The One Big Beautiful Bill Act became law in July 2025. It changed federal tax rules with immediate and long-term effects. Tax professionals need to understand these updates to answer client questions during the 2026 filing season.
SALT Cap Increase: The Biggest Change for High-Tax States
The state and local tax deduction cap increased from $10,000 to $40,000 for tax years 2025 through 2029. For married filing separately filers, the cap is $20,000.
The cap increases by 1% annually during this period. For 2026, the cap will be $40,400. This benefit phases out for taxpayers earning above $500,000.
What clients will ask:
- "Can I deduct more of my property taxes now?"
- "Should I itemize instead of taking the standard deduction?"
- "Does this apply to my 2025 return?"
Clients in high-tax states like California, New York, and New Jersey benefit most. Those who previously hit the $10,000 cap can now deduct up to $40,000 in combined state income, sales, and property taxes if they itemize.
The standard deduction for 2025 is $15,750 for single filers and $31,500 for married filing jointly. Many taxpayers still won't itemize unless their total deductions exceed these amounts.
Permanent Tax Brackets: No More Sunset Concerns
Tax brackets are now permanent. The lowest rate remains at 10% and the highest at 37%. This removes uncertainty about future tax planning.
Clients no longer need to worry about bracket changes expiring in 2026. Tax planning strategies can focus on income timing and deduction optimization without the previous sunset deadline.
Child Tax Credit Expansion
The 2025 tax law changes include a Child Tax Credit expansion. Details about income limits and phase-out ranges vary based on filing status and adjusted gross income.
What clients will ask:
- "How much is the Child Tax Credit for 2025?"
- "Do I still qualify if my income increased?"
- "Can I claim this for my newborn?"
Tax professionals should verify current credit amounts and phase-out thresholds when preparing returns. The expansion aims to provide additional relief for families with qualifying children.
Senior Tax Benefits: Additional $6,000 Deduction
Taxpayers age 65 and older qualify for an additional $6,000 deduction for tax years 2025 through 2028. This deduction reduces taxable income beyond the standard deduction.
Seniors with significant medical expenses or charitable contributions may still benefit from itemizing. Compare itemized deductions against the standard deduction plus the senior deduction to determine the best approach.
What clients will ask:
- "Do I automatically get this deduction?"
- "Can I claim this if I itemize?"
- "Does my spouse qualify if they turn 65 this year?"
Tip and Overtime Income Deductions
Two new deductions target service workers and hourly employees.
Qualified tip income deduction: Up to $25,000 in tip income may be deductible. Requirements include proper documentation and reporting on Form 4137 or employer W-2 statements.
Overtime pay deduction: Single filers can deduct up to $12,500 in qualified overtime pay. Married filing jointly filers can deduct up to $25,000. Overtime must be clearly identified on Form W-2.
What clients will ask:
- "Does my restaurant job qualify for the tip deduction?"
- "How do I prove my overtime hours?"
- "Can I claim both deductions?"
These deductions require accurate payroll records. Clients should maintain documentation throughout the year.
Estate Tax Changes for 2026
The federal estate tax exemption increases to $15 million per individual, effective January 1, 2026. Married couples can combine exemptions for a total of $30 million.
This change primarily affects high-net-worth clients. Estate planning strategies may need adjustment based on the higher exemption threshold.
What clients will ask:
- "Does this affect my estate plan?"
- "Should I update my trust documents?"
- "How does portability work with the new exemption?"
Tax professionals should coordinate with estate planning attorneys when clients have complex asset structures.
Business Property Deduction
Businesses can claim a 100% deduction for qualifying property placed in service after January 19, 2025. This applies to equipment, machinery, and certain real property improvements.
The deduction allows full expensing in the first year rather than depreciating assets over multiple years. Section 179 limitations and phase-out thresholds still apply.
What clients will ask:
- "Can I write off my entire equipment purchase?"
- "Does this apply to vehicles?"
- "What counts as qualifying property?"
Business owners should plan major purchases strategically to maximize this benefit.
How to Prepare for Client Questions
These 2025 tax law changes create planning opportunities and compliance requirements. Tax professionals should:
Update software and worksheets to reflect new deduction limits and credits. Most tax preparation platforms release updates by mid-January.
Review prior-year returns for clients who may benefit from increased SALT deductions or new income-based deductions. Compare itemized versus standard deduction totals.
Document conversations about new deductions and eligibility requirements. Clients may need clarification on qualification criteria throughout the season.
Establish verification procedures for tip income and overtime deductions. Request payroll documentation before preparing returns.
Coordinate with other professionals when clients have estate planning or business structure questions beyond basic tax preparation.
Common Filing Season Scenarios
Scenario 1: Client in California paid $45,000 in state income and property taxes. They can now deduct $40,000 instead of $10,000, creating a $30,000 additional deduction.
Scenario 2: Client age 66 with $20,000 in itemized deductions. Standard deduction plus senior deduction ($15,750 + $6,000 = $21,750) exceeds itemized deductions. Client takes standard deduction.
Scenario 3: Restaurant server earned $30,000 in tips, properly reported on W-2. Qualifies for $25,000 tip income deduction, significantly reducing taxable income.
Resources for Tax Professionals
The IRS publishes updated guidance on 2025 tax law changes through Publication 17 and revenue procedures. State tax agencies issue separate guidance on SALT deduction coordination.
Professional organizations including NATP and NSA provide continuing education courses covering new provisions. These courses count toward annual CE requirements.
For comprehensive tax preparation tools and resources, visit TIG Tax Pros for professional tax software solutions and industry updates.
Action Steps
Review client files from prior years to identify those who may benefit from increased SALT deductions. Contact high-income clients about phase-out thresholds.
Prepare questionnaires asking about tip income, overtime pay, and senior status. Include these questions in initial client intake forms.
Schedule additional time for returns with complex deduction scenarios. New provisions require careful documentation and verification.
Monitor IRS announcements for additional guidance on implementation details. Some provisions may require clarifying regulations or safe harbor procedures.
These 2025 tax law changes affect millions of taxpayers. Tax professionals who understand the updates can provide accurate guidance and identify tax-saving opportunities for clients.