Standard Deduction & Personal Exemptions - Effective for 2025 and later
- Indefinitely extends the higher standard deduction amounts, adjusted annually for inflation, and the termination of personal exemptions. Standard deduction increased for 2025 to $15,750 for single filers, $31,500 for joint filers and $23,625 for those filing as head of household.
Qualified Car Loan Interest Deduction - Effective 2025-2028
- Authorizes a new temporary deduction of up to $10,000 for loan interest on qualified passenger vehicles (a car, minivan, van, sport utility vehicle, pickup truck or motorcycle with at least two wheels and a gross vehicle weight rating of less than 14,000 pounds; purchased for personal use, the original use of which begins with the taxpayer; manufactured primarily for public streets, roads and highways; and final assembly for which took place in the U.S.), regardless of whether you itemize deductions. The loan must have originated after Dec. 31, 2024, be secured by a first lien on the vehicle and can include refinancings if all requirements are met. To qualify for the full deduction, the taxpayer’s MAGI must be $100,000 or less ($200,000 or less for joint filers). The deduction is reduced by $200 per $1,000 of income above these thresholds and fully phases out when MAGI exceeds $150,000 ($250,000 for joint filers).
Child Tax Credit & Other Dependent Credit - Effective 2025 and later
- Increases the maximum child tax credit to $2,200 per qualifying child, of which $1,700 is refundable for 2025. The nonrefundable and refundable portions of the credit are adjusted annually for inflation. TCJA’s higher phaseout thresholds of $200,000 ($400,000 for joint filers) as well as the $500 nonrefundable tax credit for qualifying dependents who are not considered a qualifying child indefinitely extended.
Qualified Expenses for 529 Accounts - Effective July 4, 2025, and later for expanded definition; 2026 and later for higher K-12 limit
- Types of K-12 expenses that qualify for (federal) tax-free withdrawals from a 529 account expanded. Qualified K-12 expenses now include, not just tuition, but also curriculum and curricular materials, books and other instructional materials, online educational materials, certain tutoring costs, certain testing fees, fees for dual enrollment in a higher-education institution and certain educational therapies for students with disabilities. Additionally, the $10,000 annual limitation for K-12 expenses increases to $20,000 beginning in 2026. The types of higher-education expenses that qualify for (federal) tax-free withdrawals from a 529 account expanded to include tuition, fees, books, supplies and equipment required for enrollment in a credentialing program; fees for testing required to obtain or maintain the postsecondary credentials; and fees for continuing education required to maintain postsecondary credentials.
Trump Accounts - 2026 and later for opening and funding accounts; 2025–2028 for one-time federal contribution
- Establishes a new “starter” IRA for children, with special rules until age 18. Trump accounts may have to be established through the Treasury and can be funded no earlier than July 4, 2026.
- Prior to age 18, account characteristics are as follows:
- Account registration: Must be opened before age 18 as custodial accounts (i.e., assets belong to the minor). Child must have SSN.
- Contributions: Up to $5,000 can be contributed each year (adjusted annually for inflation beginning in 2028). Contributions are nondeductible, there are no taxable compensation requirements and they don’t count toward normal IRA limits. A one-time contribution of $1,000 from the federal government will be made for children born after Dec. 31, 2024, and before Jan. 1, 2029, (it will not count toward the annual contribution limit).
- Investments: Must be invested in mutual funds or ETFs that track the S&P 500 or another index of mostly U.S. equities with an expense ratio of 10 basis points or less.
- Distributions: Not permitted prior to age 18.
- Once the child turns 18, normal traditional IRA rules generally apply. However, these accounts may not be aggregated with other IRAs when applying the pro rata rule.
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