8 min read
Spruce
New tax laws for 2025: Key changes from the Big Bill and more
8 min read
Spruce
At a glance
- The One Big Beautiful Bill Act ushered in several updates to taxes for 2025 and beyond, including new and expanded credits and deductions, giving taxpayers new options to maximize refunds.
- New rules for reporting digital income mean that taxpayers may get Form 1099-DA for their crypto or digital asset transactions from the 2025 tax year.
- Spruce has several ways to help you make the most of your tax refund.
Let’s be real—taxes aren’t something most people want to think about until they absolutely have to. In a normal year, there are a few tax law changes you’d want to take note of, but 2025 saw sweeping changes across the tax code. These changes could not only impact how you file in 2026, but they could affect your refund.
From new rules on overtime and tips to changes in crypto reporting and child-related credits, there’s a lot going on at the moment. And we’re here to cover it all.
The goal here isn’t to overwhelm you—it’s to break things down so you know what matters and how 2025 tax changes might affect your bottom line.
Plus, we’ll share all the ways that Spruce can help make the most of your refund!
What are the main 2025 federal tax law changes?
The One Big Beautiful Bill Act (OBBBA) is at the center of these updates, along with new IRS tax reporting rules for digital income.
Hang tight as we take a closer look at the biggest tax changes for 2025:
Larger standard deduction and tax brackets are now permanent
Before OBBBA, a few important elements of the tax code were set to expire: the larger standard deduction and the seven tax bracket tiers (10%, 12%, 22%, 24%, 32%, 35%, and 37%.). These elements are now locked in, so this part of filing should feel familiar.
Of course, the bracket ranges still shift upward each year for inflation. This means if your income stayed roughly the same, your overall tax rate (effective rate) could dip a little.
No tax on tips
Work at a job where tips are life? You could benefit from this new rule. While people talked about this as the “no tax on tips” provision, it’s really just a portion of your qualified tip income that’s sheltered from income tax.
Specifically, you can deduct up to $25,000 of qualified tips from income taxes per return when you file your 2025 taxes. The rule covers a long list of tipped workers, think baristas, bar tenders, make-up artists, manicurists and more.
But take note of the fine print: The deduction starts to phase‑out (be reduced) for higher incomes and your tips are still subject to FICA taxes (Social Security and Medicare). Plus, this deduction is not available for those selecting Married Filing Separately as their filing status.
No tax on overtime pay
Put in extra hours? Here’s a tax perk you’ll want to know about. But first, let’s clarify—not all of your overtime is tax free—that’s just how some people refer to this rule.
Here are the details you need to know: You can deduct up to $12,500 in overtime pay (or $25,000 if married filing jointly) from federal income taxes for 2025. So, if you worked OT for time and a half, it’s the “half” that can counts towards this deduction. Another nitty gritty detail to take note of: the overtime must qualify under the Fari Labor Standards Act which means not everyone that earns overtime wages will qualify for the deduction.
What else? This deduction starts to phase out for higher earners and FICA taxes (Social Security and Medicare) still apply to your OT income. And those filing as Married Filing Separately do not qualify for this deduction.
1099‑K threshold change
If you earn money through third-party payment apps or online marketplaces, this change matters to you. The threshold that triggers when platforms need to send Form 1099‑K increased. For 2025 the new amount is $20,000 and 200 transactions (up from $5,000 last year). This means fewer people will get the form.
But here’s the catch: the income is still taxable even if you don’t receive Form 1099‑K. You need to track your side hustle or resale income and report it accurately. Your best bet is to keep digital statements and receipts handy—underreporting can lead to IRS headaches and penalties later.
Child‑related credit changes & investment accounts
If you have kids or plan to soon, there are several 2025 tax changes to know about.
- Child Tax Credit – This long-time credit has been bumped up to a $2,200 max (last year it was $2,000) and the refundable portions remain for qualifying families. Going forward, this amount will be adjusted for inflation.
- Adoption Tax Credit – This credit is now worth up to $17,280 per child and up to $5,000 of this amount is refundable. If you have a higher income, the amount of the credit will start to phase out.
- 529 Plans – Starting with 2025 taxes, the new rules expand what counts as qualified expenses for both K-12 and post-secondary costs.
- Trump accounts – As part of your 2025 tax return, you can set up an account for children under 18. Families and employers will be able to contribute annually once the accounts start accepting funds on July 4, 2026. The total annual contribution limit is $5,000 with $2,500 of the total allowed from employer contributions. Lastly, those with newborns in 2025 will receive a one-time $1,000 contribution from the government.
Find out more about these new tax rules for families.
Car loan interest deduction
If you bought a new American-made car with a loan after December 31, 2024, you may qualify for this deduction. This new tax deduction could allow you to deduct up to $10,000 in interest paid if the car’s final assembly was in the U.S. You’ll need your VIN and loan paperwork to claim it.
It’s also worth noting that this is a below-the-line deduction, meaning you can claim it even if you take the standard duction and do not itemize.
Crypto & digital assets reporting (Form 1099‑DA)
If you traded crypto or digital assets in 2025, be on the lookout for a new tax form. Brokers now issue Form 1099‑DA for most transactions—there’s no minimum threshold. Even if you don’t get a form, you must report all taxable crypto activity, including sales, swaps, and payments.
And heads up! Cost basis isn’t required for the first year, so you may need to dig out your records of your transactions to avoid paying too much in taxes.
Other 2025 tax law changes
The new tax laws from 2025’s OBBBA brought so many changes, and each change involves lots of nitty gritty details. There are a few we didn’t dig into here, but we’ve got you covered on the H&R Block site if you’d like to learn more about the new limit for State and Local Tax (SALT) deduction and new $6,000 deduction for seniors.
How tax year 2025 changes could affect your refund
Tax law changes in 2025 (or any year, really) can open the door to new deductions and credits, lowering the amount of tax you owe. Combine that with life changes —like a new job, marriage, or growing family— or other factors that affect your refund and your refund could look different compared to last year.
It really boils down to your specific life situation each year. So, for example, if your work didn’t include overtime, but you did receive tips, then only the tip deduction would apply to you.
Get help filing your taxes with H&R Block
Navigating these changes alone can feel overwhelming. That’s where H&R Block’s expertise comes in. Whether you want to take control and file taxes online on your own, or file with a tax pro, we’ll help you get your maximum refund.*
How Spruce can help you make the most of your tax refund
Getting back the most you can on taxes is important. But don’t just stop there. Check out these three ways that Spruce can maximize your refund experience.
- Early tax refund – Get your federal tax refund up to 5 days early when you deposit it into your Spruce account7—because waiting longer is overrated. Imagine having that money early to pay bills or start saving without missing a beat. And, knowing the IRS is phasing out paper checks, it it’s a relief to know you won’t need to stress about the expected delays for mailed refunds.
- Smart tax refund – Spruce helps you make a smart move with your refund by suggesting how much to save, so you can kick-start or bump up your savings.
- Watch your savings grow – Every dollar you tuck in Spruce savings works hard with 3.50% APY—letting you make money when you save money. Add Round Up to the mix, and those spare cents from everyday purchases start stacking up your savings.
Start an account with Spruce today
From setting saving goals to making budgeting painless, Spruce has many features that can help you manage money and reach your financial goals. Plus, there are no monthly or sign-up fees and no minimum balance requirements with Spruce, so you can keep even more money in your pocket.
This information provided for general educational purposes only. It is not intended as specific financial planning advice as everyone’s financial situation is different.
*All tax situations are different. Not everyone gets a refund. See hrblock.com/guarantees for complete details.
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