Get Ready For Tax Season!
Submitted by Anthony Brunson, P.A. Certified Public Accountants & Business Advisors
The 2025 tax filing season reflects one of the most significant sets of changes in recent years following enactment of H.R. 1, P.L. 119-21, commonly known as the One Big Beautiful Bill Act. While the law permanently extended many provisions of the Tax Cuts and Jobs Act (TCJA), it also introduced new deductions and reporting requirements that increase complexity for organizations and their employees.
Although many changes apply at the individual taxpayer level, nonprofits, governmental entities, and businesses will be directly affected through payroll reporting, employee communications, benefits administration, and tax planning.
Permanent TCJA Provisions Now Locked In
H.R. 1 permanently extended the TCJA’s individual tax rates of 10% through 37% and the higher standard deduction amounts. For 2025, the standard deduction is:
- $15,750for single filers
- $31,500for married filing jointly
- $23,625for heads of household
The personal exemption remains eliminated. Miscellaneous itemized deductions are permanently disallowed, and higher alternative minimum tax (AMT) exemption amounts remain in place and indexed for inflation.
Why it matters: These permanent rules provide long-term certainty, but they do not reflect newly enacted deductions in 2025 withholding tables, raising the risk of employee under- or over-withholding.
SALT Deduction Increase
Beginning in 2025, the federal deduction for state and local taxes (SALT) increased to $40,000 ($20,000 for married filing separately (MFS)), subject to income-based phaseouts beginning at $500,000 of modified Adjusted Gross Income (AGI) ($250,000 MFS). The deduction cannot be reduced below $10,000 ($5,000 MFS).
Passthrough entity tax (PTET) elections remain unchanged, which is relevant for business owners and taxable subsidiaries.
Credits and Deductions Affecting Employees
The child tax credit was permanently increased to $2,200 per qualifying child, with $1,700 refundable in 2025. Phaseout thresholds of $200,000 (single) and $400,000 (joint) were made permanent. New rules require the taxpayer (or at least one spouse on a joint return) to have a valid Social Security number to claim the credit.
Mortgage interest deductions remain limited to interest on up to $750,000 of acquisition debt, while the moving expense deduction remains eliminated for most taxpayers.
Business-Related Tax Provisions
For business clients and taxable subsidiaries:
- 100% bonus depreciationapplies to qualifying property placed in service on or after January 19, 2025
- Section 179 expensingincreased to $2.5 million, with a $4 million phaseout threshold
- Domestic R&D costsmay again be deducted immediately, while foreign R&D must still be capitalized
The 20% Qualified Business Income (QBI) deduction was made permanent. Beginning in 2026, phase-in ranges for certain service businesses will expand, and a new $400 minimum deduction will apply for qualifying active owners.
New Temporary Deductions (2025–2028)
H.R. 1 introduced several new deductions that apply whether or not a taxpayer itemizes and require additional payroll awareness:
- Senior deduction:$6,000 per individual age 65+ ($12,000 for married couples), subject to phaseouts beginning at $75,000 of MAGI ($150,000 joint)
- Tip income deduction:Up to $25,000 for workers in traditionally tipped occupations, with phaseouts beginning at $150,000 modified adjusted gross income (MAGI) ($300,000 joint); employees of certain professional service businesses are excluded
- Overtime income deduction:Up to $12,500 ($25,000 joint), limited to the overtime premium portion of pay; employers must separately report qualifying amounts on Form W-2
- Auto loan interest deduction:Up to $10,000 of interest on qualifying new personal-use vehicles, subject to income limits
Other Notable Changes
- Health Savings Accounts:Telehealth services may be covered without jeopardizing HSA eligibility beginning in 2025
- Electric vehicle credits:Clean vehicle credits were repealed for vehicles acquired after September 30, 2025
What Organizations Should Do Now
The permanent extension of TCJA provisions provides long-term certainty, but the introduction of new deductions and reporting requirements adds complexity. This increases the need for proactive planning and communication. Organizations should:
- Review payroll systems for new Form W-2 reporting requirements
- Prepare employee communications regarding new deductions and phaseouts
- Reassess capital investment and depreciation strategies
- Coordinate early with tax and audit advisors
Tax payers have until April 15, 2026 to file their taxes, with an extension gives you intil October 15, 2026, to file, but you must still pay taxes owed by April 15, 2026 to avoid penalties. Please contact our team to discuss how these changes may affect your organization, your employees, or related entities.