2025 Trump Tax Changes Explained

September 5th, 2025

When filing their 2025 federal taxes (in early 2026), Ohio residents will need to take several changes into account from last year. President Trump signed the One Big Beautiful Bill Act into law on July 4th, 2025, and it contains major changes for tax filers, including new deductions on income and an expansion of the child tax credit. Read on to learn how to navigate tax changes under Trump.

The Tip Income Deduction

Ohio has a large service industry, and many of those jobs encourage tipping so the new tip income deduction will have a larger than average impact upon Ohioans.

This new deduction from your overall federal taxes is for up to $25,000 in tips received in 2025. These can be in the form of cash tips, tips put on a credit or debit card, tips received on an app like Uber or DoorDash, and tips from tip pools (such as when a restaurant staff divides tips evenly). These tips have to be itemized, of course, so saving proper documentation is an absolute must for Ohioans looking to take advantage of this Trump tax change.

There are a few exceptions and limitations to keep in mind:

  • Tips beyond $25,000 for the year are not deductible.
  • Some income that mimics tips does not count as tips, such as an automatically added 20% gratuity for large restaurant parties.
  • The deduction phases out above salaries of $150,000 AGI.
  • Some industries cannot deduct their tips, most notably musicians, dancers, and anyone else in the performing arts.

The Overtime Pay Deduction

Another change in President Trump's tax bill is a deduction for overtime pay. If an Ohio resident works more than 40 hours in a week, any higher rate they get for overtime pay can be deducted from their 2025 federal tax bill.

Note that it's not all pay beyond 40 hours; it's the extra pay, often called the "premium" portion. This means that if an Ohio resident's usual rate was $20 an hour, and they worked for 50 hours a week, they would typically be paid $30 an hour for hours 41-50. The extra $10 an hour is the premium portion of their pay, and it's fully tax-deductible for up to $12,500 for those filing singly and $25,000 for those filing jointly. This applies to FLSA-qualifying overtime only, which means that those working comp time wouldn't get this deduction, nor would those getting overtime from a state law, or those getting beyond the "time and a half" typical overtime pay.

The Senior Deduction

Another change from the 2025 Trump tax bill is a $6,000 federal tax bill deduction for those taxpayers aged 65 and older. This one is more straightforward than the ones discussed above, and there are only a few exceptions to keep in mind:

  • The deduction begins to phase out after $75,000 in income for single filers and $150,000 for joint filers (calculated using AGI).
  • For joint filers, both filers must meet all qualifications.
  • Social security and pension income do count towards AGI.

The Car Loan Interest Deduction

This deductible from President Trump's 2025 tax changes allows a taxpayer to deduct up to $10,000 from their car interest payments in 2025 from their federal taxes. There is a limitation to it that’s important to understand for taxpayers in Ohio and everywhere: the car must have been assembled in the U.S. This rule exists to encourage U.S. manufacturing, but it does mean that not every car interest payment is deductible for tax year 2025.

The Child Tax Credit Expansion

The Child Tax Credit expansion is, unlike the other 2025 Trump tax changes on this list, not a deductible but a credit, and not a new rule but an expansion of an old one. Being a credit, it directly subtracts from the tax bill owed, as opposed to being deducted from your taxable income. The Child Tax Credit was introduced in 1997, and has since seen a few increases in its size from its original 400. This latest one increases it from a $2,000 credit to a 2,200 credit.

How Should Taxpayers Adapt to These Tax Changes?

One of the best things about these 2025 Trump tax changes is that while it would be challenging for all of them to apply to any one taxpayer, they are applicable both to those itemizing their taxes and to those taking the standard deduction. This means that whether their filing is the simple standard deduction or a more complex itemized deduction, many taxpayers can find at least one of these beneficial changes to improve their tax bill outlook.

The Bottom Line

The new 2025 Trump tax law changes are helpful to many taxpayers, and the number of changes and the exceptions and limitations involved do not have to be an overwhelming amount of complexity with the right information at hand. To learn more about recent tax law changes and how they affect you, schedule an appointment today with the accounting and tax preparation professionals at Gudorf Tax Group.