President Donald Trump signed the One Big Beautiful Bill Act into law in July. The legislation made permanent many provisions of the Tax Cuts and Jobs Act of 2017 and ushered in numerous new and modified tax deductions.
“A lot of the changes that the bill made will take effect in 2026,” says Patrick Malloy, co-director of national tax practice and strategy for Crescent Grove Advisors in Milwaukee.
Still, there is a long list of items that are changing for the 2025 tax season.
“I think people might be pleasantly surprised this year to see their tax burden go down,” says Jeff Kelson, partner and co-leader of the national tax office at Eisner Advisory Group in Iselin, New Jersey.
Here’s what will be different about filing taxes this year:
— There is a Schedule 1-A for new deductions.
— Up to $40,000 in state and local taxes can be deducted.
— Parents can claim a Trump account with Form 4547.
— Businesses can opt for 100% bonus depreciation.
— Standard deductions have been adjusted.
— You may get a larger refund than normal.
— State tax returns could be subject to retroactive changes.
[READ: Trump’s One Big Beautiful Bill Includes New Tax Breaks: Will You Benefit?]
There Is a Schedule 1-A for New Deductions
Last year’s tax overhaul included several new deductions, and the IRS has created Schedule 1-A to report them. The form will be used for the following:
— Tip exclusion: Up to $25,000 in tipped income can be deducted from taxes by single taxpayers earning up to $150,000 and married couples earning up to $300,000. “The tip has to be the amount the customer willingly paid,” says Logan Allec, a certified public accountant and owner of Choice Tax Relief.
— Overtime exclusion: Single taxpayers can deduct up to $12,500 in overtime pay, and married couples can deduct up to $25,000 in overtime pay, provided their total income does not exceed $150,000 or $300,000, respectively.
— Car loan interest deduction: Up to $10,000 in car loan interest can be deducted by single taxpayers earning up to $100,000 and married couples earning up to $200,000. The vehicle must meet certain qualifications, including having its final assembly in the U.S.
— Enhanced deduction for seniors: Taxpayers age 65 and older can claim an additional $6,000 deduction if their income doesn’t exceed $75,000 for a single taxpayer or $150,000 for a married couple filing jointly. This provision of the Republican tax bill has been touted by some as delivering on the president’s promise to no longer tax Social Security benefits, but that’s not accurate, tax experts say. “It’s a little misleading because it didn’t change how Social Security is taxed,” according to Allec.
Taxpayers who exceed the income limits listed for any of the items above may still be able to claim a partial deduction.
There are also additional limitations and requirements to qualify for these tax breaks. For example, workers in some occupations may not be allowed to exclude their tips.
“There’s a list of industries that qualify, but the list is pretty extensive,” says Christy Woodward, senior tax advisor with MCF Advisors in Lexington, Kentucky.
Up to $40,000 in State and Local Taxes Can Be Deducted
Taxpayers who itemize their deductions have long been able to deduct how much they pay in state and local taxes. However, the Tax Cuts and Jobs Act of 2017 capped that amount at $10,000. That, combined with an increase in the standard deduction, meant many people stopped itemizing.
The One Big Beautiful Bill Act increases the state and local tax deduction, commonly called SALT, to $40,000 for the 2025 tax year. That may make itemizing more appealing to taxpayers, particularly homeowners in areas with high property taxes.
“It doesn’t take much to be over the standard deduction limit,” Kelson says.
Parents Can Claim a Trump Account With Form 4547
All children born in 2025 are eligible for a Trump account, so long as they have at least one parent with a Social Security number. The government will make a one-time $1,000 deposit into the account, then family members can make additional contributions. Money in the account can’t be accessed until the child is 18.
“It’s like every kid is now a trust fund baby,” Kelson says.
The details are still being worked out, and the accounts aren’t expected to come online until this summer. However, parents can elect to open one for their child by submitting Form 4547 with their tax return.
“I think it’s going to be interesting to see what the utilization on those is,” Woodward says. She adds that in future years, it is expected there will be a checkbox for parents to elect to open a Trump account, rather than a separate form to complete.
Businesses Can Opt for 100% Bonus Depreciation
Businesses can deduct expenses, but for some purchases, they are required to use a lengthy depreciation schedule. That means the amount they can deduct each year is relatively small. The new tax bill, though, gives them the option to claim the entire purchase amount — 100% depreciation — in the first year.
As with most tax deductions, various limitations and requirements must be met to take advantage of this bonus depreciation.
“If you’re a small business, things have gotten a lot nicer but also more complicated,” Kelson says.
[READ: How the One Big Beautiful Bill Act Could Affect Housing]
Standard Deductions Have Been Adjusted
Each year, the standard deduction is adjusted, and for the 2025 tax year, taxpayers will be eligible for the following amounts:
— Single taxpayers: $15,000, up from $14,600 in 2024
— Heads of household: $22,500, up from $21,900 in 2024
— Married couples, filing jointly, and surviving spouses: $30,000, up from $29,200 in 2024
“We still have the elevated standard deduction and favored tax brackets that we’ve enjoyed the last few years,” Malloy says.
The Tax Cuts and Jobs Act nearly doubled the standard deduction and adjusted tax brackets, such as reducing the top income tax bracket from 39.6% to 37%. Those provisions were scheduled to sunset at the end of 2025, but with the passage of the One Big Beautiful Bill Act, the higher standard deductions and lower tax brackets are now here to stay.
You May Get a Larger Refund Than Normal
In an address to the nation in December, Trump said this spring could be the “largest tax refund season of all time,” and tax experts agree that many people will receive more than usual.
“One of the reasons is that they did not adjust the tax withholding tables,” Woodward says.
Employers use these tables to withhold taxes from worker paychecks, but without new tables, tax withholdings don’t reflect the changes enacted by the One Big Beautiful Bill Act. That means employees may have overpaid their taxes last year and will be refunded that amount when they file their tax return. Plus, new and expanded deductions could lead to larger refunds.
“I’m not sure it’ll be as crazy as the administration claims,” Allec says.
While many people are likely to get larger refunds, taxpayers should keep expectations in check. “I would caution against expecting a big refund,” Malloy advises.
State Tax Returns Could Be Subject to Retroactive Changes
Tax changes aren’t just happening at the federal level. There could be adjustments to state tax returns as well.
States use one of two methods of adopting federal tax adjustments, explains Christian Burgos, managing director at Baker Tilly in New York City. Some states, such as California, use a static conformity model in which they adopt provisions of the IRS tax code from a specific date. Others use rolling conformity in which they automatically incorporate changes to the federal tax code.
However, states using rolling conformity may decide to decouple from certain changes that they deem too generous. For instance, they may decide not to allow 100% bonus depreciation, or as New York has done, they may continue to fully tax tips and overtime pay.
“It’s going to be driven largely by the state’s revenue,” Burgos says.
The wrinkle for taxpayers is that states may not finalize their tax code changes until after the tax season is underway. What’s more, states could make changes retroactive.
“When the OBBBA was passed … many states had closed their legislative session for the year,” according to Burgos. As a result, states are just now looking at whether and how to decouple from specific provisions of the One Big Beautiful Bill Act. Burgos says legislation has been introduced in about 20 states to make changes this year.
The takeaway for taxpayers is that if they expect a significant state refund because of a change to the federal tax code, they may want to wait until later in the tax season to file in case their state makes adjustments.
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Trump’s Tax Cuts: What Will Be Different When You File Taxes in 2026? originally appeared on usnews.com
