💡 What the One Big Beautiful Bill Act Means for Your Taxes in 2025

On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) became law. While the name might sound flashy, the tax changes inside are serious and they could affect how much you owe or save next year. Whether you're a W-2 employee, a 1099 contractor, or a small business owner, here’s what you need to know to stay ahead of the curve.

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Key Tax Changes Made Simple

• Tax Rates Stay the Same

The current tax brackets (like 10%, 12%, 22%) won’t expire in 2026 as originally planned. That means no automatic tax hikes unless Congress changes things later.

• Standard Deduction Gets a Boost

Starting in 2025:

• Single filers can deduct $15,750

• Married couples can deduct $31,500

This helps reduce taxable income, even if you don’t itemize.

• Child Tax Credit Increases

The credit goes up to $2,200 per child and stays refundable. You’ll need valid Social Security numbers for both you and your child to qualify.

• State & Local Tax (SALT) Deduction Expanded

You can now deduct up to $40,000 in state and local taxes (like property or income tax) through 2029. But if your income is over $500,000, the deduction starts to shrink.

• New Deduction for Seniors

If you’re 65 or older, you may qualify for a $6,000 deduction though it’s reduced if your income is over $75,000 ($150,000 for couples).

• Business Owners Keep Their 20% Deduction

If you own a pass-through business (like an LLC or sole proprietorship), the 20% Qualified Business Income (QBI) deduction is now permanent. Income limits have been raised, and even small businesses can get a minimum $400 deduction.

• Auto Loan Interest Is Now Deductible

If you bought a U.S. made car, you can deduct up to $10,000 in loan interest even if you don’t itemize. Income limits apply, and you’ll need to provide the vehicle’s VIN.

• Tip Income Deduction

If you work in a tipped industry (like food service or beauty), you can deduct up to $25,000 in tips. This applies through 2028 and is available even if you don’t itemize.

• Overtime Pay Deduction

If you earn less than $150K (single) or $300K (joint), you can deduct up to $12,500 ($25,000 joint filers) in overtime pay. This is separate from the tip deduction and applies through 2028.

• New “Trump Accounts” for Kids

These are special savings accounts for children under 18. You can contribute up to $5,000 per year, and the money can be used later for education or starting a business. The government will even kick in $1,000 for eligible kids born between 2025 and 2028.

• Charitable Giving for Non-Itemizers

Even if you don’t itemize, you can now deduct up to $1,000 in charitable donations ($2,000 for couples) starting in 2026.

• Child & Dependent Care Credit Expanded

You can now get up to 50% back on qualifying childcare expenses. The credit gradually decreases as your income rises, but it won’t drop below 20%.

• Scholarship Donation Credit

You can get a $1,700 tax credit for donating to approved scholarship organizations that help fund K–12 education. Plus, scholarships received from these groups won’t count as taxable income.

✨ Final Thoughts

Some of these changes like the standard deduction and QBI deduction just lock in what we’ve already been using. But others, like the tip and overtime deductions, Trump Accounts, and auto loan interest deduction, are brand new and could open doors for smart tax planning.

At Savvy Girl Tax, we’re here to help you turn tax law into strategy. If you’re wondering how these updates affect your 2025 return, let’s chat.

xoxo,

AShira

Founder, Savvy Girl Money