Deductions for seniors

Overview of the deduction

• 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).

Who qualifies

• You must be age 65 on or before the last day of the tax year.

• Available for eligible taxpayers (both itemizing and non-itemizing).

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No Tax on Tips

Overview of the deduction

• 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.

• “Qualified tips” include voluntary cash or charged tips received from customers, including shared tips.

• Maximum annual deduction is $25,000.

• For self-employed individuals, deduction cannot exceed net income (before this deduction) from the trade or business where tips were earned.

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

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No Tax on Overtime

Overview of the deduction

• 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”).

• Overtime must be reported on Form W-2, Form 1099, another statement furnished to the individual, or directly by the individual.

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

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

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No Tax on Car Loan Interest

Overview of the new deduction

• 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).

What counts as qualified interest

Interest must be paid on a loan that:

• Originated after December 31, 2024

• Was used to purchase a vehicle originally used by the taxpayer

• Was secured by a lien on the vehicle

• Was for a personal-use (nonbusiness) vehicle

If a qualifying vehicle loan is later refinanced, interest paid on the refinanced amount is generally eligible for the deduction.

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Trump Accounts

Overview of 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.

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*Information obtained from https://www.irs.gov/newsroom/one-big-beautiful-bill-provisions