Trump’s New Tax Bill Reshapes Deductions and Credits

An overview of new tax changes highlighting key deductions and credits.

News Summary

President Trump has signed a new tax bill that introduces significant changes to standard deductions, state and local tax deductions, and tax credits for clean energy vehicles. Taxpayers can expect increased standard deductions and a higher SALT cap, while credits for clean energy vehicles are set to expire soon. The Child Tax Credit has been made permanent and increased, benefiting families. These updates create opportunities for savings, although benefits will vary by income level.

Trump’s ‘Big, Beautiful Bill’ Changes the Tax Landscape for 2025

On July 4, 2025, President Trump put his signature on what’s being called the “Big, Beautiful Bill.” This legislative move has introduced some significant changes to our tax system, expanding and extending provisions from the previous Tax Cuts and Jobs Act (TCJA) rolled out in 2018. If you thought taxes couldn’t get any more complex, think again!

New Standard Deductions: What to Expect

First off, let’s talk about the standard deduction, which is a big part of most taxpayers’ returns. Under the new bill, the standard deduction has permanently increased. Here’s how it breaks down:

$750 increase for single taxpayers and married individuals filing separately.
$1,125 increase for heads of households.
$1,500 increase for married couples filing jointly.

And it gets better! Starting in 2025, these standard deductions will continue to rise yearly with inflation—so you can breathe a little easier knowing some relief is on the way.

Let’s Talk State and Local Tax Deductions

state and local tax (SALT) deduction. The previous cap of $10,000 has jumped all the way up to $40,000 for itemizers. But beware: this cap will rise annually by 1% from 2026 to 2029, and then it quietly expires in 2030. Also, eligible taxpayers with a modified adjusted gross income (MAGI) between $500,000 and $633,333 will start losing some eligibility for SALT deductions, so keep an eye on those numbers.

Impacts on Clean Energy Vehicle Tax Credits

If you were hoping to snag some clean energy vehicle tax credits, you might want to act fast. Both the $4,000 credit for used vehicles and the $7,500 credit for new vehicles will disappear after September 30, 2025. As for the Residential Clean Energy Credit, which has allowed homeowners to deduct 30% of the installation costs for clean energy improvements, it will also end on December 31, 2025.

What Future Tax Savings Look Like

A recent analysis from the Tax Policy Center indicates that households could save an average of $2,900 in tax payments by 2026, but the benefits won’t be evenly distributed. High-income Americans will likely see larger tax cuts compared to their lower-income counterparts. For example, households in the bottom income quintile might save about $150, while those in the top quintile can look forward to savings of about $12,540.

New Deductions on the Table

The bill also brings some exciting new tax breaks. There’s a “no tax on tips” provision that allows workers to deduct up to $25,000 for cash tips earned. A temporary deduction for overtime pay above the normal rate is also on the list, as well as an increased deduction for personal auto loan interest—now up to $10,000 for new U.S.-assembled vehicles.

Children and Charitable Contributions

Another point for parents is the Child Tax Credit, which has now been made permanent. Not only that, but it has also increased by $200 per child, bringing the total to $2,200. Furthermore, the bill restores the charitable contributions deduction for non-itemizers, allowing individuals to deduct up to $1,000 or $2,000 for couples—a great incentive for those considering philanthropy.

Temporary Deductions for Seniors

For seniors aged 65 and older, the deduction has temporarily increased by $6,000, or $12,000 for qualifying couples—definitely a positive change for many!

What Happens Next?

Keep an eye out for guidance from the IRS regarding which jobs qualify for the “no tax on tips” provision and updated reporting rules expected by October 2, 2025. It seems like we’ve entered a new era of tax changes, so hang tight as these new opportunities unfold!