What’s New? Tax Year 2025: Tax Law Changes

Income Tax Return Due Dates

Your clients will have until Wednesday, April 15, 2026 to file their 2025 returns.

Tax Form Changes

• Child Tax Credit, Additional Child Tax Credit, & Credit for Other DependentsChild Tax Credit (CTC) has been permanently increased to $2,200 per child.The Additional Child Tax Credit (ACTC) has increased, and up to $1,700 is now refundable.The Credit for Other Dependents (ODC) has been made permanent at $500 per child/dependent.

• Earned Income Tax Credit – The maximum credit for Married Filing Jointly (MFJ) and claiming three or more Qualifying Dependents increases to $8,046 in 2025, with the credit completely phased out at $68,675 of Adjusted Gross Income (AGI). If your client is a Single filer with no Dependents, they can receive a maximum credit of $649, with the credit completely phased out at $19,104 of AGI.

• New Senior DeductionMust be age 65 or older.$6,000 per qualifying Individual ($12,000 for MFJ).Click the following link for more details: https://app.mytaxprepoffice.com/support/article/1.0/9085

• No Tax on TipsMaximum Deduction $25,000.Phase-out when Modified Adjusted Gross Income (MAGI) is greater than $150,000 ($300,000 for MFJ).Click the following link for more details: https://app.mytaxprepoffice.com/support/article/1.0/9082

• No Tax on OvertimeMaximum deduction $12,500 ($25,000 for MFJ).Phase-out when Modified Adjusted Gross Income (MAGI) is greater than $150,000 ($300,000 for MFJ).May deduct the pay that exceeds their regular rate of pay such as the “half” portion of “time-and-a-half” compensation.Click the following link for more details: https://app.mytaxprepoffice.com/support/article/1.0/9083

• No Tax on Car LoansMaximum deduction $10,000.Phase-out when Modified Adjusted Gross Income (MAGI) is greater than $100,000 ($200,000 for MFJ).Click the following link for more details: https://app.mytaxprepoffice.com/support/article/1.0/9084

• Increased Standard Deduction – For Tax Year 2025, the Standard Deduction amounts are below:Married Filing Jointly (MFJ); Qualifying Surviving Spouse (QSS) – $31,500.Single; Married Filing Separately (MFS) – $15,750.Head of Household (HOH) – $23,625.

• State And Local Tax (SALT) – Limit increase to $40,000 for 2025.

• 529 Plan Qualified Expenses – Expands to include more K-12 and homeschool expenses, and postsecondary credentialing expenses. In particular, CPA credentialing would also be allowed (including exam expenses).

• Qualifying Charitable Distributions (QCD) – Code ‘Y’ has been added to Form 1099-R, Line 7 to indicate when the Line 1 distribution is a QCD.

• Form 1099-K – The threshold for receiving a 1099-K form has reverted to the pre-tax year 2021 conditions:Gross Amount must exceed $20,000.Number of Transactions must exceed 200.

• Standard Business Mileage Rate – The rate is 70 cents per mile.

• Standard Medical Mileage Rate – The rate is 21 cents per mile.

• Standard Charitable Mileage Rate – The rate is 14 cents per mile.

• Clean Vehicle Credits – Disallowed for purchases made after September 30, 2025. This applies to New Clean Vehicle, Used Clean Vehicle, and Qualified Commercial Clean Vehicle credits.

• HSA Contribution Limits Increase$4,300 for self-only coverage.$8,550 for family coverage.

• 401(k) Contribution Limits Increase$23,500 for employee contributions.$70,000 for combined employee and employer contributions.$7,500 for catch-up contributions for individuals 50 or older.

• Bonus Depreciation (Special Allowance)Assets placed in service from January 1, 2025, to January 19, 2025, Bonus Depreciation allowed is 60%.Assets placed in service January 20, 2025, or after, Bonus Depreciation allowed is 100%.

• Depreciation 2025 Limit IncreasesSection 179 increases to a maximum $2,500,000 current year expense with a threshold increase up to $4,000,000.Maximum depreciation on a new vehicle is $20,200.

• NEW Depreciation ClassesManufacturing Property – Qualifies for Bonus Depreciation; construction must begin after January 19, 2025, and before January 1, 2029. Must be placed in service prior to 2031.Domestic Research and Experimental Expenditures – Can elect to amortize costs related to domestic research and experimental activities. Must have no less than a 5-year Recovery Period. Can elect to include amounts paid in 2022, 2023, and 2024.

• Section 199A Qualified Business Income (QBI)Deduction made permanent at 20%.Phase-out thresholds increase to $75,000 ($150,000 MFJ).

• New E-File Mandate for Business Returns – The mandate to e-file returns if you prepare more than 250 returns has decreased to 10 for returns filed in 2025. This applies to Information Returns such as forms 1099, W-2, 1065, 1120, and 1120S in any combination that exceeds 10. It eliminates the exception for businesses with assets less than $10 million: https://www.irs.gov/newsroom/irs-and-treasury-issue-final-regulations-on-e-file-for-businesses

IRS References:

https://www.irs.gov/newsroom/one-big-beautiful-bill-provisions

https://www.irs.gov/credits-deductions/individuals/child-tax-credit

https://www.irs.gov/newsroom/401k-limit-increases-to-24500-for-2026-ira-limit-increases-to-7500

https://www.irs.gov/newsroom/irs-increases-the-standard-mileage-rate-for-business-use-in-2025-key-rate-increases-3-cents-to-70-cents-per-mile

https://www.irs.gov/credits-deductions/individuals/earned-income-tax-credit/earned-income-and-earned-income-tax-credit-eitc-tables?utm_source=chatgpt.com#eitctables

https://www.irs.gov/newsroom/irs-issues-faqs-on-form-1099-k-threshold-under-the-one-big-beautiful-bill-dollar-limit-reverts-to-20000