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- How the big, new tax law affects your money</p>
<p>Molly MoorheadJuly 8, 2025 at 11:46 PM</p>
<p>The sweeping policy bill signed by President Trump on July 4 ushers in an array of tax provisions that will affect virtually every American's finances. It extends lower tax rates that skew toward wealthier taxpayers while introducing new deductions and benefits for middle-class families and seniors.</p>
<p>Here are some key changes that could impact your wallet:</p>
<p>Higher SALT deduction</p>
<p>The new law raises the cap on state and local tax deductions from $10,000 to $40,000. A boosted SALT cap will make it more advantageous for many homeowners — especially those living in high-tax states like New York, New Jersey, and California — to itemize their taxes again and could translate to thousands of dollars in annual tax savings for those homeowners, tax professionals told Yahoo Finance.</p>
<p>Read more: Who benefits from the new SALT cap?</p>
<p>New deductions for homeowners</p>
<p>The new law permanently extends a $750,000 limit on the amount of a mortgage eligible for the mortgage interest deduction and reinstates a provision allowing mortgage insurance premiums, which millions of homeowners pay annually, to be deducted as interest. The state and local tax deduction, known as SALT, also quadrupled, which can be particularly helpful for owners in states with high property taxes.</p>
<p>Read more: Why homeowners might want to itemize this year</p>
<p>A new deduction for seniors</p>
<p>Older, middle-income Americans get a $6,000 boost to their standard deduction from 2025 through 2028. It starts phasing out for those who earn over $75,000 ($150,000 for couples). The catch: The poorest seniors already don't pay taxes on their Social Security benefits, so this deduction won't help them.</p>
<p>Read more: Additional $6,000 deduction for seniors</p>
<p>'No tax on tips'</p>
<p>The catchphrase "no tax on tips" has become a key highlight of the president's signature tax and spending law. Many workers who have historically received tips will be able to deduct up to $25,000 in tips from their taxable income through 2028. The deduction begins phasing out at incomes above $150,000, and workers will still have to pay federal taxes on tips beyond the $25,000 cap.</p>
<p>Read more: What does "no tax on tips" really mean?</p>
<p>Deduction for business owners and the self-employed</p>
<p>Part of the 2017 Tax Cuts and Jobs Act (TCJA), the QBI deduction allows eligible self-employed taxpayers and small business owners to deduct up to 20% of qualifying business income on their federal income taxes. President Trump's tax bill made those provisions permanent. This deduction reduces your taxable business income and can result in a lower tax burden or a larger refund, depending on your financial situation.</p>
<p>Trump accounts</p>
<p>Bearing the name of the president, these new, tax-advantaged investment accounts are prefunded with $1,000 for each child born from the beginning of 2025 through the end of 2028. Kids born before this year are eligible for the IRA-style accounts but not the $1,000 seed money. Backers say the accounts will get kids started on saving and investing from an early age, but financial planners and experts say the particulars of the accounts make them less attractive than other savings vehicles.</p>
<p>Read more: How Trump accounts work — and why financial experts don't love them</p>
<p>Changes to 529 plans</p>
<p>The new legislation significantly expands how tax-advantaged 529 plans can be used for K-12 education costs. Under Trump's 2017 tax bill, parents can withdraw up to $10,000 each year to pay for K-12 tuition. The 2025 law allows up to $20,000 in annual withdrawals while widening the definition of "qualified expenses" in K-12 to include nontuition categories like books, tutoring, standardized testing fees, educational therapies for children with disabilities, and more. Certain professional credential fees will also now be covered as qualified expenses.</p>
<p>Read more: Trump bill brings big changes to 529 plans</p>
<p>HSAs get some tweaks</p>
<p>You can now use HSA dollars to pay for concierge medical services — those are bespoke health plans that charge a membership fee for easy access to doctors and care. The law also expands the category of health insurance plans that can offer HSAs, and perhaps most significantly, it allows HSA funds to be used for telehealth.</p>
<p>Read more: HSA changes in Trump's tax bill</p>
<p>Small expansion of the child tax credit</p>
<p>Taxpayers who make under $200,000 as a single filer or $400,000 filing jointly can qualify for a partially refundable credit of up to $2,200 for each child under 17 they claim as a dependent. That's a $200 bump from the current credit amount, but short of the $3,600 enacted during the pandemic, which reduced child poverty to record lows. The new law also increases the annual limit to contribute pretax dollars to a flexible spending account for childcare to $7,500 from $5,000.</p>
<p>Read more: Child tax credit gets a boost</p>
<p>Adoption tax credit becomes partially refundable</p>
<p>To help cover qualified expenses like adoption and attorney fees this tax year, adoptive parents can claim a maximum credit of $17,280 per child, with $5,000 of that credit amount being refundable thanks to the new tax law. The credit, which applies per adoption rather than per year, is phased out if families make more than $259,190 and less than $299,190.</p>
<p>The credit becoming partially refundable means "that lower income families are going to have the same support that middle- and upper-middle income families are receiving once they complete an adoption," Ryan Hanlon, president and CEO of the National Council For Adoption, told Yahoo Finance.</p>
<p>The bill — now a law — makes other existing provisions permanent, notably the lower tax rates established by Trump's 2017 tax cuts. Those marginal rates — 10%, 12%, 22%, 24%, 32%, 35%, and 37% — along with the new, higher standard deduction amounts of $15,000 for single filers and $30,000 for married couples are now permanent.</p>
<p>Molly Moorhead edits personal finance news for Yahoo Finance.</p>
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