For years, taxpayers were told the 2017 Tax Cuts and Jobs Act (TCJA) provisions were set to expire at the end of 2025, and that a political fight over what came next was inevitable. That fight happened — and it’s over. On July 4, 2025, Congress passed the One Big Beautiful Bill Act (OBBBA), which made most of the TCJA’s individual tax provisions permanent, added several new deductions, and reset a number of thresholds going into 2025.
The IRS has since released its official inflation adjustments for tax year 2025 (the return you’ll file in early 2027) under Revenue Procedure 2025-32, layering routine cost-of-living increases on top of OBBBA’s structural changes. Here’s what actually changed, what’s new for 2025 specifically, and what it means for your planning.
The Big Picture: What OBBBA Settled
Rather than letting the TCJA sunset, OBBBA locked in the framework most taxpayers have used since 2018:
- The seven tax brackets are permanent. Rates of 10%, 12%, 22%, 24%, 32%, 35%, and 37% continue with no scheduled expiration.
- The larger standard deduction is permanent and continues to be adjusted for inflation each year.
- Personal and dependent exemptions remain eliminated — permanently, this time.
- The suspension of the itemized deduction phaseout (the old “Pease limitation”) is permanent, though OBBBA adds a new cap on the tax value of itemized deductions specifically for taxpayers in the top 37% bracket.
In short, the widely anticipated 2025 “cliff” didn’t happen. What did happen is a mix of permanent structural changes plus several temporary, targeted provisions that taxpayers need to track individually.
2025 Tax Brackets
| Rate | Single | Married Filing Jointly |
| 10% | Up to $12,400 | Up to $24,800 |
| 12% | $12,400 – $50,400 | $24,800 – $100,800 |
| 22% | $50,400 – $105,700 | $100,800 – $211,400 |
| 24% | $105,700 – $201,775 | $211,400 – $403,550 |
| 32% | $201,775 – $256,225 | $403,550 – $512,450 |
| 35% | $256,225 – $640,600 | $512,450 – $768,700 |
| 37% | Over $640,600 | Over $768,700 |
These brackets apply to income earned in 2025 and are used for 2025 withholding and estimated payments; you’ll report against them on the return you file in 2027.
2025 Standard Deduction
- Single / married filing separately: $16,100 (up from $15,750 in 2025)
- Married filing jointly: $32,200 (up from $31,500 in 2025)
- Head of household: $24,150 (up from $23,625 in 2025)
With the deduction this high, itemizing still only makes sense for taxpayers whose mortgage interest, state and local taxes, and charitable giving add up to more than these thresholds combined.
New and Expanded Provisions Under OBBBA
Several OBBBA provisions are genuinely new — not just inflation updates — and several are temporary, which matters for planning:
- Senior deduction (2025–2028 only): Taxpayers age 65 and older can deduct an additional $6,000 ($12,000 for a married couple where both spouses qualify), on top of the standard or itemized deduction. It phases out for individuals with modified adjusted gross income over $75,000 ($150,000 for joint filers).
- No tax on tips and overtime (temporary): Certain tip income and overtime pay can be deducted within statutory limits for tax years 2025 through 2028, aimed at service and hourly workers. Eligibility and dollar caps are specific, so confirm you qualify before assuming this applies.
- Higher SALT deduction cap (temporary): The $10,000 cap on state and local tax deductions rises to $40,400 for 2025, phasing out for incomes above $505,000 ($252,500 for married filing separately). The cap increases roughly 1% a year through 2029, then reverts to $10,000 in 2030 absent further legislation.
- Larger employer-provided childcare credit: The maximum credit available to employers jumps from $150,000 to $500,000 ($600,000 for eligible small businesses) starting in 2025.
- New car loan interest deduction: A temporary deduction for interest on loans used to buy a new, U.S.-assembled personal vehicle, subject to income phaseouts.
- Trump Accounts for children: A new tax-advantaged account type for children born 2025–2028, with a $1,000 government-funded seed deposit for eligible children.
Estate and Gift Tax
- Estate and gift tax exemption: $15,000,000 per individual for 2025 (up from $13,990,000 in 2025) — a jump of just over $1 million, and now indexed for inflation going forward as a permanent OBBBA baseline. Married couples can shield $30,000,000 combined.
- Annual gift tax exclusion: Stays at $19,000 per recipient for 2025 (unchanged from 2025). Gifts to a non-citizen spouse are excludable up to $194,000.
High-net-worth taxpayers who were rushing to use exemption amounts before an anticipated 2025 reduction can stand down — but the higher exemption is still framed as part of the current law rather than a truly permanent floor, so periodic estate plan reviews remain worthwhile.
Credits and Family Provisions
- Child tax credit: Remains at a maximum of $2,200 per child for 2025 and 2025, with a $1,700 refundable portion. Inflation adjustments resume for 2027.
- Earned income tax credit: The 2025 maximum rises to $8,231 for taxpayers with three or more qualifying children (up from $8,046 in 2025), with lower maximums for fewer children.
- Adoption credit: Rises to $17,670 in 2025, with up to $5,120 potentially refundable.
- AMT exemption: Increases to $90,100 for single filers and $140,200 for joint filers in 2025.
What This Means for You
Run the math on itemizing versus the standard deduction again — the higher SALT cap specifically may tip the scale for taxpayers in high-tax states who write off well above $10,000 in state and local taxes. If you’re 65 or older, make sure your preparer is applying the new senior deduction; it’s easy to miss since it’s separate from the standard deduction. Workers with significant tip or overtime income should confirm eligibility for the new deduction rather than assuming it applies automatically.
High-Net-Worth and Estate Planning
The higher $15 million exemption creates a window for additional lifetime gifting, but it’s calendar-year-dependent and tied to current law rather than a hard permanent guarantee. If your estate plan was built around the old TCJA sunset assumptions, it’s worth a review.
Business Owners
The permanence of the qualified business income deduction and the restored favorability on R&D expensing and bonus depreciation change the calculus on entity structure and the timing of large purchases or capital expenditures. If you’re weighing S-corp versus C-corp treatment or planning equipment purchases, model both under the new permanent rules rather than the pre-OBBBA assumptions.
Not sure how these changes land on your specific return? Bracket shifts, a temporary SALT cap, and new age- and income-based deductions are easy to apply incorrectly — especially if you’re catching up on a prior-year return or already dealing with an IRS notice. Talk to a Tax Law Advocates attorney or enrolled agent about how the 2025 rules affect your situation.
Bottom Line
The tax-law uncertainty that defined 2024 and 2025 has largely resolved: most of the framework taxpayers got used to under the TCJA is now permanent, layered with a set of new — but mostly temporary — deductions aimed at seniors, tipped and hourly workers, and taxpayers in high-tax states. The practical task now isn’t guessing what Congress might do; it’s making sure your withholding, itemization strategy, and estate plan actually reflect the rules as they now stand.
If your return involves significant SALT deductions, tip or overtime income, an estate near the exemption threshold, or business income, it’s worth having a tax professional model your specific numbers against the 2025 rules rather than relying on last year’s return as a guide.
FAQ
Did the TCJA actually expire at the end of 2025? No. The One Big Beautiful Bill Act, signed July 4, 2025, made most of the individual TCJA provisions — including the seven tax brackets and the larger standard deduction — permanent before they could sunset.
Is the higher SALT deduction cap permanent? No. The $40,400 cap for 2025 is temporary, scheduled to increase roughly 1% annually through 2029 before reverting to $10,000 in 2030 unless Congress acts again.
Do I automatically get the new senior deduction if I’m over 65? You still have to meet the income phaseout rules, and it applies on top of — not instead of — the regular standard deduction or additional age-based standard deduction amount. Confirm with your preparer that it’s being applied.
Does the no-tax-on-tips or no-tax-on-overtime provision apply to everyone with tip or overtime income? No. Both are subject to statutory dollar caps, income limits, and specific eligibility rules, and both are currently scheduled to expire after 2028.
