Important Tax Law Changes for 2025

HR1, passed in July 2025, has several changes that will affect a substantial number of our clients.

 Employees in traditionally tipped jobs, as specified by the U.S. Treasury and IRS, can exclude up to $25,000 in tips from federal income tax through 2028, subject to income limits and specific eligibility requirements.

Overtime pay up to $12,500 (or $25,000 for joint filers) can be deducted in the same period, again with income phaseouts.


New temporary deductions allow taxpayers to deduct interest on personal car loans for new U.S.-assembled vehicles (up to $10,000 per year) purchased after 2024, with income phaseouts and expiration at the end of 2028. A VIN number is required to submit with the tax return.

The state and local tax (SALT) deduction cap, which limits how much you can deduct for state and local taxes, rises sharply (subject to income limits) from $10,000 to $40,000 for 2025 and stays elevated through 2029 before dropping back in 2030.

New child savings accounts start with a $1,000 federal deposit for kids born in 2025–2028 and allow further yearly contributions subject to limits and rules. If you have a child born prior to 2025, you are still allowed to open the account without the  matching government contribution and contribute as much as $5000 per year until the child turns 18, at which time the account converts to a regular IRA. We will have a form to submit with the taxes and the IRS sets up the account. 

The federal Child Tax Credit increases to $2200 per child.