🧾 Tax Changes from the Big Beautiful Bill (2025–2028)
The One Big Beautiful Tax Bill, passed in 2024, brings some of the most significant tax law changes in recent years. Designed to provide relief to working families, retirees, and service industry employees, these updates take effect beginning in tax year 2025 and are scheduled to last through 2028.
At Tidewater Executive Tax Service, we’re committed to keeping you informed and prepared. Below, you’ll find a breakdown of the key changes — explained in simple terms — so you can understand how they may benefit you and your family.
From new deductions for tips and overtime pay to increases in the standard deduction and expanded credits for seniors, these updates could impact your refund or reduce what you owe. Be sure to review the details below and reach out if you have questions — we’re here to help you navigate it all.
🩺 Medicaid & SNAP Eligibility Updates (Starting 2025) The Big Beautiful Tax Bill included changes that impact who qualifies for federal assistance programs like Medicaid and SNAP (food assistance). These updates are set to take effect starting in 2025, and may change how individuals apply for or maintain these benefits. What Changed? Beginning in 2025, new income and asset verification rules will apply to both Medicaid and SNAP eligibility. These updates are designed to increase oversight and ensure that benefits are going to those who meet the updated requirements. Income Thresholds Eligibility will continue to vary by household size and state, but the federal baseline for income limits has been adjusted. For example, many households will now need to have income below 130% of the federal poverty level to qualify for SNAP, and below 138% of the federal poverty level to qualify for Medicaid, which aligns with current ACA Medicaid expansion guidelines. In 2025, this translates roughly to: For a single individual: income must be under $20,000 to $21,000 For a family of four: income must generally be under $43,000 to $45,000 Note: Exact amounts vary depending on household size, state guidelines, and whether the state expanded Medicaid. Asset Verification New federal guidelines will allow states to enforce stricter asset tests. This means applicants may be required to report savings, vehicles, and other resources when applying or renewing benefits. Some states may choose to limit eligibility for households with assets above a certain threshold, even if income qualifies. Documentation Requirements Expect increased documentation requirements, including: Proof of residency Proof of income (such as pay stubs or tax returns) Utility bills or rent agreements Social Security numbers and IDs for all household members Renewal processes may also become more frequent or require more detailed paperwork than in prior years. What You Need to Know If you currently receive Medicaid or SNAP benefits, you may need to reverify your eligibility in 2025 under the new rules. This includes submitting updated income and asset information, even if your circumstances haven’t changed. If you’re applying for the first time, be prepared to provide detailed financial information and respond promptly to requests from your state’s eligibility office.
👴 Senior Bonus Deduction (2025–2028) As part of the Big Beautiful Tax Bill, seniors age 65 and older will benefit from a brand-new tax deduction starting in tax year 2025. This deduction is designed to ease the tax burden on older Americans by reducing the amount of income that is subject to federal tax. Who Qualifies? Any taxpayer who is 65 or older by the end of the tax year is eligible. If you’re married and filing jointly, you can claim the full deduction as long as at least one spouse is 65 or older. This deduction is available whether you take the standard deduction or itemize your deductions. How Much Is the Deduction? Eligible seniors will receive an additional deduction of up to $6,000. If you’re married filing jointly, you may qualify for up to $12,000. This deduction is in addition to your standard deduction or itemized deductions. Income Limits The full deduction is available to single taxpayers with a modified adjusted gross income (MAGI) of $75,000 or less, and to married couples filing jointly with a MAGI of $150,000 or less. The deduction begins to phase out above those amounts and is completely phased out when income reaches $175,000 for single filers and $250,000 for joint filers. For every $1,000 over the threshold, the deduction is reduced by $100. When Does It Start? This deduction applies to income earned beginning January 1, 2025, and will be available for tax years 2025 through 2028—unless extended by future legislation. What You Need to Know This is a deduction—not a credit—so it directly reduces your taxable income. It does not affect how Social Security benefits are taxed, but it can reduce your overall tax bill. If you or your spouse turn 65 in 2025, be sure to claim this new benefit when filing your return.
🕒 Overtime Pay Deduction (2025–2028) New from the Big Beautiful Tax Bill: W-2 employees can now deduct a portion of their overtime pay from taxable income — giving hard-working Americans a break at tax time. 🧾 Who Qualifies? ✅ W-2 employees earning FLSA-defined overtime pay 🚫 Not available to independent contractors or self-employed individuals 📌 Applies to overtime above 40 hours/week, paid at 1.5× rate 💸 How Much Can You Deduct? Filing StatusMax Deduction (per year) Single$12,500 Married Joint$25,000 💼 Income Limits (MAGI-Based) Filing StatusFull Deduction If MAGI ≤Phased Out After Single$150,000$275,000 Married Filing Joint$300,000$425,000 🔹 For every $1,000 over the threshold, the deduction is reduced by $100. 🔹 This is based on Modified Adjusted Gross Income (MAGI). 📅 When Does It Start? ✅ Applies to overtime earned starting January 1, 2025 🛑 Scheduled to expire after the 2028 tax year 📍 Additional Notes This is not a payroll item — it’s a deduction claimed on your individual tax return You’ll still pay Social Security and Medicare taxes on overtime pay The IRS will provide additional guidance for W-2 reporting 💡 Bottom Line: If you're a W-2 worker clocking overtime, you may qualify for up to $25,000 in tax deductions starting in 2025. This change could significantly reduce your federal tax bill during the 2025–2028 tax years.
📈 Standard Deduction Increase (2025–2028) The Big Beautiful Tax Bill included a significant increase to the standard deduction, giving most taxpayers a larger tax break without the need to itemize. This change takes effect beginning with the 2025 tax year and will apply through 2028, unless extended. What Is the Standard Deduction? The standard deduction is a flat dollar amount that reduces the income you're taxed on. Most taxpayers use it instead of itemizing deductions like mortgage interest, charitable donations, or medical expenses. What’s Changing? Starting in 2025, the standard deduction will increase by $2,000 for single filers and $4,000 for married couples filing jointly. This increase is on top of the regular annual inflation adjustment. For example: If the regular inflation-adjusted deduction for a single filer is $14,000 in 2025, the increased deduction will now be $16,000 For married filing jointly, if the inflation-adjusted amount is $28,000, the new total becomes $32,000 These higher deductions reduce taxable income, which could mean a lower overall tax bill — especially for taxpayers who don’t have enough deductions to itemize. Who Benefits? Nearly all taxpayers who take the standard deduction will benefit, but it especially helps: Middle-income earners Seniors (in addition to the Senior Bonus Deduction) Individuals without mortgage interest or high medical expenses Young workers, retirees, and low-to-moderate income families When Does It Start? The increase applies to tax returns filed for 2025 through 2028. It does not apply to 2024 tax returns. What You Need to Know If you typically take the standard deduction, this increase will automatically apply when you file your 2025 tax return — you don’t need to do anything extra to claim it. It’s a simple but meaningful change that will reduce taxable income for most filers.
💵 Tips Income Deduction (2025–2028) Thanks to the Big Beautiful Tax Bill, W-2 employees who earn tips can deduct a portion of their tip income from their taxable income — starting in 2025. 🧾 Who Qualifies? You must be a W-2 employee in a tip-based role Qualifying jobs include: Servers, bartenders, barbers, hair stylists, nail techs, delivery drivers, valets, etc. Only voluntary tips qualify: Tips left in cash or via credit card Pooled tips shared among staff Mandatory service charges (e.g., automatic gratuities) do not qualify 💸 How Much Can You Deduct? Filing StatusMax Deduction (per year) Single$25,000 Married Joint$50,000 💼 Income Limits (MAGI-Based) Filing StatusFull Deduction If MAGI ≤Phased Out After Single$150,000$275,000 Married Filing Joint$300,000$425,000 🔹 The deduction is reduced by $100 for every $1,000 over the limit 🔹 Based on Modified Adjusted Gross Income (MAGI) 📅 When Does It Start? Applies to tip income earned after January 1, 2025 Available for tax years 2025 through 2028 Set to expire after 2028 unless extended 📍 Additional Notes This is a federal income tax deduction on your personal tax return You will still pay: Social Security and Medicare taxes on tip income State income taxes, unless your state changes the rules Employers are encouraged to keep accurate tip reporting to help employees claim the deduction 💡 Bottom Line: If you’re a W-2 employee who earns tips, you may be eligible to deduct up to $25,000 ($50,000 joint) of tip income per year from your taxable income — a huge win for service industry workers.
☀️ Residential Energy Credits: Set to Expire in 2025 The Big Beautiful Tax Bill kept many energy efficiency credits in place through 2025 — but they are now officially set to expire at the end of the 2025 tax year unless Congress extends them. 🔋 What Qualifies in 2025? ✅ Residential Clean Energy Credit (Form 5695, Part I) 30% credit for the cost of: Solar panels Solar water heaters Battery storage Geothermal heat pumps Fuel cells No dollar limit for most items (except fuel cells) ✅ Energy Efficient Home Improvement Credit (Form 5695, Part II) 30% credit for the cost of: Energy-efficient windows and exterior doors Insulation, air sealing, ductwork High-efficiency furnaces, boilers, central AC, water heaters Home energy audits (up to $150) Annual limits apply, e.g.: $1,200 total general cap $600 for windows, $500 for doors $2,000 additional for certain HVAC systems 📅 Deadline: December 31, 2025 All purchases and installations must be completed by 12/31/2025 Any qualifying expenses after that may no longer be eligible for a federal credit unless new legislation is passed 💡 Who Should Act Now? Homeowners planning: A new solar system Major HVAC replacement Insulation or window upgrades Battery storage or energy-efficient appliances If you’ve been considering energy upgrades, 2025 may be your last year to claim up to thousands of dollars in tax credits. ⚠️ Important Notes These are nonrefundable credits – they reduce your tax liability, but won’t result in a refund if you owe nothing Some states also offer additional incentives Keep all receipts, certifications, and IRS Form 5695 for your records 💡 Bottom Line Energy efficiency upgrades made by December 31, 2025, may still qualify for up to 30% in federal tax credits — but these incentives are scheduled to expire after this year. Don’t wait!
💼 IRS Funding Shift: What It Means for Taxpayers As part of the Big Beautiful Tax Bill, Congress has redirected how the IRS is funded — placing a greater focus on taxpayer services and reducing enforcement efforts aimed at middle-income Americans. What Changed? In previous years, the IRS received a significant increase in funding to expand audits, hire more agents, and modernize technology. However, the new legislation rolls back a portion of that funding and reallocates resources toward improving service for everyday taxpayers. Less Focus on Small Audits The bill directs the IRS to scale back enforcement targeting middle- and lower-income individuals, including small businesses and gig workers. While high-income earners (generally those making over $400,000) and complex tax cases will still receive scrutiny, the average taxpayer should expect fewer audits and less aggressive enforcement. More Support for Taxpayers The IRS is now expected to focus more on: Reducing call wait times Improving processing speed for refunds and letters Expanding online services and tax account access Enhancing assistance for low- and moderate-income taxpayers This shift aims to make the IRS easier to work with — not more intimidating. What You Need to Know This doesn’t mean compliance is no longer important. Taxpayers are still responsible for accurate reporting and timely filing. However, if you’ve ever felt overwhelmed by a confusing letter, delayed refund, or long phone wait, these changes are designed to improve that experience starting in 2025.
👶 Child Tax Credit Increase (2025–2028) The Big Beautiful Tax Bill brought an important win for families by increasing the Child Tax Credit beginning with the 2025 tax year. This change puts more money back in the hands of working parents during the years their children need it most. What’s New? The Child Tax Credit increases from $2,000 to $2,500 per qualifying child The increased amount applies to children under age 17 who meet residency and dependency rules The refundable portion remains at $1,400, but will now be adjusted for inflation starting in 2026 The credit is also indexed for inflation overall, so the $2,500 amount could increase slightly each year beginning in 2026 What Stays the Same? The child must be your dependent and have a valid Social Security number At least one parent must also have a valid SSN You must have earned income to claim the refundable portion Income phaseouts still apply, with the credit beginning to reduce for higher-income families When Does It Start? The updated credit amount begins with tax year 2025 and will apply through 2028, unless extended by future legislation. It does not affect 2024 tax returns. What You Need to Know Families will now receive a larger per-child credit, with a greater portion becoming refundable over time. This means even more parents will benefit — especially those with moderate to low income — and the credit will retain more value in future years as inflation adjustments take effect.
📌 What Stayed the Same from the Tax Cuts and Jobs Act The Big Beautiful Tax Bill preserved several key provisions from the 2017 Tax Cuts and Jobs Act (TCJA), ensuring that many popular tax benefits for individuals and businesses remain in effect through at least 2028. 🏠 Increased Standard Deduction The doubled standard deduction from the TCJA remains in place: Single filers will continue to benefit from a larger automatic deduction, reducing taxable income without itemizing Married couples filing jointly also keep their higher deduction amounts Note: The Big Beautiful Bill added an extra boost to the standard deduction beginning in 2025 (see our update above). 💰 Lower Individual Income Tax Rates The reduced tax brackets for individuals and families introduced by the TCJA are preserved. This means: Most Americans will continue to benefit from lower marginal tax rates The top tax rate remains reduced compared to pre-2017 levels 👨👩👧👦 $2,000 Child Tax Credit (Now Increased) The original TCJA set the Child Tax Credit at $2,000 per child. The Big Beautiful Tax Bill keeps that structure in place — and increases it to $2,500 per child starting in 2025. 🧾 20% QBI Deduction for Pass-Through Businesses The Qualified Business Income (QBI) deduction — also known as the 20% deduction for pass-through income — remains in effect: Available to sole proprietors, partnerships, S corporations, and some LLCs Helps reduce taxable income for many small businesses 💼 Bonus Depreciation The 100% bonus depreciation provision from the TCJA was extended: Businesses can continue to fully expense qualifying assets in the year of purchase This includes new and used equipment, vehicles, and other tangible property 💡 What You Need to Know If you or your business have been benefitting from the TCJA, you will continue to see those savings under the Big Beautiful Bill. Most major provisions were preserved or extended — with some enhancements, like increased deductions and credits.
🎓 Education Credit Simplified (2025–2028) The Big Beautiful Tax Bill made it easier for students and families to claim tax benefits for college and career training by consolidating the two existing education credits into one simplified credit. This change applies to tax years 2025 through 2028. What Changed? Previously, there were two separate education credits: The American Opportunity Credit (AOC) – limited to undergraduate students The Lifetime Learning Credit (LLC) – available for a broader range of education, but less generous Starting in 2025, these are merged into one unified education credit that offers better flexibility and broader coverage. What’s Included in the New Education Credit? Worth up to $2,500 per eligible student per year Covers qualified expenses such as: Tuition Required fees Course materials (like textbooks or supplies) Available for both: Undergraduate students Graduate students and adults returning to school or changing careers Who Qualifies? Must be enrolled at least half-time in an eligible post-secondary institution The student must not have already claimed the maximum number of years (typically 4 years for undergrad, unlimited for career training) The taxpayer claiming the credit must have a modified adjusted gross income (MAGI) under $80,000 for single filers or $160,000 for married filing jointly to receive the full benefit The credit phases out completely at $90,000 single / $180,000 joint When Does It Start? The new, simplified education credit applies to qualified expenses paid after January 1, 2025 and can be claimed on tax returns filed for the 2025 tax year and beyond. What You Need to Know This change makes it easier for students and families to understand and claim the education credit — no more choosing between two confusing options. Whether you’re paying for a child’s college, going back to school yourself, or earning a new certification, the unified $2,500 credit may offer meaningful tax savings.
⚠️ Disclaimer
The tax updates and highlights presented above are based on the most recent version of the One Big Beautiful Tax Bill, which was passed in 2024 and takes effect beginning in tax year 2025. While these provisions are now law, official IRS guidance and implementation procedures are still forthcoming in many areas.
At Tidewater Executive Tax Service, we are committed to providing accurate and timely information. As always, we will monitor IRS updates and legislative clarifications closely. If changes, delays, or adjustments are issued, we will update this page and inform our clients accordingly.
For personalized advice based on your unique situation, please consult with one of our tax professionals.
📌 SALT Deduction Increase: From $10,000 to $40,000 Effective in 2025, the cap on the SALT (State and Local Tax) deduction will increase from $10,000 to $40,000. This major change is part of the newly passed federal tax bill and will offer significant relief to many taxpayers who itemize deductions on Schedule A. 🔍 Background: Prior to the Tax Cuts and Jobs Act (TCJA) of 2018, there was no limit on the amount of state and local taxes (SALT) that could be deducted. The TCJA imposed a $10,000 cap, limiting the benefit for taxpayers in high-property-tax or high-income-tax states. ✅ Key Reasons This Increase Is Good News: Expanded tax relief for homeowners and those in high-tax areas Restores fairness in itemized deductions Improves the value of Schedule A for middle and upper-middle-income earners Potentially lowers federal tax liability for taxpayers with significant SALT payments 💬 What This Means for You: If you typically itemize your deductions and pay more than $10,000 in property, state, or local taxes, this change could have a big positive impact on your tax return. We’re closely following IRS guidance as implementation details roll out. Our team is already preparing to help clients maximize this deduction starting with the 2025 tax year. 📞 Have questions? Reach out to your Tidewater tax professional today!