What to Know About the 2025 Tax Law Changes
Recently, new legislation was passed that is reshaping the tax landscape for both individuals and businesses. Below is a summary of some of the relevant updates included in the legislation. What’s permanent, what’s expanded, and what you should consider before year-end.
For Individuals
2017 Tax Cuts Now Permanent
The tax brackets and standard deduction levels from the 2017 Tax Cuts and Jobs Act (TCJA) are now permanent. For 2025, the standard deduction is:
- $15,750 for Single filers
- $23,625 for Head of Household
- $31,500 for Married Filing Jointly
- These figures will be adjusted annually for inflation
SALT Deduction Expanded (With Limits)
The cap on the state and local tax (SALT) deduction has increased from $10,000 to $40,000 for filers with modified adjusted gross income (MAGI) under $500,000 (or $1 million for joint filers). The cap gradually phases down as income increases, but won’t fall below $10,000 through 2029.
Boost to Child Tax Credit
From 2025 through 2028, the child tax credit increases to $2,500 per qualifying child. It is scheduled to revert to $2,000 starting in 2029.
New Deduction for Tips and Overtime
A new “above-the-line” deduction allows certain workers to deduct tip and overtime income from their taxable income. This provision is in effect through 2028 and provides relief for hourly wage earners.
Additional Deduction for Seniors
Taxpayers age 65 and older will receive an extra $6,000 standard deduction from 2025 to 2028. This benefit phases out gradually for those with incomes between $75,000–$175,000 (single) or $150,000–$250,000 (joint).
For Businesses and Investors
QBI Deduction Made Permanent
The 20 percent Qualified Business Income (QBI) deduction for pass-through entities is now permanent, giving small business owners long-term clarity and planning confidence. Additionally, the Qualified Opportunity Zones program has been extended, with modest changes.
R&D Expensing Reinstated
Domestic research and experimental (R&E) costs—as well as software development expenses—can once again be fully expensed in the year incurred through 2029. Foreign R&D must still be amortized.
Bonus Depreciation Extended
Businesses can continue to immediately expense the cost of qualifying capital investments, helping capital-intensive industries maintain stronger cash flow.
Energy and Other Notables
Green Energy Credits Rolled Back
Several clean energy incentives from the Inflation Reduction Act are being reduced or phased out. Fossil fuel permitting processes have been streamlined to support domestic energy production.
New Tax on University Endowments
A new tax has been enacted on large university endowments, targeting institutions with significant assets relative to student population.
Planning Ahead
The 2025 tax law offers a mix of permanent changes and temporary reliefs, making strategic tax planning more important than ever. Whether you’re looking to adjust your withholdings, plan business investments, or optimize deductions, the SDK team is here to help you make the most of these new provisions.
Have questions?
Contact your SDK advisor to discuss how these changes affect your specific tax situation.