📅 Signed into law on July 4, 2025, the new 887-page U.S. tax legislation brings major changes that could impact your paycheck, deductions, and even car purchases. It goes beyond just extending Trump’s 2017 tax cuts—it makes some permanent, adds new credits, removes others, and reshapes tax rules across income brackets, donations, estates, and more.
Let’s break down the key highlights of the law and test your tax knowledge along the way.
🔝 1. Top Income Tax Rate
💡 New Rule:
The top federal income tax rate remains at 37%, made permanent from the 2017 tax law.
📌 Applies To:
Taxable income over $626,350 for individuals in 2025.
An attempt to increase it to 39.6% for ultra-high earners was rejected.
📊 2. Standard Deduction Increased
💡 New Standard Deduction for 2025:
- 🧍♂️ Single: $15,750
- 👩❤️👨 Married filing jointly: $31,500
✔️ This amount will be adjusted for inflation annually.
🏠 3. SALT Deduction Raised (Temporarily)
💡 New SALT Deduction Cap (State and Local Taxes):
Raised from $10,000 ➡️ $40,000, starting 2025.
⚠️ This increased cap:
- Phases out for income over $500,000.
- Expires after 2029, reverts back to $10,000 in 2030.
❤️ 4. Charitable Deductions for All
💡 Even if you take the standard deduction, you can still claim:
- ✅ Up to $1,000 for single filers
- ✅ Up to $2,000 for joint filers
🗓️ Effective from 2026.
Itemizers can deduct above 0.5% of AGI (also from 2026).
🎓 5. More 529 Plan Uses
💡 New Eligible Expenses:
- K–12 tutoring,
- SAT/ACT/AP test fees,
- Books & supplies
➡️ 529 withdrawals remain tax-free for these expanded uses.
🚗 6. EV and Energy Credits End Soon
💡 EV Credit ($7,500) Ends:
- ❌ For purchases made after Sept. 30, 2025
💡 Solar & Home Efficiency Credits End:
- ❌ After Dec. 31, 2025
Act fast if you’re planning an electric vehicle or solar panel purchase!
👶 7. Child Tax Credit Rises
💡 New Max Credit per Child in 2025: $2,200
📌 Income thresholds remain the same:
- $200,000 (single)
- $400,000 (joint)
✔️ Adjusts for inflation starting in 2026.
⚰️ 8. Estate Tax Threshold Increases
💡 Estate Tax Kicks In Over:
$15 million in 2026, up from ~$14 million.
📈 Inflation adjustments begin in 2027.
🚘 9. Car Loan Interest Deduction
💡 Deduct up to $10,000 in car loan interest (2025–2028), if:
- 🚙 Vehicle is assembled in the U.S.
- ⛽ Must be gas-powered (electric doesn’t count)
- 🚛 Must weigh under 14,000 lbs
- 🚘 Must have at least 2 wheels (includes motorcycles)
Income phase-out:
- $100,000 (single)
- $200,000 (joint)
💸 10. No-Tax Promise on Tips & Overtime
💡 Trump’s Promise Partially Delivered:
Starting 2025–2028:
- ✅ No tax on tip income (up to $25,000)
- ✅ No tax on overtime ($12,500 for singles, $25,000 for joint filers)
⚠️ Phases out at:
- $150,000 (single)
- $300,000 (joint)
Why This Matters
This tax overhaul impacts everyday earners, families, estate planners, EV buyers, and even students. Some provisions are temporary, others are permanent—so it’s crucial to plan your finances smartly.
🧠 Test Your Knowledge — Quick Quiz Recap
- Top Tax Rate ➡️ 37% ✅
- Standard Deduction ➡️ $15,750 / $31,500 ✅
- SALT Cap ➡️ $40,000 ✅
- Charity Deduction (Standard) ➡️ Yes ✅
- 529 Plan Uses ➡️ All of the above ✅
- EV Credit Ends ➡️ Sept 30, 2025 ✅
- Child Credit ➡️ $2,200 ✅
- Estate Tax Threshold 2026 ➡️ $15 million ✅
- Car Loan Interest Limit ➡️ $10,000 ✅
- No Tax on ➡️ Tips and Overtime ✅