A new tax law, signed on July 4, is bringing several important changes that could affect how much you save—or owe—starting in 2025. From raising the cap on state and local tax deductions to offering new savings accounts for babies and giving seniors a bigger standard deduction, the law includes a mix of updates aimed at families, retirees, and working taxpayers. Whether you own a home, have kids, or are planning for retirement, these changes are worth paying attention to.

State and Local Tax Deduction Limit Quadrupled

Homeowners in states with steep property taxes stand to benefit the most from a major revision to the SALT (state and local tax) deduction. The cap, which has restricted deductions to $10,000 since 2018, is now raised to $40,000. For residents of states like California, New Jersey, and New York, this change could mean a return to itemizing deductions—unlocking thousands in potential tax relief. For households that felt penalized under the previous cap, this is a major reversal.

New Standard Deduction Add-On for Seniors

Americans over the age of 65 with moderate incomes will see a $6,000 increase in their standard deduction starting in 2025. However, this boost will taper off for seniors earning above $75,000—or $150,000 for couples—making it narrowly targeted. While the intent is to ease tax burdens for older taxpayers, the practical impact is limited for retirees who already fall below the federal tax threshold.

Government-Funded Accounts for Newborns

Children born between 2025 and 2028 will automatically receive a $1,000 deposit into new investment accounts backed by federal funds. Though designed to promote financial literacy and long-term saving from birth, these accounts have drawn mixed reactions from financial professionals. Critics point to limited investment flexibility compared to traditional custodial IRAs or 529 plans, suggesting the new structure may favor optics over efficacy.

Expanded 529 Education Plan Use

The 529 savings plan, long used by parents to cover college costs, now covers a far wider range of K-12 expenses. Annual withdrawals of up to $20,000 are now allowed—not just for tuition, but also for tutoring, testing fees, educational therapy for children with disabilities, and even certain credentialing exams. This expansion turns the 529 plan into a more flexible financial tool for families navigating the rising cost of pre-college education.

Updates to Health Savings Accounts (HSAs)

HSAs have been updated to meet the realities of modern healthcare. Americans can now use HSA funds to cover membership-based concierge medical services, a growing model in private healthcare. The law also expands telehealth eligibility and allows more insurance plans to be paired with HSAs. These revisions position HSAs as more versatile vehicles—not just for routine expenses, but for tailored and tech-driven care as well.

Child Tax Credit Adjustments

Parents will see a modest increase in the child tax credit. Starting in 2025, qualifying households can receive up to $2,200 per child under the age of 17—an incremental bump of $200. While this is far below the expanded pandemic-era credits that temporarily slashed child poverty, it does slightly ease the cost of raising children. In addition, the annual limit for pretax childcare contributions through flexible spending accounts has been increased from $5,000 to $7,500.

Permanent Lower Tax Rates and Standard Deductions

One of the most significant long-term shifts is the solidification of the 2017-era tax brackets. The existing marginal rates—ranging from 10% to 37%—are now embedded in the tax code permanently. Coupled with fixed standard deductions of $15,000 for individuals and $30,000 for married couples, this move removes the sunset clause and provides long-term predictability for taxpayers.

This newly enacted law represents a broad overhaul of the tax system, with implications for virtually every taxpayer. Whether you’re a parent, retiree, or homeowner, these changes could affect how you save, spend, and file taxes in the coming years.

Also Read: Millions of U.S. Seniors Hit With 50% Social Security Cuts as Government Reclaims Overpaid Benefits

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