2025 was a big year for taxpayers. The passing of the OBBBA in July 2025 brought significant changes to the tax laws. By now you’ve probably heard about the no tax on tips, the no tax on overtime provisions, or the additional senior deduction. There has been a lot of speculation on how these provisions will work. For tax year 2025, here is what we know.
NO TAX ON (QUALIFIED) TIPS
WHO: Individuals working in a qualified occupation that received qualified tips.
WHAT: An income deduction on your individual tax return. It is not an income exclusion, it is a tax return deduction. Tips are still subject to Social Sand Medicare taxes.
WHEN: Effective for tax years 2025-2025.
WHERE: NEW: Schedule A1.
LIMITS: Deduction limit: $25,000
PHASE OUTS: $150,000 (S), $300,000 (MFJ).
NOTES: For a list of qualified occupations:
NO TAX ON OVERTIME
WHO: Individuals who receive qualified overtime compensation.
WHAT: An income deduction on your individual tax return. It is not an income exclusion; it is a tax return deduction. Overtime pay is still subject to Social Sand Medicare taxes. Overtime means the “half” portion of “time-and-a-half”. (EX: Your regular hourly rate is $25/hour; Half would be $25 * .5 = $12.50).
WHEN: Effective for tax years 2025-2025.
WHERE: NEW: Schedule A1,
LIMITS: Deduction limit: $12,500 (S), $25,000 (MFJ).
PHASE OUT: $150,000 (S), $300,000 (MFJ).
NOTES: For the 2025 tax year, there will be no changes to your W2. Employers should provide you with a statement advising the Qualified Overtime portion of your W2 box 1 income. Employers can also put the Qualified Overtime portion in Box 14 of your W2.
ADDITIONAL SENIOR DISCOUNT
WHO: Individuals who are 65 years of age or older.
WHAT: This is an additional $6,000 per qualified individual income deduction, on top of the standard or itemized deduction.
WHEN: Effective for tax years 2025-2025.
WHERE: NEW: Schedule A1,
PHASE OUT: $75,000 (S), $150,000 (MFJ).
NOTES: Must have social security number. Married couples must file jointly to receive this deduction.
NO TAX ON CAR LOAN INTEREST
WHO: Individuals that have a new car loan for personal vehicles.
WHAT: An income deduction on your individual tax return on the interest paid on a new vehicle loan. It is not an income exclusion; it is a tax return deduction.
WHEN: Effective for tax years 2025-2025.
WHERE: NEW: Schedule A1,
LIMITS: Deduction limit: $10,000 (S), $20,000 (MFJ).
PHASE OUT: $100,000 (S), $200,000 (MFJ).
NOTES: Loan must be new loan after 12/31/2024.
INCREASED CHILD TAX CREDIT
WHO: Families with children.
WHAT: The Child Tax Credit (CTC) increased from $2,000 to $2,200 per qualifying child.
WHEN: Made permanent.
WHERE:
CHANGES TO MISCELLANEOUS ITEMIZED DEDUCTIONS
Taxpayers are permanently unable to claim miscellaneous itemized deductions that were previously suspended under the TCJA, such as; unreimbursed employee expenses, tax preparation fees, investment fees.
CHANGES TO CHARITABLE CONTRIBUTION DEDUCTION
WHO: Taxpayers who take the standard deduction.
WHAT: A permanent above-the-line deduction for charitable donations of $1,000 per filer who takes the standard deduction beginning in tax year 2026.
WHEN: 2026 on beyond.