Who Does it Affect?

• Tipped Employees: Enjoy a temporary federal income tax deduction on tips (currently for 2025 to 2028), subject to income limit phaseouts 

• Married Couples: Must file jointly to claim the deduction.

Full Details:

The act labels one of its new, temporary (effective 2025 through 2028) deductions “no tax on tips,” and this is how it has been portrayed in the media, so many clients may be surprised to discover that they will still owe tax on tips. Some may have already been surprised to find taxes were still being withheld on their tip income after the act was enacted. The first thing to recognize is that the deduction applies only to federal income tax; taxpayers will still owe Social Security and Medicare taxes on their tip income. The second is that states have so far not followed the federal government’s lead, so state income tax will still be owed on tip income (in states with an income tax). 

And not all taxpayers will be eligible for the deduction, either because they work in an occupation that does not customarily and regularly receive tips or because their tip income was not reported to them on the appropriate form (Form W-2, Wage and Tax Statement; various versions of Form 1099; or Form 4137, Social Security and Medicare Tax on Unreported Tip Income). The IRS has promised to release a list of occupations that customarily and regularly receive tips and therefore make the recipient eligible for the deduction. The IRS has also promised transition relief for tax year 2025 for individuals claiming the deduction and for employers subject to new reporting requirements. 

Taxpayers conducting or employed by a trade or business that is a specified service trade or business (SSTB) under Sec. 199A(d)(2) are ineligible for the “no tax on tips” deduction. SSTBs include any trade or business involving the performance of services in the fields of health; law; accounting; actuarial science; performing arts; consulting; athletics; financial services; brokerage services; investing and investing management; trading or dealing in securities, partnership interests, or commodities; or any trade or business where the principal asset of the trade or business is the reputation or skill of one or more of its employees or owners. 

In addition, some taxpayers may find the deduction reduced because their MAGI is too high (the deduction phases out for taxpayers with MAGI over $150,000 ($300,000 in the case of a joint return)). And the maximum deduction is $25,000, so taxpayers with tip income over that amount will end up paying income tax on the overage (or over the phased-down amount, if their MAGI exceeds the threshold). For self-employed taxpayers, the deduction cannot exceed the individual’s net income (without regard to the “no tax on tips” deduction) from the trade or business in which the tips were earned. And married taxpayers must file jointly in order to claim the deduction. 

Who Does it Affect?

• Overtime Workers: Enjoy a temporary federal income tax deduction on overtime pay (currently for 2025 to 2028), subject to income limit phaseouts 

• Married Couples: Must file jointly to claim the deduction.

• Reporting Requirements: Overtime must be reported as qualified overtime compensation on the appropriate form from your employer

Full Details:

Another deduction that may catch some clients unaware is the new, temporary (effective 2025 through 2028) deduction called “no tax on overtime.” This deduction holds many of the same potential surprises as the “no tax on tips” deduction. 

First, it applies only to federal income tax, not Federal Insurance Contributions Act (FICA) taxes and not state taxes. Also, if the taxpayer’s overtime is not reported as qualified overtime compensation on the appropriate form (Form W-2, Form 1099, or other specified statement furnished to the individual), it is not eligible for the deduction. Only the portion of overtime pay that exceeds the taxpayer’s regular rate of pay (e.g., the “half” portion of time-and-ahalf pay) is potentially deductible, up to a maximum deduction of $12,500 ($25,000 in the case of a joint return), so taxpayers earning more than that in overtime pay will have to pay income tax on the overage. And, finally, the deduction phases out by $100 for every $1,000 the taxpayer’s MAGI exceeds $150,000 ($300,000 in the case of a joint return). This means it will phase out for single taxpayers at $275,000 of MAGI and for joint filers at $550,000 of MAGI. 

As with the “no tax on tips” deduction, married individuals must file jointly to claim the deduction. 

The IRS has promised transition relief for tax year 2025 for individuals claiming the deduction and for employers subject to new reporting requirements.  

Who Does it Affect?

• Seniors Aged 65+: Claim a $6,000 deduction per person (up to $12,000 for joint filers) from 2025 to 2028.

• High-Income Seniors: Deduction phases out for those with MAGI over $75,000 ($150,000 for joint filers).

Full Details:

Under the act, individuals who are age 65 and older may claim a deduction of $6,000 in 2025 through 2028. The $6,000 amount is per person — so married couples can claim a $12,000 deduction if they both qualify. However, the deduction phases out for taxpayers with modified Preparing clients for new provisions next tax season By Alistair M. Nevius, J.D. journalofaccountancy.com October 2025 | 3 adjusted gross income (MAGI) over $75,000 ($150,000 for joint filers). To qualify, a taxpayer must turn 65 on or before the last day of the tax year. This new deduction is in addition to the current additional standard deduction for seniors of $1,600, or $2,000 if the individual is unmarried and not a surviving spouse. 

Because the extra senior deduction was created as a substitute for a “no tax on Social Security” promise that could not be adopted under the budget reconciliation rules that governed the passage of the act, clients may think they have to be receiving Social Security benefits to take the deduction, but they do not. Individuals age 65 and older can claim the deduction even if they haven’t started taking Social Security. On the other hand, individuals between the ages of 62 and 64 are not eligible for the deduction, even if they have started receiving Social Security benefits. 

Who Does it Affect?

• New Car Buyers: Deduct up to $10,000 in interest paid on loans for new, personal-use vehicles purchased after 2024.

Full Details:

The act allows individuals to deduct up to $10,000 in interest paid on a loan used to purchase a qualified vehicle, but various restrictions embedded in the provision may prove a trap (including a phaseout beginning at $100,000 of MAGI ($200,000 for married taxpayers filing jointly)). 

To qualify for the deduction, the interest must be paid on a loan that is originated after Dec. 31, 2024; used to purchase a vehicle, the original use of which starts with the taxpayer (used vehicles do not qualify); for a personal use vehicle (not for business or commercial use); and secured by a first lien on the vehicle.

A qualified vehicle is a car, minivan, van, SUV, pickup truck, or motorcycle with a gross vehicle weight rating of less than 14,000 pounds that has undergone final assembly in the United States, among other requirements.

Finally, for many eligible clients, the interest deduction will not outlast the car loan; the provision is set to expire after 2028. 

Who Does it Affect?

• Parents: Enjoy a permanent $2,200 nonrefundable child tax credit (up from $2,000 in previous years) per child, plus an additional refundable credit of $1,700 for 2025 (up from $1,400 in previous years).

Full Details:

The nonrefundable child tax credit was permanently increased to $2,200 per child. The additional child tax credit (the refundable child tax credit) of $1,400, adjusted for inflation, was also made permanent. The additional child tax credit after adjustment for inflation is $1,700 for 2025. The credit starts to phase out at MAGI of $200,000 ($400,000 in the case of a joint return). There is also a $500 nonrefundable credit available for each dependent of the taxpayer other than a qualifying child. As formerly, Social Security numbers must be shown on the return for each child for whom the credit is being claimed. 

New for 2025, however, is a requirement that the taxpayer claiming the credit (or in the case of a joint return, at least one of the spouses) also must have a Social Security number, which must be included on the taxpayer’s return. 

Who Does it Affect?

• All Taxpayers: Enjoy higher standard deductions permanently.

• High-Income Earners: Face new limits on itemized deductions starting in 2026.

• Educators: Lose the ability to deduct unreimbursed expenses as miscellaneous itemized deductions.

Full Details:

The act made the TCJA’s increased standard deduction permanent. For 2025, it is set at $15,750 for single filers, $31,500 for married individuals filing jointly, and $23,625 for heads of household. Along with the increased standard deduction, the act made permanent the TCJA’s suspension of miscellaneous itemized deductions (although it removed eligible educators’ unreimbursed employee expenses from the miscellaneous itemized deductions list). 

The act also created a new limit beginning in 2026 on the amount of benefit high-income taxpayers can get from their itemized deductions. The act limits the amount of itemized deductions available to taxpayers in the 37% tax rate bracket. Their itemized deductions (determined before the limitation on itemized deductions) will be reduced by 2/37 of the lesser of the amount of the taxpayer’s itemized deductions or the amount of the taxpayer’s taxable income (before the limitation on itemized deductions and increased by the amount of itemized deductions) that exceeds the start of the 37% tax rate bracket. 

The act also made permanent the TCJA’s removal of the deduction for personal exemptions (setting it at zero). 

Who Does it Affect?

• All Taxpayers: If you take the standard deduction, you can now claim up to $1,000 in above‑the‑line charitable donations on your federal return, no itemizing required

Full Details:

The OBBBA establishes an above‑the‑line deduction for cash charitable contributions by taxpayers who do not itemize. For tax year 2026 and beyond, individual filers who take the standard deduction may deduct up to $1,000 of qualified charitable contributions on Form 1040. This deduction reduces adjusted gross income (AGI) directly and is available only if you do not itemize.

This is similar to how charitable donations were treated during the pandemic when there was a $300 deduction. Taxpayers who choose to itemize should instead report charitable deductions on Schedule A under the usual rules; the above‑the‑line deduction is intended solely for non‑itemizers and cannot be claimed in addition to Schedule A deductions for the same contributions. This goes in to affect in 2026 (tax return filed in 2027).

Who Does it Affect?

• Homeowners: Enjoy a bigger deduction for state and local taxes, including property taxes, increasing from $10,000 to $40,000 in 2025. (must itemize)

Full Details:

For 2025, the limit on the federal deduction for state and local taxes (the SALT cap) increases to $40,000 ($20,000 for married taxpayers filing separately) from the previous $10,000. The amount of the deduction available to a taxpayer is reduced by 30% of the amount the taxpayer’s MAGI exceeds $500,000 ($250,000 for married taxpayers filing separately), but the phaseout stops when the deduction reaches $10,000 ($5,000 for married taxpayers filing separately). The act did not limit the various workarounds that states have enacted and taxpayers are currently using to avoid the SALT cap. 

Who Does it Affect?

• Homeowners: Can still deduct mortgage interest on up to $750,000 in home loans, as this rule has been made permanent.

Full Details:

The TCJA’s provision limiting the qualified residence interest deduction to the first $750,000 in home mortgage acquisition debt was made permanent by the act. It also made permanent the exclusion of interest on home-equity indebtedness from the definition of qualified residence interest. The act also reinstates the provision (which had expired after Dec. 31, 2021) allowing certain mortgage insurance premiums on acquisition indebtedness to count as qualified residence interest.

Who Does it Affect?

• Electric Vehicle Buyers: 2025 is the final year to claim credits for qualifying electric vehicles purchased before October 1, 2025. 

Full Details:

Certain energy credits are being eliminated during 2025. The clean vehicle credit, the previously owned clean vehicle credit, and the qualified commercial clean vehicle credit all were terminated at the end of September. Clients who bought qualifying vehicles before Oct. 1 may qualify for a credit; those who bought on or after that date will not. 

Who Does it Affect?

• 529 Plan Beneficiaries: Can use distributions for additional expenses, including job training and certification programs.

• K-12 Students: Can use 529 plan funds for certain elementary and secondary school expenses.

Full Details:

For distributions made after July 4, 2025, the act allows tax-exempt distributions from Sec. 529 savings plans to be used for additional qualified higher education expenses, including “qualified postsecondary credentialing expenses” in connection with “recognized postsecondary credential programs” and “recognized postsecondary credentials.” 

Another change to Sec. 529 plans that clients may have heard about — allowing distributions to be used for certain educational expenses in connection with enrollment or attendance at an elementary or secondary school — also applies to distributions made after July 4, 2025. 

Who Does it Affect?

• Homeowners in Disaster Areas: Can deduct losses from federally declared disasters, and starting next year, certain state-declared disasters too.

Full Details:

The TCJA’s provision limiting the itemized deduction for personal casualty losses to losses resulting from federally declared disasters is now permanent. The act also expanded the provision to include certain state-declared disasters, but that change is not effective until next year.

Who Does it Affect?

• Most Taxpayers: Can no longer deduct moving expenses, as this deduction has been permanently eliminated.

Full Details:

The act makes permanent the TCJA’s elimination of the moving expense deduction, except for active-duty members of the U.S. armed forces. A new provision added by the act allowing a moving expense deduction for certain members of the intelligence community takes effect in 2026. 

Who Does it Affect?

• Adoptive Parents: Can receive up to $5,000 of the adoption credit as a refund, even if they owe no federal income tax.

Full Details:

Starting in 2025, a portion of the adoption credit is refundable — up to $5,000.

Before 2025, the adoption credit was entirely nonrefundable, meaning it could only reduce your tax liability to zero. The limit was $16,810 per child for qualified adoption expenses. For the 2025 tax year, the credit is capped at $17,280 per eligible child, including a $5,000 refundable portion. 

Who Does it Affect?

• Business Owners: Can deduct the full cost of new equipment

Full Details:

The allowance is increased to 100% for property acquired and placed in service on or after Jan. 19, 2025, as well as for specified plants planted or grafted on or after Jan. 19, 2025. Property placed in service in the first 18 days of 2025 is subject to the former, reduced rate of 40% in effect before the enactment of the act. 

Who Does it Affect?

• Business Owners: Can write off up to $2.5 million in the cost of new equipment and software purchased

Full Details:

For property placed in service in 2025, the maximum amount a taxpayer may expense under Sec. 179 is $2.5 million, reduced by the amount by which the cost of the qualifying property exceeds $4 million. The $2.5 million and $4 million amounts are adjusted for inflation for tax years beginning after 2025. 

Who Does it Affect?

• Self-Employed Individuals and Small Business Owners: Your business losses that exceed certain income thresholds will continue to be limited, affecting how much you can deduct from your taxes.

Full Details:

The act makes the Sec. 461(l)(1) limitation on excess business losses of noncorporate taxpayers permanent.

The limitation said if your business deductions exceeded your business income plus a threshold amount ($270,000 for single filers, $540,000 for married filing jointly), the excess would not be deductible in the current year.  Instead, that loss would be carried forward to future tax years.

Who Does it Affect?

• Businesses Conducting R&D: Can immediately deduct domestic research expenses starting in 2025

Full Details:

The act allows taxpayers to immediately deduct domestic research or experimental expenditures paid or incurred in tax years beginning after Dec. 31, 2024. However, research or experimental expenditures attributable to research that is conducted outside the United States will continue to be required to be capitalized and amortized over 15 years under Sec. 174.

Small business taxpayers with average annual gross receipts of $31 million or less (other than a tax shelter) can retroactively apply this change to tax years beginning after Dec. 31, 2021. In addition, all taxpayers that made domestic research or experimental expenditures in tax years beginning after Dec. 31, 2021, and before Jan. 1, 2025, can elect to accelerate the remaining unamortized deductions for those expenditures over a one- or two-year period.

Who Does it Affect?

• Businesses with over $25M in income: Starting in 2025, depreciation, depletion, and amortization will no longer reduce your adjusted taxable income (ATI) for interest deduction limits.

Full Details:

The act changed the definition of adjusted taxable income (ATI) under Sec. 163(j) for tax years beginning after Dec. 31, 2024, permanently excluding depreciation, depletion, and amortization from the computation of ATI. The act also amended the definition of “motor vehicle” to allow interest on floor plan financing for certain trailers and campers to be deductible.

The basic rule: You can deduct business interest up to 30% of a measure of your income called ATI. If you can’t deduct some interest because of the limit, you carry it forward and try again next year.

How ATI is figured: For tax years after Dec. 31, 2024, ATI is computed more generously — you add back depreciation, depletion, and amortization (so it’s like EBITDA). That means the 30% cap is less likely to bite. From 2022–2024 the law used a tighter measure (didn’t add those items back), which could reduce the deductible interest.

Small businesses: If your average annual gross receipts for the past three years are below the inflation‑adjusted threshold (previously $25M), you’re generally exempt — meaning you don’t have this 30% limit.

Who Does it Affect?

• Small Business Investors: You can avoid paying taxes on some or all of the capital gains from selling shares in a small business

Full Details:

The act modified the Sec. 1202 exclusion for gain from qualified small business stock (QSBS) by providing a tiered gain exclusion for QSBS acquired after July 4, 2025. For QSBS acquired after that date and held for three years, 50% of the gain will be excluded from gross income. If the QSBS is held for four years, the exclusion rises to 75%. If the QSBS is held for five years or more, 100% of the gain will be excluded from income. 

Who Does it Affect?

• Small Businesses: You won't receive a Form 1099-K for income from online platforms unless you have more than $20,000 in sales and over 200 transactions in a year. This change rolls back the previous lower threshold of $600.

• MA Residents: The reporting threshold is still $600, no change

Full Details:

The act provides that with respect to reporting on Form 1099-K, Payment Card and Third Party Network Transactions, a third-party settlement organization is not required to report unless the aggregate value of third-party network transactions with respect to a participating payee for the year exceeds $20,000 and the aggregate number of such transactions with respect to a participating payee exceeds 200.

A lower reporting threshold of $600 (with no minimum transaction number) had been enacted as part of the American Rescue Plan Act of 2021, P.L. 117-2, but the IRS had issued guidance that phased in the implementation of that threshold over a multiple-year period, and under that guidance, the reporting threshold had been scheduled to be $2,500 in 2025 and $600 in 2026. 

Who Does it Affect?

• Small Businesses: Starting in 2026, you won't receive a Form 1099 for income unless you earn more than $2,000 in a year from a single payer.

• MA Residents: The reporting threshold is still $600, no change

Full Details:

The act increased the information-reporting threshold for certain payments to persons engaged in a trade or business and payments of remuneration for services to $2,000 in a calendar year (from $600), but this change is not effective until 2026. 

Most updates listed here apply to 2025 tax returns filed in 2026, unless otherwise noted. Some changes take effect mid-year or phase in gradually.

If you’re unsure which rules apply to your specific situation, we can help you review the timing and impact. 

The easiest way is to look at your income sources, dependents, filing status, business ownership (if any), and major life changes (marriage, home purchase, childcare, retirement).

We can help you identify exactly which updates affect you and whether action is needed.  

Potentially.

Changes to credits, deductions, income thresholds, or withholding rules can increase or decrease your refund.

Your refund is essentially a calculation of how much tax you paid during the year versus what you owe.

If you want certainty, we can run a quick projection based on your current income and withholding. 

It depends on your income type and which changes apply to you. If certain credits phase out or deductions shrink, you may need to adjust your withholding or quarterly payments to avoid a surprise balance due.

We can review your pay stubs or business income to determine if changes are recommended.  

Common areas that affect businesses include:

• depreciation & equipment expensing rules

• payroll tax thresholds (Social Security wage base, UI rates)

• 1099-K or 1099-NEC reporting changes

• business credit modifications

• BOI reporting requirements
   

Which ones matter most depends on your entity type, payroll size, and expenses. We can walk through the changes that directly apply to your business.

Yes, if your total expected tax liability changes.

Updates to credits, business deductions, depreciation, income phaseouts, or payroll taxes can affect how much you should pay each quarter. We can help you update your estimates so you avoid underpayment penalties 

Potentially.

Updates to depreciation, payroll thresholds, fringe benefits, or 1099 reporting often require bookkeeping adjustments.

If your books reflect outdated rules, it can create issues at year-end or during an audit. If you’d like, we can keep your books compliant throughout the year so tax season is simpler. 

Yes.

Many credits and deductions have annual limit changes, phaseouts, or new documentation requirements. We can review which credits or deductions your business may gain or lose based on these updates.  

Most years include updated contribution limits for retirement accounts. These increases can benefit both individuals and business owners looking to reduce taxable income.

We can help determine if increasing contributions makes sense for your situation. 

Possibly. Certain deductions, credits, and reporting rules require updated documentation or receipts.

If you're unsure, we can review your situation to help you stay compliant throughout the year.   

Usually not. The IRS publishes updates online, but they don’t proactively notify taxpayers about changes that may affect them.

This is why we summarize the key updates here and can review them with you directly.

The sooner, the better — especially if you might need to update withholdings, estimated taxes, payroll settings, or bookkeeping categories.

We recommend most clients schedule a mid-year or year-end review to avoid surprises during tax season. Keep in mind, little can be done to reduce taxes during tax prep; if it’s before year‑end, there are many planning options we can pursue.