New tax law changes: What to know for 2025 and beyond

Summary

• Tax rates will stay lower: The income tax rate reductions that were temporarily established in 2017 have now been made permanent, keeping the lowest rate at 10% and the highest at 37%.
• New and expanded deductions offer more savings for some taxpayers: Several new tax benefits have been introduced—including a $6,000 deduction for people 65 and older, expanded state and local tax (SALT) deductions up to $40,000, and car loan interest deductions—though each comes with different income limits and timing.
• Charitable giving gets more complex: People who claim the standard deduction can now also deduct up to $2,000 in cash donations to charities, but those who itemize will face new restrictions starting in 2026.

Tax law update

The One Big Beautiful Bill Act (OBBBA) has introduced sweeping tax changes that taxpayers need to understand before filing their next return, according to TIAA Wealth Management’s 2025 Year-End Tax Planning Guide.

Newer provisions offer bonuses for seniors and people living in states with high taxes, while some of the individual income provisions from the Tax Cuts and Jobs Act (TCJA) in 2017 were made permanent with OBBBA. The standard deduction is larger, it’s easier to itemize, lower income tax rates have been made permanent, and there is a slew of other changes that could change your tax bill.

Here’s what you need to know to prepare for this tax year and going forward.

What’s staying put

• Taxes stay lower for longer. OBBBA increases and makes permanent the nearly doubled standard deduction that began as part of 2017’s TCJA, which was supposed to expire in 2025. The lowest bracket remains at 10%, and the highest is 37%. The standard deduction in 2025 is $15,750 for a single filer and $31,500 for those married filing jointly.
• Estate tax exemption hits $15 million. The new tax law expands the federal exemption that had (temporarily) doubled under the TCJA. Individuals can now leave up to $15 million to heirs without their estate facing a federal tax. Beginning January 1, 2027, that amount will be indexed for inflation annually.
• As for gifts: The annual exclusion for gifts remains at $19,000, which means an individual can give up to $19,000 per person (double that for a married couple) a year without those gifts counting towards the lifetime annual exclusion of $15 million.

What’s new

• (Some) seniors get a break. A new tax deduction of $6,000 for people 65 and older begins with the 2025 tax year and extends through 2028. The deduction phases out for those with modified adjusted gross income (MAGI) between $75,000 and $175,000 for a single filer and $150,000 to $250,000 for married joint filers.

• You can deduct more state and local taxes. The deduction for state and local taxes had been limited to $10,000 since the TCJA in 2017. The new limit in 2025 is $40,000 and will increase 1% annually. That means people in high-tax states have more opportunity to itemize their deductions and forgo the standard deduction of $15,750 for single filers and $31,500 for married couples.

  This provision has two limitations, though. First, the amount of state and local taxes people can deduct phases out between $500,000 and $600,000 MAGI for both single and married filing jointly, eventually dropping back down to the $10,000 limit. Also, this provision is scheduled to revert to $10,000 in 2030.

• Big changes to charitable deductions. OBBBA brings back a pandemic-era break for charitable giving. Typically, charitable deductions must be itemized, but in 2020 and 2021, taxpayers who claimed the standard deduction were also allowed to claim an additional deduction for up to $300 per person. Beginning in 2026, a new permanent charitable deduction for non-itemizers returns, allowing single filers to claim up to $1,000 in cash donations and married couples $2,000. For people who usually claim the standard deduction, it’s worth considering pushing some charitable donations into 2026.

  For those who itemize, the new law imposes a 0.5% floor for charitable deductions based on your adjusted gross income (AGI). For example, if your AGI is $100,000, you’ll only be able to deduct charitable deductions that exceed $500—so a $2,500 donation will yield a $2,000 deduction.

  People in the top tax bracket of 37% will see further limitations: The amount of all their deductions, including charitable donations, will be treated as if they’re in the 35% bracket. So, for charitable donations, after accounting for the 0.5% floor, say you have a $1,000 donation. Instead of that resulting in a $370 deduction, it will be limited to a $350 deduction.

  “High earning taxpayers who make significant charitable gifts each year might want to make some of their 2026 planned donations in 2025 so they can maximize their deductions,” says TIAA Director of Wealth Planning Strategies Colleen Carcone.

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