As we prepare for the upcoming tax seasons, the IRS has released new guidance following the passage of the One Big Beautiful Bill Act. These changes affect both individuals and business owners, and many of them begin as soon as January 1, 2025.
Below is a simple summary I prepared to help you understand what’s changing, what’s staying, and how it may impact your tax planning for 2025 and 2026.
- Higher Standard Deductions (Effective 2025 & 2026)
The IRS confirmed larger standard deductions for both 2025 and 2026.
Tax Year 2025 (Filed in 2026)
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- Single/MFS: $15,750
- Married Filing Jointly: $31,500
- Head of Household: $23,625
Tax Year 2026 (Filed in 2027)
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- Single/MFS: $16,100
- Married Filing Jointly: $32,200
- Head of Household: $24,150
- New Deductions: Tips, Overtime & Car Loans (2025–2028)
The IRS introduced several new deductions available even if you don’t itemize:
- “No Tax on Tips” Deduction
Up to $25,000 per year for workers in tipped occupations.
Phases out for higher-income taxpayers.
- “No Tax on Overtime” Deduction
Up to $12,500 per year (or $25,000 for married filing jointly) for eligible overtime pay.
- Car Loan Interest Deduction
Up to $10,000 per year on interest for a new personal vehicle assembled in the U.S.
- Additional Standard Deduction for Seniors (2025–2028)
Individuals age 65+ can claim an additional $6,000 on top of their regular standard deduction. Married couples where both spouses qualify may add $12,000.
- Estate and Gift Tax Exclusion Thresholds
The Act increases the estate and gift tax exclusion thresholds to $15 million for single filers and $30 million for married couples starting in 2026
- Qualified Business Income (QBI) Deduction Made Permanent
The IRS confirmed that the 20% QBI deduction for pass-through businesses (S-corps, partnerships, LLCs) is now permanent.
- Qualified Business Income (Section 199A) Thresholds
- $403,500 (joint)
- $201,750 (single)
Phase-outs apply above these amounts.
- Bonus Depreciation & Business Interest Rules Enhanced
The Act permanently reinstates 100% bonus depreciation for qualified assets in the year put into service for property acquired beginning January 20, 2025
- Interest Deduction Rules Improved
Changes to the business interest limitation rules generally allow more interest to be deducted.
What You Should Do Now
Here are a few action items I recommend for clients:
- Review your income projections
- Review your withholding or estimated payments in early 2025.
- Keep documentation for tips, overtime, and car loan interest if eligible.
- If you own a business, begin preparing payroll systems for new reporting rules that may apply starting in 2026.
- Check 199A eligibility and plan accordingly to take advantage of the 20% QBI deduction
- Plan asset purchases strategically to take advantage of bonus depreciation.
- If you’re 65 or older, make sure you receive the expanded standard deduction.
Final Thoughts
The One Big Beautiful Bill Act introduces some of the most meaningful tax changes we’ve seen since the 2017 Tax Cuts and Jobs Act. While some provisions are temporary and others permanent, they all present planning opportunities for both individuals and business owners.
As always, Orange Accounting will guide you through these updates and help you understand how they affect your taxes, cash flow, and financial planning.
If you have any questions about how these changes apply to you or your business, I’m here to help.
Camila Roizental, CPA
