The biggest tax law since 2017.
The parts you heard about expire in three.
Signed 4 July 2025. Some of it made the 2017 rules permanent, which removes a cliff everyone had been planning around. But the four changes that got all the headlines — tips, overtime, car loan interest, the senior deduction — are temporary, and they end after 2028. Knowing which half you are standing on is the whole job.
The floor under your planning
The rates, the higher standard deduction, the pass-through deduction, full equipment expensing, the estate exemption. These are not scheduled to expire. You can build a multi-year plan on them, which was not true a year ago.
Plan around itThe four you have three years to use
Tips, overtime, car loan interest and the senior deduction all end with the 2028 tax year. Anyone whose situation fits one of them has a limited window, and the last chance to act on it is a return filed in early 2029.
Use it or lose it“No tax on tips” and “no tax on overtime” are deductions with caps, income limits and conditions — not exemptions. Plenty of people who expect a windfall will not get one, and a few who expect nothing will. The only way to know which you are is to run your actual numbers.
What changed for individuals.
Four new deductions, one much larger cap, and a set of quieter permanent changes that will matter more over ten years than the headline items do.
Tips
Deduct up to $25,000 of qualifying tips. You do not have to itemize. It narrows once income passes $150,000 ($300,000 joint), and your occupation has to be on Treasury's published list — more than seventy of them, finalised in April 2026. Married filers generally have to file jointly to claim it.
Overtime
Deduct up to $12,500 ($25,000 joint). Read that carefully: only the premium half of time-and-a-half counts, not the whole overtime cheque, and only overtime the Fair Labor Standards Act actually requires. It starts narrowing at the same $150,000 ($300,000 joint) as tips, though it runs out sooner.
Car loan interest
Deduct up to $10,000 of interest on a loan for a new personal vehicle with final assembly in the United States, where the loan was taken out after 31 December 2024. The VIN goes on the return. Narrows above $100,000 ($200,000 joint) — a tighter income limit than the other three.
The senior deduction
$6,000 for each person aged 65 or over, on top of the extra standard deduction that already existed. It narrows from $75,000 of income ($150,000 joint). It is the smallest of the four by cap, and for most retired couples it is the only one they can use.
The IRS put tips, overtime, car loan interest and the senior deduction together on Schedule 1-A, published in March 2026 — one schedule for the four temporary deductions, because they all end on the same day. For 2025 the W-2 did not have boxes for tips and overtime yet, so the amounts had to be worked out from pay records. The forms are being updated to carry dedicated boxes from 2026; the instructions were still in draft when we last checked.
State and local taxes
The SALT cap went from $10,000 to $40,000 — half that if you file separately. It phases down once income passes $500,000 and is back to $10,000 by around $600,000, so the benefit sits squarely with upper-middle earners in high-tax states. In 2030 it returns to $10,000 for everyone.
Rates and the standard deduction
The 2017 rates were due to rise in 2026 — the top rate back to 39.6%. That does not now happen. The larger standard deduction is permanent too: for 2026 it is $16,100 single, $32,200 joint, $24,150 head of household.
Child tax credit and the estate exemption
The child tax credit is $2,200 and now rises with inflation. The estate and gift exemption is $15 million per person from 2026, indexed — it was going to fall by roughly half. If your estate plan was built around that cliff, it needs a fresh look.
Charitable giving, both directions
If you take the standard deduction you can now deduct up to $1,000 ($2,000 joint) of cash giving — new, and permanent. If you itemize, only giving above 0.5% of your adjusted gross income counts at all. Some donors gain, some lose, and for a few the answer is to bunch two years of giving into one.
Plain English.
Zero Gimmicks.
The headlines promised universal windfalls. Tax reality delivered income caps, strict conditions, and sunset dates. We model how the 2025–2028 rules apply to your exact wage, deduction, and business profile before you make major financial moves.
What changed for businesses.
This is the half of the law that is mostly permanent, and it is the half that rewards planning. Three of these change what you should buy, and when.
100% bonus depreciation
Full first-year write-off of qualifying equipment is back, with no phase-down schedule ahead of it. The old step-down to 40% and then zero is gone. Timing a purchase across a year-end is now a cleaner decision than it has been since 2022.
Section 179 to $2.5 million
The expensing limit is now $2,500,000, with the phase-out starting at $4,000,000 of purchases, and both figures index from here. For 2026 they are $2,560,000 and $4,090,000 — roughly double where the limit sat before the law.
Research costs, deductible again
Domestic research and development is immediately deductible again for tax years starting after 2024, ending the five-year amortisation that hurt a lot of small firms. Research conducted abroad still has to be spread over fifteen years.
The 20% pass-through deduction
Section 199A was going to expire at the end of 2025. It does not. From 2026 there is also a $400 minimum deduction for anyone with at least $1,000 of qualified business income, and the phase-in range widened, which softens the cliff for service businesses near the threshold.
Small business stock
Founders and early investors get a tiered exclusion: 50% at three years, 75% at four, 100% at five. The company-size ceiling rose to $75 million and the per-issuer cap to $15 million. Only for stock issued after 4 July 2025 — older stock keeps the old rules.
The 1099 threshold moves
You will file fewer of them. The 1099-NEC and 1099-MISC threshold goes from $600 to $2,000 for payments made from 2026. Separately, 1099-K reverted to the old $20,000 and 200 transactions test, which spares a lot of casual sellers a form they should never have received.
Small businesses could elect to go back and deduct research costs capitalised in 2022, 2023 and 2024 — a genuine refund opportunity for firms under about $31 million of receipts. That election had to be made by 6 July 2026 and that date has passed. Going forward the deduction is automatic; the retroactive catch-up is closed. If nobody told you about it at the time, that is worth knowing about whoever was doing your returns.
Interest deductions loosened
The limit on deducting business interest is calculated on earnings before depreciation again, which raises the cap for asset-heavy businesses that borrow.
Employer childcare credit
From 2026 the credit runs up to $500,000, and $600,000 for smaller employers, covering a higher share of the cost. Small firms can also pool with each other rather than running something alone.
Opportunity zones stay
The programme is permanent now, with a fresh round of zone designations taking effect in 2027 and better terms for rural funds. Existing zones run through 2028.
Your state probably does not follow any of this.
This is the single most common surprise we are handling, and it is not a loophole or an oversight — it falls out of how the deductions were built.
Most states start their calculation from your federal adjusted gross income. The four new deductions — tips, overtime, car loan interest, senior — were written to come off after that number, not before it. So in most states they never reach the state return at all. Your federal bill falls. Your state bill does not move.
Maryland's Comptroller said so in plain terms in its own analysis of the law. Virginia went further and moved off automatic conformity altogether, fixing its rules to the federal code as it stood on 31 December 2025 and separately declining to follow the new expensing and research provisions. The District's position has been contested between the Council and Congress and we are not going to tell you it is settled when it is not.
Across fifty states, some follow federal changes automatically and some pin themselves to a fixed date and decide each year — and the research and depreciation provisions are the ones most often refused. We file in all of them, so we treat every state as its own question rather than assuming the federal answer carries.
Three things follow from it.
One. A federal refund estimate is not a total refund estimate. Ask what the state does before you plan around the number.
Two. If you moved, worked across a state line, or run a business registered in more than one state, the gap between the federal and state answer gets wider, not narrower.
Three. On the business side, expect an addback. A machine you wrote off in full federally may still be depreciating on your state return for years, and the two sets of books have to be kept apart.
What to actually do about it.
A law with an expiry date is a planning instrument. These are the moves worth having a conversation about, in rough order of how much they tend to be worth.
Check whether you qualify at all
Tips and overtime have occupation rules, income limits and a joint-filing requirement. Half the people who assume they qualify do not, and some who assume they do not actually do.
Move income into the window
If a deduction only exists for three more years, the timing of a bonus, a vehicle purchase, or a retirement date can be worth more than it looks.
Use the SALT cap while it is high
$40,000 through 2029, then back to $10,000 from 2030. Prepaying, bunching, and for business owners the state pass-through election, are all worth a look now rather than in five years.
Revisit the estate plan
A $15 million permanent exemption is a different world from a cliff that was going to halve it. Plans built for the old assumption are frequently now doing work nobody needs.
A three-year window closes whether or not anyone reminds you.
A tax break with an end date isn’t a gift. It’s a deadline wearing a nicer suit.
The IRS's own index, section by section, with the guidance issued under each.
IRS — 2026 inflation adjustments irs.gov · Revenue Procedure 2025-32Where the 2026 standard deduction, brackets, estate exemption and expensing limits come from.
IRS — the tipped occupations list Final regulations, April 2026Whether your job is on the list, in the IRS's own words. More than seventy occupations.
IRS — energy and vehicle credit end dates Fact Sheet 2025-05The exact cut-off for each clean vehicle and home energy credit.