2025 U.S. Personal Tax Update

The standard deduction has increased to $15,750 for single and $31,500 for married filing jointly status filers.

Beginning in the 2025 tax year, seniors (65+) can claim a new, enhanced $6,000 individual or $12,000 married filing jointly, “senior deduction” under the One Big Beautiful Bill Act (“OBBBA”). The enhanced deduction begins to phase out once your income reaches $75,000 for single and $150,000 for married filing jointly.

The State and Local Tax (“SALT”) deduction has increased to $40,000 for taxpayers who are itemizing deductions on their federal return. This will allow taxpayers to deduct from their federal taxable income property taxes (on real estate located in the U.S.) and income taxes paid to states/localities. This phases out for higher income taxpayers with income over $250,000 for single and $500,000 for married filing jointly.

The OBBBA introduced a new deduction for workers that receive tips, such as those working in the restaurant industry. The maximum deduction is $25,000 per worker and phases out for taxpayers with income over $150,000 for single and $300,000 for married filing jointly.

The OBBBA introduced a new deduction for overtime compensation for work performed in the U.S. for which you received a W-2. The maximum annual deduction is $12,500 for single and $25,000 for married filing jointly, and phases out for taxpayers with income over $150,000 for single and $300,000 for married filing jointly.

The OBBBA introduced a new deduction for interest paid on loans for new, U.S. assembled vehicles purchased for personal use. The maximum deduction is $10,000 for interest and is subject to income limitations, phasing out starting at $100,000 of income for single filers and $200,000 for married filing jointly.

The child tax credit has increased by $200 to a maximum of $2,200 per dependant under age 17 for 2025. The child tax credit is refundable up to $1,700 per child (subject to phase out limitations), however you must have at least $2,500 of earned income. To qualify, the child must be under the age of 17 as of December 31, 2025, must have a valid U.S. SSN, and must live with the Taxpayer for more than half the year.

If you bought a new, qualified plug-in electric vehicle on or before September 30, 2025, you may be eligible for a clean vehicle tax credit up to $7,500.

Starting July 5^th, 2026, parents can open a “Trump Account” on behalf of their U.S. children that have a U.S. SSN. A Trump Account is a new type of Individual Retirement Account (IRA) for your children that will grow tax deferred in the U.S. (however it may be taxable on your Canadian return). For U.S. citizen children with a U.S. SSN born between January 1st, 2025 and December 31st, 2028, their Trump Account will receive a pilot program contribution of $1,000. The Trump Account can be opened using an online portal that will be available by summer 2026.

The 2025 annual gift tax exclusion is $19,000 per recipient, and $190,000 when gifting to your non-U.S. citizen spouse.

For the 2025 taxation year, the federal lifetime estate and gift tax exclusion is $13.99 Million, per individual. Effective January 1, 2026, the exemption permanently increases to $15 Million (adjusted annually for inflation), under the OBBBA.

Any gifts, bequests, or inheritance received after January 1^st, 2025 by a U.S. person from a “covered expatriate” will be subject to a new 40% gift tax. There is no annual gift tax exclusion for gifts received from a covered expatriate. The U.S. person receiving the gift will be responsible for filing Form 708 and paying the gift tax. In general, a ‘covered expatriate’ is a former U.S. citizen or long-term U.S. resident (green card holder) who renounced their citizenship or surrendered their green card, and met certain criteria at the time of expatriation.

Effective September 30^th, 2025, the IRS has begun phasing out issuing tax refunds by paper cheques. If you are expecting a refund from the IRS, you will need to set up direct deposit using one of the following accounts:
- A U.S. bank account with a branch located in the U.S.; or
- A U.S dollar account with a Canadian bank that is Automated Clearing House (ACH) compatible (has a U.S. routing number). This is offered by many major Canadian banks. It is your responsibility to confirm with your bank that they can accept direct deposits from the IRS
- If you are receiving U.S. Social Security, we recommend you set up direct deposit directly with the Social Security Administration.

If you have any questions or require additional details, please contact us.

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