Before it was the law it was called the One Big Beautiful Bill. Now it’s just the Tax Act of 2025. No matter what you call it though, there may be some provisions that that make tax time a less painful experience.
Senior Bonus
For tax years 2025-2028, every qualified person 65 years of age and older will receive an additional deduction of $6,000, no matter whether you take the standard deduction or itemize. The full deduction is available for those married filing jointly with modified adjusted gross income (MAGI) of up to $150,000, and $75,000 or less for all other taxpayers. For 65-year-olds above those limits the deduction will be reduced by 6% of MAGI.
No Tax on Tips
The no tax on tips provision allows a deduction of up to $25,000 on reported qualified tips received. The deduction is available whether a person takes the standard deduction or itemizes. The deduction phases out for individuals with MAGI over $150,000 or $300,000 for those married filing jointly.
No Tax on Overtime
This allows a deduction of up to $12,500 for individuals and $25,000 for persons married filing jointly for qualified overtime compensation. It’s available to both those who itemize and those who don’t. There is a cap, however. No tax on overtime phases out for individuals with MAGI over $150,000 or $300,000 for those married filing jointly.
The deduction applies to most taxpayers who receive overtime wages under the Fair Labor Standards Act (FLSA). That means:
- Hourly and other non-exempt employees are eligible for this benefit.
- Exempt salaried employees generally do not qualify for this deduction, since they don’t receive overtime under FLSA rules. Non-exempt salaried employees can still qualify, since they are entitled to overtime protections.
- You must have overtime earnings paid at a higher rate than your regular wages.
- A valid Social Security number is required.
- It’s still unclear whether self-employed workers like independent contractors will qualify. Right now, you’ll still report business income and expenses normally on Schedule C.
No tax on overtime applies only to the “extra” portion of your overtime compensation (the half-pay above your base rate). If you earn straight-time bonuses, tips, or hazard pay, those don’t qualify for the overtime deduction.
Standard Deduction
The standard deduction permanently increases to:
- $31,500 married filing jointly
- $23,625 head of household
- $15,750 single filer
Going forward, these amounts will be adjusted for inflation every year.
Form 1099-K Information Reporting
Form 1099-K is a report of payments you got for goods or services during the year from:
- Credit, debit or gift cards
- Payment apps or online marketplaces, also called third party settlement organizations or TPSOs
- A payment app or online marketplace is required to send you a Form 1099-K if the payments you received for goods or services total over $5,000. However, they can send you a Form 1099-K with lower amounts. The payments can be made through any:
- Payment app
- Online community marketplace
- Craft or maker marketplace
- Auction site
- Car sharing or ride-hailing platform
- Ticket exchange or resale site
- Crowdfunding platform
- Freelance marketplace
Under the 2025 tax act, third party settlement organizations are not required to file form 1099-K unless the gross amount of reportable payment transactions to a payee exceeds $20,000 and the number of transactions exceeds 200.
Adoption Credit
The Adoption Tax Credit helps ease the financial burden of adoption by allowing would-be parents to claim qualified adoption-related expenses as a tax credit on their federal income tax return.
For the 2025 tax year, the credit is capped at $17,280 per eligible child. The credit starts to phase out for taxpayers with a modified adjusted gross income (MAGI) above $259,190 and is eliminated for those with a MAGI over $299,190.
For 2025, up to $5,000 of the Adoption Tax Credit is a refundable credit, meaning that even if it reduces your tax bill to $0, you could still get up to $5,000 refunded. Any remaining unused credit can be carried over for up to five years.
Under the new law, Indian tribal governments are allowed to determine a child’s “special needs” status.
Child Tax Credit
The Child Tax Credit is a federal tax benefit designed to help taxpayers with the costs of raising children. It reduces your tax bill on a dollar-for-dollar basis, which means it’s not just a tax deduction — it’s a direct credit against what you owe.
To be considered a qualifying child, your dependent child must:
- Be under age 17 at the end of the tax year.
- Be your biological child, stepchild, foster child, sibling, stepsibling, or a descendant of any of these (like a grandchild, niece, or nephew).
- Have lived with you for more than half the year.
- Not have provided more than half of their own financial support.
- Be a U.S. citizen, national, or U.S. resident alien.
- Have a valid Social Security number (SSN). Having an individual taxpayer identification number (ITIN) is not enough to claim the CTC.
The full Child Tax Credit is available for filers with MAGI up to:
- Married filing jointly $400,000
- Single or head of household $200,000
- Married filing separately $200,000
The maximum Child Tax Credit amount for 2025 is $2,200 per qualifying child.
Energy Efficient Home Improvement Credit
Through December 31, 2025, federal income tax credits are available to homeowners which allow up to $3,200 to lower the cost of energy efficient home upgrades by up to 30 percent.
In addition to the energy efficiency credits, homeowners can also take advantage of the modified and extended Residential Clean Energy credit, which provides a 30 percent income tax credit for clean energy equipment, such as rooftop solar, wind energy, geothermal heat pumps and battery storage, also ending December 31, 2025.
This information is presented for informational purposes only and does not constitute an offer to sell, or the solicitation of an offer to buy any investment products. None of the information herein constitutes an investment recommendation, investment advice or an investment outlook. The opinions and conclusions contained in this report are those of the individual expressing those opinions. This information is non-tailored, non-specific information presented without regard for individual investment preferences or risk parameters. Some investments are not suitable for all investors, all investments entail risk and there can be no assurance that any investment strategy will be successful. This information is based on sources believed to be reliable and Alhambra is not responsible for errors, inaccuracies, or omissions of information. For more information contact Alhambra Investment Partners at 1-888-777-0970 or email us at info@alhambrapartners.com.
