2025–2026 Tax Changes Explained: What Every Individual Taxpayer Should Know

2025–2026 Tax Changes Explained: What Every Individual Taxpayer Should Know

The One Big Beautiful Bill Act (OBBBA) reshapes individual taxes beginning in 2025. Some reliefs are temporary (tips, overtime, car loan interest), while others become permanent in 2026. Use this guide to understand what’s changing and how to prepare.

Standard Deduction (2025)

Senior Bonus Deduction (2025–2028)

Taxpayers aged 65+ (or with qualifying disabilities) may claim an extra $6,000 on top of the standard deduction. Phase-out begins above roughly $75,000 Single / $150,000 MFJ.

“No Tax on Tips” (2025–2028)

Service workers can exclude up to $25,000 in tips from taxable income ($50,000 MFJ). Benefit phases out above about $150,000 Single / $300,000 MFJ.

“No Tax on Overtime” (2025–2028)

Deduct up to $12,500 in overtime pay ($25,000 MFJ) with similar AGI phase-outs.

Car Loan Interest Deduction (2025–2028)

Deduct up to $10,000 of interest on a new, U.S.-assembled vehicle. Used cars and leases do not qualify. Phase-out starts above about $100,000 Single / $200,000 MFJ.

Child Tax Credit (from 2025)

The CTC increases to $2,200 per qualifying child and will adjust for inflation. Refundability is expanded for lower-income families.

Housing & Mortgage Rules

• Mortgage interest limit ($750,000) is permanent.
• Moving expense deduction remains repealed (active-duty military exception).
• Mortgage insurance premiums (MIP) return as deductible in 2026 under defined criteria.

529 Plan Expansion (from July 4, 2025)

Qualified withdrawals now include homeschool materials, tutoring, online courses, and certain therapies for students with disabilities—beyond traditional tuition.

New/Updated Forms to Watch

• W-2 (wages): due to arrive by Jan 31, 2026.
• 1099-DA (digital assets) for crypto/NFT disposals.
• 1099-K (third-party platforms) more taxpayers receive forms due to lower thresholds.

Plan Your AGI (Phase-outs Matter)

• Contribute to HSA, Traditional IRA, or workplace plans.
• Self-employed: consider SEP-IRA or Solo 401(k).
• Track eligible tips and car loan interest for the new deductions.

Filing Calendar & Quick Checklist (2025 Return)

• Forms issued by: Jan 31, 2026
• IRS opens e-file (expected): late Jan 2026
• Tax Day: Apr 15, 2026 (extension to Oct 15)

Related Posts & References

• 2025 Tax Tips: Master Your Filing Status for Maximum Savings
• Form W-2 Explained: Your 2025 Guide to the Most Important Tax Form for Employees
• IRS Newsroom — filing & policy updates
• Congress.gov — bill text & summaries
• IRS Pub 501 — filing info & standard deduction
• IRS Pub 970 — education benefits (529)

⚖️ Educational information only, not tax advice. For personal guidance, consult an Enrolled Agent (EA) or tax professional.