The 2025 tax filing season (for the 2025 tax year) includes major changes enacted by the “One Big Beautiful Bill Act,” which made permanent many provisions of the 2017 Tax Cuts and Jobs Act and introduced several new temporary deductions and credits.
Key changes for individual filers are detailed below:
Major New Deductions (Temporary, 2025-2028)
These new deductions are available even if you take the standard deduction (claimed on the new Schedule 1-A Form):
Tip Income Deduction: Eligible workers can deduct up to $25,000 of qualified tip income, with phase-outs for higher earners. Tips remain subject to Social Security and Medicare taxes.
Overtime Pay Deduction: Eligible workers can deduct the portion of overtime pay that exceeds their regular rate (e.g., the “half” in time-and-a-half pay), up to $12,500 ($25,000 for joint filers), with phase-outs for higher earners. Overtime pay remains subject to Social Security and Medicare taxes.
Senior Deduction: An additional $6,000 deduction is available for taxpayers age 65 and older ($12,000 for qualifying married couples), with phase-outs for those with higher modified adjusted gross incomes (MAGI).
Car Loan Interest Deduction: You may deduct up to $10,000 per year in interest paid on a loan for a new, U.S.-assembled vehicle purchased in 2025, with phase-outs for higher earners.
Permanent and Inflation-Adjusted Changes
Standard Deduction: The standard deduction amounts have increased for inflation:
Single: $15,750
Married Filing Jointly: $31,500
Head of Household: $23,625
Tax Brackets: The seven federal income tax brackets (10%, 12%, 22%, 24%, 32%, 35%, 37%) were made permanent, with the income thresholds adjusted for inflation.
Child Tax Credit: The maximum credit increased to $2,200 per qualifying child, and up to $1,700 is refundable for eligible low-to-moderate-income taxpayers.
SALT Deduction Cap: The cap on the State and Local Taxes (SALT) deduction for itemizers is temporarily raised to $40,000 for married couples filing jointly, with income phase-outs.
Retirement Contributions: Annual contribution limits for 401(k) plans and IRAs have been slightly adjusted for inflation for the 2025 tax year.
1099-K Reporting Threshold: The reporting threshold for third-party payment networks (like Venmo or PayPal for goods and services) reverts to over $20,000 in payments and more than 200 transactions, instead of the previously planned $600 threshold.
Other Notable Changes
Clean Vehicle Credits End: The new and used clean vehicle tax credits for electric vehicles (EVs) are not available for any vehicle acquired after September 30, 2025.
“Trump Accounts”: A new type of IRA for children (born between Jan 1, 2025, and Dec 31, 2028) is established, with a potential government seed contribution of $1,000 via a new Form 4547.
