Filing Your 2025 Taxes: The Biggest Changes You Need to Know
Filing Your 2025 Taxes: The Biggest Changes You Need to Know
The 2025 tax season looks familiar on the surface but underneath, a lot has changed.
The IRS officially opens tax filing on Monday, January 26, and this year’s returns reflect major tax-law updates tied largely to the One Big Beautiful Bill Act (OBBB). These changes extend and expand several provisions that were previously temporary, while adding brand-new deductions that affect millions of workers and families.
At the same time, the IRS is entering the season with reduced staffing and updated systems, which could slow responses and increase processing delays. That makes understanding the new rules before you file more important than ever.
Here’s a clear breakdown of what’s different for 2025 and how it may affect your tax bill or refund.
TCJA Rules Are Staying in Place for 2025
One of the biggest shifts this year is actually about stability.
The One Big Beautiful Bill Act permanently extends many parts of the Tax Cuts and Jobs Act (TCJA) that were originally scheduled to expire. That includes:
- The current tax bracket structure
- Lower marginal tax rates
- The larger standard deduction
Without this extension, many households would have seen automatic tax increases as the law reverted to older rules. Instead, the familiar TCJA framework remains intact with updated numbers.
This matters because the TCJA was never designed to last forever for individuals. While corporate tax cuts were permanent, family-focused provisions came with a built-in expiration. The new law removes that uncertainty and gives taxpayers a longer runway to plan ahead.
Inflation-Adjusted Tax Brackets and a Higher Standard Deduction
As expected, the IRS adjusted all seven federal tax brackets for inflation in 2025. This helps prevent “bracket creep,” where pay raises push income into higher tax rates even when purchasing power hasn’t improved.
The standard deduction also increased again for every filing status. That continues the trend started under the TCJA and keeps itemizing unnecessary for most filers.
What this means in real terms:
- More of your income is protected from tax
- Slightly lower taxable income, even if your salary stayed the same
- Fewer people need to track itemized deductions
These changes also help explain why refunds may look larger in 2026. Withholding tables weren’t fully updated to reflect the new deductions, meaning some workers paid more during the year than they ultimately owe.
Example:
A single filer earning $70,000 may now stay fully within the 22% bracket, instead of having part of their income taxed at 24%. Combined with the higher standard deduction, that can reduce taxable income by several hundred dollars.
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The Child Tax Credit Gets a Modest Boost
For 2025, the Child Tax Credit (CTC) increases to $2,200 per qualifying child and will now adjust annually for inflation.
While the long-term future of the credit remains politically uncertain, the short-term impact is clear: families receive slightly more relief than last year.
For households with multiple children, the increase adds up quickly, either through a higher refund or a smaller balance due. Importantly, the structure of the credit remains familiar, so parents won’t need to learn a new system to claim it.
At a time when food, housing, and childcare costs remain elevated, even a modest credit increase can help smooth the edges of a tight budget.
A Major Expansion of the SALT Deduction
One of the most meaningful changes for higher-cost areas is the SALT deduction expansion.
For 2025:
- The cap increases from $10,000 to $40,000
- The benefit begins to phase out when income exceeds $500,000
This change primarily benefits homeowners and taxpayers in high-tax states like New York, New Jersey, and California, where property taxes and state income taxes often exceed the old limit.
For many households, this restores a deduction that had been mostly unusable since 2018.
Example:
A homeowner paying $18,000 in property taxes and $9,000 in state income tax can now deduct the full $27,000, compared to just $10,000 under the prior cap.
If you previously defaulted to the standard deduction because of the old limit, 2025 may be the year itemizing makes sense again.
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New Deductions for Tip Income and Overtime Pay
Two new deductions aim to support workers with variable or hourly pay.
Through 2028, eligible taxpayers can deduct:
- Up to $25,000 in tip income
- Up to $12,500 in overtime income per person
- Up to $25,000 in overtime for joint filers
These deductions phase out as income rises.
Because employers were not yet required to separately report qualified tips and overtime on W-2s or 1099s, the IRS allows multiple documentation methods for 2025, including:
- Social Security tip amounts (Box 7)
- Tip logs (Form 4070)
- Pay stubs or employer records
This flexibility is intentional and helps service-industry and hourly workers claim the deduction without extra paperwork hurdles. In future years, reporting will be more standardized.
What to Do Before You File
With several changes hitting at once, preparation matters.
Before filing:
- Gather income documents early, especially if you earn tips or overtime
- Recheck whether itemizing now makes sense under the higher SALT cap
- Confirm eligibility for the larger Child Tax Credit
- Use the IRS withholding estimator if your income changed in 2025
Because the IRS is operating with fewer staff and new systems, e-filing with direct deposit remains the fastest and most reliable way to receive a refund.
A bit of upfront review can help you avoid delays, reduce errors, and make sure you’re actually benefiting from the new rules.
Final Thoughts
The 2025 tax season isn’t about learning a brand-new system, it’s about understanding meaningful updates to a familiar one. Higher deductions, expanded credits, and targeted relief for workers and homeowners could make a noticeable difference, especially if you plan ahead.
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