Written by Heidi Johnson Bixby, CFP®, and Ralph Doggett, CFP®, EA.
At our recent 2025–2026 Tax Law Update event, we unpacked one of the most wide-ranging sets of tax changes in years: the H.R. 1 law, also known as the ‘One Big Beautiful Bill’ Act, enacted on July 4, 2025. With more than 800 pages of updates—affecting individuals, families, businesses, and investors, the session focused on what you as a taxpayer needs to know heading into 2025 and how planning ahead can make a meaningful difference for your financial picture.
Read more for key takeaways from our live event.
A Bigger Standard Deduction—With Income Limits
One of the headline changes for 2025 is a substantial increase in the standard deduction:
- $15,750 for Single filers
- $23,625 for Head of Household
- $31,500 for Married Filing Jointly
- Additional amounts still apply for taxpayers 65+ and/or blind
The surprising twist: under H.R.1, taxpayers age 65+ can benefit from a new deduction up to $6,000 for Single and $12,000 Married Filing Joint even if they itemize.
However, higher-income households will see a gradual phaseout beginning at $75,000 AGI for single filers and $150,000 AGI for joint filers.
This change provides a significant boost for middle-income taxpayers while reinforcing the importance of year-round tax planning for those near the phaseout thresholds.
New Personal Deductions for Workers
To sTo support service-sector and hourly workers, H.R.1 introduces several new deductions:
- Auto Loan Interest Deduction (2025–2028)
Up to $10,000 per year for interest on qualifying new vehicle loans, with rules around U.S. assembly and vehicle type.
- Tip Income Deduction
A new deduction of up to $25,000, available for voluntary tips reported on W-2s or Form 4137.
- Overtime Pay Deduction
Up to $12,500 Single / $25,000 MFJ, aimed at employees who receive premium overtime pay.
Each of these includes income phaseouts and specific eligibility requirements, but together they represent a significant—though temporary—expansion of worker-focused tax relief.
A Major Increase to the SALT Deduction
Perhaps the most widely discussed provision: the State and Local Tax (SALT) deduction cap increases from $10,000 to $40,000 through 2029, with a high-income phaseout beginning at $500,000 AGI.
For taxpayers in states like Oregon and Washington who pay property or state income taxes in excess of $10,000 per year, this temporary expansion may open new planning opportunities—particularly for ‘bunching’ deductions when appropriate to exceed the Standard Deduction.
Business Deductions Get a Boost
Business owners will also see changes, including:
- Section 179 expensing limit increasing to $2.5 million, with a higher phaseout threshold
- R&D expenses once again fully deductible, with retroactive relief for affected years
These adjustments may influence equipment purchases, hiring plans, and year-end investment decisions.
Looking Ahead: Key Changes in 2026
H.R.1 introduces several administrative and planning-related changes beginning in 2026, including:
- The IRS moving to Direct Deposit Only for most refunds; no more paper checks
This applies to 4th Quarter 2025 estimated payments due January 15, 2026 - New above-the-line and itemized deduction rules for charitable giving
- Expanded HSA eligibility and qualified medical purchases
- Broader 529 plan uses, including online courses, tutoring, and testing
- The end of many energy tax credits on December 31, 2025
- The Federal estate tax exemption rising to $15 million
These changes underscore the importance of treating 2025 as a strategic planning year.
Planning Opportunities for the 2025 Tax Year
With so many changes arriving at once, 2025 offers a chance to consider long-term tax strategy. In addition to investment and retirement planning, charitable giving is one of the other opportunities for tax efficiency this year.
Charitable Giving Opportunities
- Take advantage of the new above-the-line charitable deduction
Beginning in 2026, taxpayers who don’t itemize can still deduct up to $1,000 Single / $2,000 MFJ in cash gifts (not non-cash or contributions to donor-advised funds). And planning ahead can help you time gifts to maximize both itemized and non-itemized benefits. - Understand the new ‘charitable floor’ for itemizers
For those who itemize, charitable gifts will need to exceed 0.5% of AGI beginning in 2026 to be deductible. This creates an incentive to accelerate charitable giving into 2025, when the floor does not apply. - Bunch donations to maximize the temporarily expanded SALT deduction
With the SALT cap increasing to $40,000 for 2025–2029, taxpayers who normally sit near itemization thresholds can strategically time charitable gifts to unlock higher deductions. - Consider Donor-Advised Funds (DAFs)
2025 may be a particularly good year to fund a DAF—especially for high-income filers—because:- Income is lower than expected
- You anticipate higher income or RMDs in future years
- You want to front-load giving before the 2026 charitable floor takes effect
- Pair charitable gifts with Roth conversions
Large charitable deductions can help offset taxable income from Roth conversions—making 2025 an ideal year to combine the two strategies.
Additional Key Planning Strategies
- Take advantage of the 0% capital gains bracket
- Evaluate Roth conversions before future thresholds shift
- Use IRA or 401(k) contributions to stay under phaseout ranges
- Review SALT strategies while the higher cap is available
- ‘Bunch’ medical expenses while itemizing
- Assess timing of income, bonuses, and deductions around new phaseouts
As we often say, the right decisions depend on your personal situation and financial goals.
The Bottom Line: Tax Complexity Is Growing—Planning Matters More Than Ever
A couple of themes were clear throughout the session: tax law continues to grow in complexity, and it’s a good time to get ahead of the changes by looking at key tax and financial planning steps.
Our team of tax professionals and financial planners remain committed to staying on top of tax law and planning—and to helping clients make informed decisions for their long-term financial picture.
If you would like to watch a recording of the November 19 event, you can access it here: https://www.youtube.com/watch?v=IJ79qb3zQCQ
If you would like to speak with one of the financial professionals at Integrated Tax Services or Johnson Bixby, please reach out.
