2025 Tax Updates

What's New Under the OBBBA

Senior Deductions

Effective 2025 through 2028, individuals age 65 and older may claim an additional $6,000 deduction.
This is in addition to the standard deduction for seniors available under existing law.
Applies per eligible individual (or $12,000 for a married couple if both spouses qualify).
Phases out for taxpayers with modified adjusted gross income over $75,000 ($150,000 for joint filers).

No Tax on Tips (up to $25K)

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.

No Tax on Overtime

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”).
Does not include voluntary OT
Max = Singles $12,500

Married $25K

No Tax on Car Loan Interest

Effective 2025 through 2028, individuals may deduct interest paid on a loan used to purchase a qualified vehicle for personal use that meets other eligibility criteria. 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).

Trump Accounts

Parents, guardians, or others can establish a Trump Account for an eligible child.
Trump Accounts cannot be funded before July 4, 2026.
The federal government will make a one-time $1,000 contribution for each eligible child’s account.
Authorized contributions from individuals and employers are allowed up to $5,000 per year.
Employers can contribute up to $2,500 per year toward an employee’s or dependent’s Trump Account without it counting as taxable income for the employee.
Funds must be invested in certain mutual funds or exchange-traded funds that track a U.S. stock index such as the S&P 500.

Standard deduction increased to $15,750 for individuals and $31,500 for married couples.

Under S.A.L.T. (State & Local Taxes) Taxpayers are allowed to deduct 1) property taxes 2) state and local income taxes (or sales taxes in lieu of income taxes) up to a combined $40,000 maximum for most filers.

Child and Dependent Care Credit

Temporarily increased from $3,000 - $6,000 to $8,000 - $16,000. The credit begins to reduce by 20% for families earning over $400,000.