Jerry
In 2025, President Trump’s new legislation officially rolls out significant tax deductions on your returns—impacting restaurant workers, overtime earners, seniors, and auto buyers. Let’s break down these eye-opening details directly from the IRS.
2025 Tax Bill: Big Picture
This sweeping law extends the 2017 Tax Cuts and Jobs Act and introduces fresh benefits. According to tax analysts, it will reduce federal revenue by $4.5 trillion between 2025 and 2034.
While critics warn it may also cut food and health aid to low-income families, the White House promotes it as a major accelerator of economic growth.
Permanent & Enhanced Standard Tax Benefits
Several core provisions are locked in:
- Child Tax Credit: Permanent increase of $200 per child, rising from $2,000 to $2,200
- Standard Deduction for tax year 2025:
- Single filers: $15,750 (+$750)
- Married filing jointly: $31,500 (+$1,500)
- Head of household: $23,635 (+$1,135)
- State and Local Tax (SALT) deduction cap permanently raised (exact cap to be updated by IRS)
New IRS-Verified Deductions
These temporary deductions apply for the 2026–2028 filing years and aim to give immediate relief before potentially expiring.
| Deduction | Annual Cap (Single/Joint) | Income Phase-Out |
|---|---|---|
| Tip Income | Up to $25,000 / $50,000 | $150K / $300K |
| Overtime Pay (“Time & a Half”) | Up to $12,500 / $25,000 | $150K / $300K |
| Senior Deduction (65+) | $6,000 / $12,000 | $75K / $150K |
| New Car Loan Interest | Up to $10,000 | $100K / $200K |
1. No Tax on Tips
- Allows deduction of up to $25,000 in reported tips (or $50,000 joint)
- Phases out above $150K income ($300K joint)
- Targets roughly 4 million Americans, including servers and salon staff
- Eligible jobs list will be released by Oct 2, 2025
2. No Tax on Overtime
- Deduct the portion of overtime pay paid at “time-and-a-half”
- Up to $12,500 per individual ($25K joint)
- Same phase-out thresholds as tips
3. $6,000 Senior Deduction
- Extra tax break for individuals 65+
- Up to $6,000 (or $12K for couples where both qualify)
- Available even without itemizing
- Aimed at reducing Social Security taxation
4. New Car Loan Interest Deduction
- Deducts up to $10,000 in interest on new, U.S.-assembled vehicle loans
- Applies for cars, SUVs, minivans, pick-up trucks, and motorcycles under 14,000 lbs
- Requires the vehicle’s VIN on your return
- Phases out over $100K / $200K income
What It Means for You
Thanks to this legislation:
- Millions in the service and retail industries may finally avoid taxes on their tips
- Overtime workers get to keep more of their premium compensation
- Retirees gain a valuable boost to offset costs even on non-itemized returns
- New car buyers using U.S.-made vehicles get sizable tax relief
- Child tax credit increases support families more
What You and Tax Preparers Should Do
- Update tax software to include new deduction lines for tips, overtime, senior, and car interest.
- Track earnings closely—exceeding thresholds may limit benefits.
- For seniors, ensure your age and claim eligibility are accurately reported.
- Car buyers, hold onto proof of U.S. assembly and VIN info for filing.
- Expect expiration: these deductions are temporary through 2028 unless renewed.
Trump’s “Big Bill” delivers major new deductions: tips, overtime pay, senior credits, new car financing, all designed to reduce tax burdens across income brackets.With a one-time increase in child credits, it rewards working families, retirees, and workers alike.
But because most deductions are temporary, planning is key—track your income, gather documentation, and work with your tax professional to maximize your savings while they last.
FAQs
Do these deductions apply automatically to my paycheck?
No. You must claim them on your tax return for 2026–2028. There’s no payroll withholding change.
Can I double-dip—take tips and overtime deductions in the same year?
Yes—each has a separate cap, but phase-outs apply based on your total income.
Are these deductions permanent?
Not in their current form. They’re temporary through 2028, except for the permanent increases to standard and child tax credits.