Trump's 2025 Tax Legislation: Potential Increases or Decreases in Your Tax Return
In the upcoming 2025 tax season, several significant changes have been introduced by the One Big Beautiful Bill (OBBB). These alterations affect various aspects of taxation, including the Child Tax Credit, standard deductions, and business expenses. Here's a breakdown of the key changes and their potential effects on taxpayers.
Child Tax Credit
The Child Tax Credit has undergone a notable change, with the credit amount increasing from $2,000 to $2,200 for qualifying children 17 and under. However, it's essential to note that this credit is now contingent on the taxpayer having a valid work-eligible Social Security Number. This requirement may potentially affect non-citizens who lack such qualifications, reducing their refundable credits and, consequently, their tax refunds.
Standard Deductions
The OBBB has made permanent the higher standard deduction amounts introduced by the 2017 Tax Cuts and Jobs Act. For instance, single filers can expect a standard deduction of $15,750 in 2025, representing a $1,150 increase compared to the previous year. Married couples filing jointly will see a $2,300 increase in their standard deduction.
Bonus Depreciation and Section 179 Expensing
The maximum deduction amount and phase-out threshold for Section 179 expensing have been increased, allowing businesses to now deduct up to $2.5 million in property. Additionally, making permanent "bonus depreciation" allows qualified property that you buy and place into service after January 19, 2025, to be eligible for immediate 100% expensing.
Child Tax Credit and Income Caps
Income caps have been introduced for the new Child Tax Credit, meaning that those earning above $200,000 (single filers) or $400,000 (married filing jointly couples) will likely see less benefit from this credit in their tax refunds.
Tips Deduction and Overtime Tax Dreamcatcher
Good news for service workers! The tax on tips deduction up to $25,000 is now available, potentially allowing them to have zero federal income tax if they claim this deduction. Additionally, a "no tax on overtime" deduction worth up to $12,500 for tax years 2025 through 2028 is available for overtime workers, potentially increasing their tax refund or lowering their federal tax liability.
Bonus Standard Deduction for Older Adults
The OBBB has added a new bonus standard deduction of $6,000 for older adults, but this benefit is dependent on modified adjusted gross income (MAGI) and could be reduced or lost if income exceeds the limits of $150,000 for married, filing jointly couples and $75,000 for single filers.
State and Local Tax Deduction (SALT)
The SALT deduction changed under the OBBB, and most taxpayers claim the standard deduction these days. However, if you itemize your federal return and live in a high-cost area, you could see a reduction in your tax liability due to the temporary increase in the SALT cap to $40,000.
Immigration Status and Child Tax Credit Eligibility
The OBBB affects non-citizens' tax refunds primarily by tightening eligibility for the Child Tax Credit to only those taxpayers who have a work-eligible Social Security Number. This change means many non-citizens without such a Social Security Number may no longer qualify for this credit, potentially reducing their tax refunds starting with the 2025 tax year.
Families with Multiple Children
Families with four children could see an increase in child tax credit breaks from $8,000 to $8,800, translating to potential savings of $400 compared to last year's federal return.
Disclaimer
This article serves as a summary of the changes introduced by the OBBB and is not intended to provide comprehensive tax advice. It is always recommended to consult with a tax professional for personalised guidance.
[1] OBBB Impact on Non-Citizens' Tax Refunds [2] Child Tax Credit Changes Under OBBB [3] Standard Deduction Changes Under OBBB [4] International Tax Changes Under OBBB
In the realm of personal-finance, the One Big Beautiful Bill (OBBB) has brought changes to tax benefits and deductions, impacting non-citizens in the defi sector. Specifically, the Child Tax Credit now requires a valid work-eligible Social Security Number, potentially reducing non-citizens' refundable credits and tax refunds. Meanwhile, in the world of business-finance, the OBBB has increased the maximum deduction amount for Section 179 expensing, allowing businesses to deduct up to $2.5 million in property, and made permanent "bonus depreciation" for qualified property bought and placed into service after January 1, 2025, offering an immediate 100% expensing.
