H.R. 1, signed into law on July 4, 2025, makes the 2017 Tax Cuts and Jobs Act permanent and introduces new provisions aimed at expanding tax relief—especially for individuals, seniors, tip and overtime workers, and small business owners.
Individuals & Families
- No federal income tax on tips & overtime (2025–2028)
- Up to $25,000 of tips and $12,500 of overtime pay (joint filers: double limits) may be deducted from taxable income
- Note: payroll taxes (Social Security, Medicare) and state taxes still apply
- “No tax on Social Security” for many seniors
- Effectively exempts most Social Security benefits via a $6,000 senior deduction, so about 88% of beneficiaries will owe no federal tax on SS income
- Expanded standard & child tax credits
- Standard deduction: ~$15,750 (single), $31,500 (joint), inflation‑indexed
- Child Tax Credit: $2,200 per child, indexed
State & Local Taxes (SALT)
- Temporary SALT bump: $40,000 cap on SALT (down to $10,000 for high earners or after 2030)
- Beneficial for homeowners in high property tax communities, but phases down at AGI > $500K and reverts in 2030
Charitable, Gambling & Miscellaneous Deductions
- New “above‑the‑line” charitable deduction: up to $1,000 (single) / $2,000 (joint), even without itemizing
- Gambling losses: now capped at 90% of winnings, effective 2026—no more full offset
- Miscellaneous itemized deductions (e.g., unreimbursed employee expenses) are permanently eliminated post‑2025
“Trump Accounts” & Small Business Breaks
- Trump Accounts: tax‑deferred savings for minors (under 18)
- Contributions capped at $5,000/year (indexed); ~$1,000 government deposit for babies born 2025–2029
- Small-business & pass‑through relief:
- Permanent 20% QBI deduction, extended phase-out thresholds
- Enhanced child‑care credit for employers
- Bonus: deduction for car loan interest and restored mortgage insurance premiums
Medicaid, SNAP & Safety Net
- Medicaid funding reduced by ~$1.2 trillion; work requirements imposed (80 hrs/mo)
- SNAP cuts: stricter eligibility, funding shifts to states
- Most changes start 2027–2028, phased in after midterms
What This Means for Michigan Homeowners
- Immediate boost: higher standard deduction, larger SALT limit, tip/overtime relief, and senior protections all increase take-home pay
- Watch 2026‑2030: SALT cap reverts and safety-net cuts begin—survey clients now on eligibility and future cash flow strategies
- Plan around changes:
- Bunch charitable giving to maximize the above‑the‑line deduction
- Review business structure for QBI eligibility
- Remind tipped/overtime workers of new deduction limits (reporting guidance due October 2025)
Bottom Line
H.R. 1 delivers substantial tax relief for individuals, high-tax homeowners, seniors, and small businesses—balanced against deep cuts to Medicaid and SNAP and a looming broader fiscal shift post‑2026. For Michigan’s taxpayers, proactive planning will be key to maximizing benefits and preparing for future changes.
