The One Big Beautiful Bill, passed on July 4, 2025, is a major update to the U.S. tax system. It makes several tax cuts from previous years permanent and introduces new tax deductions aimed at working families, seniors, small business owners, and middle-income earners.
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If you’re looking for an easy-to-understand summary of this 2025 tax law, here’s everything you need to know.
Key Tax Benefits Under the 2025 One Big Beautiful Bill Law
1. Higher Child Tax Credit
Parents can now claim $2,200 per child, with $1,400 refundable, meaning you can get money back even if you don’t owe any taxes.
How to Qualify
To claim the Child Tax Credit in 2025:
- Your child must be under age 17 at the end of the tax year.
- The child must have a valid Social Security number.
- You must claim the child as a dependent and they must live with you for more than half the year.
2. Tax Deduction for Tips
Workers in tipped industries (like restaurants, delivery, salons) can now deduct up to $25,000 in tips from their taxable income.
3. Deduction for Overtime Pay
If you work extra hours, you can deduct a portion of your overtime income—up to $12,500 per year.
4. Car Loan Interest Deduction
If you purchase a car assembled in the United States, you can deduct up to $10,000 per year in interest paid on the loan.
5. Extra Deduction for Seniors
People 65 years and older now get an additional $6,000 standard deduction.
6. Deduction for Charity Without Itemizing
You can now deduct up to $2,000 (or $1,000 if single) in charitable donations even if you don’t itemize your taxes.
Homeowner Tax Updates
- Mortgage insurance premiums are now tax-deductible again.
- Interest on home equity loans is still not deductible.
- The limit for deducting mortgage interest remains at $750,000 in mortgage debt.
Small Business & Self-Employed Tax Benefits
- The Qualified Business Income deduction increased from 20% to 23%.
- Small business owners can still deduct full expenses for equipment, software, and other investments.
- Tax breaks for research and development remain in place.
Estate and Gift Tax Updates
- You can now give up to $15 million per person to your heirs without paying federal estate tax.
- This amount is double the previous exemption.
What’s Going Away or Being Cut
Ending Soon: Electric Vehicle Tax Credits
Tax credits for electric vehicles (EVs) will expire after September 30, 2025.
Phased Out: Green Energy Tax Breaks
Solar energy, home-efficiency, and similar tax incentives are being reduced or phased out.
Impact on the Federal Budget
This law is expected to reduce federal revenue by over $4.5 trillion over 10 years.
Critics argue that the law benefits wealthier taxpayers and corporations, while others say it simplifies taxes and helps the middle class.
Final Thoughts
The One Big Beautiful Bill 2025 brings major changes to how you file and save on taxes. Whether you’re a parent, hourly worker, retiree, or business owner, this tax law could affect your bottom line.
To see how much you could save or claim under the new rules, talk to a tax advisor—or ask me for a custom calculation.