Federal tax laws are adjusted regularly to account for economic changes, inflation, and new legislation, making it important for taxpayers to stay informed. For the 2025 tax year, several federal updates may affect deductions, credits, and overall tax liability for individuals and businesses. This overview outlines key federal tax changes to help you better understand what’s new and how it may impact your filing and planning decisions.

Federal Tax Changes for 2025

1. Standard Deductions & Tax Brackets

• The federal standard deduction amounts increased for 2025, helping reduce taxable income for many taxpayers.

• The seven current tax brackets (10%, 12%, 22%, 24%, 32%, 35%, 37%) are now permanent and adjusted for inflation.

2. Senior Deduction Expansion

• Individuals aged 65 or older can claim an additional standard deduction of up to $6,000 (and up to $12,000 for married joint filers) beginning with the 2025 tax year.

3. Expanded SALT Deduction Cap

• The State and Local Tax (SALT) deduction cap has temporarily increased to $40,000 for tax year 2025 (phasing down for higher-income taxpayers).
  This is a significant increase from the previous $10,000 limit and may benefit filers in high-tax states.

4. Child Tax Credit Boost

• The Child Tax Credit increased, providing more potential benefit per qualifying child on 2025 returns.

5. “No Tax on Tips” & Other Deductions

• New federal provisions allow certain workers to exclude tips from taxable income and expand deductions like overtime and adoption credits.

6. Estate & Gift Tax Exemptions

• The federal estate and gift tax exemption is higher for 2025 and protected from scheduled reductions, preserving tax-free transfer thresholds.