.png)
In early July, President Trump signed the One Big Beautiful Bill Act—a large and wide-reaching piece of legislation aimed at modifying several areas of the tax code. While it’s generating buzz in political and economic circles, here’s what individuals, families, and small businesses really need to know heading into the 2025 tax year.
Standard Deduction Increases
The bill permanently raises the standard deduction in 2025, locking in higher thresholds introduced by the Tax Cuts and Jobs Act (TCJA). The new deduction amounts are:
These amounts will be adjusted for inflation each year. For most taxpayers who don’t itemize, this means a lower taxable income and possibly a smaller tax bill. Itemizers may want to compare again starting next year to see which route benefits them most.
New Deduction for Tipped Workers: Up to $25,000
If you earn tips as part of your job—whether you're waiting tables, working behind a bar, or in another service role—you may see some tax relief starting in 2025.
A new provision allows for an above-the-line deduction of up to $25,000 in reported tips. That means you can reduce your taxable income, even if you don’t itemize.
Here’s what to keep in mind:
If you work in a tipped job, you’ll want to make sure your income is properly reported—and that your records are clean—so you can take advantage of this when you file.
Overtime Deduction: Up to $12,500 for 2025–2028
Starting in 2025, W-2 employees can deduct up to $12,500 in qualified overtime pay from their taxable income.
Here’s the scoop:
Child Tax Credit Boost
The Child Tax Credit has been permanently increased from $2,000 to $2,200 per child under age 17, starting in tax year 2025. The credit will now include annual inflation adjustments going forward.
Important to Note:
100% Bonus Depreciation Extended
100% bonus depreciation is back and extended through 2027. This allows businesses to fully deduct the cost of qualified equipment, machinery, and other eligible property in the year it's placed in service.
This is a return to pre-2023 rules, which had begun phasing out. Starting in 2028, the deduction will phase down to 20% per year unless extended again.
Expanded Health Insurance Deductions for Business Owners
Self-employed individuals and small business owners can now deduct a broader range of health insurance premiums, including for certain family members employed in the business.
This change may offer greater flexibility in how small businesses structure employee compensation and benefits.
Higher 1099-K Threshold
The reporting threshold for third-party payment platforms (like Venmo, PayPal, etc.) reverts to $20,000 and 200 transactions—up from the $600 threshold that was set to take effect. This may reduce surprise tax reporting for small online sellers and gig workers.
Major tax law changes can bring uncertainty—and opportunity. TaxNow helps individuals and tax professionals stay ahead with:
Want to stay ready for the 2025 changes?
*TaxNow is here to help you stay informed and prepared, but we always recommend consulting a qualified tax professional before making changes to your tax filings or strategy.*
