Key Changes Under the “One Big Beautiful Bill Act” for 2025 & 2026 Highlights

Tue, 10 Feb 2026 17:34:54 GMT

2025 Highlights

New Senior & Household Deductions

New Senior Deduction: $6,000 / $12,000 (Single(S) / Married Filed Jointly (MFJ))

Must be age 65 or older
Income < $75,000 / $150,000 (S/MFJ)
Phased out at $175,000 / $250,000 (S/MFJ)

State And Local Tax (SALT)

Limit increase to $40,000, prior year was $10,000
Income < 500,000, phased out ~$600,000 (Both Single and MFJ)
Increased Standard Deduction - $15,750 / $31,500 (S/MFJ)

Additional Standard Deduction - $2,000 for 65 or older

Federal “No Tax” Deductions

Tips - Applies to service industry, rideshare, hotel personal and others

Maximum Deduction $25,000
Income < $150,000 / $300,000 (S/MFJ)

Overtime - Deduct the premium portion of overtime pay

Maximum deduction $12,500 / $25,000 (S/MFJ)
Income < $150,000 / $300,000 (S/MFJ)
Phased out at $275,000 / $550,000 (S/MFJ)

Car Loan Interest - New cars with final assembly in the U.S.

Maximum deduction $10,000
Income < $100,000 / $200,000 (S/MFJ)
Phased out $150,000 / $250,000 (S/MFJ)

Children & Family

Child Tax Credit - $2,200 per child, under 17 and $500 for all others

New born baby - $1,000 government deposit into a savings account

Born between 1/2025 and 12/2028
Converted to an IRA in 18 years

Form 1099-K Reporting

Threshold for receiving a 1099-K form has reverted to the pre-tax year 2021 conditions
Gross amount must exceed $20,000 and more than 200 transactions

HSA Contribution Limits Increase

$4,300 for self-only coverage
$8,550 for family coverage

401(k) Contribution Limits Increase

$23,500 for employee contributions
$7,500 for catch-up contributions for individuals 50 or older

Standard Business Mileage Rate - 70 cents per mile

Standard Medical Mileage Rate - 21 cents per mile

Standard Charitable Mileage Rate - 14 cents per mile

Other 2025 Items

2026 Highlights

Non-itemizers may take $1,000/2,000 (Single/MFJ) in addition to the standard deduction
Itemizers now face a 0.5% AGI floor - only donations exceeding .5% of income are deductible

Charitable Donations

Employee contribution limit: $24,500
Catch-up: (Age 50+) $8,000 (Total $32,500)
“Super” Catch-up (Age 60-63): $11,250 (Total $35,750)

Retirement Contribution Limits

401k, 403b

IRA

Standard contribution: $7,500
Catch-Up (Age 50+): $1,100
Single: full deduction income up to $77,000
MFJ: full deduction income up to $123,000

ROTH IRA

Standard contribution: $7,500
Catch-Up (Age 50+): $1,100
Single: full deduction income up to $153,000
MFJ: full deduction income up to $242,000

This strategy allows higher income taxpayers to fund a Roth account by first making a non-deductible traditional IRA contribution, then converting that amount to a Roth IRA.

Backdoor Roth strategy

Expanded K-12 Benefits using 529 funds

Withdrawal Limit - increased from $10,000 to $20,000
Expanded Qualified Expenses - materials, tutoring, standardized testing, homeschooling
Continuing Education - adults can use 529 funds for their own career changes and certificates at eligible institutions
Professional Licensing - funds can be used for preparation and exam fees for professional licenses such as the CPA exam or the Bar exam

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