Table of Contents
- Tax Law Changes 2025
- Overtime Adjustments
- Deductions for Seniors
- Standard Deduction Increase
- Child Tax Credit Updates
- Expanded Opportunities for Business Owners
Tax Law Changes 2025
The new federal tax bill for 2025 brings a number of changes that will affect how much people pay, and how much they keep, at tax time.
Many taxpayers will see the impact of:
- higher standard deductions,
- adjusted income tax brackets for 2025,
- and new relief aimed at working families, seniors, and small-business owners.
The impact of these changes will vary depending on each taxpayer’s filing status, such as single, married filing jointly, or head of household.
These updates are particularly meaningful for households in higher-tax areas such as Orange County, California, where state and local taxes already create a heavier financial burden.
Overtime Adjustments
One of the more talked about updates is a new overtime related adjustment that applies specifically to qualifying overtime pay. Certain employees who receive a significant amount of qualifying overtime pay may see that income treated more favorably than in prior years, potentially reducing their overall tax bill.
This is a temporary deduction available only for tax years 2025 through 2028, with specific eligibility criteria and deduction limits.
For hourly workers who have been picking up extra shifts or seasonal overtime, this change can make a noticeable difference, and proper reporting becomes increasingly important.
It is important to note that, even with this deduction, overtime pay remains subject to Medicare taxes.
Deductions for Seniors
There is also an expanded deduction for seniors, known as the bonus deduction. Taxpayers age 65 and older may qualify for this additional amount on top of the regular standard deduction. Eligible seniors may receive the full deduction if their income is below certain thresholds. For retirees and older adults living on pensions, Social Security, investment income, or part-time wages, this bonus deduction can meaningfully lower taxable income and help stretch fixed resources.
Personal and dependent exemptions have been permanently eliminated under the OBBBA, with a limited exception for certain seniors aged 65 and older.
Homeowners and other taxpayers who choose to claim itemized deductions will see updated rules around state and local tax deductions, charitable giving, and medical expenses. Some residents of Orange County and other high-cost areas may still benefit from itemized deductions, particularly if they have significant property taxes or mortgage interest.
Standard Deduction Increase
Others will find that the increased standard deduction now gives them a better result than tracking and deducting individual expenses. A careful comparison at filing time can prevent surprises.
Child Tax Credit Updates
The 2025 tax year brings important updates to the Child Tax Credit (CTC) that could mean more money in your pocket at tax time. Under the new tax law, the maximum CTC has increased to $2,200 per qualifying child, up from $2,000 in previous years. This change is designed to provide greater financial support to families with children under the age of 17, helping to offset the rising costs of raising a family.
Eligibility for the child tax credit is based on your modified adjusted gross income (MAGI). For single filers, the full credit is available if your MAGI is below $200,000. Married couples filing jointly can claim the full amount if their MAGI is under $400,000. If your income exceeds these thresholds, the credit begins to phase out, so it’s important to review your income carefully when preparing your tax return. To claim the CTC, both you and your qualifying child must have a valid Social Security number.
The CTC is a federal income tax credit that provides a dollar-for-dollar reduction of your federal income tax liability. For example, a family with two qualifying children could see up to $4,400 taken directly off their tax bill, making this one of the most valuable tax benefits available to eligible taxpayers. This can result in significant tax savings, especially for families who are mindful of their taxable income and plan ahead for the tax year.
In addition to the increased CTC, the new tax law includes other tax provisions that may affect families, such as updates to the car loan interest deduction and the state and local tax (SALT) deduction cap. Taxpayers should also be aware of related credits like the Earned Income Tax Credit (EITC) and residential energy credits, which can further reduce your tax liability and increase your refund.
With the Big Beautiful Bill Act introducing these and other tax law changes, it’s more important than ever to stay informed and proactive. Reviewing your eligibility for the child tax credit and other income tax credits, understanding the income thresholds, and ensuring all Social Security numbers are valid can help you maximize your tax savings.
Consulting with a tax professional can ensure you’re taking advantage of every available tax break and staying compliant with the latest tax code updates. As tax laws continue to evolve, keeping up with these changes can help you minimize your federal income tax and make the most of your tax return each year.
Expanded Opportunities for Business Owners
Business owners, including sole proprietors, LLCs, partnerships, and S-corporations, will notice expanded opportunities to deduct equipment purchases, revised depreciation rules, and adjustments to the deduction for qualified business income. These changes can influence decisions about when to buy equipment, how to structure compensation, and how to plan for year-end. Solid bookkeeping and a well-considered approach can turn these updates into real savings.
In 2025, several other key tax law changes will impact both business owners and individuals. A new deduction is available for certain taxpayers, and a new tax break benefits those purchasing new vehicles or reporting tip income, potentially reducing federal taxable income.
Eligibility for many tax benefits, deductions, and credits now depends on income limits and filing status, including married filing, married filing jointly, married filing separately, and head of household. Certain tax benefits are now only accessible to those with a valid Social Security number, and gifts exceeding the annual gift tax exclusion require filing a gift tax return.
Adjustments to the alternative minimum tax, capital gains, and ordinary income tax rates may affect your overall tax benefit. Clean energy tax credits, clean energy credits, and federal tax credits for energy efficient home improvements are being phased out or expiring, so timely action is important.
The federal government continues to administer and enforce these changes, with some thresholds and credits adjusted annually for inflation. The Jobs Act and subsequent legislation have shaped many of these provisions, and these tax law changes can significantly affect your planning, compliance, and tax benefit.
The IRS is also investing more in its technology and matching programs, which may lead to additional notices related to Forms W-2, 1099, and 1099-K if information does not align. Timely and accurate responses can prevent unnecessary penalties and interest.
How we can help
At Mraz Tax Solutions LLC, we work with individuals, families, and business owners throughout Orange County and across the country to navigate these changes. We are available to review how the new law affects your overtime income, senior deduction, itemized-versus-standard deduction choice, and business tax strategy. Whether you are preparing a straightforward return or managing a more complex situation, we can help you file confidently under the 2025 rules.
Mraz Tax Solutions LLC is your trusted federal, state and local tax advisor and preparer.
With our comprehensive income tax preparation services, we cater to both personal and small business tax needs.
Our experienced professionals handle your tax returns, ensuring accuracy and maximizing deductions to help you minimize your tax liability.
In addition to tax return preparation, we offer tax return reviews to ensure the correctness and completeness of your filing. We understand the importance of avoiding errors and discrepancies, and our experts are here to provide a thorough review of your tax returns, giving you peace of mind.
Still not sure if we can help you with your taxes? Feel free to ask. Contact our tax advisors now.