The One Big Beautiful Bill Act (acronym: OBBBA which I think is pronounced like a Swedish pop band) brings significant changes, both eliminating some popular credits (anything green) and creating many tax planning opportunities. It's the most significant change in tax law since, well, the last time Trump controlled Congress, back in 2017.

We're still studying all the details, but wanted to send you a message regarding the most urgent items that either expire soon or go into effect for this current 2025 tax year. 

Credits Ending Soon - Act Now!

Electric Vehicle Tax Credits: Federal EV tax credits will expire on September 30, 2025. This affects:

• Up to $7,500 credit for new EVs
• Up to $4,000 credit for used EVs
• Commercial clean vehicle credits

What This Means: If you're considering an eligible electric vehicle purchase, you have a narrow window to complete your purchase to claim these substantial credits.

Home Energy Credits: Other home improvement credits go away at the end of the calendar year. This includes:

• Solar panel installation credits
• Energy-efficient home improvement credits
• Heat pump and HVAC upgrade credits

What This Means: If you're considering solar or other energy efficient upgrades (furnace, A/C, windows, etc), you need to have upgrades installed and operational by December 31, 2025 to get a tax credit. To do that, you'll need to get on a contractors calendar asap!

Enhanced & New Credits/Deductions for 2025

Expanded Child Tax Credit: The legislation permanently bumps up the biggest credit starting in 2025 and indexes this figure for inflation starting in 2026. Key changes:

• Increased from current $2,000 to $2,200 per child
• Refundable portion increased from $1,400 to $1,700 per child
• Permanent indexing for inflation starting in 2026

Enhanced SALT Benefits: The deduction limit for payment of state and local taxes (the SALT cap) is temporarily increased from the current $10,000 to $40,000 for 2025 through 2029, with a small increase each year for inflation. But then it reverts to $10,000 for 2030. The higher limit is also reduced if income exceeds $500,000.

What This Means: Especially in MN, many more homeowners will be able to deduct property tax, state income tax and car registration taxes which also means charity and medical expenses are worth tracking more diligently for 2025 - 2028. Those get tacked on top of mortgage and SALT deductions.

Temporary Senior Deduction: There is a new $6,000 per person deduction for persons aged 65 or older. This added deduction begins to phase-out at MAGI of $75,000 for single filers and $150,000 for married filing jointly. It is only available for tax years 2025 through 2028. It's a far cry from the campaign promise to "not tax Social Security", but it is some tax relief for a small set of middle class retirees.

What This Means: If you are 65+ (or will be soon), it may provide an opportunity to carefully plan some Roth conversions and/or adjust withdrawals from IRAs. Talk to your accountant regarding your specific situation if you normally pay tax on some of your Social Security checks.

Car Loan Interest Deduction: Something that disappeared from tax law 50 years ago. It has a lot of restrictions: $10,000 worth of interest. Must be a brand new purchase after 2024. Car must be assembled in the US. You need a 1098 tax form from your lender. Only available for 2025 through 2028. Phases out if income exceeds $100k ($200k if married filing jointly). N/A for leases. One positive: does NOT require you itemize other personal deductions, so available in addition to the standard deduction.

No Tax on Tips/Overtime: We'll follow up with a separate message on just these 2 topics. General idea: tips/overtime will still be taxed on your paychecks (if an employee), but then on your tax return, you can claim a deduction of up to $25,000 in tips and/or $12,500 in overtime (only the amount above normal rates, so the .5 of the 1.5x OT rate). Deductions do phase out for income > $150k ($300k married). NOTE: tip deduction IS available to self-employed individuals (talking to you hair-stylists), but it needs to be on a tax form (like 1099-K from your Merchant Services provider), so make sure your Point of Sale system has a line for tips and keep that form 1099-K you get in January.

What This Means: If you receive a substantial portion of your income from tips, talk to your tax preparer about whether or not you could adjust your withholding percentages/estimated tax payments. Or plan on filing early in 2026 as you likely will have a bigger refund than usual.

Charitable Deductions: Starting in 2026, there will be both a new $1,000 (or $2,000 married joint) above the line deduction for taxpayers that do not itemize, but also a 1/2% floor (first .5% of AGI that doesn't count) for those that DO itemize. So for higher earners: you may want to donate extra/early during 2025, but for those that do not itemize, holding off till January on gifts under $1000 could be better than giving during the holidays at year end.

Time-Sensitive Action Items

Before September 30, 2025:

• Complete electric vehicle purchases to qualify for credits
• Ensure delivery and registration before deadline
• Consider both new and used EV options

Before December 31, 2025:

• Complete home energy efficiency projects
• Install solar panels or energy storage systems
• Upgrade heating and cooling systems
• For those 65+: review income to determine if you'd like to convert or withdraw additional funds from IRAs for 2025.
• Review timing of charitable donations: 2025 vs 2026

Plan Ahead!

This is just a sampling of a few of the items in this huuge bill. We'll send additional messages regarding additional items taking effect for 2026 as well as those changes geared towards small businesses.

We'd be happy to set up a consult to discuss your situation specifically. Sending recent paystubs and/or estimates of income/expenses for 2025 ahead of said consult will be helpful for us to review and advise on your situation. Click the button below to book an appointment now.

Thanks!
Your Fox Tax Team