustments. (See our post on 2025 Tax Brackets for more information)
3. A Bigger Standard Deduction
The standard deduction also was made permanent–and the standard deduction sees a boost in 2025:
- Married filing jointly: $31,500
- Head of Household: $23,625
- Single: $15,750
Example: A married couple with $90,000 in income and no itemized deductions will only be taxed on $58,500 after the standard deduction — lowering their bill without any extra effort.
4. Expanded SALT Deduction Cap
From 2025 to 2029, the state and local tax (SALT) deduction cap jumps to $40,000 for joint filers (or $20,000 for separate filers). Previously the cap was $10,000 for everyone.
This is a welcome change for taxpayers in high-tax states, although high-income households (income greater than $500,000) may face phaseouts.
5. Business Provisions Made Permanent
Several popular business provisions are now here to stay:
- 100% bonus depreciation for new equipment
- Full expensing of R&D costs
- The 20% pass-through deduction (§199A) for sole proprietors, partnerships, and S-corporations
For small businesses, this permanence makes planning much easier.
6. Business Interest Expense Deduction Modified
The OBBBA changes how businesses calculate their interest expense deduction. Starting in 2026, depreciation, amortization, and depletion can no longer be added back into “Adjusted Taxable Income” (ATI).
Impact: Businesses with high capital expenses may see reduced deductions, meaning higher taxable income.
7. Excess Business Loss Limitation Tweaked
Noncorporate taxpayers (sole proprietors, LLC owners, etc.) will still face limits on excess business losses. However, OBBBA changes how “specified losses” are applied, slightly softening the blow for some filers.
This prevents taxpayers from fully deducting very large losses in a single year, but allows them to carry losses forward.
8. Changes to Charitable Contributions
Starting in 2026, if you itemize, you’ll need to surpass a 0.5% of AGI floor before charitable contributions can be deducted. For those who will use the standard deduction, there’s an additional deduction available of up to $1,000 for single and $2,000 for joint filer for charitable contributions.
Example: If your AGI is $100,000, the first $500 of charitable contributions doesn’t count toward deductions. Anything above that does.
9. AMT (Alternative Minimum Tax) Rules Locked In
The AMT exemptions and thresholds introduced under TCJA are made permanent. While this is good news for most middle-income taxpayers, high earners should still review exposure with their tax professional, since the phaseout rules remain.
10. Energy & Home-Related Credit Changes
Some energy credits are winding down:
- Residential energy credit (§25D) has stricter timelines for installations
- Certain clean energy incentives phase out sooner than expected
- Business-related energy credits require certification and documentation
This means you’ll want to plan energy-related upgrades carefully to maximize benefits.
Why This Matters
The OBBBA is designed to provide permanence and predictability after years of temporary tax law provisions. For individuals, this means more certainty about tax brackets and deductions. For businesses, it provides long-term planning stability for depreciation, pass-through income, and R&D costs.
But with new benefits come new pitfalls — from charitable floors to phasing out of energy credits — so staying informed is key.
Wrap-Up
Tax law isn’t static, and 2025 proves it. Whether you’re an individual filer, a small business owner, or both, these changes affect how you’ll file and how you’ll plan.
This post is part of my Tax Planning & Organization Series — designed to help you stay on top of your finances, avoid surprises, and take advantage of opportunities in the tax code.
In upcoming posts, we’ll dig deeper into different deductions, credits, and planning strategies for small businesses and households to help you prepare for filing season.
– Brendan Tiedeman, CPA
