Also, the phase-in amounts are increased from $50,000 to $75,000 for single filers and from $100,000 to $150,000 for joint filers.

Bonus depreciation: The Act makes additional first year (bonus) depreciation for certain qualified property permanent at 100% (under prior law, it was to phase out to zero). This provision is effective for property acquired after Jan. 19, 2025. There is also a new 100% bonus depreciation provision for “qualified production property” (QPP, which is certain non-residential real property used in the manufacturing, production or refining of certain tangible personal property). This QPP provision is effective for property placed in service after July 4, 2025.

179 Expensing limits:

For property placed in service after 2024, the Code Sec. 179 expensing limits are increased to $2,500,000 and the phaseout threshold is increased to $4,000,000.

Both limits are subject to inflation adjustments.

Business interest:

For post-2025 tax years, the Act modifies the definition of adjusted taxable income for purposes of the Code Sec. 163(j) limitation on business interest.

The new rule makes the limitation less restrictive by allowing depreciation and amortization to be added back, resulting in a higher adjusted taxable income, and potentially a larger allowable interest deduction.

The small business exemption remains for businesses (other than tax shelters) with average annual gross receipts below the inflation-adjusted threshold (e.g., $31 million for 2025).

Real property trades or businesses and farming businesses can elect out of the limitation if they use the alternative depreciation system (ADS) for applicable property

Deduction limitation for compensation of publicly held corporation executives:

For post-2025 tax years, all members of a publicly held corporation’s controlled group and affiliated service group are subject to the $1 million per year compensation deduction limits of certain top executives.

Foreign tax credit (FTC) Allocation of deductions to foreign source net CFC tested income (formerly known as GILTI):

The Act, which renames GILTI to net CFC tested income, limits the deductions that may be allocated to income in the net CFC tested income category to (i) the deduction for net CFC tested income itself as well as for taxes imposed on that income and (ii) any other deductions directly allocable to net CFC tested income. Also, no amount of interest expense or R&E expense may be allocated to this category. Deductions which would have been allocated to the net CFC tested income category but for this provision must instead be allocated to U.S. source taxable income for purposes of the FTC limitation. This provision is effective for tax years beginning after 2025.

Exclusion of gain on the sale or exchange of qualified small business stock (QSBS):

The Act provides that gain on the “applicable percentage” (50% for stock held for 3 years, 75% for stock held for 4 years, 100% for stock held for 5 years) is eliminated for QSBS acquired after July 4, 2025.

Also, the gain exclusion threshold is increased from $10 million to $15 million, and the $50 million aggregate gross asset limit is increased to $75 million.

All thresholds will be adjusted for inflation.

Enhanced manufacturing investment credit:

The advanced manufacturing investment credit (also known as the semiconductor credit or the CHIPS credit) on qualified investments in an advanced manufacturing facility built before Jan. 1, 2027 is increased  to 35% (up from 25%) for property placed in service after 2025.

Information reporting, Form 1099-K:

The Act retroactively reverts the Form 1099-K reporting threshold back to the pre-ARPA $20,000 and 200 transactions threshold.

Information reporting, Forms 1099-NEC, 1099-MISC:

For payments made after 2025, the reporting thresholds for Forms 1099-NEC and 1099-MISC are increased from $600 to $2,000 (adjusted for inflation after 2026).

Gain on the sale of certain farmland property:

For sales or exchanges occurring after July 4, 2025, sellers of qualified farmland property may elect to pay capital gains tax on the sale in four equal annual installments.

The first payment is due with the return for the year in which the sale occurs, with the remaining payments being due with the successive years’ returns. 

If any payment is missed, the balance is due immediately.

Corporate charitable contributions:

• The annual charitable contribution deduction is generally limited to 10% of taxable income, but  the deduction is reduced by 1% of taxable income for tax years after 2025.
• There is a new 1% floor: only the aggregate amount of contributions exceeding 1% of taxable income is deductible.

Excess business losses: The Act makes the Code Sec. 461(l) limit on excess business losses permanent for noncorporate taxpayers.

• Threshold Amounts: For 2025, the threshold is $313,000 for single filers and $626,000 for joint filers. For tax years after 2025, these amounts are adjusted for inflation using 2024 as the base year.
• Definition: An “excess business loss” is the excess of aggregate trade or business deductions over the sum of aggregate gross income or gain from those trades or businesses plus the threshold amount.
• Treatment of Disallowed Losses: Any excess business loss disallowed under Code Sec. 461(l) is treated as a net operating loss (NOL) carryforward to subsequent tax years.
• The Act also permanently suspends the separate excess farm loss limitation so all business losses (including farming) are subject to the excess business loss limitation.
  • The limitation applies at the partner or shareholder level for partnerships and S corporations.

Energy efficient commercial buildings deduction:

Under the Act, the energy efficient commercial building deduction terminates for any cost of energy efficient commercial building property whose construction begins after June 30, 2026.

Cost recovery for energy property:

The Act eliminates 5-year MACRS classification for energy property effective for property for which construction begins after 2024.

Advanced energy project credit:

Effective July 4, 2025, “add backs” in the event of the revocation of a project certification are discontinued.

Advanced manufacturing production credit:

The Act terminates the credit for wind energy components produced and sold after Dec. 31, 2027. It also subjects pre-Act applicable critical minerals to a new phaseout schedule and tightens the rules regarding foreign entities.

Energy efficient home improvement and new energy efficient home credits:

The energy efficient home improvement credit under Code Sec. 25C is terminated for property placed in service after 2025.

The new energy efficient home credit under Code Sec. 45L terminates for any qualified new energy efficient home acquired after June 30, 2026.

Residential clean energy credit:

The residential clean energy expenditures credit is terminated for any expenditures made after 2025.

Clean vehicle credits:

The credits for new and previously owned clean vehicles terminate for vehicles acquired after Sept. 30, 2025.

The credit for qualified commercial clean vehicles also terminates for vehicles acquired after Sept. 30, 2025.

Alternative fuel vehicle refueling property credits:

The credit for “alternative fuel vehicle refueling property” (such as an EV charger) terminates for property placed in service after June 30, 2026.

No Income Tax on Tips – For Employers:

• The provision does NOT exempt employers from payroll tax (FICA) obligations on tips. Employers must continue to withhold and pay Social Security and Medicare taxes on all reported tips, as before.
• Starting in 2025, employers must separately report the amount of qualified tips and the employee’s occupation on Forms W-2 (for employees) and 1099 (for independent contractors).
• For tips received before January 1, 2026, employers may use any reasonable method to approximate designated tip amounts due to the retroactive effective date.
• Only cash and credit card tips in customary tipping occupations qualify, and service charges are excluded.
• Employers must ensure payroll systems can track and report qualified tips and occupations for W-2 reporting, including for the retroactive portion of 2025.

No Tax on Overtime: 

For the 2025 tax year, employers are required to report the total amount of qualified overtime compensation on employees’ Forms W-2 and, for non-employees, on applicable 1099 forms.

Because most payroll systems do not currently separate out qualified overtime, the law provides transition relief for 2025: employers may use any reasonable method to estimate and report qualifying overtime amounts for this year.

There are no changes to the W-2, 1099, or federal income tax withholding tables for 2025; employers should continue using current reporting procedures. Updates to forms and withholding procedures reflecting the new law will take effect for tax year 2026 and beyond.

The Act makes the lower individual income tax rates and wider tax brackets introduced by the Tax Cuts and Jobs Act permanent, preventing a scheduled tax rate increase after 2025.

For example, the top individual rate will remain at 37% (instead of reverting to 39.6%), and the marriage penalty relief for most brackets continues. This means married couples filing jointly will typically not face higher taxes compared to filing as singles.

Increased Standard Deduction: The standard deduction has been permanently increased for 2025 and beyond:

For 2025: $30,000 for joint filers, $22,500 for heads of household, and $15,000 for singles

For 2026: $31,500, $23,625, and $15,750.

Reduced Itemized Deductions for High Earners:

Starting in 2026, high-income taxpayers’ itemized deductions will be reduced by 2/37 (about 5.4%) of the lesser of

• the amount of itemized deductions or (b) their taxable income that exceeds the threshold for the 37% tax bracket.

The Pease limitation which previously reduced itemized deductions for high-income taxpayers was permanently repealed.  With this change, bunching itemized deductions into a single year and taking the standard deduction in alternate years can be effective.

Child Tax Credit:

This credit was increased to $2,200 per child* (indexed for inflation after 2025), with the refundable portion set at $1,700 for 2025 (also indexed for inflation).

The $500 credit is retained for other dependents, and phaseout thresholds at $400,000 for joint filers and $200,000 for others remain the same. 

*The CTC is available for children under age 17 at the close of the tax year who are U.S. citizens, can be claimed as dependents, and have a valid SSN.

Estate & Gift Exclusion Amount:

The exclusion amount for federal estate and gift tax will increase to $15 million (indexed for inflation) for estates of decedents dying and gifts made after Dec. 31, 2025.

Individual Alternative Minimum Tax Exemption (AMT) Amounts:

The Act made increased AMT exemption amounts and phaseout thresholds permanent. 

• 2025 exemption amounts are $137,000 for joint filers, $88,100 for single filers, $68,500 for married filing separately, with phaseout thresholds of $1,252,700 for joint filers and $626,350 for others. These amounts are indexed for inflation annually.
• For tax years beginning after 2025, the phaseout rate for the AMT exemption increases from 25% to 50%. This means the exemption phases out twice as quickly for higher-income taxpayers starting in 2026. The standard deduction and, after 2025, personal and dependency exemptions are not allowed for AMT purposes, meaning they must be added back to alternative minimum taxable income (AMTI). 
• AMT continues to be calculated at 26% on the first $239,100 ($119,550 for married filing separately) of AMTI above the exemption and 28% on the excess.

Deduction for Taxpayers Age 65 or Older:

For tax years 2025–2028, individuals age 65 or older (and their spouses, if filing jointly) can claim a new $6,000 deduction per qualified person.

To maximize this benefit, seniors should aim to keep their adjusted gross income (AGI) below $75,000 (single) or $150,000 (joint), as the deduction is reduced by 6% of any excess.  A Social Security Number is required for each qualifying individual to avoid disallowance of the deduction.

Car Loan Interest:

For tax years 2025–2028, individuals can deduct up to $10,000 per year in interest paid on loans for new personal-use vehicles even if they don’t itemize deductions.

The deduction phases out for single filers with MAGI over $100,000 and joint filers over $200,000.

To qualify, the loan must be for a new, U.S.-assembled car, SUV, van, pickup, or motorcycle (under 14,000 pounds), secured by a first lien.

The taxpayer must be the original owner, and the vehicle’s VIN must be reported on the tax return.

Child and Dependent Care Credit:

Starting in 2026, the Child and Dependent Care Credit will be more valuable for many families. The maximum credit rate increases to 50% of eligible expenses, up to $3,000 for one qualifying individual or $6,000 for two or more.

The full 50% rate applies to families with AGI up to $15,000 and gradually phases down to 35% for AGI up to $75,000 ($150,000 for joint filers).

As always, thorough records of all qualifying expenses and coordination with any employer-provided dependent care benefits will help maximize the full credit potential.

Contributions to Scholarship-Granting Organizations:

New for tax years ending after Dec. 31, 2026, individual taxpayers can claim a federal income tax credit of up to $1,700 per year for cash contributions to qualifying scholarship-granting organizations (SGOs) in participating states.

To maximize this benefit, confirm relevant state participation and ensure the SGO is on the IRS-approved list before contributing.

Disaster-Related Personal Casualty Losses:

Individuals can now claim a personal casualty loss deduction for a federally declared disaster, even if they don’t itemize.

The standard deduction is increased by the amount of the net disaster loss. Documentation of losses and insurance claims are required. 

The rules for filing an amended return to claim a disaster-related casualty loss remain unchanged from prior law.

Taxpayers may elect to deduct a qualified disaster loss in the tax year immediately preceding the year in which the disaster occurred.

This election can be made on an original or amended return for the prior year.

An amended return must be filed no later than six months after the due date (without extensions) for filing the return for the disaster year.

American Opportunity and Lifetime Learning Credits:

Starting in 2026, to claim the American Opportunity Tax Credit (AOTC) the correct Social Security Number (SSN) of the student (or taxpayer or spouse, if applicable) must be included along with the Employer Identification Number (EIN) of each college or university. 

The Act did not change the credit amount, phaseout thresholds, or general eligibility for the Lifetime Learning Credit.

The only change is that, for tax years beginning after 2025, a valid Social Security Number (SSN) will be required for the taxpayer and student to claim the credit, rather than just a Taxpayer Identification Number (TIN).

For tax years beginning after 2025, the requirement for a valid Social Security Number (SSN) means that both the taxpayer and the student (if the credit is claimed for someone other than the taxpayer or spouse) must have a valid SSN issued on or before the due date of the tax return for that year to be eligible for the Lifetime Learning Credit.

ITINs (Individual Taxpayer Identification Numbers) will no longer be sufficient, and if the SSN is issued after the return due date, the credit cannot be claimed for that year.

If the required SSN is missing or incorrect, the IRS will deny the credit for that year. This change tightens eligibility and may exclude certain noncitizens and others who previously qualified using an ITIN.

Eligibility to Enroll in Qualified Health Plan:

For tax years after 2027, the premium tax credit (PTC) can only be claimed for months the health insurance Exchange has verified an individual’s eligibility to enroll in a qualified health plan (QHP) and to receive advance PTC payments. Federal tax returns should be timely file to avoid losing the credit.

Any changes in income, family size, or other circumstances should be promptly reported to the Marketplace within 30 days and quickly respond to any requests for information.

Deduction for Qualified Residence Interest:

The deduction for mortgage interest on home acquisition debt is permanently capped at $750,000 ($375,000 if married filing separately), rather than increasing to$1 million in 2026 as previously scheduled. 

Any interest for a new mortgage or refinancing on debt above $750,000 will not be deductible.

The Act made the disallowance of a deduction for interest on home equity lines of credit (HELOCs) permanent.

In addition, mortgage insurance premiums are now deductible as qualified residence interest for tax years beginning after 2025.

The deduction applies to qualified mortgage insurance on acquisition indebtedness.

The deduction is phased out by 10% for each $1,000 ($500 if married filing separately) of AGI above $100,000 ($50,000 if married filing separately), and is completely phased out for AGI above $109,000 ($54,500 if married filing separately).

If premiums are prepaid, the deduction must be amortized over the shorter of the loan term or 84 months, with only the allocable portion deductible each year.

Miscellaneous Itemized Deductions: The Act permanently eliminates miscellaneous itemized deductions for individual taxpayers.

Educator Expense Deduction:

The Act adds a new educator expense itemized deduction effective starting in 2026.

It allows eligible K–12 teachers, counselors, coaches, and aides who work at least 900 hours per year to deduct unreimbursed classroom expenses. Qualifying expenses include books, supplies, and equipment used for instructional activities.

This new deduction provides a permanent, standalone benefit for educators’ out-of-pocket classroom expenses, but you must itemize deductions to take this deduction.

New Tax-Deferred Investment Accounts for Children:

Taxpayers can open a new type of tax-deferred investment account for eligible, called a “Trump account,”

• Eligibility: Can be opened for U.S. citizens under 18 with a valid Social Security number.
• Contributions: Up to $5,000 per year (indexed for inflation after 2027) in after-tax dollars can be contributed for each eligible child until the year the child turns 18.
  • For children born between January 1, 2025, and December 31, 2028, the federal government will contribute an initial $1,000 to each account.
  • Employers may also contribute up to $2,500 per year, and these employer contributions are excluded from the employee’s taxable income.
• Investments: Until age 18, funds must be invested in low-fee mutual funds or ETFs tracking a qualified U.S. equity index.
• Tax Treatment: Contributions are not tax-deductible, but earnings grow tax deferred.
  • Withdrawals are generally not allowed before age 18, at which point the account transitions to a traditional IRA and the beneficiary gains full control.
• Special Rules: If the beneficiary dies or becomes disabled before age 18, special rollover rules apply, including the ability to roll over the account to an ABLE account for disabled individuals.
• Gift Tax: Contributions count toward the annual gift tax exclusion.
• Employer Deduction: Employers can deduct the cost of contributions, which are treated as a fringe benefit and subject to nondiscrimination requirements.

Adoption Credit:

Starting in 2025, the adoption credit is enhanced to include a refundable portion of up to $5,000 per child (indexed for inflation). This means eligible taxpayers can receive up to $5,000 as a refund even if they owe no tax.  Form 8839 must be filed in the year the adoption is finalized, which requires a taxpayer identification number for each adopted child.

Qualified Higher Education Expenses:

Changes to 529 savings plans allow families to use tax-free distributions for a much broader range of K-12 education expenses including not just tuition, but also curriculum, books, online materials, tutoring, standardized test fees, dual enrollment, and educational therapies for students with disabilities.

Starting in 2026, the annual limit for K-12 distributions doubles from $10,000 to $20,000 per beneficiary.

To maximize tax savings, consider timing 529 withdrawals to match qualified expenses within the same tax year, and coordinate with other education tax credits to avoid overlap.

Higher Education Expenses for 529 Accounts:

529 plan distributions can now be used tax-free for a wider range of education expenses, including not only college costs but also “qualified postsecondary credentialing expenses.”

This means 529 funds can be used for tuition, fees, books, supplies, and equipment required for enrollment in recognized certificate, licensing, or apprenticeship programs even if they are not traditional degree programs.

Individuals’ Charitable Deductions:

Charitable contribution deduction rules were significantly revised for tax years beginning after December 31, 2025

For individuals:

• The 60% AGI limit for cash contributions to public charities is now permanent.
• Non-itemizers can take an above-the-line deduction for cash gifts to public charities: up to $1,000 for single filers and $2,000 for joint filers.
• A new 0.5% AGI floor applies to itemized charitable deductions, so only contributions exceeding 0.5% of AGI are deductible as an itemized deduction.
• The overall limitation on itemized deductions is reinstated for high-income taxpayers, potentially reducing allowable deductions.

Limitation on Casualty Loss Deduction:

Starting in 2026, personal casualty loss deductions are permanently limited to losses from federally declared disasters (and certain state-declared disasters).

Remittance Transfers: Starting in 2026, a new 1% excise tax will apply to remittance transfers from U.S. senders to recipients in foreign countries.

Transfers funded with cash, money orders, cashier’s checks, or similar physical instruments such as non-U.S. payment apps are subject to the tax.

• Transfers that are excluded from the 1% excise tax under Title 31, Chapter 53 are those withdrawn directly from financial institutions governed by the Bank Secrecy Act. These institutions include banks, credit unions, savings associations, trust companies, money services businesses (such as money transmitters, check cashers, and issuers of traveler’s checks or money orders), broker-dealers in securities, casinos and card clubs, Insurance companies, and mutual funds.

If a remittance transfer is withdrawn directly from an account at one of these regulated financial institutions, it is not subject to the excise tax.

Additionally, transfers funded with a U.S.-issued debit or credit card are also excluded.

Wagering Losses:

Starting in 2026, only 90% of wagering losses can be deducted against winnings, even if losses equal or exceed winnings.

Deduction and Exclusion for Moving Expenses:

Moving expenses are now permanently nondeductible for most taxpayers, and any employer reimbursement for moving costs is fully taxable as income.

Only active-duty military members moving under orders and, starting in 2026, certain intelligence community employees remain eligible to deduct or exclude qualified moving expenses.

ABLE Accounts: The rules for ABLE (Achieving a Better Life Experience) accounts were permanently enhanced as follows:

• Contribution Limits: The annual contribution limit is now set at the annual gift tax exclusion amount ($19,000 for 2025), plus an additional amount for certain employed beneficiaries.
  • If the beneficiary is employed and not covered by an employer retirement plan, they can contribute the lesser of the federal poverty line for a one-person household,
  • or their compensation for the year, in addition to the standard limit.
• Eligibility: Starting in 2026, individuals who became disabled before age 46 (up from age 26) can qualify for an ABLE account.
• Rollover Provisions: Tax-free rollovers from Section 529 qualified tuition programs to ABLE accounts are now permanent, subject to the annual contribution limit.
  • Rollovers from new “Trump accounts” to ABLE accounts are also allowed, provided the entire balance is rolled over in a direct trustee-to-trustee transfer in the year the beneficiary turns 17.
• Saver’s Credit: The ability for designated beneficiaries to claim the saver’s credit for contributions to their own ABLE accounts is now permanent.
  • After 2026, only ABLE account contributions (not IRA or employer plan contributions) will be eligible for the saver’s credit.
  • The maximum annual amount eligible for the credit will increase from $2,000 to $2,100, indexed for inflation.
• Other Rules: The ability to change the designated beneficiary to another eligible family member remains.
  • The rules for excess contributions and excise taxes (6% on excess) remain, but corrective distributions can avoid the penalty if made within the tax year.

Individual SALT Limitation:

The SALT (state and local tax) deduction cap is temporarily increased to $40,000 for 2025 ($40,400 in 2026, with 1% annual increases through 2029), before reverting to $10,000 in 2030.

For those with modified adjusted gross income (MAGI) above $500,000 in 2025, the deduction phases out by 30% of the excess over the threshold but will not drop below $10,000.

Managing income and deductions to stay below the phaseout threshold, or timing large transactions to occur in years with a higher cap, can help maximize this tax benefit.

Energy Efficient Home Improvement Credit (IRC Sec. 25C):

This credit, which provides a 30% tax credit for qualifying energy-efficient improvements to your home (such as windows, doors, insulation, and HVAC systems), will expire for property placed in service after December 31, 2025. There is no phaseout or transition period; the credit simply ends after this date. Unused credits cannot be carried forward to future years].

Residential Clean Energy Credit (IRC Sec. 25D):

This credit, which covers 30% of the cost of qualified solar, wind, geothermal, fuel cell, and battery storage installations, will also expire for expenditures made after December 31, 2025.

There is no transition rule or phaseout. However, if you incur qualifying expenses before the deadline, any unused credit can be carried forward to offset future tax liability

Clean Vehicle Credits (IRC Sec. 30D, 25E, 45W):

Federal tax credits for the purchase of new, previously-owned, and commercial clean vehicles will expire for vehicles placed in service after September 30, 2025. There are no transition rules or phaseouts for these credits

Alternative Fuel Vehicle Refueling Property Credit (IRC Sec. 30C):

The credit for installing alternative fuel vehicle refueling property (such as electric vehicle charging stations) will end for property placed in service after June 30, 2026. For personal property, there is no carryforward of unused credits. For business property, unused credits may be carried forward as part of the general business credit.

No Income Tax on Tips – For Employees:

• Employees in occupations that customarily received tips as of December 31, 2024, can deduct up to $25,000 of qualified tips per year from their taxable income for tax years 2025 through 2028.
• “Qualified tips” include cash tips, credit card tips, and tips received through tip pooling, but not service charges or tips in specified service trades or businesses.
• The deduction phases out by $100 for every $1,000 of modified adjusted gross income (MAGI) above $150,000 for single filers or $300,000 for joint filers.
• Only tips properly reported on IRS-approved forms (e.g., Form W-2) are eligible, and married taxpayers must file jointly to claim the deduction.
• The IRS will publish a list of qualifying occupations, and the deduction is available to both itemizers and non-itemizers.
• The deduction requires a valid Social Security Number.

No Tax on Overtime:

The “no tax on overtime” rule is a temporary deduction for the FLSA overtime premium, subject to income limits and reporting requirements, and does not exempt overtime pay from payroll tax withholding or reporting at the employer level.

The deduction is claimed by employees (or non-employees) on their individual tax returns for the 2025–2028 tax years.

The deduction applies to “qualified overtime compensation,” which is the overtime premium required under the Fair Labor Standards Act (FLSA)—that is, pay for hours worked over 40 in a week, at a rate above the regular rate.

• The maximum deduction is $12,500 per year for single filers and $25,000 for joint filers.
• The deduction phases out by $100 for every $1,000 of modified adjusted gross income (MAGI) above $150,000 (single) or $300,000 (joint).
• Only the overtime premium portion (not regular wages or tips) is eligible.
• The deduction is available to both employees and non-employees (such as independent contractors) who receive qualified overtime compensation.
• Married individuals must file jointly to claim the $25,000 limit.
• A valid Social Security Number must be included on the return.
• The deduction is available to non-itemizers and can be claimed in addition to the standard deduction.
• Employers must report the total amount of qualified overtime compensation on employees’ W-2 forms (or 1099s for non-employees).
• The IRS will update withholding procedures beginning in 2026 to reflect the new deduction.
• The deduction is not available for regular wages, non-FLSA overtime, or amounts already deducted as tips.