Washington Passes Major Tax Legislation

• Tax rates locked in
  The tax brackets you’ve gotten used to under the TCJA — 10%, 12%, 22%, 24%, 32%, 35%, and 37% — are now permanent. This avoids the jump that was expected for 2026.
• AMT phaseouts adjusted
  For higher earners, the alternative minimum tax (AMT) won’t start phasing out until your income hits around $1 million for joint filers in 2026, indexed for inflation.
• No personal exemption, but a break for seniors
  The personal exemption is permanently gone. However, there’s a new $6,000 deduction for seniors (age 65 and older) that will apply from 2025 through 2028.
• Standard deduction gets bigger
  From 2025 on, the standard deduction is permanently increased to about $15,750 for single filers, $23,625 for heads of household, and $31,500 for joint filers, with adjustments for inflation in later years.
• Changes to itemized deductions
  If you’re in the top tax bracket (37%), you’ll see your itemized deductions start to phase out after 2025, and the old miscellaneous itemized deductions that needed to exceed 2% of AGI are permanently gone (except for teachers, who still get up to $300).
• Temporary SALT cap relief
  The deduction for state and local taxes (SALT) gets a temporary boost, rising to $40,000 for 2025 and increasing slightly each year through 2029. It phases down if your income tops $500,000. Starting in 2030, the limit reverts to $10,000.
• Car loan interest deduction
  Starting in 2025, you can deduct up to $10,000 in interest on loans for vehicles assembled in the U.S., without needing to itemize. This phases out for incomes above $100,000 for single filers ($200,000 for joint filers) and expires after 2028.
• Charitable deduction for non-itemizers
  If you don’t itemize, you can still deduct up to $1,000 for single filers ($2,000 for joint filers) for charitable gifts, starting in 2026.
• Child tax credit changes
  The child tax credit is now $2,200 per qualifying child, indexed for inflation. The credit for nonqualifying children stays at $500 and phases out for incomes over $200,000 for single filers ($400,000 for joint filers).
• 529 plans expanded
  You can now use up to $20,000 from a 529 plan for K-12 expenses, doubling the old limit.
• “Trump accounts” for newborns
  These new tax-advantaged accounts will be seeded with $1,000 from the government for newborns between 2025 and 2028. Families can contribute up to $5,000 annually, with contributions adjusted for inflation after 2027. No distributions can be made until the child turns 18.
• Opportunity Zones made permanent
  The program allowing special tax treatment for investments in designated areas is now a permanent feature, with rolling 10-year designations beginning in 2027.
• Special breaks on tips and overtime
  There are temporary deductions through 2028 for qualified tips (up to $25,000) and overtime (up to $12,500 for single filers / $25,000 for joint filers), phasing out above $150,000 income.
• Gambling losses limited
  If you itemize gambling losses, they’re now capped at 90% of your wagering losses, up to the amount of your winnings.
• Energy credits ending
  The energy efficient home improvement credit and residential clean energy credit will no longer apply to property placed in service after December 31, 2025.

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Business Provisions

• More generous expensing and depreciation
  Section 179 expensing jumps to a $2.5 million limit (with a $4 million investment cap). Plus, 100% bonus depreciation becomes permanent for property acquired and placed in service after January 19, 2025.
• Manufacturing bonus
  Qualified production property that breaks ground by 2029 and is in service by 2031 can take additional bonus depreciation.
• QBI deduction is here to stay
  The 20% qualified business income (QBI) deduction is now permanent, with higher phase-in levels and a guaranteed $400 minimum for those with at least $1,000 of QBI.
• More flexibility on R&D
  Domestic research expenses can now be deducted right away or amortized over at least 60 months. Small businesses (under roughly $31 million in gross receipts) can elect to apply this retroactively to 2021 and amend past returns. Businesses can also choose to accelerate existing deductions from 2022-2024 over one or two years.  Foreign research expenses continue to be capitalized over 15 years.
• Limits on business interest
  Business interest deductions are capped at 30% of EBITDA (earnings before interest, taxes, depreciation, and amortization) starting after 2024.
• Charitable giving now has a floor
  Only contributions above 1% of taxable income count, up to a 10% limit, with excess carried forward for five years.
• Bigger credits for employer-provided child care
  The credit increases to 40% of qualified child care costs (up to $500,000 for most), with even better terms for small businesses.
• Excess business loss limitation now permanent
  The rule limiting excess business losses for non-corporate taxpayers is now a permanent feature of the tax code.
• Energy credits ending
  There will be several changes to energy tax credits and incentives after 2025.  

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Miscellaneous Provisions

• 1099 reporting gets simpler
  The threshold for sending 1099s jumps to $2,000 starting in 2026, with inflation adjustments in later years.
• Estate exclusion rises
  The estate and gift tax exclusion increases to $15 million in 2026, with annual inflation adjustments.
• International tax changes.
  Foreign derived intang ible income (FDII) is replaced by foreign derived deduction eligible income (FDDEI), giving domestic corporations a 33.34% deduction on certain foreign income. Global intangible low-taxed income (GILTI) is replaced by “net CFC tested income,” with a 40% deduction. Meanwhile, the base erosion tax (BEAT) is now permanently set at 10.5%.