Here are six ways the new tax law and spending bill could reduce your 2025 tax bill.  Keep in mind that these six provisions all go into effect this year.

1. Higher Standard Deduction

The standard deduction is a set dollar amount that taxpayers can claim each year to lower their tax bill – and the new tax law boosts that amount substantially. The new law increases the standard deduction for single filers from $15,000 to $15,750 and for married couples filing jointly from $30,000 to $31,500. You must choose to either claim the standard deduction or itemize your deductions.  You want to pick the larger number, because the number you pick will then be subtracted from your income to get your taxable income.  The lower your taxable income, the lower your tax bill.

2. New Bonus Deduction for People 65 Or Older

Eligible taxpayers who are 65 or older get to claim an even higher deduction.  The new law includes a bonus deduction worth as much as $6,000, or $12,000 for married couples filing jointly if both spouses are over age 65. The bonus deduction is temporary – it’s available from 2025 through 2028 – and there are income limits.  Once a taxpayer’s modified adjusted gross income (MAGI) hits $75,000 (or $150,000 for married couples filing jointly), the value of the tax break starts to phase out.

3. Higher SALT Deduction

Taxpayers who itemize their deductions will now be able to write off more money they spend on state and local taxes (SALT) – including state income and property taxes – thanks to an increase in the value of the SALT deduction. The new law increases the SALT deduction to $40,000 ($20,000 if married filing separately), up from the $10,000 ($5,000 if married filing separately). But the higher cap is temporary. It’s in effect from 2025 through 2029.

In 2030, the cap drops back to $10,000. The deduction phases out for taxpayers with a MAGI of $500,000 or more ($250,000 or more if married filing separately).  That income limit will increase by 1 percent per year and the overall SALT deduction cap will rise by 1 percent per year – until the higher cap expires after 2029.

4. No Tax on Tips and Overtime Pay

One of Trump’s campaign promises was to get rid of federal taxes on tips and overtime pay, and the new law fulfills that promise, at least partly.  While workers will still need to report this type of income, they’ll now receive a deduction on qualified tip income of up to $25,000. Meanwhile, employees who earn overtime pay will get a tax break on up to $12,500 (up to $25,000 if married filing jointly) of the income they earn for working those extra hours.

There are income limits on these tax breaks.  Once a taxpayer’s MAGI hits $150,000 (or $300,000 if married filing jointly), the value of each of these tax breaks starts to phase out, decreasing by $100 for every $1,000 above the income limit. Both of these provisions are in effect from 2025 through 2028.

5. Higher Child Tax Credit

The new legislation also raises the amount of the child tax credit, which taxpayers can claim for each qualifying dependent under age 17. While the TCJA had temporarily increased the credit from $1,000 per child to $2,000 through 2025, the new law hikes that amount permanently to $2,000, effective starting in 2025.  The credit amount will rise with inflation adjustments each year after 2025. The maximum refundable portion of the tax credit is now $1,400 (that too will be adjusted each year based on inflation).  The refundable portion is also referred to as the additional child tax credit as a refund even if you don’t owe the IRS any money.

However, under the new law, the taxpayer claiming the tax credit must have a Social Security number, and that includes both spouses if married filing jointly.  Previously, only the child had to have a Social Security number.  This change could make an estimated 4.5 million children ineligible for the credit, according to the Center for Migration Studies.

6. New Deduction for Car Loan Interest

Eligible borrowers can now claim a deduction for the interest paid on a loan for a personal vehicle, as long as that car is new, was purchased in 2025 through 2028 and was assembled in the U.S. It is unclear exactly what “assembled in the U.S.” means – some car manufacturers may, for example, put on a rear-view mirror on the car in the U.S. to try to meet that requirement.

The deduction is maxed out at $10,000 per year and phased out for single taxpayers with modified adjusted gross income above $100,000, or married-filing-jointly above $200,000.  You don’t have to itemize on your tax return to receive this benefit.

These are just a few highlights of the new bill.  Watch for more information in the coming weeks and months on ways the new bill may affect you and your business.