Inside the New Tax Act: 12 Key Tax Changes Every American Should Know

On July 4, President Trump signed sweeping new tax legislation into law—an expansion and partial overhaul of the landmark 2017 Tax Cuts and Jobs Act (TCJA). For individuals, families, retirees, and businesses alike, this new law offers a mix of permanent and temporary tax changes, with the goal of extending relief, avoiding tax hikes scheduled for 2025, and providing targeted benefits for seniors, working families, and certain high-tax states.

While navigating the new law will take time, understanding its core changes is critical for financial planning and wealth management. As a financial advisor, here’s a breakdown of the 12 key tax changes and what they could mean for your bottom line.

1. Permanent Extension of the 2017 Tax Brackets

One of the most impactful moves is the permanent preservation of the seven tax brackets introduced by the TCJA. These include a bottom rate of 10% and a top marginal rate of 37% for high-income earners. This codifies what was initially set to expire after 2025 and avoids a reversion to the higher pre-TCJA rates.

What this means for you:
Most taxpayers will retain their current marginal tax rates, avoiding automatic increases that were set to kick in starting January 1, 2026. However, not all brackets will be indexed to inflation, potentially increasing tax liability over time in real-dollar terms.

2. Standard Deduction Increased—and Made Permanent

The standard deduction, which was doubled under TCJA, will now be permanently fixed at $15,750 for single filers and $31,500 for married couples filing jointly. These amounts will be indexed for inflation beginning in 2026.

Why this matters:
For the majority of Americans who don’t itemize deductions, this will provide a larger base-level deduction, reducing taxable income and simplifying returns.

3. State and Local Tax (SALT) Deduction Boosted—Temporarily

The SALT deduction cap increases from $10,000 to $40,000 for single and joint filers starting in 2026. However, this higher cap phases out at $500,000 of income and will revert back to $10,000 in 2030. For those filing separately, the cap is $20,000 (reverting to $5,000 in 2030). Annual 1% increases apply from 2026 through 2029.

Impact:
This is a significant but time-limited win for residents in high-tax states like California, New York, and New Jersey. Still, its eventual phase-out will require long-term planning for higher earners.

4. Child Tax Credit (CTC) Gets a Boost

Originally doubled by the TCJA, the Child Tax Credit is now permanently increased to $2,200 per child beginning in tax year 2025.

Benefit for families:
This is an ongoing, meaningful benefit for parents of dependent children, offering more financial relief amid rising costs of living and childcare.

5. Gift and Estate Tax Exemption Raised Again

The federal gift and estate tax exemption climbs to $15 million for individuals and $30 million for married couples filing jointly, up from $13.99 million and $27.98 million, respectively. The new limits will be indexed to inflation.

Estate planning implications:
High-net-worth individuals can transfer more wealth tax-free—creating estate planning opportunities but also urgency, as these thresholds may be debated in future political cycles.

6. Mortgage Interest Deduction Cap Made Permanent

The mortgage interest deduction, reduced from $1 million to $750,000 in mortgage debt under the TCJA, is now a permanent feature of the tax code. For single filers, the limit is $375,000. Certain mortgage insurance premiums may also remain deductible.

Planning tip:
Homebuyers in high-cost real estate markets may need to factor in this ceiling when financing property.

7. Return of Charitable Deductions for Non-Itemizers

Non-itemizers can now deduct cash charitable contributions—$1,000 for single filers and $2,000 for joint filers—starting in 2026. For itemizers, a 0.5% of AGI floor applies. Additionally, for high-income donors in the 37% bracket, charitable deductions are capped at 35%.

Advice for philanthropists:
This creates fresh incentive for middle-income earners to give, but higher earners will face limits on the tax efficiency of their donations.

8. No Taxes on Tips and Overtime (Temporarily)

From 2025 through 2028, tipped and overtime income will be deductible up to $25,000 (tips) and $12,500 (overtime) for individuals—or $25,000 total for joint filers. These benefits phase out at $150,000 and $300,000 of income, respectively.

Worker relief:
This targeted provision helps service and hourly workers, particularly in industries like hospitality and retail.

9. Additional Senior Deduction

An extra $6,000 deduction will be available to individuals 65 and older from 2025 to 2028, in addition to existing deductions for senior taxpayers. The benefit begins to phase out at $75,000 (single) and $150,000 (joint).

Why it matters:
While the law didn’t eliminate taxes on Social Security, this deduction could help offset the tax burden for middle-income retirees.

10. Car Loan Interest Deductibility (For U.S.-Assembled Vehicles)

From 2025 to 2028, taxpayers can deduct up to $10,000 of interest on car loans—if the vehicle was assembled in the U.S. This deduction is limited to those with incomes under $100,000 (single) and $200,000 (joint).

Consumer incentive:
This provision supports domestic auto manufacturing and offers financial relief for qualifying buyers.

11. New Trump Savings Accounts for Children

The legislation introduces a “Trump Account” for children, with up to $5,000 in annual contributions. Parents of children born between 2025 and 2028 receive a $1,000 federal seed contribution. Funds grow tax-deferred and convert into traditional IRAs at age 18.

Strategic opportunity:
This novel savings vehicle mirrors “baby bonds” and could offer parents and relatives a new long-term savings strategy, especially useful for multi-generational wealth building.

12. Expanded HSA and 529 Account Flexibility

The law broadens HSA eligibility, permits monthly payments of $150 (individual) or $300 (family) for direct primary care, and makes telehealth-related coverage permanent. It also expands 529 usage to include testing fees, educational therapies, and vocational training programs.

Health and education win:
These changes boost the utility of two key tax-advantaged accounts, offering more flexibility for managing healthcare and education expenses.

What’s Missing?

Despite speculation, the legislation did not repeal taxes on Social Security income—up to 85% of benefits can still be taxed above certain thresholds. However, the enhanced senior deduction may help reduce or eliminate this burden for some filers temporarily.

Final Thoughts: A Mixed Bag with Long-Term Impact

While the new tax law permanently extends several TCJA provisions, including tax bracket structure, the standard deduction, and estate tax exclusions, many of its new features—especially those benefiting seniors and lower-income families—are only temporary. These provisions could become political footballs in future election cycles.

As Naveen Malwal of Fidelity noted, the law delivers modest tax relief and may provide a slight boost to economic growth. But for taxpayers, it adds complexity as well as opportunity. Proactive tax planning is essential, especially for high-income earners, retirees, and families with children.

Next Steps for Taxpayers:

• Review your income and deduction strategies for 2025–2028 to take advantage of temporary provisions.
• Consult a financial advisor or tax professional about estate planning, especially if your assets approach the new exemption thresholds.
• Consider funding a Trump Account for your child if eligible—early contributions could yield long-term benefits.
• Reevaluate your charitable giving and education savings strategies under the new guidelines.

Staying ahead of tax law changes is key to financial success. This new legislation provides tools and incentives—but also deadlines. Make sure you’re ready.