The One Big Beautiful Bill: What You Need to Know About the Latest Tax Changes

The newly passed One Big Beautiful Bill is shaking up the tax landscape with several high-impact provisions—some temporary, some permanent. Whether you’re a wage earner, a family, or a small business owner, the tax updates for 2025 and beyond bring opportunities for planning and savings. Below is a focused look at the tax-specific changes you should have on your radar.

1. Temporary Relief: Tips and Overtime Now Tax-Free (For 2025 Only)

For tax year 2025, income from tips and overtime will not be subject to federal income tax. This provision is designed to provide immediate relief to hourly and service workers, but it's a one-year-only benefit—so make the most of it while it lasts.

2. Child Tax Credit Expansion

The Child Tax Credit is increasing, offering more support to families with qualifying children. While the exact amount of the increase isn’t specified, this enhancement is intended to put more money back into the pockets of parents and guardians.

3. Higher Standard Deduction for Seniors

Taxpayers aged 65 and older will benefit from an increased standard deduction, which will reduce their overall taxable income. This change acknowledges the fixed-income reality of many seniors and makes filing easier for those who don’t itemize.

4. SALT Deduction Cap Gets a Lift

The cap on state and local tax (SALT) deductions is being raised, giving higher earners in high-tax states a better chance of benefiting from itemizing deductions. This adjustment should ease the burden for homeowners and others who pay significant local taxes.

5. New Deduction for Certain Vehicle Loan Interest

A new deduction is being introduced for interest paid on specific types of vehicle loans. This change encourages vehicle ownership and offers a fresh way to lower taxable income for eligible buyers.

6. Adoption Tax Credit Now Partially Refundable

The adoption tax credit is getting a makeover—it will now be partially refundable. This allows families to benefit from the credit even if they don’t owe much in taxes, making adoption more financially accessible.

7. Introduction of Children’s Savings Accounts

The bill creates a new type of savings account for children, allowing parents to set aside funds for future expenses. These accounts are designed to encourage long-term financial planning from a young age and may carry special tax benefits.

8. Electric Vehicle Credit Ends Soon

If you’re thinking about buying an electric vehicle, act fast. The $7,500 EV tax credit will expire on September 30, 2025. Purchases made after this date will no longer qualify, so timing your purchase matters.

9. Inflation Adjustments to Key Tax Figures

Many tax thresholds will rise in 2025 due to inflation adjustments. These include tax brackets, the standard deduction, IRA income limits, and phaseouts for the Earned Income Credit and Alternative Minimum Tax. For example, the top of the 10% tax bracket for single filers will increase from $11,600 to $11,925.

10. Earned Income Tax Credit (EITC) Changes

For 2025:
-- The maximum EITC for couples with three or more children will rise to $8,046, with phaseout beginning at $68,675 AGI.
-- Single filers with no dependents can receive up to $649, phasing out at $19,104 AGI.

These changes broaden access to the credit and increase the potential benefit for working taxpayers.

11. Higher AMT Exemption

The Alternative Minimum Tax (AMT) exemption amount is increasing. This inflation adjustment will help ensure fewer middle-income earners get caught up in the AMT calculation process.

12. Reporting Threshold for Third-Party Payments Increased

The 1099-K reporting threshold is rising again. This means payment platforms like PayPal, Venmo, and others won’t be required to issue tax forms unless your transactions exceed the updated, higher limit—good news for side hustlers and small business owners.

13. Big Wins for Businesses

Business owners will see several favorable changes:

-- 100% bonus depreciation is back
-- Full expensing for manufacturing structures (temporarily)
-- Immediate expensing of R&D costs
-- Business interest deductions now follow an EBITDA-based rule again
-- Section 179 expensing limits have increased
-- 1099-K reporting threshold has also been adjusted upward

Together, these provisions lower tax bills and improve cash flow for business owners making investments or hiring staff.

Key Takeaways for 2025 and Beyond

These tax changes present a range of new planning opportunities:

-- Hourly workers should track tip and overtime income for proper tax treatment
-- Families can benefit from larger credits and new savings tools
-- Seniors will enjoy a more generous standard deduction
-- Business owners can capitalize on enhanced expensing and deduction rules
-- EV shoppers should act before the September 30, 2025 deadline

What to Do Now

If you're a taxpayer, contractor, or business owner, now is the time to revisit your tax strategy. From maximizing deductions to timing major purchases and fine-tuning how you report income, there are numerous opportunities to reduce your tax liability—especially if you plan ahead.

At Financial Umbrella, we help individuals and businesses make sense of legislation like the One Big Beautiful Bill so you can stay compliant, confident, and financially optimized.

Need a walkthrough of how these changes affect you? We’re here to help.

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