The new tax law passed in 2025 (known as OBBA 2025) will have a significant impact on families when they file their 2025 returns this year.
For families in the 24% bracket or higher ($105,700 for single filers and $211,400 for Joint returns) there are a few main areas that may benefit you.
- State and local tax deductions (SALT) will increase from $10,000 to $40,000. However, starting at $500,000 of modified adjusted gross income (MAGI), the deduction phases back down to $10,000 at $600,000+ MAGI.
- The Tax Cut and Jobs Act brackets have been made permanent. (Of course, permanent means unless a new tax law changes them). This prevented the brackets from reverting to the higher 2018 brackets. (Top bracket was 39.6% vs. 37%).
- For 2025, the standard deduction is higher at $31,500 for Joint filers and $15,750 for single filers.
- The child tax credit has been made permanent and increased to $2,200 per child.
- This deduction also phases out for joint filers with a MAGI of $400,000+.
- Seniors (age 65+) can claim a $6,000 deduction ($12,000 if married).
- This deduction also phases out for incomes for single returns at $75,000 and $150,000 for joint returns of MAGI.
- Lastly, the alternative minimum tax exemption will be $88,100 for the 2025 tax year, with the phase-out starting at $626,350 for single returns and $1,252,700 for joint returns.
Don’t be surprised if you pay less than you expected or get a refund larger than you expected. These tax changes will impact many Americans, even if you are in a higher brackets. Consult your tax professional. If you have a tax “windfall” you should contact your financial advisor to help you decide what the highest and best use of your tax break might be.
Registered representative of, and securities and investment advisory services offered through Hornor, Townsend & Kent, LLC (HTK), Registered Investment Adviser, Member FINRA/SIPC. 800-873-7637, www.htk.com. HTK is a wholly-owned subsidiary of The Penn Mutual Life Insurance Company. Wealth Coordination Partners is not affiliated with HTK. HTK does not offer tax or legal advice. Always consult a qualified adviser regarding your individual circumstances.
The information presented is for educational purposes only and derived from sources assumed to be reliable – it is not relied upon as tax, legal, or financial advice, nor used for the purpose of avoiding any tax penalty. 8737879RG_Jan27
