The Internal Revenue Service (IRS) has issued guidance for the 2025 tax season, introducing changes brought by the One Big Beautiful Bill (OBBB) signed by Donald Trump. One of the updates is that the standard deduction is raised to $15,750 for single taxpayers and $31,500 for married couples. Another change is the additional $6,000 deduction for those over 65, as long as income is below $75,000.
Federal taxes on tips, overtime, and car loan interest are also eliminated, and a credit of up to $1,700 is created for contributions to Scholarship Granting Organizations (SGOs) under Revenue Procedure 2026-6. In addition, the plan includes the opening of ‘Trump Accounts’ with $1,000 deposits for children born between 2025 and 2028, and a $6 billion donation from Michael Dell for child support. Despite these multiple federal tax changes, the IRS warns that states and cities like Washington DC may not follow these measures, forcing taxpayers to organize their W-2 forms, 1099s, and digital records in advance.
IRS’s updates for 2026
The implementation of the One Big Beautiful Bill (OBBB) law represents one of the most significant changes in the recent U.S. tax code. According to data provided by Colorado PERA, although many of these measures will reach their full effect in 2026, some are already applicable for the 2025 fiscal year. The increase in the standard deduction aims to simplify the process, making it possible for a larger portion of your income to be tax-exempt. This results in the following standard deduction:
- $15,750 for single individuals.
- $31,500 for married couples.
As for those over 65, the new law also offers additional financial relief, as long as their income does not exceed $75,000 per year; they will be able to deduct an extra $6,000 from their taxable income between 2025 and 2028.
Local decoupling and exemptions
Despite the multiple changes expected to fully take effect in 2026 (although some will apply for the 2025 fiscal year), the IRS has warned that some cities, states, and districts, such as Washington DC, will not adopt these new measures. This means that even if the federal government does not collect certain taxes, your state or area of residence may still do so. This reflects the decisions of local governments to fund other programs, such as the local Child Tax Credit (CTC). The agency, together with the Treasury Department, is working against the clock to clarify federal exemptions versus local taxes, as well as their impact on the wallets of those affected.
Investment in the Future and Education
The law also introduces incentives related to education and social investment. Through Revenue Procedure 2026-6, it is made easier for all states and Washington DC to participate in a $1,700 tax credit program starting January 1, 2027. This credit is non-refundable and is granted for cash contributions to Scholarship Granting Organizations (SGOs) that assist elementary and secondary students from low- and middle-income families. To qualify, the SGO must appear on the official list of the corresponding state.
Another measure includes the Trump Accounts, in which the government will deposit $1,000 for babies born now (between 2025 and 2028). In addition to the initial deposit, another $250 is expected for many children thanks to the recent $6 billion donation made by Michael Dell and Susan Dell, founders of Dell Technologies.With so many changes on the horizon, the IRS urges citizens to organize and plan their financial records in December, including bank details, W-2 forms, 1099 forms, and documents that confirm digital asset transactions.
Frequently asked questions
What is the new standard deduction?
It rises to $15,750 (singles) and $31,500 (married). Seniors over 65 with low incomes can subtract an additional $6,000.
Are taxes on tips and overtime eliminated?
At the federal level, yes, but cities like Washington DC can ignore this rule and continue charging local taxes.
What are “Trump Accounts”?
Investment accounts with an initial government deposit of $1,000 for children born between 2025 and 2028.
Who receives Michael Dell’s extra $250?
Children up to 10 years old who do not qualify for the $1,000 federal benefit, as long as they live in areas with low or medium income.
What is the $1,700 credit?
It is a benefit for donating to scholarship organizations (SGO) for low-income families, available starting January 1, 2027.