Overview
- The law locks in the TCJA rate structure and delivers an estimated $129 billion cut for 2025, with the Tax Foundation projecting an average $611 tax reduction and a larger average refund of about $3,800.
- The SALT deduction cap rises to $40,000 for 2025 with annual 1% increases through 2029 and income-based phaseouts, and the value of itemized deductions for those in the 37% bracket will be limited to 35% starting in 2026.
- Families gain more flexibility with education savings as 529 annual qualified K-12 withdrawals double to $20,000 and eligible expenses broadened in 2025, and a new 530A 'Trump Account' is set to launch with a $1,000 federal seed for babies born 2025–2028 and tax-free withdrawals for specified uses from ages 18 to 30.
- Taxpayers aged 65 and older can claim an additional $6,000 deduction ($12,000 for qualifying joint filers) through tax year 2028, subject to modified adjusted gross income phaseouts that can be affected by retirement withdrawals.
- Targeted write-offs include a tips deduction coupled with lower 1099 thresholds that increase recordkeeping, a temporary deduction of up to $10,000 per year for interest on qualifying U.S.-assembled new car loans through 2028, and from 2026 an overtime deduction (up to $12,500 single or $25,000 joint) with employer reporting and income phaseouts.