The Tax Cuts and Jobs Act of 2017 (TCJA) included lower federal income tax brackets, bigger standard deductions, and higher gift and estate tax exemptions, among other provisions. The law stipulated that some of those tax breaks would sunset at the end of 2025. If that were allowed to happen, the Tax Foundation estimated that more than 60% of tax filers would face increased taxes.1
Uncertainty around future taxes has been discussed for the past few years, impacting financial strategy considerations among individuals, families, and small business owners. However, legislation signed into law in July 2025 made many of the TCJA provisions permanent, lifting some of the uncertainty and adding a degree of clarity to future tax policy.
In addition to making many of the 2017 tax cuts permanent, the 887-page legislation included many other tax provisions, such as a senior “bonus,” larger state and local tax deductions, higher estate and gift tax exemptions, as well as breaks for tip income, overtime pay, and auto loans. It also created a new tax-advantaged savings account for children.2
Now that we have all had some time to digest the legislation signed on July 4, we would like to provide you with an overview of the tax changes included in the new law. Keep in mind that this article is for informational purposes only and is not a replacement for real-life advice. Consult your tax, legal, and accounting professionals before modifying your tax strategy.
Changes for Individuals
- Tax Rates and Brackets2
The legislation makes the TCJA individual tax rates permanent and adjusts the income thresholds for 2025 to account for inflation, preventing taxpayers from moving into higher brackets solely due to rising wages or prices. - Estate and Gift Tax Exemption3
The legislation permanently increases the estate tax exemption and lifetime gift tax exemption to $15 million for single filers ($30 million for married filing jointly) in 2026. The exemption amount will then be indexed for inflation. - Standard Deduction3
The law permanently increases the TCJA’s standard deduction amounts. Starting in 2025, the standard deduction increases to $15,750 for single filers, $23,625 for heads of household, and $31,500 for married individuals filing jointly. The standard deduction will be adjusted for inflation in the future, and the changes have been made retroactive to include 2025. - Bonus Deduction for Older Adults4
The new law includes a temporary $6,000 “bonus” for Americans ages 65 and over. The full deduction is available to individuals with up to $75,000 in modified adjusted gross income ($150,000 for married couples filing jointly)—the bonus phases out for taxpayers who are above those thresholds. A temporary senior deduction is in place for tax years 2025–2028. Some speculated that this provision is in place of eliminating taxes on Social Security, since changes to Social Security are generally not permitted in reconciliation legislation. - State and Local Tax Deduction (SALT)4
The state and local tax deduction (SALT) applies to those who itemize their taxes and provides a federal deduction for state and local income and property taxes. Before 2018, there were no limits on the SALT deduction, but the TCJA introduced a $10,000 SALT deduction cap. This measure was unpopular in higher-taxed states and became an issue during negotiations on the current law. The agreed-upon legislation temporarily lifts the SALT cap to $40,000 starting in 2025 and phases out for taxpayers with more than $500,000 in income. The cap and income figures will increase by 1% yearly through 2029. If not extended, the SALT limit will revert to $10,000 in 2030. - Alternative Minimum Tax Exemption3
The Alternative Minimum Tax (AMT) is a separate tax calculation that ensures certain taxpayers pay at least a minimum amount of tax, even if they qualify for various deductions and credits under the regular tax system. The TCJA increased the AMT exemption amounts and raised the phaseout thresholds so fewer people would be subject to it.
The new law permanently extends the higher AMT exemptions that the TCJA introduced. The phaseout threshold (the income level where the AMT exemption starts shrinking) is set at the 2018 TCJA levels of $500,000 for single filers and $1 million for married couples filing jointly. Both the AMT exemption and the phaseout threshold will be indexed for inflation. However, the law increases the phaseout rate from 25% to 50% of the amount by which a taxpayer’s AMT income exceeds the threshold. As a result, the exemption is reduced more quickly once income passes the threshold.
- Child Tax Credit4
The child tax credit benefits families with qualifying children under age 17 who have a valid Social Security number. The TCJA temporarily doubled the maximum credit from $1,000 to $2,000, with the increase scheduled to expire after 2025. Under the new legislation, the maximum credit will be permanently increased to $2,200 starting in 2025 and will be indexed for inflation beginning the following year. The law also makes permanent the higher refundable portion of the credit—known as the additional child tax credit—which will likewise adjust for inflation. - Tax Break on Tips4
For service workers, there is a temporary federal income tax deduction of up to $25,000 per year on qualified tip income. The tip deduction has an income limit of $150,000, or $300,000 for joint filers, and is in effect for tax years 2025–2028. - Tax Break on Overtime4
The legislation also provides a temporary tax break for overtime pay. It allows for a maximum $12,500 above-the-line deduction for overtime pay ($25,000 for married couples filing jointly) from 2025 to 2028. The tax break begins to phase out once earnings exceed $150,000 ($300,000 for joint filers). The deduction applies only to federal income tax and does not exempt overtime pay from payroll taxes. - Auto Loan Interest Deduction4
The new law creates a tax deduction for car loan interest. Qualified households can deduct up to $10,000 of annual interest on new auto loans from their taxable income. Once again, this deduction is temporary, lasting from 2025 to 2028. The deduction’s value starts to decline for individuals whose annual income exceeds $100,000 ($200,000 for married couples filing jointly). To qualify, cars must also be assembled in the United States. - 529 Modifications5
The law expands allowable tax-free 529 withdrawals for expenses beyond K–12 tuition and applies to private, public, religious, and homeschool students. 529 withdrawals can now be used to cover the cost of curriculum materials, tutoring, or classes outside the home, educational therapies for students with disabilities, and testing fees. For credentials and licenses, the law also makes a range of non-college programs eligible for 529 withdrawals. - Child Savings Account4
The legislation includes a new savings account for children with a one-time deposit of $1,000 from the federal government for U.S. citizens born in 2025–2028. Parents can contribute up to $5,000 a year, with the account balance being invested in a fund that tracks a U.S. stock index. Employers can also contribute up to $2,500 to an employee’s account, which wouldn’t be counted as income to the recipient. From a tax perspective, the account functions like an individual retirement account. Earnings grow tax-deferred, and qualified withdrawals are generally taxed as ordinary income. However, between the ages of 0 and 17, withdrawals are not allowed. At age 18, the account automatically rolls into a traditional IRA in the child's name. At this point, withdrawals are allowed under IRA rules. - Charitable Deductions6
Starting in 2026, the law allows for a new charitable gift deduction for taxpayers who do not itemize up to $1,000 for single filers or $2,000 for married couples filing jointly. Those who itemize can only claim a tax deduction if their qualified charitable contributions exceed 0.5% of their adjusted gross income.
Changes for Qualified Small Businesses
In addition to individual tax changes, the new legislation includes several provisions that may affect businesses. These include:
- Qualified Business Income (QBI) Deduction7
The law makes the 20% deduction for qualified business income, which was set to expire at the end of the year, permanent. This is targeted at pass-through entities, such as sole proprietorships, partnerships, and S corporations. - Increased Expensing Limits7
The legislation raises the maximum amount a small business can expense for qualifying property from $1 million to $2.5 million. There is also a higher phaseout threshold and inflation adjustments. This provision is intended to allow small businesses to deduct more capital investments immediately, which might help cash flow and encourage growth. - Estate Tax8
The law increases the estate tax exemption for small business owners, which could influence decisions about passing businesses to the next generation. - Restored Bonus Depreciation8
The 100% bonus depreciation, which allows businesses to deduct the full cost of new equipment and facilities immediately, has been reinstated.
Potential Tax Concerns of New Legislation
While the passage of the new law has averted the consequences of tax rates and brackets reverting to pre-2017 levels, there are concerns about some of the details and economic implications of the sweeping legislation.
As detailed above, many of the new tax policies in the law were not made permanent, with most expiring in 2028. These limits were negotiated to reach an agreement in a closely divided Congress with divergent priorities. If a future Congress does not extend or make these policies permanent, taxpayers will see some or all of these breaks go away. That might put us back into the realm of uncertainty.
Tax Strategies Can Be Complicated
While there are many other aspects of the legislation, including elements that are more politically sensitive, we discuss taxes because a well-thought-out financial strategy often considers taxes.
For a comprehensive review of your personal situation, always consult with a tax or legal advisor. Neither Cetera Wealth Services LLC nor any of its representatives may give legal or tax advice.
1 CNBC, June 18, 2024
2 CNBC, July 3, 2025
3 Journal of Accountancy, July 7, 2025
4 CNBC, July 4, 2025
5 The Wall Street Journal, June 13, 2025
6 Fidelity, July 2025
7 Fortune, July 2025
8 USA Today, July 1, 2025