On July 12, 2025, President Trump signed the “Great and Beautiful Bill” (OBBBA) on the National Day of 2025, which is like a tax reform gift package filled with tax benefits but also hidden challenges. From tax exemptions on tips to deductions for mortgage and car loans, this new policy wave starting from 2025 will directly impact your wallet!
Senior accountant Wang Rongmei gave an exclusive interview to Dajiyuan to help everyone understand the new policy changes, who can save money, and how to save the most easily.
From 2025 to 2028, federal income tax exemptions for tips and overtime pay are granted, saving up to $25,000 for taxpayers with an annual income below $150,000 for individuals or $300,000 for couples, expiring in 2028. The standard deduction has also significantly increased to $15,750 for individuals and $31,500 for couples. Additionally, even without itemizing deductions, you can still claim additional deductions for charitable donations ($1,000 for individuals and $2,000 for couples), making tax filing simple and cost-effective.
Starting from 2026, the Child Tax Credit (CTC) has been increased to $2,200 per child, with $1,700 refundable, extending until 2028 and adjusted for inflation. However, children who are non-citizens and whose parents lack legal status will not qualify, affecting about 2.6 million children. American babies born between 2025 and 2028 are eligible for a $1,000 “Trump Savings” starter fund, with parents allowed to invest an additional $5,000 annually with tax-deferred investment earnings, helping to save for their children’s future education.
The cap on State and Local Tax (SALT) deductions has surged from $10,000 to $40,000 and will be adjusted for inflation starting in 2026. However, for those earning over $500,000 (individuals $250,000), the deduction amount gradually decreases to $10,000 (individuals $5,000), expiring in 2029.
The deduction for mortgage interest remains with a principal cap of $750,000, applicable to homes purchased after December 16, 2016, for primary or second homes. Buying American-made cars can also save money as the maximum deduction for car loan interest is $10,000, yet for those earning over $100,000 (couples $200,000), the deduction will shrink, expiring in 2028. The Electric Vehicle Tax Credit ($7,500 for new cars, $4,000 for used cars) will end on September 30, 2025, so act fast if you are considering purchasing one.
Elders with an annual income below $75,000 (couples $150,000) can claim an additional $6,000 deduction until 2028, helping retirees save on taxes.
Wang Rongmei reminds us that this wave of tax reforms will impact different individuals differently.
Low-income individuals can benefit from increased standard deductions, resulting in lower tax payments. However, certain considerations such as the Supplemental Nutrition Assistance Program (SNAP) requiring 80 hours of work per month could increase living pressures for approximately 4.7 million people, including the homeless, elderly, and veterans exempt from the program.
The Congressional Budget Office (CBO) estimates that out of 71 million Medicaid beneficiaries, 11.8 million people may lose coverage. Among the 40 million SNAP beneficiaries, 3 million may no longer qualify.
Middle-class families opting for standard deductions can save both money and hassle. However, those who rely on itemized deductions may face higher tax payments due to the elimination of personal exemptions, moving expenses, and disaster loss deductions.
High-income earners can potentially save $2,000 to $5,000 yearly thanks to the unchanged 37% highest tax rate and relaxed SALT limits. Nevertheless, anti-tax evasion measures have made it tougher for offshore companies and capital gains to avoid taxes, so tax burdens may not necessarily decrease. The CBO estimates that the wealthiest households on average save $12,000, while the poorest households could pay an additional $1,600 due to reduced benefits.
Immigrants and visa holders should take note that DACA recipients, along with H-1B, L-1, F-1 visa holders, are unable to purchase subsidized insurance through the Affordable Care Act (ACA), resulting in reduced medical coverage. Tax residents have the option of choosing standard or itemized deductions, while non-residents can only itemize. The pressure on student loan borrowers is also evident, with the maximum lifetime limit for graduate loans reduced to $100,000 and $200,000 for professional degrees, offering fewer repayment options.
For friends residing in high-tax states like California, consider itemizing deductions to maximize SALT utilization; individuals with moderate to low incomes may find standard deductions the easiest route to tax savings.
At the beginning of 2025, remember to update your W-4 form, particularly for self-employed individuals who should calculate estimated tax payments to avoid penalties.
Families with children should remember to apply for the Child Tax Credit and low-income tax refunds, ensuring that their children have citizenship and social security numbers, while non-resident parents must have an Individual Taxpayer Identification Number (ITIN).
Interested in purchasing an electric vehicle? Act before September 30, 2025, to benefit from the $7,500 (new cars) or $4,000 (used cars) tax credit.
Wang Rongmei emphasizes that the “Great and Beautiful Bill” brings many tax benefits, yet welfare cuts and immigration restrictions may pose challenges for some individuals.
The tax seasons of 2025 and 2026 present various changes, consulting a professional accountant can provide peace of mind and reassurance. By timing your actions correctly and planning strategically, taxpayers can save money and reduce stress during this wave of tax reforms!
Wang Rongmei Accountancy Firm, established by senior accountant Wang Rongmei (CPA, MBA, MST), has been serving the Bay Area for 30 years, providing professional tax and accounting services to help clients save money effortlessly.
Contact Information:
Phone: (408) 998-1688
Email: [email protected]
Office Hours: Monday to Friday 8:30 AM – 5:30 PM PST
Address: 2050 Concourse Dr. #34, San Jose, CA 95131
Website: https://wangaccountancy.com/