A number of tax changes as part of the Big Beautiful Bill of 2025 could have a major impact on your returns, in some cases leading to higher refunds and deductions.
According to the impartial Tax Foundation“refunds will be larger than normal in the upcoming filing season due to the One Big Beautiful Bill Act (OBBBA) tax cuts for 2025.” However, the Foundation added that the size of the refund “will vary significantly depending on the taxpayer’s circumstances.”
An executive order issued in 2025 could also affect how you get your refund, as the Internal Revenue Service phases out mailing physical checks and encourages taxpayers to take advantage of direct deposit.
The deadline to file your 2025 taxes is April 15, and the first filing day begins on January 26. As the deadline approaches, here’s what you need to know about the changes that could affect you.
New increases and deductions
Increase in child tax credit
According to the IRS, the child tax credit has increased from $2,000 per qualifying child to $2,200 for tax year 2025.
To qualify, a child must be under the age of 17 at the end of the tax year and be a dependent of the taxpayer in question. They must also have lived with their parent or guardian for more than half of the tax year.
There is a phaseout for taxpayers with annual incomes over $200,000 for single filers, or $400,000 for joint filers.
The standard deduction will increase
The standard deduction for single taxpayers has been increased to $15,750 for the 2025 tax year. It has also been increased to $23,625 for the head of household. and up to $31,500 for taxpayers filing jointly.
Adoption credit, senior raises and more
As part of the law, the adoption credit was increased, along with an exclusion from inheritance taxes. the tax authorities said. Some seniors can also claim a higher deduction, the new tax law states, as those age 65 and older can claim an additional $6,000 deduction.
The law also eliminated taxes on tips, overtime and interest on car loans.
Taxes on tips
One of President Donald Trump’s campaign promises was to eliminate the tip tax for American workers. Although those taxes have not yet been completely abolished, significant reductions in revenues can be made.
According to the IRS, taxpayers can deduct up to $25,000 in tips if their modified adjusted gross income for tax year 2025 was less than $150,000 for individual taxpayers, or less than $300,000 for those filing jointly.
That deduction can be taken for taxpayers who itemize their deductions, or for those who don’t and take the standard deduction instead, the IRS said.
However, taxpayers should be aware that some payroll taxes may still apply to tips, and tips are likely still taxed at the state or local level depending on where they live.
Tax deduction on overtime
Overtime taxes have also been changed with provisions of the bill. Federal officials are warning workers that if their overtime pay is affected by collective bargaining agreements, they may not qualify for the deduction. For more information, consult an accountant or tax return service.
For those who qualify, overtime can also be deducted up to $12,500 per taxpayer, with phase-outs beginning at an adjusted adjusted gross income of $150,000 for individual taxpayers or $300,000 for those filing jointly.
Like the tip tax, the change is only in effect temporarily.
The state and local tax (SALT) deduction will increase
For taxpayers who itemize their deductions instead of taking the standard deduction, the SALT deduction has increased to $40,000 from the previous level of $10,000.
That deduction could be important for taxpayers who work in states with higher tax rates, experts say. More information can be found here.
Tax cuts for new cars
The bill also includes new deductions for newly purchased vehicles built or assembled in the United States.
According to federal officials a vehicle qualifies as an “Applicable Passenger Vehicle” if it has a vehicle weight of less than 14,000 pounds, and is for primarily personal use.
Anyone who purchased a new vehicle in tax year 2025 and paid at least $600 in interest on that vehicle is eligible for the deduction of up to $10,000.
Which tax credits will disappear?
Under the bill, two key tax credits championed by the Biden administration expired at the end of last year: the electric vehicle credit and a home energy efficiency credit. According to NBC Newseligible taxpayers can still claim it on their returns this spring.
The $7,500 EV credit formally expired on September 30, but taxpayers who bought an electric car before then can collect it tax credit by submitting an additional form with their tax return.
Changes to the way you get your money back
The IRS began phasing in paper checks in September 2025 as part of Executive Order 14247. As part of the order, “most refunds will be issued via direct deposit or other secure electronic methods,” according to a release in September.
The IRS added that direct deposit is the “fastest way to receive a refund,” typically issued within 21 days.
How much can your refund be?
Many could receive a larger refund this year than in 2025, NBC News reports thiswith the nonpartisan Tax Foundation estimating the average tax refund this year amount to $3,800almost 25% more than last year.
How to track your refund
Taxpayers can track refund status using Where is my refund?the IRS2Go app, or their IRS individual online account.
According to the IRS, refunds “will be issued in less than 21 days if filed electronically,” with direct deposit selected. For non-electronic payments, refunds sent by mail may take six weeks or more.
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