Designed to extend many of the tax relief provisions originally enacted by the Tax Cuts and Jobs Act (TCJA), the new law includes a wide range of tax breaks for individuals, families, and small businesses.

As CPAs committed to helping individuals improve their financial well-being and reduce tax burdens, we’ve summarized 20 of the most relevant changes for middle-income taxpayers. Our goal is to provide clarity on how these updates may benefit you and how to plan accordingly.

1. Higher Standard Deduction

Beginning in 2025, the standard deduction increases to:

This enhancement means more of your income is shielded from taxation — particularly helpful for taxpayers who do not itemize deductions.

2. New Personal Exemption for Seniors

For tax years 2025 through 2028, taxpayers age 65 and older may claim a personal exemption of up to $6,000, subject to income phaseouts starting at $75,000 (or $150,000 for joint filers). This targeted relief benefits older adults on fixed incomes.

3. Increased Child Tax Credit

The Child Tax Credit rises to $2,200 per qualifying child starting in 2025, with annual inflation adjustments thereafter. As before, both the child and at least one parent must have valid Social Security numbers to qualify.

4. Tip Income Deduction

If you work in a tipped occupation (such as hospitality or service industries), you may deduct up to $25,000 in reported tip income from your taxable income. This applies for 2025 through 2028 and begins to phase out at $150,000 of modified AGI ($300,000 for joint filers).

5. Overtime Pay Deduction

Taxpayers who work overtime may deduct up to $12,500 of overtime wages (or $25,000 for joint filers) as an above-the-line deduction. The phaseout thresholds match those for tip income.

6. Deduction for Vehicle Loan Interest

A new provision allows an above-the-line deduction of up to $10,000 for interest paid on qualified auto loans (including refinanced loans) for vehicles purchased after 2024. This deduction is phased out above $100,000 of modified AGI ($200,000 MFJ).

7. Charitable Contributions for Non-Itemizers

Non-itemizers may now deduct up to $1,000 in charitable contributions ($2,000 for joint filers). This is in addition to the permanent 60% AGI cap for cash contributions. Itemizers will also be subject to a new 0.5% floor on charitable deductions.

8. Student Loan Forgiveness Exclusion Made Permanent

Student loan amounts forgiven due to death or permanent disability are now permanently excluded from taxable income — offering meaningful relief to borrowers and their families.

9. Expanded 529 Plan Flexibility

Tax-free 529 distributions now cover:

This offers families broader opportunities to use tax-advantaged education savings.

10. New “Trump Accounts” for Children

Children born between 2025 and 2028 may receive a $1,000 federally funded contribution into a new “Trump Account,” a tax-advantaged savings vehicle. Parents can contribute an additional 8$5,000 annually* (post-tax). These accounts are designed to support long-term savings from an early age.

11. Qualified Business Income Deduction (QBI) Made Permanent

The 20% QBI deduction for sole proprietors, partnerships, and S corporations is now permanent. The law also raises the phaseout thresholds by $25,000 ($50,000 for joint filers) and provides a minimum $400 deduction for small business owners who might otherwise phase out entirely.

12. Higher Estate and Gift Tax Exclusion

Effective in 2026, the federal estate and gift tax exclusion increases to $15 million per person, adjusted for inflation. This change significantly reduces the number of estates subject to estate tax and enables more flexible legacy planning.

13. Expanded Section 179 Deduction

Section 179 expensing limits increase to $2.5 million, with a phaseout beginning at $4 million. This allows businesses to immediately deduct the cost of qualified equipment, software, and property placed in service — making capital investment more attractive.

14. 100% Bonus Depreciation Made Permanent

Businesses may permanently write off 100% of the cost of eligible property in the year placed in service. This is especially beneficial for companies with heavy investments in equipment or infrastructure.

15. More Favorable Business Interest Deduction Rules

Beginning in 2025, the calculation for the business interest expense limitation once again excludes depreciation, amortization, and depletion, improving deductibility for many capital-intensive businesses.

16. Expanded Employer-Provided Child Care Credit

Employers offering child care benefits can now receive a credit of up to $500,000 (or $600,000 for eligible small businesses), up from the prior $150,000 cap. This could result in greater availability of employer-sponsored child care programs.

17. Capital Gain Exclusion for Small Business Stock Enhanced

Under updated rules for Qualified Small Business Stock (QSBS):

The lifetime gain exclusion cap also increases from $10 million to $15 million, incentivizing longer-term investments in startups and growth companies.

18. New Credit for Scholarship Donations

Starting in 2027, taxpayers may claim a credit of up to $1,700 for donations to certified scholarship-granting organizations. The credit replaces the traditional charitable deduction and supports school choice initiatives at the state level.

19. Simplified 1099 Reporting Requirements

The IRS has raised thresholds for several reporting forms:

This reduces reporting burdens for gig workers, online sellers, and small contractors.

20. Phaseout or Repeal of Energy Credits

To offset revenue losses, the OBBBA repeals many energy-related tax credits, including those for:

Most of these changes are effective for purchases made after 2025 or even sooner. If you’re planning energy-efficient upgrades or EV purchases, consider completing them before year-end.

Let’s Talk

If you have questions about how these changes affect your individual or business situation, we invite you to schedule a consultation with us.

Disclaimer: This content is for informational purposes only and should not be relied upon as tax or legal advice. Please consult a qualified tax professional to determine how these provisions apply to your unique situation.