What Changed in 2025 — And Why It Matters
Tax law changed again in 2025. But the real issue isn’t what changed — it’s whether you’re positioned to benefit from it.
The One Big Beautiful Bill Act, signed into law in July 2025, introduced several updates that could affect individual taxpayers, retirees, and higher-income households. Here are the changes you should understand before filing:
1. New Deductions for Tips and Overtime
Two new deductions are now available:
- Up to $25,000 for qualified tip income (subject to income limits)
- Up to $12,500 for overtime pay ($25,000 if married filing jointly), also subject to income limits
These deductions may significantly reduce taxable income for eligible workers. However, documentation and income thresholds will matter. If your earnings fluctuate, planning becomes even more important.
2. New Senior Deduction
Taxpayers age 65 and older may now claim:
- $6,000 senior deduction
- $12,000 if both spouses are 65+ and filing jointly
This deduction is also subject to income limits.
For retirees, this could affect withdrawal strategies from retirement accounts. Coordinating Social Security, pension income, and investment distributions now requires more precise planning.
3. Increased Child Tax Credit
The Child Tax Credit increases to $2,200 per qualifying child.
While modest, this adjustment may improve refund amounts for qualifying families and should be factored into overall tax projections.
4. Higher SALT Deduction Cap
The State and Local Tax (SALT) deduction cap increases to $40,000 for most filers.
However, this benefit begins phasing out for individuals with a modified adjusted gross income (MAGI) over $500,000.
For high-income earners in high-tax states, this change could materially impact tax planning decisions — including estimated payments, entity structuring, and income timing.
Tips to Make Filing Easier
To reduce delays and help secure a faster refund, the IRS recommends:
- Ensure you’ve received Form W-2 and other earnings documents, such as Form 1099, from employers and payers.
Most forms are generally not required to be furnished before February 1, 2026, and mail delivery may take additional time. - Visit irs.gov to access Form 1040 or Form 1040-SR (available for seniors born before January 2, 1960), along with official instructions.
- File electronically and use direct deposit.
- Check irs.gov regularly for updated tax information.
Electronic filing remains the most reliable way to reduce delays and protect your refund timeline.
Key Filing Dates for 2025 Returns
Mark these dates:
- January 9 — IRS Free File opened.
IRS Free File Guided Tax Software (available only at irs.gov) allows participating software providers to accept completed returns for taxpayers or families with an adjusted gross income (AGI) of $89,000 or less in 2025 and electronically file them at no cost. - January 26 — Free File Fillable Forms became available for taxpayers with an AGI above $89,000 to complete and e-file themselves at no charge.
- January 26 — IRS began accepting and processing individual tax returns.
- April 15 — Filing deadline for most taxpayers to submit 2025 returns or request an extension.
- October 15 — Deadline for those who requested an extension.
Missing deadlines can result in penalties and interest — even if you expect a refund.
Tax Refund Expectations
The IRS expects to issue most refunds within 21 days of receiving a tax return — provided that:
- The return is filed electronically
- Direct deposit is selected
- There are no processing issues
Paper returns significantly increase processing time and refund delays.
The Strategic Takeaway
Tax changes are rarely just administrative updates. They shift planning opportunities, income timing decisions, and documentation requirements.
The difference between compliance and optimization is preparation.