11/05/2025
New Deductions for Certain Income (temporary for 2025-2028):
Qualified Tips: You may deduct up to $25,000 in qualified tips, available to both itemizing and non-itemizing taxpayers, with a phaseout for Modified Adjusted Gross Income (MAGI) over $150,000 (single) or $300,000 (joint filers).
Qualified Overtime Pay: You may deduct up to $12,500 of the "half" portion of "time-and-a-half" overtime pay (or $25,000 for joint filers), also with a phaseout for MAGI over $150,000 (single) or $300,000 (joint filers).
Car Loan Interest: You may deduct up to $10,000 in interest paid on a loan for a new qualified passenger vehicle purchased in 2025, with a phaseout for MAGI over $100,000 (single) or $200,000 (joint filers).
Enhanced Senior Deduction: Individuals age 65 and older can claim an additional $6,000 deduction ($12,000 for a qualifying married couple), subject to income phaseouts.
Child Tax Credit: The maximum credit has increased to $2,200 per eligible child (under age 17), with a refundable portion of up to $1,700.
State and Local Taxes (SALT) Deduction: The cap for itemized deductions on state and local taxes increased to $40,000 ($20,000 for married filing separately), with phaseouts for higher-income taxpayers.
Clean Vehicle Credits: Most clean vehicle credits will expire for vehicles acquired after September 30, 2025.
Retirement Contributions: The 401(k) and 403(b) contribution limit increased to $23,500 (plus a $7,500 catch-up for age 50+), while the IRA limit remains $7,000 ($8,000 for age 50+).
Taxpayers can use a new 2025 Form W-4 to adjust their income tax withholding to reflect these changes.