Read below to see how the new tax bill affects you and your family
A Note:
This blog post is intended specifically for young professionals and families and focuses on important changes in the new tax bill that are likely to affect them.
So What's Changed?
SALT Cap
- SALT Cap increases to $40k.
- This may impact your decision of whether to itemize or not in the future.
Dependent Care FSA
- 50% increase from $5,000 to $7,500 in 2026
Child Tax Credit
- 10% increase from $2,000 to $2,200
Car Loan Interest Deduction
- You can now deduct up to $10,000 of interest paid, even if you do not itemize.
- Phase out for joint filers starts at $200k ($100k single).
New "Trump" Accounts
- The government will provide a $1,000 initial contribution into a tax-advantaged savings account for US citizens born within 2025-2028
- Families can contribute up to $5,000 annually (post-tax)
- Earnings grow tax-deferred
- Once the child reaches 18, distributions for qualified expenses are taxed at long term capital gains rates
- Qualified expenses include higher education expenses, small business expenses/loans, and first-time home purchase (up to $10k)
- Because the earnings grow tax-deferred, this account is more tax-advantaged than a brokerage, but it is less tax-advantaged as an education savings vehicle compared to the 529.
529 Education Savings Expansions
- Increase in K-12 annual withdrawal limit from $10k to $20k
- Expansion on qualified expenses:
- K-12 expenses can now include expenses for books, tutoring, standardized testing fees + more.
- Certification and licensing expenses related torecognized postsecondary credentials
- This includes a broad range of professional certifications and licenses - from HVAC licenses to CPA certifications.
Tips & Overtime Deductions
- Tax deduction for Overtime pay - up to $25k for joint filers ($12.5k for single).
- Phase outs are $300k for joint filers ($150k single)
- Tax deduction for Tips - up to $25k.
- Phase outs starting at $150k
Charitable Deductions
- If you use the standard deduction:
- New $2k charitable deduction for joint filers ($1k single)
- If you itemize:
- There is a 0.50% AGI floor before charitable donations are tax deductible
Green Energy Tax Credits
- New or previously owned “clean” vehicles must now be placed in service by September 30 2025 in order to receive tax credits. Previously this was in 2032.
- Deadline for qualifying for the energy-efficient home improvement credit or residential clean energy credit is now December 31 2025. Previously this was in 2034.
Additional Senior Deduction
- Seniors get an added $6k standard deduction
- Phase outs begin at $150k for joint filers
HSA's more widely available + Telehealth benefits
- HSA's are now available for healthcare marketplace Bronze and Catastrophic plans
- Those with HSA's can utilize telehealth services without affecting eligibility of HSA contributions
What's Extended or now "Permanent"?
Note: "Permanent" = until a new congress changes legislation
Federal Tax Rates
- A Major component of the legislation is that many of the major tax changes that were enacted in 2017 will remain intact - including individual federal income rates.
Standard Deduction
- The higher standard deduction is now permanent and will be adjusted for inflation in the future.
- $31,500 for joint filers, $23,625 for heads of households, $15,750 for single filers
Alternative Minimum Tax (AMT)
- Recent exemption amounts are made permanent
- $137k for joint filers, $88.1k for single
- Exemption phaseout limits change from $1,252,700 to $1,000,000 for joint filers, $626,350 to $500,000 for single filers.
Qualified Business Income Deduction
- This remains at 20% but the phaseout amount is now $150k as opposed to $100k
Pass-through entity tax elections
- This type of tax election for certain businesses will continue to exist despite some experts expecting that this would go away with the new bill.
- This allows businesses to pay state taxes through the business entity rather than at the individual level.