One of the biggest updates this year is the passage of the One Big Beautiful Bill Act (OBBBA). It made some permanent changes that many expected would result in the Tax Cuts and Jobs Act (TCJA) expiring.

I’ve included a breakdown in the guide below. But if you have questions about how any of this impacts your specific situation, just reach out. I’m here to help.

General Tax Questions

1. How does the OBBBA affect the TCJA rules for 2025 and beyond?

The OBBBA passed in mid-2025, prevents most of the major TCJA provisions from expiring at the end of 2025. Instead of seeing higher tax rates and a smaller standard deduction in 2026, OBBBA makes many TCJA rules permanent — including the current rate brackets, the larger standard deduction, and the 20% pass-through deduction.

The bill also adds several new provisions mentioned above, such as updated vehicle credits, a new interest deduction for qualifying U.S.-assembled vehicles, and the return of 100% bonus depreciation for certain business assets. For most taxpayers, this means your 2025 return (filed in 2026) follows familiar TCJA rules, and many of those rules will continue into 2026 and beyond.

2. When is the deadline for filing taxes this year?

For the 2025 tax year, the deadline to file your federal individual income tax return and pay any taxes owed is Wednesday, April 15, 2026.

3. What are the rates and brackets for tax year 2025?

4. How do tax brackets work? 

The IRS sets inflation-adjusted tax brackets annually. Your marginal tax rate is based on the bracket into which your total taxable income falls. However, your tax liability isn’t simply your income multiplied by your marginal rate.

Your effective tax rate, which is the rate you actually pay, factors in all of the progressive tax brackets you fall under and any tax credits you claim. This effective rate is generally lower than your marginal tax rate.

Here’s an example with 2025 tax year figures to show how it works:

Alicia is a single filer with $75,000 in taxable income.

Alicia’s marginal tax rate is 22% because she falls into that bracket for the highest portion of her income. However, her effective tax rate will be lower after calculating taxes for each portion of her income. Here’s how it looks:

• 10% bracket: $11,925 × 10% = $1,192.50
• 12% bracket: ($48,475 – $11,925) × 12% = $4,386
• 22% bracket: ($75,000 – $48,475) × 22% = $5,835.50

Total tax liability: $1,192.50 + $4,386 + $5,835.50 = $11,414

To find Alicia’s effective tax rate, divide her total tax liability by her taxable income:

$11,414 ÷ $75,000 = 15.2%.

5. What is the standard deduction for 2025?

For 2025, the standard deduction has increased to adjust for inflation.

Note: If you are 65 or older or blind, your standard deduction is higher. For 2025, the additional standard deduction amounts are:

• Single or head of household: Additional $2,000
• Married filing jointly, married filing separately, or qualifying surviving spouse: Additional $1,600 per spouse, if eligible.
• New bonus senior deduction: A separate, temporary deduction of up to $6,000 per eligible individual (or $12,000 for a qualifying married couple) is available for those 65 and older. The deduction starts to decrease for taxpayers with a modified adjusted gross income (MAGI) over $75,000 (single)/$150,000 (married filing jointly).

6. Should I itemize or take the standard deduction?

Choosing between the standard deduction and itemizing depends on which option effectively lowers your taxable income. Itemizing may be beneficial if your deductible expenses exceed the standard deduction. Common itemized deductions include:

• Mortgage interest: Interest paid on a home mortgage
• State and local taxes (SALT): The SALT deduction cap rises to $40,000 in 2025 and is indexed upward through 2029. In 2030, it’s scheduled to revert to the prior-law cap, and for higher-income households, the benefit gradually phases out until it effectively disappears.
• Medical expenses: Out-of-pocket costs exceeding 7.5% of your adjusted gross income
• Charitable contributions: Donations to qualified organizations
• New for 2025: Tip income deduction: You can now deduct up to $25,000 in qualified tip income through 2028 for modified adjusted gross income earnings under $150,000 ($300,000 for joint filers). This is a brand-new benefit and may help lower taxable income for anyone working in tip-based roles.
• New for 2025: Overtime deduction: Workers can deduct up to $12,500 in qualified overtime pay — or $25,000 for joint filers — until 2028 with phase-outs beginning at higher income levels above $150,000. This is a helpful break for anyone who regularly picks up extra hours.

If the total of these expenses surpasses the standard deduction for your filing status, itemizing could reduce your taxable income more than the standard deduction would. However, itemizing requires thorough record-keeping and documentation of all deductible expenses.

Since nearly 90% of taxpayers claim the standard deduction, it likely makes the most sense. Assessing your financial situation, however, is essential to determining which option is best for you.

Consulting with a tax professional can help you make an informed decision based on your circumstances.

7. What is a tax credit, and which ones should I take?

A tax credit directly reduces your tax liability, lowering the income tax you owe on a dollar-for-dollar basis. This is distinct from tax deductions, which decrease your taxable income. For the 2025 tax year, several tax credits are available to eligible taxpayers, including:

• Child Tax Credit (CTC): This credit offers up to $2,200 per qualifying child under 17, with a refundable portion of up to $1,700. The credit begins to phase out for higher-income taxpayers.
• Earned Income Tax Credit (EITC): Designed to assist low- to moderate-income workers and families, the EITC’s maximum amount is $8,046 for taxpayers in 2025 with three or more qualifying children. Income thresholds and phase-out ranges apply.
• Child and Dependent Care Credit: This non-refundable credit allows up to $3,000 in expenses for one qualifying individual and $6,000 for two or more, helping those who incur care expenses work or seek employment. Find out if you’re eligible here.
• Adoption Tax Credit: Providing up to $17,280 per eligible child for qualified adoption expenses, this non-refundable credit phases out for taxpayers with modified adjusted gross incomes above certain thresholds.
• American Opportunity Tax Credit (AOTC): This credit offers up to $2,500 per student for qualified education expenses over four years. It is available to taxpayers with a MAGI of up to $80,000 ($160,000 for joint filers) and includes up to $1,000 as a refundable credit.
• Lifetime Learning Credit: This non-refundable credit provides up to $2,000 per tax return (or 20% of up to $10,000) for qualified tuition and related expenses, with applicable income phase-out ranges.
• Saver’s Credit: Offering up to $1,000 ($2,000 for married couples filing jointly) for eligible contributions to retirement plans, this credit requires being at least 18 years old, not a full-time student, and not claimed as a dependent on another person’s tax return.

8. Are there any deductions for student loan interest? 

You may be eligible to deduct up to $2,500 of interest paid on qualified student loans during the tax year, even if you don’t itemize deductions. This deduction is gradually reduced and eventually eliminated for single filers with a modified adjusted gross income (MAGI) between $85,000 and $100,000 and for married couples filing jointly with a MAGI between $170,000 and $200,000. For more detailed information, refer to the IRS’s Student Loan Interest Deduction.

9. What are the standard mileage rates for 2025? 

For the 2025 tax year, the IRS has set the standard mileage rates as follows:

• Business use: $0.70 per mile, an increase of $0.03 from 2024.
• Charitable organizations: $0.14 per mile, unchanged from 2024.

These rates apply to electric and hybrid-electric vehicles, as well as gasoline- and diesel-powered vehicles. Taxpayers can calculate the actual costs of using their vehicle instead of applying the standard mileage rates.

10. What are the medical travel and military mileage rates for 2025? 

The mileage rate for medical travel and military moves is $0.21, unchanged from 2024.

Retirement Tax Questions

11. What are the retirement plan contribution limits for 2025?

For the 2025 tax year, the IRS has adjusted the contribution limits for various retirement plans:

• 401(k), 403(b), and 457 plans: The elective deferral limit has increased to $23,500. Individuals aged 50 and over can make an additional catch-up contribution of $7,500, bringing the total to $31,000. Those aged 60 to 63 are eligible to make a catch-up contribution of up to $11,250 if their plan allows.
• SIMPLE IRAs: The contribution limit is now $16,500, with a catch-up contribution of $3,500 for those 50 and older, totaling up to $20,000. Those aged 60 to 63 can make a $5,250 “super” catch-up contribution.
• Traditional and Roth IRAs: The contribution limit remains $7,000. Individuals aged 50 and over can contribute an additional $1,000 as a catch-up contribution, for a total of $8,000.

12. What about required minimum distributions (RMDs) for 2025? 

For 2025, the key thing to know is that the newer RMD rules are now fully in effect. Most retirement account owners must begin taking RMDs at age 73, and the standard deadlines still apply: your first RMD is due by April 1st of the following year, and every year after that by December 31st.

For inherited IRAs, beneficiaries who fall under the 10-year rule may now be required to take annual distributions if the original owner had already started RMDs. If the original owner died before RMD withdrawals began, you generally have more leeway on timing. Just be sure the account is emptied within 10 years.

13. My property was affected by a natural disaster in 2025. What should I know? 

If your property was damaged in a federally declared 2025 disaster, the IRS may offer several forms of relief. This can include extended tax-filing deadlines, the option to claim casualty-loss deductions, and special access to retirement funds through Qualified Disaster Recovery Distributions (QDRDs).

Under QDRD rules:

• You may withdraw up to $22,000 from eligible retirement accounts without the 10% early-withdrawal penalty.
• The income can be spread over three years, and you also have the option to repay the amount within three years to avoid taxation.

Beyond tax relief, be sure to document all damage, keep receipts for repairs, and review what your insurance covers — such as temporary housing, debris removal, or rebuilding costs. Because benefits vary by location, always confirm that your county is included in the official FEMA declaration and review the IRS disaster-relief page for your area’s specific guidance. Check the IRS website for specific extensions applicable in your area.

14. Are there any tax breaks for senior adults and retirees?

Yes! Here are a few to look for:

• Extra standard deduction: Individuals 65 or older are eligible for an additional standard deduction. An extra deduction of $2,000 is available for single filers or heads of household aged 65 or older, and $1,600 per qualifying spouse for married couples filing jointly.
• New $6,000 senior bonus deduction:Starting in 2025, adults 65 and older can claim a “senior bonus” deduction of up to $6,000 (or $12,000 for married couples when both spouses are 65+). It’s available whether you itemize or take the standard deduction.
  • Full deduction at incomes up to $75,000 (single) or $150,000 (married filing jointly).
  • Phases out above these limits and disappears entirely at higher income levels.
  • This new deduction is scheduled to apply for tax years 2025-2028.
• Credit for the elderly or disabled: Eligibility for the credit for the elderly or disabled depends on meeting IRS income limits and, if married filing jointly, both spouses must meet the age or disability criteria. The credit is calculated on Schedule R, starting with a base amount and reducing it by certain pension, annuity, or disability payments before applying a 15% credit rate. Because it’s a nonrefundable credit, it can lower your tax bill but cannot generate a refund. It’s most valuable for seniors and disabled taxpayers with lower to moderate incomes.
• IRA contributions: Working spouses can contribute to spousal IRAs for non-working spouses. For 2025, the contribution limit is $7,000 per spouse under 50, with an additional $1,000 catch-up contribution for those 50 or older, allowing a total of $8,000 per eligible spouse.
• Medicare premiums deduction: Taxpayers who itemize deductions can claim unreimbursed medical expenses that exceed 7.5% of their adjusted gross income (AGI). This deduction is particularly beneficial for individuals with substantial out-of-pocket medical costs.
• Charitable contributions: Individuals aged 70½ or older can make tax-free charitable donations directly from their IRAs through Qualified Charitable Distributions (QCDs). Due to inflation adjustments, the annual QCD limit has increased to $108,000 per individual, up from $105,000 in 2024. Married couples, where both spouses are eligible and have separate IRAs, can collectively donate up to $216,000. These distributions can also satisfy Required Minimum Distributions (RMDs) for those aged 73 or older. To ensure the QCD is tax-free, the IRA trustee must transfer the funds directly to a qualified charity, and the donor should obtain a written acknowledgment from the charity confirming the contribution.
• Property tax benefits: Many states and local governments offer property-tax exemptions, credits, and freezes for seniors — typically for homeowners 65 or older who use the home as their primary residence and meet income or residency requirements. At the federal level, property taxes can still be deducted as part of theSALT deduction if you itemize. For the 2025 tax year, the SALT deduction cap increases from $10,000 to up to $40,000, with the higher cap available to most taxpayers below certain income thresholds. For higher-income households, the deduction phases out and may revert to a lower cap.
• Gifting to reduce taxable estate: In 2025, individuals can gift up to $19,000 per recipient without incurring a gift tax, thereby reducing the taxable estate.

Miscellaneous Tax Deductions

15. What are the lifetime estate and gift tax exemptions for 2025?

For the 2025 tax year, the federal estate tax exemption is $13.99 million per individual, up from $13.61 million in 2024. This means an individual can transfer up to $13.99 million upon death without incurring federal estate taxes. For married couples, the combined exemption is $27.98 million.

The annual gift tax exclusion is $19,000 per recipient in 2025, up from $18,000 in 2024. This allows you to gift up to $19,000 to individuals such as children, grandchildren, or others without triggering the need to file a gift tax return or affecting your lifetime estate and gift tax exemption. If you’re married, you and your spouse can each gift $19,000 to the same recipient, totaling $38,000 per recipient annually.

16. What are the capital gain rates for 2025?

If you sold stocks, mutual funds, or other capital assets you held for at least one year, the IRS taxes any gain at a 0%, 15%, or 20% rate. The 2025 rates have been adjusted upward, with thresholds increasing by approximately 3% across various filing statuses.

0% Rate:

• Single filers: Taxable income up to $48,350.
• Married filing jointly: Up to $96,700.
• Married filing separately: Up to $48,350.
• Head of household: Up to $64,750.

15% Rate:

• Single filers: Taxable income from $48,351 to $533,400.
• Married filing jointly: $96,701 to $600,050.
• Married filing separately: $48,351 to $300,000.
• Head of household: $64,751 to $566,700.

20% Rate:

• Single filers: Taxable income over $533,400.
• Married filing jointly: Over $600,050.
• Married filing separately: Over $300,000.
• Head of household: Over $566,700.

17. What tax incentives are available for making energy-efficient upgrades to my home? 

• Energy Efficient Home Improvement Credit:For qualifying improvements made to your existing U.S. residence and placed in service after January 1, 2023, and by December 31, 2025, you may claim a federal tax credit equal to 30% of the cost of eligible work. The credit is nonrefundable and cannot be carried forward. The annual credit limit is generally up to $1,200 for items like insulation, windows/doors, and air sealing, plus a separate up-to $2,000 limit for heat pumps, heat pump water heaters, and biomass stoves/boilers — meaning the maximum you could claim in one year is potentially up to $3,200 if you qualify in both categories. A key requirement for 2025 (and later) is that the goods must come from a “qualified manufacturer” and include the required identification number on Form 5695.
• Residential Clean Energy Credit:For qualifying property (solar panels, wind turbines, geothermal heat pumps, fuel cells, battery storage systems of at least 3 kWh) placed in service between 2022 and December 31, 2025, you may claim 30% of the installation cost. There is no dollar cap on the credit (except for some fuel-cell property), and unused amounts can be carried forward. However, beginning January 1, 2026 no new property will qualify under the current law unless Congress acts again.

18. Are HSA contributions tax-deductible? What else has changed with HSAs?

Yes. The contributions to an HSA are tax-deductible, and the earnings (if invested) are tax-free, as are withdrawals for eligible medical expenses.

For 2025, you can contribute up to $4,300 for individual coverage and $8,550 for family coverage to your HSA. You report your contributions on Form 8889 with the total contributions transferred to and reported on your Form 1040. Remember, you have until April 15, 2026, to contribute to your HSA for the 2025 tax year.

19. What should I know if I bought health insurance from the Affordable Care Act (ACA) marketplace? 

If you purchased a health insurance plan through the Health Insurance Marketplace (under ACA) for 2025 coverage, here are key points:

• The Premium Tax Credit (PTC) is available to help reduce your monthly premium and/or your tax liability if you enrolled in a Marketplace plan and meet eligibility requirements.
• For 2025, you must have a household income at or above 100% of the federal poverty level (FPL) for your household size.
• Under the temporary rules extended through the 2025 coverage year, there is no upper-income cap (i.e., above 400% of FPL) on eligibility for the PTC. That means households with income above 400% of FPL may still qualify if they meet all other criteria.
• You must enroll through the Marketplace or your state’s equivalent, opt out of your employer’s insurance (if applicable, which also means you’re ineligible for the premium tax credit with ACA), and you must file federal income tax returns including Form 8962 to reconcile any advance credit payments.
• Because of the temporary elimination of the 400% FPL cap, many more households may be eligible in 2025.

20. Are charitable contributions eligible for a tax deduction in 2025? 

Contributions — of cash or non-cash assets — received by December 31, 2025, are eligible for tax deductions. Generally, you may deduct up to 60% of your AGI for cash donations. Keep in mind that charitable contributions are deductible only if you itemize.

Deductions for non-cash contributions, such as property or appreciated assets, are generally limited to 30% of your AGI. The exact limit depends on the type of property donated and the recipient organization.

21. Are there any tax deductions for teachers in 2025?

Eligible K–12 educators can deduct up to $300 in qualified classroom expenses in 2025. This includes books, supplies, and technology used for teaching. To qualify, you must work at least 900 hours in the school year as a teacher, instructor, counselor, principal, or classroom aide. Married couples who are both educators may each claim the deduction.

22. What should I know about platforms like PayPal and Venmo for 2025?

For 2025, these platforms must send a 1099-K to anyone who receives more than $20,000 in payments and completes 200 or more transactions in a tax year.

Even if you don’t receive a form, you are still responsible for reporting all taxable income from these apps on your tax return. To calculate your income, review any 1099-K you receive, separate business or sales payments from personal transfers, subtract returns and related expenses, and report the remaining net amount as income.

23. What should I know about side gigs, freelance income, or selling items online in 2025?

Whether you drive part-time, freelance, consult, tutor, or sell items online, all income from side work must be reported on your 2025 tax return. Key points:

• Platforms such as Uber, Etsy, and Rover may issue Form 1099-NEC, 1099-K, or both, depending on your activity.
• Even if no form is issued, you must report all income from gig or platform-based work.
• Ordinary and necessary business expenses — including mileage, supplies, equipment, home-office expenses, and platform fees — may be deductible.
• With OBBBA making the 20% pass-through deduction permanent, many gig workers may qualify for the Qualified Business Income (QBI) deduction on net earnings.
• If you expect to owe tax, you may need to make quarterly estimated payments to avoid penalties.

This category often catches taxpayers off guard, so good record-keeping throughout the year is essential, especially moving forward.

24. What vehicle tax credits or deductions are still available for the 2025 tax year?

For the 2025 tax year, the clean vehicle credit was still available — up to $7,500 for new electric vehicles (EVs) and $4,000 for used EVs — but it expired on September 30, 2025, so only vehicles purchased before that date qualify. The 2025 rules also introduced a new deduction of up to $10,000 in interest for new, U.S.-assembled personal vehicles financed after December 31, 2024.

Additionally, businesses can take advantage of the restored 100% bonus depreciation for qualifying vehicles placed in service in 2025 and later under OBBBA, allowing a full first-year deduction.

25. My buddy/neighbor/co-worker uses an online platform to file his taxes. He says it’s quick and easy. What should I know? 

While online tax platforms are convenient, they are not right for everyone. Individuals with complex financial situations may benefit from the services of a local tax professional. The following individuals and scenarios are included:

• Those with multiple income sources
• Self-employed, contract workers, clergy, or small business owners
• Those recently divorced or separated
• Those who grew their families through adoption in 2025
• Those who are considered high-net-worth individuals
• Expats
• Those with complex stock holdings
• Individuals dealing with tax debt, liens, or levies

Unlike online tax return platforms, you can receive personalized guidance and insights. Moreover, the security of your financial data is a vital concern when entering sensitive data online.

Beyond that, partnering with a local tax professional means you have a trusted expert who’s readily available for face-to-face meetings whenever you need assistance, whether during tax season or any other time of the year.

So, while online options offer convenience, the long-term financial well-being and peace of mind that come with professional guidance and face-to-face support are well worth it.

I hope this guide gives you a clearer picture of what to expect when filing your 2025 tax return. If you know someone else who would find it useful, feel free to share it.

When you’re ready to set up your tax appointment, reply to this email or call our office. If you need anything in the meantime, don’t hesitate to reach out — that’s why I’m here.

Please don’t hesitate to reach out with any questions or concerns.

Marc Aarons may be reached at 714-887-8000 or Email Marc

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