The One, Big, Beautiful Bill has a significant effect on federal taxes, credits and deductions for 2025 and 2026. It was signed into law on July 4, 2025. Below are some of the more relevant provisions.  

 

For tax year 2025:

• The standard deduction will increase to $31,500 for married filing jointly, $15,750 for single and married filing separately and $23,625 for head of household.
• The top marginal tax rate will remain at 37%.  
  
  

For tax year 2026, the standard deduction will increase to $32,200 for married filing jointly, $16,100 for single and married filing separately and $24,150 for head of household. 

 

Estates of decedents who pass away in 2026 have a basic estate tax exclusion of $15,000,000, up from $13,990,000 for 2025.  

 

Effective 2025 through 2028:

• Individuals who ae age 65 and older may claim an additional deduction of $6,000. This new deduction is in addition to the extra standard deduction currently in force. This deduction phases out for taxpayers with modified adjusted gross income over $75,000 for single taxpayers and $150,000 for married. The taxpayer must be 65 on or before December 31.
  
• Employees and self-employed individuals may deduct tips received in occupations deemed by the IRS as customary and ordinary. Maximum annual deduction is $25,000. For self-employed the deduction cannot be greater than the individual’s net income from the business that provided the tip income. Deduction phases out for taxpayers with modified adjust gross income over $150,000 for single taxpayers and $300,000 for married.
• Individuals who received qualified overtime income may deduct the pay that exceeds their regular rate of pay. The maximum amount of overtime pay that may be deducted is $12,500 for single taxpayers and $25,000 for married.
• Individuals may deduct interest paid on a loan used to purchase a qualified vehicle, provided the vehicle is purchased for personal use. Maximum annual deduction is $10,000 and the deduction phases out for taxpayers with modified adjusted gross income over $100,000 for single taxpayers and $200,000 for marked. Additionally the vehicle must of undergone final assembly in the United States.  

All of the new deductions are available for itemizing and non-itemizing taxpayers.

All clean vehicle tax credits expired on September 30, 2025.

How quickly the time goes; we are almost at the end of the year. Happy Thanksgiving to all  our clients, providers and friends. We appreciate the opportunity to serve your financial needs.  

 

James J. Denora, CPA, CFP®