What is a good business credit score? Everything you need to know

Congress signed the One Big Beautiful Bill Act into law on July 4, 2025, and the changes it introduced to deductions and credits are substantial. New tax benefits were added, others were expanded, and a handful were repealed. 

Whether you’re a tipped worker or one of the 72% of business owners in our Entrepreneurship Trends Report who are looking to invest in growth, understanding the tax changes for 2025 could help you hold on to more of your income. 

This guide covers everything you need to know about the 2025 tax changes and how the updates will affect your tax bill. 

The new tax rules in 2025

New temporary deductions for workers and families

Key permanent provisions for businesses and investments

Other notable tax changes

Find peace of mind come tax time

What are the new tax rules in 2025?

The Trump tax plan of 2025 has resulted in significant tax reform. From permanent extensions of the Tax Cuts and Jobs Act (TCJA) provisions to the introduction of new temporary tax benefits, the One Big Beautiful Bill Act (OBBBA) has brought about significant changes. 

Some of the tax changes for 2025 are permanent, while others are only temporary provisions. Let’s start our exploration of the tax updates by reviewing the permanent changes made to standard deductions. 

Standard deductions and personal exemptions

When the TJCA was signed into law in 2017, it nearly doubled the standard deduction but also cut personal exemptions. The result was that more than 90% of Americans were filing using the standard deduction by 2020. 

These features from the TCJA were carried forward with the signing of the OBBBA. Standard deductions will remain at the higher level and be adjusted for inflation every year.

For 2025, the deduction amounts are: 

Like the TCJA, the new bill has completely eliminated personal exemptions. However, seniors have gained access to a new deduction boost. Those 65 and older may now qualify for a $6,000 per person bonus deduction and the existing extra deduction for seniors. 

Here’s how the deductions look for 2025:

* Married example assumes both spouses are 65 or older

This new senior deduction will begin to phase out with a Modified Adjusted Gross Income (MAGI) above $75,000 for single filers and $150,000 when married filing jointly.

New temporary deductions for workers and families

In addition to extending and expanding the deductions introduced initially in the TCJA, the OBBBA introduced some new provisions aimed at helping the average worker and their families. These temporary tax deductions are retroactive to January 1, 2025.

How the "no tax on tips" provision works

With the new bill, up to $25,000 in tip income can now be excluded from federal income taxes for the more than 4 million estimated tipped workers. 

This above-the-line deduction applies to both traditional employees and self-employed individuals. It is also available when taking the standard deduction or when itemizing your deductions. 

However, there are four strict limitations for the new no tax on tips provision:

1. You have to work in an occupation designated as regularly receiving tips
2. All tips must be voluntary to qualify (auto gratuities and service charges are excluded)
3. You need to have a work-eligible Social Security number
4. If married, you have to file jointly

Additionally, the new deduction does have income limitations, with phaseout starting at a MAGI of $150,000 for single filers and $300,000 for married filing jointly.

Tips under this new provision are only exempt from federal income taxes. Social Security, Medicare, and state/local taxes will still be subject to these taxes. Paying these FICA taxes when self-employed will require the accurate calculation of quarterly payments.

How the "no tax on overtime" provision works

Another major provision of the OBBBA is the no tax on overtime deduction. Both employees and self-employed individuals may now deduct up to $12,500 ($25,000 for joint filers) of overtime pay from their taxable income. This applies to the premium part of the overtime pay, required by the Fair Labor Standards Act (FLSA). 

For instance, if your regular pay is $20/hour, and your overtime rate is $30/hour, then the deductible amount is the extra $10/hour. 

In 2025, this qualified overtime pay will still be fully taxed, with no required changes to withholding or payroll taxes for employers. However, when filing a return, employees and contractors will be able to deduct overtime premiums from their taxable pay. This could put you in one of the lower tax brackets, potentially decreasing your tax bill and increasing your refund. 

To qualify for the deduction, individuals must be paid on a nonexempt hourly or salaried basis and eligible for overtime under FLSA guidelines. They must also have a work-eligible Social Security number. 

In addition to the $12,500 max, the deduction will begin phasing out at: 

• $150,000 MAGI for single filers
• $300,000 MAGI for married couples

How does the car loan interest deduction work?

If you are planning to buy a new car soon, you may be able to get a tax break. The No Tax on Car Loan Interest deduction allows you to deduct interest paid on a new car loan from your taxable income. 

However, to qualify, there are a few key stipulations:

1. The vehicle is new
2. Assembly on the vehicle was completed in the United States
3. The loan was originated after December 31, 2024 (refinance loans do count)
4. Vehicle is for personal use
5. Meets the IRS definitions for a qualified vehicle

The IRS defines eligible vehicles as “a car, minivan, van, SUV, pick-up truck or motorcycle, with a gross vehicle weight rating of less than 14,000 pounds, and that has undergone final assembly in the United States.”

Unfortunately, these rules mean that interest paid on loans for used or leased vehicles is not deductible. 

The amount of deductible interest maxes out at $10,000 annually, and the deduction begins phasing out at $100,000 MAGI for single filers and $200,000 MAGI for joint filers.

Key permanent provisions for businesses and investments

It’s not just workers that will benefit from the new tax provisions; employers and the self-employed will also see significant benefits. This is great news for the 34% of business owners in our Entrepreneurship in 2025 Trends Report who worry about the impact small business taxes will have on their potential growth.

Research and development (R&D) expensing 

To encourage business growth, starting in 2025, research and development (R&D) costs will be fully deductible in the year they were incurred. 

Prior to this change, R&D costs had to be capitalized and amortized over five years (15 years for nondomestic R&D expenses). This accounting method update means domestic R&D costs can now be immediately expensed. However, nondomestic costs will still need to follow the 15-year amortization schedule. 

But what about R&D costs that you have already partially amortized? Well, the IRS gives you options depending on the size of your business. 

Small businesses that grossed less than $31 million/year in the last three years have two options:

1. File amended returns for 2022, 2023, and 2024 to claim the full costs in the year incurred. 
2. Take the remaining amortization in 2025 or split it between 2025 and 2026.

The options available for companies that do not qualify as small businesses are: 

1. Deduct remaining unamortized costs in 2025
2. Split costs between 2025 and 2026 filings

With R&D expenses increasing an average of 7.5% a year, this accounting switch can save businesses a significant chunk of change. 

Bonus depreciation made permanent

Another provision made permanent to fuel business growth, bonus depreciation allows companies to fully deduct qualified capital expenses in the purchase year. Previously, businesses were required to spread out the deduction over the assets' usable life. 

This change means that capital investments like new machinery, software, etc., can be expensed in the year they were purchased. 

Additionally, a new category for real estate was offered. Now, property used for qualified production activity (e.g., manufacturing) can be expensed in the year of purchase. 

With 45% of business owners surveyed in our QuickBooks Small Business Insights expressing concerns about cash flow problems, bonus depreciation may be able to help.

Section 199A qualified business income deduction  

Introduced in the TCJA, the qualified business income (QBI) deduction lets business owners and self-employed individuals deduct up to 20% of their business income from taxable income. 

For instance, if you generate $100,000 in business income this year, you would be able to deduct $20,000 from your taxable income for 2025. This deduction, which was formerly temporary, is now permanent. 

Thanks to the OBBBA, the Section 199A deduction has been made permanent, and its limitations have been adjusted. While the phase-in limits for the deduction remain at the original levels for the 2025 tax year, they are set to expand significantly beginning in 2026, allowing more businesses to retain partial deductions before the deduction fully phases out. 

The phase-in ranges expand as follows, effective for tax years beginning after December 31, 2025:

• For single filers, the phase-in range expands from $50,000 to $75,000.
• For married joint filers, the phase-in range expands from $100,000 to $150,000.

Another new feature added was a minimum QBI deduction. For businesses and self-employed individuals who earn at least $1,000 in qualified business income, there is now a minimum deduction of $400. 

The income threshold ($197,300 single and $394,600 married) and minimum deduction values will now be adjusted annually for inflation.

Other notable tax changes for 2025/26

In addition to the new deductions and revised tax provisions for businesses, several other changes were made to existing credits and tax exemptions. Let’s review the most notable changes. 

Clean energy credits repealed

The OBBBA made several changes to the clean energy credits, with many benefits being repealed, modified, or phased out. Here are the key updates: 

• The energy-efficient home improvement credit is ending with expenses needing to occur before Dec. 31, 2025. 
• The residential clean energy credit was repealed, with 2025 (2026 tax filing) being the last year to take the credit. 
• Clean vehicle credits are being phased out. To be eligible for this credit, consumers must purchase by September 30, 2025. 
• The clean electricity investment and production credits for wind and solar will not be available to property placed in service after December 31, 2027.
• The clean fuel production credit was extended to 2029
• A list of prohibited foreign entities was added to many of these credits and will take effect starting in 2026.

Considering these changes, those planning on investing in clean energy improvements may want to speed up their timeline. 

Changes to child and family tax benefits

For those with children, the OBBBA expanded and added many child-related tax benefits. 

Child Tax Credit (CTC)

The big one is the Child Tax Credit (CTC). The credit amount was increased to $2,200 per child and will now be adjusted annually for inflation. And the credit will now be refundable up to $1,700. 

Credit for Other Dependents

The Credit for Other Dependents, which was set to expire, has also been made permanent with OBBBA, allowing families to receive a $500 credit for dependents who don’t qualify for the CTC. 

Child and Dependent Care Credit

Changes were also made to the Child and Dependent Care Credit, with the maximum credit rate being raised to 50% of expenses (up from 35%). And the phase-in ranges have been generously expanded. For instance, joint filers with an AGI up to $150,000 now qualify for the 35% rate. Previously, this was only available to joint filers with an AGI of $43,000 or less. 

Adoption Credit

A change was also made to the Adoption Credit, converting it to a partially refundable credit (it was previously nonrefundable). Those claiming the credit can now get up to $5,000 back even when their tax liability is zero. 

Trump Savings Accounts

Another significant change was the introduction of the Trump Savings Accounts. These new accounts will work like traditional IRAs, but are only for children under 18. Parents will be able to contribute up to $5,000 a year (adjusted for inflation), and the government will add a one-time $1,000 bonus for children born between 2025 and 2028. 

Estate and gift taxes affected

Before the OBBBA, the increased values for the federal estate and gift tax exemptions were set to sunset. However, the new bill made the increased values permanent and set them to adjust every year for inflation. Here’s a quick look at the new exemption values.

Note: These same changes and values apply to the generation-skipping transfer tax exemption. The annual gift tax exclusion was not modified with these new provisions.

Find peace of mind come tax time

Navigating tax filing with the new tax changes in 2025 might seem daunting, but it doesn’t have to be. From estimating quarterly taxes using the new deductions to expensing R&D costs in a timely fashion, a robust accounting platform can help. 

Organizing expenses, tracking invoices, and monitoring your cash flow are all made simple with QuickBooks’ tools and resources. Plus, with all the IRS tax changes in 2025, our deduction and bookkeeping tools can help ensure you are always getting the maximum tax benefits. Learn more about managing your business with QuickBooks accounting software.