The tax law signed into law last summer made a number of changes that affect individual taxpayers beginning with the 2025 tax year. These updates largely impact personal income tax returns, not business filings, and many of them apply whether you are retired, working, or somewhere in between.

Some provisions are already in effect for the 2025 filing season, while others will not apply until 2026. Either way, it is worth understanding what has changed on the individual side before you start gathering tax documents or making assumptions based on prior years.

Several of these changes may reduce your personal tax bill or increase your refund. Others introduce new deductions that come with added documentation requirements and income limits. In many cases, eligibility depends on your filing status, income level, or personal circumstances rather than anything related to a business or employer.

Below is a practical overview of the most notable individual tax changes for 2025:

1. Higher standard deduction

The standard deduction increased again for 2025. Single filers can claim $15,750, married couples filing jointly can claim $31,500, and heads of household can claim $23,625.

Most individuals continue to take the standard deduction because it exceeds their itemized deductions. This change benefits taxpayers automatically and does not require any additional planning or elections.

2. New personal deduction for seniors

Individuals born before January 2, 1961 who have a valid Social Security number may qualify for a new personal deduction of $6,000. Married couples filing jointly may claim $12,000 if both spouses qualify.

This deduction applies to individual returns only and is available whether you itemize or take the standard deduction. It begins to phase out at higher income levels.

3. Higher state and local tax deduction cap

For individuals who itemize, the cap on the deduction for state and local taxes increased significantly. For 2025, the limit is $40,000, or $20,000 for married filing separately.

This applies to personal income taxes or sales taxes, along with property taxes, subject to income limitations for very high earners. This change affects individual itemized deductions and does not alter business tax treatment.

4. New car loan interest deduction

Individuals who purchased a new vehicle for personal use in 2025 and financed the purchase may be eligible to deduct some of the interest paid on the loan.

This is a personal deduction, not a business vehicle rule. It applies only to new vehicles used primarily for personal purposes and is capped at $10,000 per year. Income limits apply, and the vehicle must be assembled in the United States.

5. Deduction for tips

A new deduction is available for certain individuals who earn tip income. Despite how it has been marketed, this is not a full exclusion of tips from income.

Instead, it allows eligible individuals to deduct qualified tip income up to a dollar limit, subject to income thresholds. This change affects individual wage earners and does not apply at the business or employer level.

6. Deduction for overtime pay

Certain individuals may qualify for a deduction related to overtime compensation. The deductible amount is limited to the portion of overtime pay above the employee’s regular wage and is based on federal labor law definitions.

This deduction applies to individual wage income and does not change payroll tax reporting or employer obligations.

7. Higher child tax credit

The maximum child tax credit increased to $2,200 per qualifying child for 2025. This is a personal credit claimed on individual returns and continues to require valid Social Security numbers and compliance with income phaseouts.

8. Expiration of clean vehicle tax credits

The clean vehicle credits for new and used electric vehicles were accelerated toward expiration. Individuals who purchased qualifying vehicles before September 30, 2025 may still be eligible, but vehicles purchased after that date will not qualify.

These credits apply to personal vehicle purchases and do not affect business depreciation or fleet vehicle rules.

9. New investment accounts for newborns

The federal government will fund $1,000 investment accounts for certain children born between January 1, 2025 and December 31, 2028. This is an individual and family level benefit and requires elections made with the parents’ personal tax return.

10. New crypto tax reporting

For the first time, many individual crypto transactions will be reported directly to the IRS by centralized exchanges. Individuals who sold or exchanged crypto in 2025 should expect to receive new reporting forms.

This change increases reporting transparency but does not change how businesses account for crypto activity.

Final thoughts

The 2025 tax year brings more changes to individual tax returns than most recent years. Many of these provisions do not affect businesses at all, but they can materially impact personal tax planning, withholding, and documentation.

If you have questions about how these individual changes affect your personal return, or if you expect to claim any of the new deductions or credits, it is worth reviewing your situation early. At Oakhaven, we help individuals understand how tax law changes apply to their personal financial picture, not just how they show up on a tax form.