2025 Tax Deductions for Working Americans and Seniors: What to Know

Goodman Bookkeeping Team
Aug 2
2 min read

Updated: Aug 20

Important changes are coming to the 2025 tax season. On July 4, 2025, the One Big Beautiful Bill Act was signed into law. It introduces four new tax deductions aimed at supporting working individuals and seniors. This post outlines each provision, who qualifies, and how to prepare.

1. Deduction for Tip Income

Employees and self-employed individuals who earn tips in service-based roles may now deduct up to $25,000 of reported tip income annually. This deduction applies to jobs recognized by the IRS as customarily and regularly receiving tips as of December 31, 2024.

Details:

Applies to tip income reported on Form W-2, 1099, or reported directly on Form 4137
Available to both standard deduction and itemizing filers
Phases out at $150,000 for individual filers or $300,000 for joint filers
Self-employed individuals in Specified Service Trades or Businesses do not qualify
The IRS will publish a list of eligible occupations by October 2, 2025

2. Deduction for Overtime Pay

Workers who receive overtime compensation under the Fair Labor Standards Act may now deduct the portion of their pay that exceeds their regular rate.

Details:

Maximum deduction is $12,500 per individual or $25,000 for joint returns
Applies to overtime reported on W-2 or 1099
Available to standard and itemizing filers
Deduction phases out starting at $150,000 for individuals and $300,000 for joint returns

3. Deduction for Car Loan Interest

Interest paid on loans for new personal-use vehicles may now be deducted. This is a new opportunity to save for those financing a qualifying vehicle purchase.

Details:

Deduction limit is $10,000 per year
Vehicle must be newly purchased with final assembly in the United States
Loan must be secured by a lien on the vehicle
Leased and used vehicles do not qualify
Deduction phases out starting at $100,000 for individuals and $200,000 for joint filers
The Vehicle Identification Number (VIN) must be listed on the tax return

4. Deduction for Seniors

Taxpayers age 65 and older may now claim an additional $6,000 deduction. This is in addition to the existing senior standard deduction.

Details:

Married couples in which both individuals qualify may deduct $12,000
Available to all filers regardless of itemization
Deduction phases out starting at $75,000 for individuals and $150,000 for joint filers
Social Security Number of the qualifying individual must be included on the return

How to Prepare

If you think one or more of these deductions may apply to you, or if you are unsure how to proceed, we are here to help. At Goodman Bookkeeping & Tax Services, we walk through the details with you, determine eligibility, and ensure accurate filing. Tax season can be complex, but planning ahead can make all the difference.