What's Happening?
As the 2025 tax season begins, several changes have been introduced due to President Trump's 'Big Beautiful Bill' legislation. The standard deduction has increased significantly, and new deductions have been introduced,
including a senior deduction for those aged 65 and older. Taxpayers can also deduct interest on loans for U.S.-assembled vehicles and benefit from 'no tax on tips' and 'no tax on overtime' provisions. Additionally, two key tax credits, the electric vehicle credit and the home energy efficiency credit, expired last year but can still be claimed by eligible taxpayers. The child tax credit has increased to $2,200 per child under 17. A new tax-advantaged savings account, the 'Trump account,' allows parents to save for their children with government seed money for those born between 2025 and 2028.
Why It's Important?
These changes are significant as they could lead to larger tax refunds for many Americans, with the average refund expected to increase by nearly 25% compared to the previous year. The increase in the standard deduction and the expansion of the SALT deduction cap could benefit taxpayers who itemize deductions. The introduction of the 'Trump account' provides a new savings opportunity for families, potentially impacting long-term financial planning. The continuation of certain tax credits, despite their expiration, offers relief to those who made qualifying purchases last year. These measures reflect President Trump's campaign promises and could influence public perception and economic behavior.
What's Next?
Taxpayers are advised to gather all necessary forms before filing to avoid the need for amendments. The IRS has set the filing deadline for April 15, with extensions available. The IRS Direct File program is no longer available, but the Free File program remains an option for eligible taxpayers. The IRS encourages the use of direct deposit for faster refunds. As these changes take effect, taxpayers and tax professionals will need to navigate the new landscape, potentially influencing future tax policy discussions and legislative actions.
