The Internal Revenue Service (IRS) is gearing up for the upcoming tax season under the leadership of new CEO Frank Bisignano, a seasoned executive with a notable background in Wall Street management. This appointment comes amid a series of leadership changes at the IRS, with Treasury Secretary Scott Bessent currently acting as the IRS commissioner following a tumultuous period that saw the replacement of multiple leaders throughout 2025.
As the 10-week tax season approaches, how effectively the IRS navigates this critical period could echo in the political arena, especially with the president’s recent commitment to delivering record tax refunds this year. Among the key changes this tax season is an update to the state and local tax (SALT) deduction. The SALT deduction, which allows taxpayers to reduce their federal taxable income by the amount paid in state and local taxes, has seen a significant increase in its cap.
Previously capped at $10,000 for seven years, the SALT deduction cap has now risen to $40,000, a change driven by a tax-and-spending bill pushed through by the Trump administration and narrowly passed by Congress. This increase predominantly benefits affluent taxpayers in high-tax regions who typically own costly homes and encounter substantial local property tax bills.
The decision to raise the SALT cap appears to be a strategic move aimed at securing support from Republican lawmakers representing wealthy suburban areas, particularly in states like New York. It is notable that no members of Massachusetts’ congressional delegation, which features no Republicans, voted in favor of the bill, highlighting the polarized nature of this tax policy.
However, limitations still exist. The $40,000 SALT deduction begins to phase out for individuals and joint taxpayers with elevated incomes. Additionally, taxpayers can only utilize the SALT deduction if they itemize their deductions, which means they must surpass the newly increased standard deduction amounts—$15,750 for single filers and $31,500 for joint filers.
Other deductions remain common as well, including those for mortgage interest and charitable contributions, but fewer than 10 percent of taxpayers are expected to itemize due to the relative simplicity and benefits of the standard deduction.
Another noteworthy change is the introduction of “Trump accounts,” tax-advantaged savings accounts established for children similar to individual retirement accounts (IRAs). Parents can contribute a maximum of $5,000 annually until the child reaches 18, and these accounts will also receive an initial government contribution of $1,000 for every US citizen born between January 1, 2025, and December 31, 2028. Children under 18 with a Social Security number are eligible to establish accounts, although they must file IRS Form 4547 with their tax returns to receive the government contribution.
The IRS is also implementing new deductions related to tips and overtime pay, providing options for qualified taxpayers to deduct up to $25,000 for tips and $12,500 for overtime, with upper limits adjusted for higher incomes.
Moreover, the child tax credit has seen an increase of $200 this year, now amounting to $2,200 per qualifying child under 17. This is particularly beneficial for low-income families, who may receive cash payouts if they owe little to no tax.
While some free filing services have been pulled back, notably the Direct File service—which was tested in a handful of states—the season does come with additional reminders for vigilance against scams. Taxpayers are urged to be cautious of fraudulent communications claiming to be from the IRS, as scammers often attempt to mislead individuals regarding tax debts or relief programs.
As the IRS readies itself for the intricacies of this tax season, the convergence of policy changes, new leadership, and potential scams paints a complex landscape for taxpayers in 2025.
