What’s New for 2025 Tax Filers

*This blog is provided for informational purposes only. This is not a complete list of tax changes. We are not tax professionals. Please consult a duly licensed tax professional when preparing your federal tax forms.*

The Internal Revenue Service (IRS) will begin accepting 2025 tax returns on January 26. As Americans prepare to file their federal tax returns, the landscape of individual tax filing has shifted significantly from last year. A sweeping legislative package enacted in July 2025 - the One Big Beautiful Bill Act (also known as OBBBA) - reshaped individual tax rules by extending and modifying parts of the Tax Cuts and Jobs Act of 2017 and also introducing new provisions that affect both refunds and liabilities. Here are some of the most impactful updates that individual filers need to know before this tax season.

1. Expanded Standard Deduction

The standard deduction is slightly increased for 2025, meaning that more income is shielded from federal tax outright. For example, the amounts are now $15,750 for single filers, $23,625 for head-of-household, and $31,500 for married filing jointly. Tax analyst Jordan Markow of a major tax advisory firm recently said, "Higher standard deductions simplify filing for many taxpayers and [can] reduce the number who need to itemize."

2. New 'No Tax on Tips' Deduction

One of the most talked-about changes in the OBBBA is a deduction for qualified tip income, essentially removing federal tax on certain tip earnings up to $25,000 for 2025 (phaseouts apply at higher incomes). This deduction is for workers such as waiters, DJs, concierges, maids, hair stylists, massage therapists, golf caddies, valets, and similar occupations, and it applies regardless of whether you itemize or not.

3. Higher Child Tax Credit

The OBBBA raised the maximum amount for the child tax credit to $2,200 for each qualifying child, up from $2,000 previously scheduled for this year. It requires, among other things, that parents and their qualifying children have Social Security numbers.

4. Deductible Car Loan Interest

A new benefit for vehicle buyers allows a deduction of up to $10,000 of interest on qualified car loans used to purchase a vehicle that was assembled in the United States. (Used cars do not qualify.) Financial planner Denise Rodriguez suggests, "This can help first-time car buyers and those upgrading their ride, but only if they meet the eligibility requirements." This deduction only applies if the final leg of production for your vehicle was done in the United States. If you qualify, ask your lender or check your loan statements to help you document the interest you paid in 2025, said Tom O'Saben, director of tax content at the National Association of Tax Professionals.

5. Additional Senior Deduction

Taxpayers 65 and older may be able to claim an extra deduction of up to $6,000 (or $12,000 for a couple). This new deduction is taken on top of your standard deduction or itemized deductions. But your deduction will be reduced if your modified adjusted gross income (MAGI) is more than $75,000 ($150,000 for joint filers) but less than $175,000 ($250,000 for joint filers).

6. Significantly Higher SALT Deduction Cap

The limitation on state and local tax (SALT) deductions (previously capped at $10,000) is temporarily increased to $40,000 for the 2025 tax year, benefiting many residents in high-tax states. Phaseout rules apply for higher-income filers. The so-called SALT deduction lets you deduct either your state and local income taxes or your state and local general sales taxes. On top of that, you may also be allowed to deduct your property taxes, assuming your income or sales taxes don't put you over the cap. Tax strategist Raymond Liu explains, "The SALT increase changes the calculus for many taxpayers: itemizing may now outperform the standard deduction in states like California and New York."

The IRS has introduced Schedule 1-A for filing the new deductions (such as tips, overtime, car interest, and senior deductions), which adds a procedural step for many filers. IRS spokesperson Angela Benoit commented in December, "New schedules and worksheets mean taxpayers should start gathering documentation early - this isn't a 'copy last year's return' season."

Treasury officials and independent analysts alike expect many taxpayers to receive larger refunds this season because withholding tables did not immediately change after enactment of the OBBBA, meaning workers overpaid throughout 2025. However, CPA Diane Carter warns, "A big refund isn't always the goal. Updating withholding and planning ahead may be more financially sound than seeing a large return after filing." While new deductions can lower your taxable income and increase refunds, understanding the rules and income limits is essential to maximizing benefits. For most taxpayers, early planning, documentation, and relying on updated IRS forms and guidance will make the filing process smoother and more advantageous.

*This blog is provided for informational purposes only. This is not a complete list of tax changes. We are not tax professionals. Please consult a duly licensed tax professional when preparing your federal tax forms.*