Deduction for Seniors (Sec. 70103)

New deduction: Effective for 2025 through 2028, individuals who are age 65 and older may claim an additional deduction of $6,000. This new deduction is in addition to the current additional standard deduction for seniors under existing law.

• The $6,000 senior deduction is per eligible individual (or $12,000 total for a married couple where both spouses qualify).

• Deduction phases out for taxpayers with modified adjusted gross income over $75,000 ($150,000 for joint filers).

• File jointly, if married, to claim the deduction

 

No tax on tips (Sec. 70201)

 New deduction: Effective for 2025 through 2028, employees and self-employed individuals may deduct qualified tips received in occupations listed by the IRS as customarily and regularly receiving tips on or before December 31, 2024, and that are reported on a Form W-2, Form 1099, or other specified statement furnished to the individual or reported directly by the individual on Form 4137.

• “Qualified tips” are voluntary cash or charged tips received from customers or through tip sharing

• Maximum annual deduction is $25,000; for self-employed, deduction may not exceed individual’s net income (without regard to this deduction) from the trade or business in which the tips were earned.

• Deduction phases out for taxpayers with modified adjusted gross income over $150,000 ($300,000 for joint filers)

• File jointly if married, to claim the deduction

 

No tax on overtime (Sec. 70202)

New deduction: Effective for 2025 through 2028, individuals who receive qualified overtime compensation may deduct the pay that exceeds their regular rate of pay (such as the “half” portion of “time-and-a-half” compensation) that is required by the Fair Labor Standards Act (FLSA) and reported on a Form W-2, Form 1099, or other specified statement furnished to the individual.

• Maximum annual deduction is $12,500 ($25,000 for joint filers).

• Deduction phases out for taxpayers with modified adjusted gross income over $150,000 ($300,000 for joint filers).

• File jointly if married, to claim the deduction

 

No tax on car loan interest (Sec. 70203)

New deduction: Effective for 2025 through 2028, individuals may deduct interest paid on a loan used to purchase a qualified vehicle, provided the vehicle is purchased for personal use and meets other eligibility criteria. (Lease payments do not qualify.)

• Maximum annual deduction is $10,000.

• Deduction phases out for taxpayers with modified adjusted gross income over $100,000 ($200,000 for joint filers).

Qualified interest: To qualify for the deduction, the interest must be paid on a loan that is:

• Originated after December 31, 2024

• Used to purchase a vehicle originally used by the taxpayer (used vehicles do not qualify)

• For a personal use vehicle (not for business or commercial use)

• Secured by a lien on the vehicle