On July 4, 2025, President Donald Trump signed into law a domestic policy bill that extended the 2017 tax cuts that were set to expire this year while making some of the 2017 rules permanent. The bill also created several new tax laws for individuals while addressing other tax issues for businesses.
Some of the changes will start this year, while others will kick in in 2026. Like previous tax laws, some of the new rules are scheduled to expire, while others are permanent.
Here’s a quick summary of six individual tax law changes that are expected to impact most tax filers in 2025.
Auto Loan Interest is deductible for new cars purchased in 2025-2028. It is a tax deduction of up to $10k for interest paid on car loans that qualify. Qualified vehicles include cars, vans, minivans, SUVs, pickup trucks, and motorcycles that weigh less than 14,000 pounds. They also must have at least two wheels and must be purchased new. The vehicle must be for personal use only and the “final assembly” must take place in the US.
Trump savings accounts for children have been established and those born in the years 2025 – 2028 will be granted $1,000 in seed money. These will act similar to an IRA and a maximum of $5,000 can be contributed each year. Once the beneficiary reaches age 18 the money can be used for higher education expenses, other qualifying post-secondary credentialing, small business or small farm expenses, and purchasing a first home. If the funds are NOT used by age 31, the beneficiary then has full access to the funds and will be taxed at the capital gain rate.
The BBB Act permanently establishes the 20 percent qualified business income deduction for sole proprietorships, partnerships, and S-Corps. It also restores 100 percent expensing for capital investments and raises the 1099-K reporting threshold to $20,000/200 transactions.
Tax breaks on tip income. The legislation creates a temporary federal income tax deduction of up to $25,000 per year on qualified tip income. The tax break would apply to workers who typically receive cash tips reported to their employer for payroll tax withholdings. It does not apply to taxpayers whose income exceeds $150,000, or $300,000 for joint filers. The temporary deduction for tip income would be in place for the tax years 2025 through 2028.
Overtime pay deduction. The legislation provides a temporary tax break for overtime pay. It offers a maximum $12,500 above-the-line deduction for overtime pay, and $25,000 for married couples filing jointly, from 2025 to 2028. The tax break begins to phase out once earnings exceed $150,000, and $300,000 for joint filers.
The bill also ended several consumer tax credits tied to clean energy in addition to making steep cuts to Medicaid, as well as enacting other non tax-related provisions.
The legislation has added new complexity to the tax code, and we anticipate the IRS will issue some guidelines on how to interpret the updated rules later this year. Speak with your tax professional if you have any questions about how the new changes may affect your specific 2025 tax return.
Sources:
CNBC.com, July 3, 2025. "Tax changes under Trump's 'big beautiful bill' —in one chart."
FoxBusiness.com, July 4, 2025. "Five major policies to know from the One Big Beautiful Bill Act."
TaxFoundation.org, July 2,2025. "The Good the Bad, and the Ugly in the One Big Beautiful Bill Act."