The new tax law signed on July 4, 2025, makes big changes to how we pay taxes. Some help immediately. Others create planning opportunities. A few have deadlines you need to know about.
Table of Contents:
The 2017 tax rates are now permanent. Without this change, your rates would have jumped up in future years. The top rate stays at 37% instead of rising to 39.6%.
These amounts grow with inflation starting in 2026. More people will take the standard deduction instead of itemizing.
New Senior Deduction
If you're 65 or older, you get an extra $6,000 deduction through 2028. This phases out if you make too much. The phaseout starts at $75,000 for single filers and $150,000 for couples.
Goes from $2,000 to $2,200 starting in 2025. This amount adjusts for inflation going forward.
The Section 199A deduction for business income becomes permanent. The income limits where it phases out increased to $75,000 (single) and $150,000 (married), making more business owners eligible. Starting in 2026, there's a minimum $400 deduction.
You can immediately deduct domestic research and development expenses starting in 2025. Small businesses with average annual gross receipts of $31 million or less can apply this change retroactively to 2022. This is a big benefit for companies investing in innovation and development.
Qualified production property gets 100% depreciation. Advanced manufacturing investment credit increases from 25% to 35%.
The federal estate tax exemption increases from about $14 million to $15 million in 2026. This gives families more room for wealth transfer strategies.
The law also preserves current tax treatment of life insurance, keeping it valuable for estate planning and business succession strategies.
Several changes have expiration dates:
The state and local tax deduction goes to $40,000 in 2025. It grows 1% each year until 2030, then drops back to $10,000.
This applies to taxpayers with income under $500,000.
Workers can deduct up to $25,000 in tips. Overtime deduction is $12,500 for single filers, $25,000 for married couples. Both phase out for income over $150,000 (single) or $300,000 (married).
Parents can contribute up to $5,000 per year to special retirement accounts for children under 18. No deductions allowed for contributions. No withdrawals allowed before age 18.
Starting in 2026, you can use 529 plans for elementary and high school expenses, not just college. The law also allows 529 funds for postsecondary credentials and certifications.
Dependent Care FSA limits increase from $5,000 to $7,500. Starting in 2026, you can claim 50% of qualified expenses (up from 35%).
You can deduct $1,000 in charitable donations ($2,000 if married) even if you take the standard deduction.
The new law creates opportunities, but the various expiration dates require attention. Consider reviewing:
The permanent tax rate changes provide planning certainty. The temporary provisions create time-sensitive opportunities. Working with your tax and financial advisors helps you capture the benefits while avoiding potential problems.
Not an offer: This document does not constitute advice or a recommendation or offer to sell or a solicitation to deal in any security or financial product. It is provided for information purposes only and on the understanding that the recipient has sufficient knowledge and experience to be able to understand and make their own evaluation of the proposals and services described herein, any risks associated therewith and any related legal, tax, accounting or other material considerations. To the extent that the reader has any questions regarding the applicability of any specific issue discussed above to their specific portfolio or situation, prospective investors are encouraged to contact Instrumental Wealth or consult with the professional advisor of their choosing. Forward-looking statements: Certain information contained herein constitutes “forward-looking statements,” which can be identified by the use of forward-looking terminology such as “may,” “will,” “should,” “expect,” “anticipate,” “project,” “estimate,” “intend,” “continue,” or “believe,” or the negatives thereof or other variations thereon or comparable terminology. Due to various risks and uncertainties, actual events, results or actual performance may differ materially from those reflected or contemplated in such forward-looking statements. Nothing contained herein may be relied upon as a guarantee, promise, assurance or a representation as to the future. Past Performance: There is no guarantee that the investment objectives will be achieved. Moreover, the past performance is not a guarantee or indicator of future results.
Certain information contained herein has been obtained from third party sources and such information has not been independently verified by Instrumental Wealth LLC. No representation, warranty, or undertaking, expressed or implied, is given to the accuracy or completeness of such information by Instrumental Wealth LLC. or any other person. While such sources are believed to be reliable, Instrumental Wealth LLC. does not assume any responsibility for the accuracy or completeness of such information. Instrumental Wealth LLC. does not undertake any obligation to update the information contained herein as of any future date