Effective starting from Tax Year 2025, the following provisions introduce significant deductions and exemptions:
No Tax on Tips (Cash Tips Only) Duction Limit
Up to $25,000 annually for single filers and $50,000 for married couples filing jointly. Applicability: Valid from 2025 through 2028 specifically for cash tips. Income Phase-out: Eligible for taxpayers with adjusted gross income (AGI) up to $150,000 (single) or $300,000 (married filing jointly). Restriction: Taxpayers using the Married Filing Separately status are ineligible for this deduction. IRS Deadline: By October 2, 2025, the IRS must publish a formal list of regular and customary tip-earning occupations.
No Tax on Overtime Duction Limit
Up to $12,500 annually and $25,000 for married couples filing jointly. Applicability: Valid from 2025 through 2028. Qualifying Amount: This deduction applies to the premium portion of overtime pay (the 0.5 multiplier for hours worked over 40 per week) as defined by the Fair Labor Standards Act (FLSA). Income Phase-out: Up to $150,000 (single) and $300,000 (married filing jointly). Restriction: Married Filing Separately status is ineligible.
Senior Citizen Supplemental Standard Deduction Additional Deduction
An extra $6,000 per person or $12,000 for married couples for taxpayers aged 65 and older. Period: Effective from 2025 to 2028. Income Limit: Available to those with income not exceeding $75,000 (single) and $150,000 (married filing jointly).
SALT (State and Local Tax) Deduction Cap Increase New Limits
From January 1, 2025, to December 31, 2029, the SALT deduction cap is raised up to $40,000 ($20,000 for single filers). Eligibility: Applies to taxpayers with income below $500,000. Sunsetting: The deduction limit will gradually decrease each year and return to $10,000 starting in 2030.
No Tax on Car Loan Interest Duction Limit
Up to $10,000 per year. Duration: Available from 2025 to 2028. Requirements: Must be a new vehicle and assembled in the United States, subject to income limitations.
