Additional Tax Changes for 2025

More Details on Other Tax Law Changes

This page covers additional tax law changes that may affect you. Not everything here will apply to your situation, but we wanted to make sure you have all the information in one place. We'll discuss which of these changes matter for you when we prepare your return.

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If You Own a Business

Several changes affect business owners, from small sole proprietors to larger companies.

Section 179 Equipment Deduction

If you buy equipment or other business property, you may be able to deduct the full cost right away instead of spreading it out over many years.

• Maximum deduction: $2.5 million (up from $1 million)
• Phase-out threshold: Starts at $4 million in purchases
• Now permanent: This won't expire in future years
• Adjusted for inflation: Amounts will increase each year

What this means: If you buy a truck, computer equipment, machinery, or other business property, you might be able to deduct the entire cost this year instead of waiting.

Bonus Depreciation (Full Expensing)

Similar to Section 179, but with different rules.

• Rate: 100% of the cost can be deducted in the first year
• Now permanent: This used to expire, but now it continues indefinitely
• Alternative option: You can choose 40% instead if that works better for your taxes
• When it applies: Property acquired after January 19, 2025

Qualified Business Income Deduction (QBID)

If you own a pass-through business (sole proprietorship, partnership, S-Corp, or LLC), you may get to deduct up to 20% of your qualified business income.

• Now permanent: This deduction continues indefinitely
• Income limits: Full deduction available under certain income thresholds
• Type of business matters: Some businesses have additional limits

Note: The rules for this deduction are complex. We'll calculate it for you and determine if you qualify.

Research & Development (R&E) Expensing

If your business does research or development work in the United States, you can now deduct those costs immediately instead of spreading them over several years.

• Applies to: Domestic research and experimental costs
• Effective: Tax years beginning after December 31, 2024

If You Have a Side Business or Gig Work

1099-K Reporting Changes (Good News!)

If you sell things online, drive for Uber or Lyft, or do other gig work, there was supposed to be a big change in tax reporting. The IRS was going to require payment processors to send you (and them) a 1099-K form if you made more than $600. That rule has been canceled.

• Old threshold is back: $20,000 in payments AND 200 transactions
• What this means: Most small sellers and occasional gig workers won't get a 1099-K
• Important: You still need to report all your income, even without a 1099-K

1099-MISC and 1099-NEC Threshold Increase

The reporting threshold for miscellaneous income and non-employee compensation has also increased.

• New threshold: $2,000 (up from $600) starting 2026/li>
• Adjusted for inflation: Will increase in future years
• Who this affects: Freelancers, contractors, independent consultants

If You're Buying a Car

Car Loan Interest Deduction (New!)

For the first time in many years, you can deduct the interest you pay on a car loan.

• Maximum deduction: $10,000 per year
• Years available: 2025 through 2028 (temporary provision)
• Type of vehicle: Qualified passenger vehicles only
• When it applies: Loans taken out after December 31, 2024
• Available even if you don't itemize: This is an above-the-line deduction

What qualifies: The vehicle must meet certain requirements. We'll help you determine if your car loan interest qualifies.

Clean Vehicle Credits Terminated

If you were planning to buy an electric vehicle to get a tax credit, those credits have been eliminated.

• Terminated: Credits for new and used clean vehicles
• Also terminated: Commercial clean vehicle credits
• Termination effective: For vehicles purchased after September 30, 2025

Family & Education

Adoption Credit Enhancement

If you adopted a child in 2025, there's good news about the adoption credit.

• Now partially refundable: Up to $5,000 can be refunded even if you don't owe taxes
• Maximum credit: Adjusted for inflation each year
• What it covers: Adoption fees, attorney costs, travel, and other necessary expenses

Important: Foreign adoptions have different timing rules. Bring your adoption paperwork to your appointment.

Child and Dependent Care Credit

This credit helps working parents pay for childcare, after-school programs, and care for disabled dependents.

• Continues as before: No major changes to this credit
• Percentage rates: Phase down from 35% to 20% based on income
• Eligible expenses: Daycare, before/after school programs, summer day camps, babysitters

Education Credits - SSN Requirement (Starting 2026)

If you're claiming education credits (American Opportunity Credit or Lifetime Learning Credit), there are new requirements starting with your 2026 tax return.

• Your SSN required: The person claiming the credit must include their Social Security number
• Dependent's SSN required: The student's Social Security number must also be included
• School's EIN required: You'll need the school's employer identification number
• Effective: Tax years beginning after December 31, 2025

Note: This does not affect your 2025 return.

Estate Planning & Gifts

Estate and Gift Tax Exemption Increase

If you have significant assets or are thinking about estate planning, the amount you can pass on tax-free has increased substantially.

• Now permanent: Previously set to decrease in 2026
• Increased amount: The exemption is now higher and permanent
• Portability: Married couples can still combine their exemptions
• Annual gift exclusion: Continues to be adjusted for inflation each year

Note: Estate planning is complex. If you have significant assets, consider working with an estate planning attorney in addition to your tax preparation.

Other Important Changes

Itemized Deduction Limits (Starting 2026)

For high-income taxpayers, there are new limits on itemized deductions beginning with your 2026 tax return.

• New limitation: Called the "Pease limitation" (named after a former congressman)
• Effective: Tax years beginning after December 31, 2025
• Who it affects: Taxpayers with high adjusted gross income
• How it works: Reduces the total amount of itemized deductions you can claim

We'll calculate this automatically if it applies to you when we prepare your 2026 return.

Charitable Contributions (Starting 2026)

Rules for deducting charitable donations have changed.

• Educator expenses: Teachers and educators can deduct their classroom expenses without the previous dollar limit (if they itemize starting in 2026
• Corporate contributions: New 1% floor for corporations making charitable donations after December 31, 2025

Premium Tax Credit Changes (2025-2027)

If you get health insurance through the marketplace (Healthcare.gov or your state exchange), there are changes to the premium tax credit with different effective dates.

• Eligibility changes (2025): Only "eligible aliens" qualify
• Repayment requirement (Starting 2026): After 2025, any excess advance premium tax credit must be repaid in full
• Income limit (Starting 2027): After 2026, those above 400% of the federal poverty level don't qualify

These changes are complex and phase in over multiple years. We'll help you understand how they affect your situation based on your specific tax year.

Miscellaneous Itemized Deductions (Permanent Starting 2025)

Most miscellaneous itemized deductions remain suspended permanently.

• Still not allowed: Unreimbursed employee expenses, investment fees, tax preparation fees
• Exception: Qualified educator expenses (with no limit if you itemize effective 2026)
• Made permanent: This suspension will continue indefinitely
• Effective: Starting with 2025 tax returns

Good news for teachers: If you're an educator, you can now deduct your classroom expenses without a dollar limit when you itemize starting in 2026

What You Should Do

When you come in for your appointment, bring:

• All your tax documents (W-2s, 1099s, etc.)
• Documentation for any major purchases or expenses
• Questions about anything you read here

We'll go through everything together and make sure you get every deduction and credit you deserve.

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Need More Information?

We may have detailed blog posts about some of these topics. If you want to learn more about a specific provision:

• Check our blog at here
• Call us with questions
• Bring your questions to your appointment