What the One Big Beautiful Bill Act Means for Your Individual Taxes in 2025 and Beyond

When Congress passed the One Big Beautiful Bill Act signed into law on July 4, 2025, it triggered the most sweeping overhaul of the U.S. tax system since 2017. While headlines focused on Trump Accounts and repealed EV credits, the bill quietly reshaped the rules for everyday taxpayers—introducing new deductions, revising old ones, and locking in key provisions that affect how millions of Americans will file in the years ahead. Here is a high-level summary that breaks down the major individual income tax changes that could shape your bottom line from 2025 through 2028—and beyond.

TAX RATES

The new law retains the current individual income tax rate structure that ranges from 10% to 37%. The income ranges these apply to are permanently adjusted for inflation each year.

STATE AND LOCAL TAX DEDUCTION

The “SALT” itemized deduction cap was raised from $10,000 to $40,000 in 2025, then increases 1% annually through 2029, before dropping back to $10,000 in 2030. However, if your modified adjusted gross income (MAGI) is over $500K, the deduction is reduced by 30% of the excess over $500K, but can’t fall below $10,000.

SENIOR BONUS DEDUCTION

The bill provides an additional standard deduction of up to $6,000 per person for seniors ages 65+ in tax years 2025-2028. The deduction is reduced by 6% of MAGI that exceeds $75K (single) and $150K (joint), which means that the senior bonus deduction phases out completely when MAGI reaches $175K single and $250K married filing jointly. You don't have to be receiving Social Security benefits to receive the deduction.

So for example, if your MAGI is $100K and you are single, you will receive an additional tax deduction in 2025 of $4,500 ($6,000 less 6% of the excess of $100K over $75K).

STANDARD DEDUCTION

The standard deduction in 2025 is $15,750 for single/married filing separately, $23,625 for head of household, and $31,500 for married filing jointly, up from $14,600, $21,900, and $29,200, respectively, in 2024. There is a regular extra standard deduction for 65+ seniors of $2,000 single and $3,200 married filing jointly (both 65+; $1,600 if one spouse is 65+), up slightly from $1,950, $3,100, and $1,550 in 2024. The standard deduction will be indexed for inflation annually.

Here’s another example. If you are married, both 65+ with income of $150K or less in 2025, you will be receiving a standard deduction of $46,700 ($31,500 base deduction + $3,200 extra 65+ deduction + $12,000 bonus 65+ deduction). Of course, if your itemized deductions are greater than your standard deduction of $46,700, we should still take the higher of the two on your 2025 return.

TIP INCOME DEDUCTION

Workers in traditionally tipped industries, such as food service, salons, and spas, can deduct up to $25,000 in tips per year from 2025 to 2028. The deduction phases out for AGIs exceeding $150K single, $300K joint filers.

OVERTIME PAY DEDUCTION

From 2025 to 2028, there is an overtime pay deduction of up to $12,500 in overtime pay per person ($25,000 for joint filers). The deduction phases out $100 for every $1,000 over MAGI of $150K single, $300K joint filers. Only the overtime premium (e.g. the extra pay above your regular hourly rate) is deductible.

PERSONAL CAR LOAN INTEREST

Taxpayers can deduct up to $10,000 in car loan interest for new cars purchased between 1/1/25 and 12/31/28 that were assembled in the U.S. This is an “above the line” deduction, meaning, you can take the deduction whether or not you itemize deductions. The deduction is reduced by $100 for every $1,000 over MAGI of $100K single and $200K joint returns.

EV TAX CREDITS

The tax credits for both new (up to $7,500) and used (up to $4,000) EVs expire this October, which means only three months remain to purchase an EV and potentially receive those credits (subject to current MAGI limits). These credits were previously set to expire after 2032.

RESIDENTIAL CLEAN ENERGY (e.g. SOLAR) CREDITS

Solar tax credits go away in 2026, which means taxpayers have limited time remaining this year to purchase, install, and place in service a home solar system by 12/31/25 to receive a 30% tax credit on the system. This also applies to batteries – if you have an existing solar system, you can install batteries by year-end and receive a tax credit on that purchase. If you have unused solar tax credits, they carry forward to future tax years.

ENERGY EFFICIENT HOME IMPROVEMENT CREDITS

These credits also go away in 2026. This applies to certain energy-efficient windows, doors, insulation, heat pumps, central A/C, etc. These credits can be as much as $1,200 to $3,200 per year. They do not carry forward to future years.

CHILD TAX CREDIT

The child tax credit increases from $2,000 to $2,200 for children under the age of 17 at the end of 2025. It phases out when MAGI reaches $200K single and $400K joint.

CHARITABLE DEDUCTIONS

The new law adds a permanent provision for non-itemizers to deduct up to $1,000 (single) and $2,000 (joint returns) in cash donations to 501(c)3 charities, beginning in 2026. In other words, you can deduct cash donations starting next year, even if you don’t itemize deductions.

The new law introduces a floor of .5% (half of a percent) of AGI for those itemizing charitable donations, beginning in 2026. What this means is that you can deduct charitable donations to the extent they exceed .5% of your AGI. So if your AGI is $200K and your charitable donations are $5,000, you can deduct $4,000 ($5,000 less .5% of $200K).

MISCELLANEOUS ITEMIZED DEDUCTIONS

The bill permanently eliminates various deductions that were previously subject to 2% of AGI prior to 2018, such as unreimbursed employee expenses, tax preparation fees, investment advisory fees, safe deposit box rental, etc.

OTHER ITEMS

Moving expenses associated with work are now permanently not deductible (unless you are active-duty military moving under orders).

After 2025, gambling losses will only be deductible up to 90% of your gambling losses. It is still 100% in 2025. And remember, you must itemize deductions to claim gambling losses. I know a couple of you that this will impact.

“Trump Accounts” are a new type of tax-deferred investment account for every child born between January 1, 2025 and December 31, 2028. The government funds the first $1,000. It is invested in a diversified U.S. stock index fund. Up to $5,000 of additional funds can be invested per year, plus an extra $2,500 from employers.  The funds can be withdrawn starting at age 18 for education and other specified uses. For those with newborns this year, the IRS should be coming out with information about these accounts by the end of the year.

There’s a provision in the new law that allows for a tax credit of up to $1,700 per taxpayer for contributions made to “Scholarship Granting Organizations” that support K-12 private or religious school scholarships. The tax credit must be taken in the year of donation. It cannot be carried forward. And you can’t take both the credit and an itemized deduction for the payment.

The new law made the $750,000 cap on mortgage loan interest deduction permanent. The cap is not tied to inflation.

The estate tax exemption increases from $13.99 million in 2025 to $15 million per individual in 2026 and will be indexed for inflation going forward. If the law hadn’t passed, the exemption would have dropped to about $7 million in 2026.

View the 870 page bill at www.congress.gov/119/bills/hr1/BILLS-119hr1eas.pdf.

Volunteer Income Tax Assistance Locations in Ventura County

The Volunteer Income Tax Assistance (VITA) program recruits volunteer tax preparers to provide free preparation of federal and state income tax returns to taxpayers with incomes of $67,000 or less in 2024. VITA benefits these taxpayers by eliminating the cost of commercial tax return preparation and by securing valuable tax credits such as the Child Tax Credit and EITC.

Local VITA location sites are as follows (see this IRS link for details, including dates and times and contact information for making appointments, when required):

• Newbury Park Library, 2331 Borchard Road - Wednesdays 10am to 4pm, 2/5/25 to 4/9/25. Appointments not required.

• Conejo Creek South Park Community Building, 1350 E. Janss Road, Thousand Oaks - Mon-Fri 8:30am to 4pm, 2/3/25 to 4/15/25. Appointments not required.

• Moorpark College - 2/1/25 to 4/30/25. Appointments are required. www.moorparkcollege.edu/departments/academic/business-administration/program/accounting/VITA

• East County Job and Career Center, 2900 N. Madera Road, Simi Valley - 2/5/25 to 4/30/25. Appointments are required.

• Oxnard College, 4000 South Rose Avenue - 2/6/25 to 4/30/25. Appointments are required.

• United Way of Ventura County, 702 County Square Drive #100, Ventura. 2/4/25 to 4/30/25. Appointments are required.

• Ventura Community Service Center, 4651 Telephone Road, 2nd Floor. Appointments are required. 2/1/25-4/30/25

Also see www.ventura.org/human-services-agency/tax-preparation

What to bring:

• Proof of identification (photo ID)

• Social Security cards for you, your spouse and dependents

• An Individual Taxpayer Identification Number (ITIN) assignment letter may be substituted for you, your spouse and your dependents if you do not have a Social Security number

• Proof of foreign status, if applying for an ITIN

• Birth dates for you, your spouse and dependents on the tax return

• Wage and earning statements (Form W-2, W-2G) from all employers

• Pension, Retirement and Social Security Income statements (Forms 1099)

• Interest and dividend statements from banks (Forms 1099)

• A copy of last year’s federal and state returns, if available

• Proof of bank account routing and account numbers for direct deposit such as a blank check

• Total paid for daycare provider and the daycare provider's tax identifying number such as their Social Security number or business Employer Identification Number

• Forms 1095-A, Health Insurance Marketplace Statement

• Copies of income transcripts from IRS and state, if applicable

To file taxes electronically on a married-filing-joint tax return, both spouses must be present to sign the required forms

www.irs.gov/individuals/checklist-for-free-tax-return-preparation

The IRS partners with software companies to provide “IRS Free File” guided tax software for taxpayers with adjusted gross income (AGI) or $84,000 or less for the 2024 tax year. Learn more at apps.irs.gov/app/freeFile. Providers for 2024 filings include FreeTaxUSA, 1040.com, FileYourTaxes.com, 1040NOW, TaxAct, OLT.com, TaxSlayer, and ezTaxReturn.com.

Deducting Losses From Federally Declared Disasters on Your Federal Income Tax Return

According to the IRS:

Personal casualty losses are losses from casualty, disaster, and theft that are not connected to a trade or business, or a transaction entered into for profit. Generally, if the loss is caused by a federally declared disaster, you may deduct personal casualty losses relating to your home, household items, and vehicles on your federal income tax return. For tax years 2018 through 2025, personal casualty losses are otherwise not deductible. A theft loss deduction is generally available, however, if the loss is due to theft related to a transaction entered into for profit. You may not deduct casualty and theft losses covered by insurance, unless you file a timely claim for reimbursement, and you reduce the loss by the amount of any reimbursement or expected reimbursement. 

A federally-declared disaster is any disaster determined by the President of the United States to warrant assistance by the federal government. Visit fema.gov/disasters for a list of federally-declared disasters. Current and recent federally-declared disasters as of January 2025 include:

• California Hurst File (FM-5551-CA) declared 1/8/25 www.fema.gov/disaster/5551

• California Wildfires and Straight-Line Winds (DR-4856-CA) declared 1/8/25 www.fema.gov/disaster/4856

• California Eaton Fire (FM-5550-CA) declared 1/8/25 www.fema.gov/disaster/5550

• California Palisades Fire (FM-5549-CA) declared 1/7/25 www.fema.gov/disaster/5549

• California Franklin Fire in Malibu (FM-5548-CA) declared 12/10/24 www.fema.gov/disaster/5548

• California Mountain Fire in Ventura County (FM-5545-CA) declared 11/6/24 www.fema.gov/disaster/5545

• California Airport Fire in Orange/Riverside Counties (FM-5538-CA) declared 9/11/24 www.fema.gov/disaster/5538

• California Bridge Fire in LA/San Bernardino Counties (FM-5537-CA) declared 9/11/24 www.fema.gov/disaster/5537

If your property is personal-use property or isn't completely destroyed, the amount of your casualty loss is the lesser of the adjusted basis of your property, or the decrease in fair market value of your property as a result of the casualty. You must reduce the loss by any insurance or other reimbursement you receive or expect to receive.

Casualty losses can be claimed as an itemized deduction on Schedule A of Form 1040, less $100 for each casualty, then subtract 10% of your adjusted gross income to calculate allowable losses for the year. However, you may elect to deduct the loss without itemizing your deductions. Your net casualty loss doesn't need to exceed 10% of your adjusted gross income to qualify for the deduction, but you would reduce each casualty loss by $500 after any salvage value and any other reimbursement. Report casualty losses on Form 4684, Casualties and Thefts.

Casualty losses are deductible in the year you sustain the loss. You have not sustained a loss if you have a reasonable prospect of recovery through a claim for reimbursement. If you have a casualty loss from a federally declared disaster that occurred in an area warranting public or individual assistance (or both), you can choose to treat the casualty loss as having occurred in the year immediately preceding the tax year in which you sustained the disaster loss, and you can deduct the loss on your return or amended return for that preceding tax year.

www.irs.gov/taxtopics/tc515

All About the Previously Owned Clean Vehicle Credit

NOTE: New legislation signed in July 2025 eliminates the Previously Owned Clean Vehicle Credit beginning in October 2025.

A brand new tax credit, the Previously Owned Clean Vehicle Credit, came about from the Inflation Reduction Act of 2022. This new credit applies to pre-owned all-electric, plug-in hybrid and fuel cell electric vehicles purchased on or after January 1, 2023 through 2032. The credit, which is non-refundable, is 30% of the sales price, up to a maximum credit of $4,000.

As with pretty much every tax law, lawmakers made sure to make the requirements for this credit as confusing as possible. Here are the main parameters:

• The sales price, exclusive of taxes ad fees, much be $25,000 or less.

• The model year of the car must be at least two years prior to the calendar year the car is purchased.

• The car must be purchased from a licensed dealer, not a private party.

• The buyer’s modified adjusted gross income (AGI) cannot exceed $150,000 for married filing jointly taxpayers, $112,500 for head of household filing status and $75,000 for other taxpayers, in either the year of purchase or the previous year.

• The buyer cannot be claimed as a dependent by someone else.

• You can’t claim the credit more than once every three years, based on the actual purchase date of the car.

• The credit is applicable per taxpayer; the IRS as of this writing has not clarified if both spouses could claim the credit within the same three-year period. (That said, in theory they could file separately in the years they claim the credit.)

There are other specifics listed at www.fueleconomy.gov/feg/taxused.shtml#requirements.

Another important detail is that vehicles are only eligible for the credit for the first qualifying sale taking place on or after August 16, 2022. In other words, a used clean vehicle is not eligible for the credit after the first time, after 8/16/22, it is re-sold for $25,000 or less. How in the world will we know if that’s the case? Ask the dealer. They will know. What this means is that two cars with the same make, model and features offered at the same price of $25,000 or less…one them could be eligible for the credit while the other one is not.

As mentioned above, this is a non-refundable credit. This means that if you take the credit on your tax return, but your federal taxes are less than the credit, the excess goes away.

But wait…there’s a solution for that beginning in 2024! Starting this year, the credit can be transferred to the dealer and applied towards the sales price. The dealer, in turn, will receive the full credit from the IRS. The only catch is that you have to meet the AGI requirements mentioned above. If you file your tax return and do not meet those requirements, you’ll have to pay back the credit with your return. Whether you claim the credit at the dealer or on your return, you have to report the purchase on Form 8936.

Let’s use an example:

George is single and decides he wants to purchase a used EV. George expects his income to be $90,000 in 2024, but his 2023 return showed $70,000 in AGI, which qualifies him for the credit in 2024. He goes to the CarMax website and searches for electric cars at a price of $25,000 or less that are shown at www.fueleconomy.gov/feg/taxused.shtml.

George finds a 2013 Chevy Bolt for $13,000 but it shows it has had two owners. If it was already re-sold by a dealer to the 2nd owner after 8/16/22 for $25,000 or less, it is not eligible for the credit. The dealer will be able to tell you if this is the case. But let’s assume the previous sale took place before that date. George purchases the car for $13,000 plus sales taxes, license fees, etc., less the credit, because he chooses to transfer the credit to the dealer. The credit is 30% times $13,000, or $3,900. Enjoy your used Chevy Bolt, George! (Let’s hope the car’s battery still holds a decent charge.)

Looking for information on NEW clean vehicle car tax credits? Visit www.fueleconomy.gov/feg/tax2023.shtml.

What is Head of Household Filing Status and Who Qualifies for It?

My hair stylist brought up the fact that her elderly mother is going to move in with her and was wondering if that will benefit her taxwise. I told her she may be eligible to use the “Head of Household” filing status on her tax return, which could save her in taxes.

Filing Status Overview

The IRS has four tax filing statuses - Married Filing Jointly, Married Filing Separately, Single, Head of Household and Qualifying Surviving Spouse (before 2022, this was referred to as Qualifying Widow(er)). More than one filing status can apply to you; it is up to you to choose the one that will give you the lowest taxes.

Head of Household Status

Head of Household (HOH) filing status is available to taxpayers that are unmarried and that provide more than half the cost of a home for “certain other persons.”

It is preferable to use Head of Household filing status because the lower tax brackets are slightly more beneficial than for Single filing status, as follows for 2023:

• 10% Tax Rate: $0 to $11,000 for Single vs $0 to $15,700 for HOH

• 12% Tax Rate: $11,001 to $44,725 for Single vs $15,701 to $59,850 for HOH

• 22% Tax Rate: $44,726 to $95,375 for Single vs $59,851 to $95,350 for HOH

• 24% Tax Rate: $95,376 to $182,100 for Single vs $95,351 to $182,100 for HOH (practically the same)

• 32% Tax Rate: $182,101 to $231,250 for Single vs $182,101 to $231,250 for HOH (exactly the same)

Additionally, the standard deduction is an amount on your tax return that reduces your taxable income and is used by the majority of taxpayers who do not itemize deductions (which we will not go into here). The standard deduction for HOH is $20,800 in 2023 vs $13,850 for Single. This is another significant benefit of filing HOH.

Head of Household Qualifying Factor #1 - Unmarried

Seems simple, right? Unmarried is unmarried, i.e.. single. But you can actually be married but be considered unmarried for HOH purposes. Here’s what the IRS considers as “unmarried” for purposes of HOH status:

• You file a separate tax return from your spouse.

• You paid more than half the cost of keeping up your home during the tax year.

• Your spouse didn’t live in your home during the last 6 months of the year, exclusive of temporary absences for business, medical care, school, or military service.

• Your home was the main home of your child, stepchild or foster child for over half the year.

• You must be able to claim the child as a dependent (with some exceptions we won’t go into detail on here).

Qualifying Child for Head of Household Status

For a child to qualify you for HOH status,

• The child must be younger than the taxpayer and either under age 19, under age 24 an a full-time student or any age and permanently and totally disabled and

• Lived with taxpayer over half the year and

• Did not provide over half of their own support and

• Is one of the following: son, daughter, stepchild, foster child, brother, sister, stepbrother/sister, half brother/sister or descendant of any of them.

So, your 23 year old stepsister who is a full time student can qualify you for HOH status if she lives with you over half the year and you provide over half of her support.

While the taxpayer claiming HOH status must be considered unmarried, the qualifying child does not have to be unmarried. The qualifying child can be married, but if you can claim him/her as a dependent, they still qualify, assuming they meet the citizen test and joint return test (which we won’t go into detail here).

Confused yet? You’re not alone.

Qualifying Relative for Head of Household Status is a Parent

Your mother or father can qualify you for HOH status if you can claim him or her as a dependent.

So what does that mean for a parent to qualify as your dependent? They have to meet the following tests:

• They can’t be claimed as a dependent on someone else’s return.

• Generally they can’t file a joint tax return with someone else, unless they are only filing to get a refund and have no tax liability.

• They are a U.S. citizen, U.S. national, U.S. resident alien or a resident of Canada or Mexico.

• Taxpayer must have paid over half of the cost of keeping up a home for the parent during the year. That includes costs such as rent, mortgage interest, real estate taxes, homeowner’s insurance, repairs and maintenance of the home, utilities, food eaten in the home and other household expenses. It does not include personal expenses such as clothing, health insurance, transportation costs, etc.

• The parent’s gross income must be less than $4,700 in 2023 ($4,400 in 2022 - this amount changes every year). How is gross income determined? Gross income is all income that is not exempt from tax, such as wages, interest, taxable unemployment, taxable social security benefits, etc.

Additionally, for purposes of determining HOH status, a parent does not have to live with the taxpayer, as long as the parent meets the various dependency tests listed above.

So let’s stand back a second. If you are unmarried and are supporting over half the cost of your parent and they either live with you or elsewhere, and their only income is Social Security, chances are you can file your taxes using Head of Household status.

Qualifying Relative for Head of Household Status Other Than a Parent

To claim a relative other than a child or a parent for HOH status, the additional requirements are:

• Must be a brother, sister, half brother, half sister, step brother, step sister, niece, nephew, stepbrother or any other person, as long as it does not violate local law.

  • Individuals that are not related to you in any of the ways above cannot qualify you for HOH status, though they can stay possibly qualify as a dependent.

• Must have lived with you over half the year.

To Learn More About Filing Status

The IRS publishes Publication 501, “Dependents, Standard Deduction and Filing Information” for those looking for more detailed information on these topics. For the short version, read the Form 1040 instructions.

Should I Start Collecting Social Security Benefits Before Reaching Full Retirement Age?

Full Retirement Age (FRA) was 65 for many years. Congress passed a law in 1983 to gradually increase FRA to reflect increasing lifespans. FRA currently ranges from 65 for those born before 1943 to 67 for those born in 1960 or later. At what point should you start taking Social Security payments?

You can also start receiving Social Security benefits as early as age 62, but your monthly benefit would be reduced anywhere from 25 to 30% as a result. See www.ssa.gov/benefits/retirement/planner/agereduction.html for more information on how much you would receive, based on your year of birth.

You can also delay receiving Social Security beyond your FRA, up until age 70. The benefit to doing this is that your benefits are increased anywhere between 5.5% to 8% per year. See www.ssa.gov/benefits/retirement/planner/delayret.html for more information.

Let’s look at a simple example:

Conejo Joe was born in 1960 and thus turned 62 in 2022. His FRA is 67. His full retirement benefit is, say, $1,000 per month. If he chooses to start receiving payments at age 62, they would be reduced by 30%, to $700 per month. If he chooses to delay receiving benefits until age 70, they would increase by 8% per year over 3 years, to $1240 per month (ignoring increases for inflation).

If Conejo Joe started receiving $700 per month at age 62, by the time he reaches age 70 he would have received $58,800 (ignoring inflation increases). If he waited until age 70, he would receive $1240 per month, or $540 per month more than starting benefits at age 62. It would take him about 9 years to make up the gap.

But if Conejo Joe had other income or continued working at age 62, up to 85% of those $700 per month Social Security payments could be taxed at the federal level (most states, including California, do not tax Social Security benefits). Those taxes should be factored into the decision as to whether he should delay receiving benefits.

If Conejo Joe started taking Social Security at age 67, he would receive $1,000 per month. So by the time he reaches age 70, he would have received total payments of $36,000 (again, ignoring inflation). Had he waited until age 70, he would receive $1240 per month, or $240 more than the FRA benefits he received for the last three years. It would take him 12 1/2 years to make up the $36,000 gap. So if he anticipates living until at least age 82 1/2, in theory it makes sense to wait until age 70 to collect benefits, if possible.

Everyone’s situation is different. Some folks really need the payments early. Others can wait because they are still working. Visit www.ssa.gov for more information and talk to your financial planner and/or CPA for guidance.

One final point. The Social Security Administration says “If you decide to delay your benefits until after age 65, you should still apply for Medicare benefits within three months of your 65th birthday. If you wait longer, your Medicare medical insurance (Part B) and prescription drug coverage (Part D) may cost you more money.

IRS Extends 2022 Tax Return Filing Deadline to October 16, 2023 in Most California Counties

Last week, the IRS extended the 2022 tax filing deadline for taxpayers in most California counties (including our local LA/Ventura/Santa Barbara/Orange counties) to October 16, 2023. The deadline was previously extended from April 18th to May 15th due to the January storms.

In addition to individual and business tax returns, this extension applies to funding IRAs and to making estimated tax payments for Q422 to Q323 (if applicable).

The state of California has conformed to extension of filings and payments to October 16th. See www.ftb.ca.gov/about-ftb/newsroom/news-releases/2023-03-ftb-california-winter-storm-tax-relief-extension.html for details.