New Federal Tax Law: What the July 4, 2025 Changes Mean for You

On July 4, 2025, President Trump signed a wide-ranging reconciliation package—originally nicknamed the “One Big Beautiful Bill Act.” After intense negotiations, marathon sessions, and a tie-breaking vote by Vice President JD Vance in the Senate, the measure locked in major tax rules and added notable new provisions for individuals and businesses.

Provisions Made Permanent

The law cements several elements that were set to sunset with the 2017 TCJA at the end of 2025. Permanently retained are:

• Income tax brackets introduced by TCJA (10% to 37%).

• Elimination of personal exemptions.

• Higher AMT exemptions and thresholds.

• Limits on mortgage interest deductions.

• Restrictions on casualty loss and miscellaneous itemized deductions.

• Rollovers from qualified tuition programs to ABLE accounts.

Additional permanent adjustments include the deduction for mortgage insurance premiums and allowing teachers to deduct unreimbursed classroom expenses without tight dollar caps.

Standard Deduction (2025 amounts; inflation-adjusted going forward)

• $31,500 for joint filers

• $23,625 for heads of household

• $15,750 for single filers and married filing separately

SALT Deduction Changes

The state and local tax (SALT) cap rises to $40,000 in 2025, then increases by 1% annually through 2029, and reverts to $10,000 in 2030. A phase-out applies for higher earners, starting at modified AGI over $500,000.

Child Tax Credit

The child tax credit is permanently increased to $2,200 per child, indexed to inflation. The refundable portion remains capped at $1,700, and a valid Social Security number is required.

Estate and Gift Changes

Beginning in 2026, the estate tax exclusion permanently rises to $15 million (inflation-adjusted each year).

Temporary Deductions for Tips and Overtime (through 2028)

• Tip income deduction up to $25,000 (with phase-outs at higher incomes).

• Overtime pay deduction up to $12,500 (with phase-outs).
  Both apply without itemizing and expire after 2028.

Additional Individual Provisions

• Special $6,000 deduction for seniors age 65+ (2025–2028).

• Automobile loan interest deduction up to $10,000 (2025–2028).

• Introduction of “Trump Accounts”—tax-advantaged accounts for newborns, seeded with $1,000.

• 529 plan expansion to cover homeschooling and K–12 expenses.

Business and International Measures

• 100% bonus depreciation permanently for specified assets acquired from January 2025 onward.

• Immediate expensing of research and experimental costs—permanent.

• Qualified Business Income (Section 199A) deduction—permanent.

Phase-Out of Green Energy Credits

To help offset costs, many green energy credits created under the Inflation Reduction Act of 2022 are terminated. Most consumer credits and clean-vehicle incentives largely expire after 2025, with longer phase-outs for certain producers.

IRS and Compliance Updates

• The IRS Direct File program is discontinued.

• New penalties target fraudulent promoters of certain tax schemes, though the final penalty levels are lower than initially proposed.

What to Do Now

This legislation reshapes the tax landscape. Coordinated planning can help you capture available benefits, steer clear of phase-outs, and avoid unpleasant surprises.

FMD Wealth Advisors can review how these rules interact with your income, deductions, business structure, estate plan, and charitable goals—then build an action list tailored to you. Contact us for a personalized strategy session.

Disclosures: FMD Wealth Advisors LLC (“FMD Wealth Advisors”) is a Registered Investment Adviser. 

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