How the “Big Beautiful Bill” Impacts Individual Taxes
The Senate just passed the “Big Beautiful Bill,” a major piece of legislation that aims to modernize the U.S. tax code. While it still needs to clear the House, the provisions are already creating a ripple effect for individual taxpayers. Here’s a breakdown of how it could affect you starting in 2025.
1. Updated Income Tax Brackets
High-income earners may see higher rates. The top federal income tax rate is set to increase from 37% to 39.6% for individuals earning over $450,000 and joint filers earning over $550,000.
2. Bigger Standard Deduction, Fewer Itemized Deductions
- Standard deduction for single filers increases to $19,000
- Married joint filers increase to $38,000
- State and local tax (SALT) deduction cap drops from $10,000 to $8,000
- Mortgage interest deduction now applies only to the first $650,000 of a mortgage
This simplifies filing for many, but it may reduce benefits for those who used to itemize heavily.
3. Expanded Family Tax Credits
- Child Tax Credit increases from $2,000 to $2,600
- Dependent Care Credit becomes refundable and is paid quarterly
These changes offer increased support for families and caregivers, especially during the school year.
4. Retirement and Investment Changes
- New “Saver’s Match” gives a 50% match on the first $2,000 contributed to an IRA
- Higher income limits for Roth IRA eligibility
- Long-term capital gains now apply after 9 months instead of 12 for most assets under $2 million
This makes saving and investing more accessible for middle-income earners.
5. Green and Energy-Saving Incentives
The bill expands the Residential Clean Energy Credit and introduces a new $500 tax deduction for eco-friendly home office upgrades.
6. IRS Enforcement and 1099-K Changes
- $19 billion invested in IRS technology upgrades
- New 1099-K threshold drops from $5,000 to $2,500 for online sales
If you sell items online or have side income, it is more important than ever to keep detailed records.
What to Do Next
- Review your 2024 financials and run projections for 2025
- Maximize deductions now if caps will affect you next year
- Follow LEAF for updates and personalized planning strategies
Need help planning around these changes? Contact the team at LEAF to make sure you’re positioned for a strong year ahead.
