12/31/2025
There are several important updates this year that may affect your refund, credits, and deductions. Here are the biggest changes taxpayers should expect:
* Child Tax Credit Increased:
Families with children under 17 can now claim up to $2,200 per child.
* New Break for Seniors (65+):
Seniors may qualify for an additional $6,000 deduction, $12,000 for a married couple, even when taking the standard deduction. The deduction phases out for taxpayers with modified adjusted gross income over $75,000 ($150,000 for joint filers).
* Higher SALT Deduction (For Itemizers):
The state & local tax deduction cap temporarily increased, giving relief to taxpayers in high-tax states. You may qualify to take the Itemized Deduction for 2025 even if you did not qualify in prior years due to the increase in the Standard Deduction. Please remember to bring your mortgage interest statement, property tax bill, itemized list of charitable contributions, medical expenses, etc.
* New Deductions for Tips:
Effective 2025 through 2028, employees and self-employed individuals may deduct qualified tips they received in occupations the IRS identified as “customarily and regularly receiving tips” on or before December 31, 2024, and are reported on a Form W-2, Form 1099, another statement furnished to the individual, or on Form 4137 if the individual directly reports the tips.
“Qualified tips” include voluntary cash or charged tips received from customers, including shared tips.
Maximum annual deduction is $25,000.
For self-employed individuals, deduction cannot exceed net income (before this deduction) from the trade or business where tips were earned.
Phases out for taxpayers with modified adjusted gross income over $150,000 ($300,000 for joint filers).
* New Deductions for Overtime:
(Employers are not required to report this information on your W2 for 2025. If your Employer does not provide overtime information in Box 14 on your W2, please bring your end of year paystub to support the deduction).
Effective 2025 through 2028, individuals may deduct the portion of qualified overtime pay that exceeds their regular rate of pay (for example, the “half” portion of “time-and-a-half”).
Overtime must be reported on Form W-2, Form 1099, another statement furnished to the individual, or directly by the individual.
Maximum annual deduction is $12,500 ($25,000 for joint filers).
Phases out for taxpayers with modified adjusted gross income over $150,000 ($300,000 for joint filers).
* Certain Auto Loan Interest:
Effective 2025 through 2028, individuals may deduct interest paid on a loan used to purchase a qualified vehicle for personal use only that meets other eligibility criteria (GVWR less than 14,000 pounds, Loan origination date after 12/31/24, VIN number required). Lease payments do not qualify.
Maximum annual deduction is $10,000.
Phases out for taxpayers with modified adjusted gross income over $100,000 ($200,000 for joint filers).
Please contact me if you have any questions regarding the 2025 filing season. Thank you!
