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.
Here are some key changes that could impact your wallet:
Higher SALT deduction: 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.
Read more here.
A new deduction for seniors: 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.
Read more here.
Trump accounts: 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.
Read more here.
Changes to 529 plans: 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.
Read more here.
HSAs get some tweaks: 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.
Read more here.
Small expansion of the child tax credit: 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.
Read more here.
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.
Molly Moorhead edits personal finance news for Yahoo Finance.
Sign up for the Mind Your Money newsletter
Click here for the latest personal finance news to help you with investing, paying off debt, buying a home, retirement, and more
Read the latest financial and business news from Yahoo Finance
