2025 Tax Law Changes: What the New Proposed Bill Means for Your Income, Deductions, and Planning Strategies
New tax law is on the horizon, here’s what is proposed and what it could mean for you:
Generally speaking - this bill is coming on the heels of 2017 tax law from Trump’s original Tax Cuts and Jobs Act (TCJA).
Much of that legislation was set to expire on 12/31/2025 and revert to pre-TCJA law - which makes the introduction of this current tax proposal particularly enticing.
The general theme from all of what I’ve seen is that this will increase after-tax income for over 60% of workers, slightly increase GDP, and slightly reduce tax revenues - increasing the deficit.
The major provisions that we’re seeing so far are:
Lock in TCJA Provisions: Permanently extend the Tax Cuts and Jobs Act (TCJA) income tax rates and bracket structure, while increasing inflation adjustments for all brackets—except the top 37% rate threshold.
Standard Deduction Adjustments: Keep the current standard deduction levels from the TCJA in place and temporarily raise them from 2025 to 2028 by $2,000 for married couples filing jointly, $1,500 for heads of household, and $1,000 for all other filers.
This is a big deal as ~80% of American take the standard deduction - this would increase the amount of income not subject to taxation.
Personal Exemption: Permanently retain the elimination of the personal exemption.
Mortgage Interest Deduction: Solidify the $750,000 mortgage debt limit and make the exclusion for home equity loan interest permanent.
This is less relevant due to the increase in the standard deduction but for high income earners this keeps itemized deductions in the mix.
SALT Deduction Reform: Set the state and local tax (SALT) deduction cap at a permanent $30,000, with a phase-down to $10,000 at a 20% rate starting at $200,000 income for single filers and $400,000 for joint filers.
This would be a big deal and help itemized deductions compete with the increasing standard deduction.
Itemized Deduction Reforms: Cement existing limitations on itemized deductions, including the removal of miscellaneous deductions, restrictions on personal casualty and gambling losses, the repeal of the Pease limitation, and the cap on moving expense deductions.
Itemized Deduction Value Cap: Restrict the benefit of itemized deductions to 35 cents per dollar claimed.
Child Tax Credit Enhancement: Make the current child tax credit permanent and temporarily increase the maximum credit to $2,500 from 2025 through 2028. After that, adjust the $2,000 credit cap for inflation.
Alternative Minimum Tax (AMT): Permanently preserve the higher AMT exemption and phaseout levels enacted under the TCJA.
This is great for those who are stock compensated. The AMT exemption acts like the standard deduction for those who have add backs subject to AMT (mainly ISO bargain elements).
Repeal Certain Green Tax Breaks: Eliminate several individual tax credits introduced by the Inflation Reduction Act—such as those for EV purchases and home energy upgrades—starting in 2026.
Deductibility of Tips: For tax years 2025 through 2028, allow workers in traditionally tipped roles (excluding high earners) to deduct reported tip income.
Auto Loan Interest Deduction: Permit a temporary deduction for interest on car loans for vehicles assembled in the U.S., available to all taxpayers from 2025 to 2028, up to $10,000. The deduction phases out for incomes above $100,000 (single) and $200,000 (joint) at $200 per $1,000.
I interpret this as a response to potentially higher auto costs in response to recent tariffs.
Senior Deduction Boost: Temporarily increase the additional standard deduction for seniors by $4,000 from 2025 through 2028 and extend eligibility to those who itemize. The larger deduction phases out at 4% starting at $75,000 (single) and $150,000 (joint) in modified AGI.
Overtime Pay Deduction: Make the premium portion of overtime wages deductible—regardless of whether the filer itemizes—for 2025 through 2028, excluding high-income earners and qualified tips.
Premium Tax Credit (PTC) Oversight: Strengthen eligibility checks for PTCs and remove limits on reclaiming overpaid credits.
This means that you may have to provide a paystub or use prior year AGI to determine what your eligibility threshold is. Today, it’s advance is based on your input of income. The clawback cap is to stop any misrepresentation of income to reduce insurance premiums.
Gift Tax Exemption:Permanently increase the estate exemption to $15M (this was set to sunset back to ~$6M upon expiration this year).
Restore 100% Bonus Depreciation: This is expected to continue through 2025 - 2029.
Increase Qualified Business Income Deduction: Previously this was at 20%, this is proposed to increase to 23%.
This is just some, but not all, of the list of some of the more major updates to existing tax law.
It’s expected that around July 4th we should have the bill passed - some version of the bill that is.
More to come once we have the final draft!