Signed into law on July 4, this sweeping legislation permanently extends many tax benefits and introduces new taxpayer-focused deductions.
On July 4, 2025, a major reconciliation bill was enacted that reshapes the tax landscape for individuals, businesses, nonprofits, and higher education institutions. While additional IRS and Treasury guidance is expected, here are the key highlights you need to know:
For Individuals
- Permanent Tax Brackets & Standard Deduction: Current TCJA rates remain, with small inflation-adjusted increases.
- New Deductions: Up to $25,000 for tip income and $12,500 for overtime wages (2025–2028).
- Expanded SALT Deduction: Increased to $40,000 in 2025 and indexed for inflation annually. Reverts to $10,000 in 2030.
- Extension and enhancement of increased estate and gift tax exemption amounts made permanent.
- Charitable Deduction Reinstated: Available to non-itemizers again, encouraging broader giving.
- Child Tax Credit: Raised to $2,200 and indexed for inflation, made permanent.
- 529 Plan Flexibility: Includes K–12 and homeschool expenses.
Other Additions:
- $6,000 senior deduction
- Auto loan interest deduction – Car loan interest is deductible now up to a cap, for certain years, and purchased after a specific date.
For Businesses
- 100% Bonus Depreciation: Made permanent for eligible assets.
- QBI Deduction (199A): Now a permanent fixture for qualified income and increased to 23%.
- Research Expensing: Renewed deduction for domestic R&D, with retroactive relief for small businesses.
- Expanded Section 179 and low-income housing provisions
For Nonprofits
- Charitable Deduction Reinstated: Available to non-itemizers again, encouraging broader giving.
- SALT changes and IRS filing program sunset may impact donor behavior and nonprofit operations.
For Higher Education
- QBI Deduction: Extended for faculty and researchers with consulting income.
- 529 Plan Flexibility: Includes K–12 and homeschool expenses.
- Research Deduction: Applicable for qualified research partnerships or initiatives.
What’s Going Away?
Many green energy incentives from the Inflation Reduction Act will sunset after 2025—including clean vehicle credits, residential energy upgrades, and EV charging credits.
The IRS Direct File program will be ended within 30 days of passage in lieu of a “public-private partnership” to replace the program.
Next Steps:
To better serve and inform our clients, we are closely monitoring IRS and Treasury updates to understand how the newly enacted provisions will be implemented. We will issue follow-up guidance as Treasury updates regulation related to the new law.
Follow us on LinkedIn to stay informed—updates will be shared there in real time as guidance becomes available.