Key tax changes in Trump’s “One Big Beautiful Bill” for 2025

Key tax changes in Trump’s “One Big Beautiful Bill” for 2025

President Donald Trump's "big beautiful bill," signed into law in early July 2025, includes several tax changes that will impact the 2025 tax year and subsequent returns. Financial advisors and tax professionals are still processing the implications of these sweeping changes, which range from permanent extensions of the 2017 tax cuts to temporary deductions for specific income groups.

Permanent Extensions of Trump's 2017 Tax Cuts

One of the marquee provisions of the bill is the permanent extension of Trump's 2017 tax cuts. This includes lower tax brackets and higher standard deductions, which will continue to reduce taxes for Americans. The standard deduction increases from $15,000 to $15,750 for single filers and from $30,000 to $31,500 for married filing jointly. Additionally, the child tax credit is bumped from $2,000 to $2,200 per child [1].

Temporary Deductions for 2025

The bill also introduces several temporary deductions effective for 2025. These include:
- A $6,000 "bonus" deduction for older Americans aged 65 and over, which phases out over $75,000 for single filers or $150,000 for married couples filing jointly [1].
- New deductions for tip income, overtime earnings, and car loan interest, with varying eligibility requirements [1].

SALT Deduction Changes

The legislation temporarily raises the cap on the state and local tax (SALT) deduction for 2025. The SALT deduction limit increases from $10,000 to $40,000, but this benefit phases out for incomes between $500,000 to $600,000, creating an artificially higher tax rate of 45.5% for high earners, referred to as the "SALT torpedo" [1].

Premium Tax Credit 'Subsidy Cliff'

The bill does not extend the enhanced premium tax credit, which had been boosted during the pandemic to make Marketplace health insurance more affordable. This means that the premium tax credit will revert to its pre-pandemic levels starting in 2026, which could raise Affordable Care Act premiums for more than 22 million enrollees [1].

Impact on Financial Planning

Financial advisors are urging clients to run projections for multiple years to understand how these new provisions could impact their taxes. Without income planning, individuals could reduce or eliminate various tax benefits they are otherwise eligible for. Jim Guarino, a certified financial planner and managing director at Baker Newman Noyes, emphasizes the importance of a holistic tax strategy, advising that "you never want to do anything in a silo" [1].

Conclusion

The "One Big Beautiful Bill" introduces significant tax changes that will impact the 2025 tax year and beyond. Financial professionals are advising clients to review their tax situations carefully and adjust their strategies accordingly to maximize benefits and minimize potential negative impacts. As these changes take effect, it will be crucial for taxpayers to stay informed and adapt their financial planning strategies.

References
[1] https://www.cnbc.com/2025/07/20/trump-big-beautiful-bill-2025-tax-changes.html
[2] https://www.cnn.com/2025/07/17/economy/powell-responds-to-vought-fed-renovation
[3] https://taxfoundation.org/blog/trump-tariffs-tax-cuts/