President Trump’s “Big Beautiful” Bill is officially law, signed on July 4th. But despite the fanfare, most Americans won’t feel the effects immediately.
While a few provisions are already in effect, many changes, especially those related to taxes, won’t show up until you file in 2026. Others, like healthcare reforms, are delayed until late next year. Here’s a breakdown of what you need to know now, and how this bill could impact your finances.
Six New or Expanded Individual Tax Breaks
1. Increased SALT Deduction Cap
One of the biggest changes is to the State and Local Tax (SALT) deduction cap. Taxpayers earning under $500,000 can now deduct up to $40,000 in SALT on their federal return, up from the previous $10,000 cap. This new cap will increase by 1% annually through 2029 before reverting to $10,000 in 2030.
2. Expanded Child Tax Credit
Beginning with the 2025 tax year, the Child Tax Credit will increase to $2,200, with $1,700 of it refundable. Starting in 2026, both amounts will be adjusted annually for inflation.
A quick refresher:
- A refundable credit can increase your refund even if you owe no taxes.
- A nonrefundable credit can reduce your tax bill to zero—but not beyond that.
3. New Senior Bonus Deduction
Seniors aged 65 or older will benefit from a new deduction of up to $6,000, available through 2028. This applies to individuals earning under $75,000 and couples earning under $150,000.
4. Car Loan Interest Deduction
If you’ve taken out a car loan for a vehicle assembled in the U.S., you may be eligible to deduct up to $10,000 in interest, provided your income is under $100,000 (or $200,000 for joint filers). This deduction is above-the-line, meaning you don’t need to itemize to claim it.
5. Tip Income Deduction
Workers who earn tips can deduct up to $25,000 in qualified tip income through 2028. Like the car loan deduction, this is above-the-line and claimed directly on your Form 1040.
6. Overtime Pay Deduction
Overtime workers can now claim a $12,500 deduction, also above-the-line. However, this benefit phases out if your income exceeds $150,000 (single) or $300,000 (married filing jointly).
What’s Coming in the Future
Private School Scholarship Credit (Starting 2027)
A new $1,700 nonrefundable credit will be available starting in 2027 for donations made to nonprofit organizations that fund K–12 private school scholarships. This could be especially beneficial for families or philanthropists focused on education.
Expiring Credits to Know About
With all these new deductions and benefits, a few current credits are also being phased out:
1. Electric Vehicle (EV) Credit
The popular EV tax credit, up to $7,500 for new and $4,000 for used electric vehicles, will expire after September 30, 2025. Originally part of the Inflation Reduction Act, this credit was previously expected to last through 2032.
2. Energy-Efficient Home Upgrade Credit
Since 2023, homeowners have been able to claim up to $3,200 for energy-efficient improvements like solar panels, insulation, windows, and advanced HVAC systems. This credit will now expire on December 31, 2025.
Planning home upgrades? Make sure to act before the deadline to claim this credit.
What This Means for You
This bill introduces meaningful tax relief for many groups: especially seniors, tip earners, families, and workers putting in extra hours. But for those considering eco-friendly purchases or electric vehicles, some major incentives are disappearing soon.
Most of these updates apply to the 2025 tax year, meaning the financial impact will show up when you file in 2026. Now is the time to talk to a tax professional and begin planning ahead.
You can watch more on our Youtube, and as always contact Paragon today if you have any questions.
