After squealing through Congress, the vast budget bill signed into law by President Donald J. Trump on July 4th will have many far-reaching effects on consumers and the economy as a whole. Taxes will be charged on the list.
The nearly 900-page “Big, Beautiful Bill” has a lot to say about taxes, with various changes, new credits and deductions being part of the new bill. But the bill at the heart of this is about extending tax provisions passed under the 2017 Tax Cuts and Employment Act (TCJA) during Trump’s first administration.
Currently, many tax cuts in 2017 are permanent
“You know, everyone is focusing on changing this and changing it, but the main point of this law was to extend or permanently extend many of the provisions that were in the 2017 Tax Cuts and Employment Act,” said CPA and principal Evan Morgan, Miami-based tax company Kaufman Rossin.
The watch was etched into many of the changes in 2017 that were set to return to early levels at the end of 2025.
“They were going to expire and return to a higher rate,” Morgan says. “They said, ‘No, no, we’re going to make it permanent.’ ”
tax
For the 2017 tax year, tax rates ranged from 10% to 39.6%. TJCA has reduced its top-rate, top-earning rating to 37%. That range is now permanent with the “big, beautiful bill” and has created provisions to adjust certain revenue thresholds or brackets for future inflation.
Standard deduction
The standard deduction increase enacted in 2017 is also expected to expire, and the new bill will not only make them permanent, but will raise them again and utilize them in the case of taxes filed in 2025.
The new standard deduction levels are:
Filing married to a single filer: Increases from $15,000 to $15,750. Co-married filing: Increases from $30,000 to $31,500. Head of household: Increases from $22,500 to $23,625.
In the 2017 tax year prior to the TCJA, the standard deduction was $6,350 for individuals, $12,700 for those jointly filed for married people, and $9,350 for household leaders.
State and Local Tax Credits
Prior to the TJCA, there was no upper limit to the amount that could be deducted from certain state and local taxes paid by the taxpayer. The 2017 law sets a $10,000 cap that was set to expire at the end of 2025, and returns without a cap.
The new bill sets a new cap at $40,000 for the tax year in 2025, and rose 1% to $40,400 in 2026. In 2029, it will return to $10,000.
State and local (salt) deductions are available only to taxpayers who identify the item, rather than taking standard deductions, and are subject to restrictions for high-income earners. Still, it’s worth exploring, especially for homeowners.
“Even in a non-tax state like Florida, the house isn’t that expensive to earn $10,000 in property taxes,” says Morgan. “Now that limit has been raised from 10 to 40.”
Child Tax Credit
In 2017, the TCJA temporarily increased its maximum child tax credit from $1,000 to $2,000. The credit is set to return to $1,000 at the end of the year. The law will increase the maximum credit this year to $2,200, adjusting for future inflation and making it permanent.
What’s new about “big and beautiful bills”?
Senior Deduction
During his campaign, Trump pledged to eliminate income taxes. This is some of the Americans who are paying more than 65 for Social Security benefits. Instead, the bill will add a new deduction for eligible taxpayers.
$6,000 for eligible individuals. $12,000 for married couples to jointly submit if both spouses are 65 years of age or older.
The deduction is temporary and ends after tax in 2028 and is layered above the standard deductions that are available with all taxpayers and additional advanced standard deductions. To obtain the full deduction, eligible taxpayers must have a revised adjusted gross income of less than $75,000 (or less than $150,000 for joint filers).
Tip/No tax on overtime
Trump also campaigns to end tips and overtime taxes, with the new law temporarily enacting both pledges. These provisions will expire after 2028 taxes unless Congress takes further action. Both will implement this tax year (for taxes submitted in 2026).
About tips:
Taxpayers are allowed to deduct “qualified” tips of up to $25,000 from their income. Temporary workers are still on the hook for payroll taxes that fund Social Security and Medicare. The industries included have restrictions and there are staged deductions above certain modified adjusted gross income thresholds ($150,000 for individuals and $300,000 for couples).
overtime:
Taxpayers are allowed to deduct up to $12,500 on their overtime salary. This doubles the $25,000 worth of eligible joint filers. The deduction applies to the amount paid for the worker’s base salary. The deduction is reduced after the same threshold as TIPS provisioning.
Car Loan Interest Deduction
This deduction is designed to enhance US car manufacturing, and therefore has built-in restrictions in the qualification. This deduction begins with taxes in 2025 (taxes filed in 2026) and expires after tax in 2028.
Basics:
Taxpayers can amortize up to $10,000 per year in interest paid on eligible car loans. Taxpayers do not need to add items to claim deductions.
limit:
The car is new and must be purchased after December 31, 2024. The car must be assembled in the US. The deduction could reduce the deduction to $0 for individuals making more than $100,000 a year (or joint filers operating over $200,000) to $0.
Tax reductions for small and medium-sized businesses
The bill has a number of tax provisions that affect businesses of all sizes, including small and medium sized businesses.
“The two biggest things we are trying to deal with are recovering bonus depreciation and strengthening the costs of Section 179 for companies purchasing fixed assets,” says Morgan, who specializes in working with small and medium-sized businesses.
The bonus depreciation change allows businesses to deduct 100% of the cost of new “qualified real estate” (certain types of machinery and other “short-lived” assets) acquired after January 19, 2025.
The TCJA set a 100% deduction in 2017, but began to progressively progressively in 2022. Before the latest changes, the deduction was 40% for the current tax year.
“In other words, if you spent $1 million as a business on computers, desks, chairs, furniture, equipment, etc., you would only get a 40% bonus appreciation deduction in 2025,” says Morgan. “It’s now been retroactively changing…and it’s back to 100%. It’s going to be pretty big.”
In Section 179, an entity can deduct the costs of a particular asset in full, rather than depreciation. “Big and Beautiful Invoice” raises the limit on this type of deduction from $1 million to $2.5 million.
There are many changes that affect business owners, and the two changes above have nuances. Employers should consult their tax advisor for more details.
Good news for online sellers
Morgan highlighted one additional change that would be interesting for those selling items online through platforms such as Etsy, Venmo, and eBay.
The 2021 American Rescue Plan reduced the sales threshold for reporting sales to $600 a year, but the implementation of the new restrictions was delayed.
The new budget bill will revive previous reporting restrictions for $20,000 and 200 transactions.
What’s going on?
“Big and Beautiful Invoice” focuses almost entirely on tax reductions, but some tax credits will disappear. It is mainly in the area of clean energy.
The $7,500 federal tax credit for purchasing a new electric vehicle and the $4,000 tax credit for purchasing a used EVS will both end on September 30, 2025. Two Clean Energy Tax Credits allow homeowners to request tax credits for rooftop solar, geothermal heat pumps, or other green energy devices.
Many changes – IRS is small
Many new tax changes require the IRS to develop new internal rules and guidelines. This is when government agencies are rapidly losing staff and funding. As part of the push for a new administration to cut the federal workforce, the IRS workforce has already fallen by more than 25%, with further cuts planned.
Rick Vanderkniff writes for the Neldwallet. Email: rvanderknyff@nerdwallet.com.
The article “GOP Megabill: What Taxpayers Should Know” originally appeared on Nerdwallet.
Original issue: July 14th, 2025, 12:42pm EDT
