1. Standard Deduction & Tax Rates
The standard deduction continues to be higher than in prior years, helping reduce taxable income for most filers. The seven federal income tax brackets (10% through 37%) remain in place and are indexed for inflation.
2. SALT Deduction Cap Increase
The cap on state and local tax (SALT) deductions is significantly increased from $10,000 to $40,000 for 2025 (with phase-outs for higher earners). This can benefit filers in high-tax states who itemize deductions.
3. New and Expanded Deductions
Several temporary deductions were introduced for tax year 2025, including:
• Tip income deduction (for qualifying tipped workers)
• Overtime pay deduction
• Auto loan interest deduction for qualifying new, U.S.-assembled vehicles
These deductions generally have income limits and expire after 2028.
4. 1099-K Reporting Threshold Reset
The reporting threshold for Form 1099-K was reset to $20,000 and at least 200 transactions, which means fewer small sellers and gig workers automatically receive 1099-K forms (though income is still taxable).
5. Clean Energy Tax Credits Ending
Some federal clean energy tax credits (like the EV credit and certain residential energy credits) are being phased out or eliminated for vehicles purchased after September 30, 2025.
📌 Other Notable Changes
- The estate and gift tax exemption is set to increase to around $15 million per individual starting in 2026.
- Many provisions of the Tax Cuts and Jobs Act (TCJA), such as the lower tax rates, are now made permanent or extended under recent legislation.
📌 What This Means for You
- You may see larger deductions and a lower taxable income due to increased standard deductions and the higher SALT cap.
- New temporary deductions (tips, overtime, etc.) could benefit eligible workers.
- Some tax breaks (like EV credits) will no longer be available for property purchased after 9/30/2025.