What the “One Big Beautiful Bill” Means for Your 2025 Taxes
What the “One Big Beautiful Bill” Means for Your 2025 Taxes
A clear look at how the new tax reform law will affect deductions, credits, retirement contributions, and more
Overview
The 'One Big Beautiful Bill' is the latest major tax legislation signed into law, bringing a mix of permanent extensions and fresh changes to how individuals, families, and small businesses will file and plan their taxes.
This bill includes everything from a larger standard deduction to new savings accounts, updates to the Child Tax Credit, and the elimination of federal income tax on tips and overtime pay.
If you prepare taxes or plan your own, it’s important to understand what’s changing so you can take advantage of the new benefits—or prepare for any adjustments.
What’s Included in the Bill?
Let’s break down the most important changes affecting 2025 tax returns, which will be filed in 2026.
1. Standard Deduction Made Permanent and Increased
The standard deduction amounts that were temporarily boosted in 2017 are now permanently locked in, with regular annual adjustments for inflation.
2025 Standard Deduction Amounts:
- $14,600 for Single or Married Filing Separately
- $29,200 for Married Filing Jointly or Qualifying Surviving Spouse
- $21,900 for Head of Household
This means more taxpayers will continue to take the standard deduction instead of itemizing.
2. Expanded Child Tax Credit
The Child Tax Credit has been expanded to include:
- A higher per-child credit amount (exact figure to be released by the IRS)
- Increased refund ability for lower-income families
- Higher income thresholds before the credit phases out
This update is designed to benefit more working families, even those with limited income.
3. Tip Income and Overtime Pay Now Tax-Free (Federally)
The new law eliminates federal income tax on:
- Tip income
- Overtime wages
This is expected to benefit hourly workers, service industry employees, and anyone earning additional pay beyond standard hours. However, these types of income are still subject to Social Security and Medicare (FICA) taxes, and may still be taxable at the state level.
4. Estate and Gift Tax Exemption Extended
The higher estate and gift tax exemption amounts are now permanent. For 2025, the individual exemption is $13.61 million, and over $27 million for married couples.
This is especially significant for high-net-worth individuals and family-owned businesses looking to transfer assets across generations without triggering federal estate tax.
5. Changes to the Adoption Credit
The adoption credit now includes:
- A higher maximum credit amount
- A broader definition of “special needs” that includes recognition of tribal governments
This expansion will help more families access financial support during the adoption process.
6. Expanded Use of 529 Plans and Education Benefits
The law expands what counts as a qualified education expense under 529 savings plans. You can now use funds for:
- Homeschooling expenses
- Career certification programs
- Postsecondary credentials such as licenses and apprenticeships
Also, employer contributions to student loan repayment programs will remain tax-free, permanently.
7. Introduction of “MAGA Accounts”
A new savings tool called the MAGA Account (short for Making America Grow Again) has been introduced.
While final IRS rules are still pending, these accounts are expected to offer:
- Tax-advantaged savings options
- Flexibility for education, emergencies, or home buying
- Potential for employer contributions
More details will be available before the 2025 filing season begins.
8. Small Business and Retirement Updates
Several tax breaks for business owners and self-employed individuals are extended or improved:
- The Qualified Business Income (QBI) deduction, allowing up to a 20% deduction for eligible business income, is now permanent
- The Saver’s Credit is expanded to reach more low and moderate-income earners
- Higher contribution limits remain for catch-up contributions to retirement accounts for individuals over age 50.
What’s Not Coming Back
Provision
Status
Personal exemptions
Eliminated
Miscellaneous itemized deductions
Still suspended
Moving expense deduction
Limited to active-duty military
Casualty and theft losses
Limited to federally declared disaster areas only
Action Steps
Whether you're filing for yourself or helping clients, here are some important steps to take now:
- Review eligibility for expanded credits such as the Child Tax Credit and Adoption Credit
- Adjust withholding and estimated tax planning for new income exclusions (tips and overtime)
- Update retirement contribution plans, especially for those over age 50
- Watch for IRS guidance on MAGA Accounts and updated 2025 forms
Final Thoughts
The One Big Beautiful Bill brings some of the most taxpayer-friendly reforms seen in years. From larger deductions and expanded credits to new savings opportunities, these changes are designed to make the tax code more flexible for working families and individuals.
Whether you're a taxpayer or a tax professional, this is a great time to get familiar with the changes and begin planning ahead for the 2025 tax year.
Helpful Resources
Publication 17: Your Federal Income Tax:
Publication 501: Exemptions, Standard Deduction, and Filing Information:
Congress.gov – Bill Summary (once released)
