2025 New Tax Credits and Deductions
- elitetaxes256
- Dec 25, 2025
- 2 min read
Major tax changes for the 2025 tax year (returns filed in 2026) were signed
into law on July 4, 2025. These changes include new income-specific
deductions and a significant increase in the standard deduction and child-
related credits.
NEW 2025 TAX DEDUCTIONS
For tax years 2025 through 2028, eligible taxpayers can take advantage of
four new deductions by filing the new IRS Schedule 1-A (Form 1040). These
include:
No Tax on Tips: Deduct up to $25,000 of qualified tip income for
workers in regular tipped occupations, with phase-outs based on
modified adjusted gross income (MAGI).
No Tax on Overtime: Deduct up to $12,500 per person ($25,000 for
joint filers) for qualified overtime pay, also subject to MAGI phase-
outs.
Enhanced Senior Deduction: A new deduction of $6,000 ($12,000 for
married couples if both qualify) for those age 65 or older by year-end,
with full availability for those below certain MAGI thresholds.
Car Loan Interest Deduction: Deduct up to $10,000 in interest paid on
loans for new, U.S.-assembled vehicles purchased for personal use,
with phase-outs based on MAGI.
UPDATED 2025 STANDARD DEDUCTIONS
Increased standard deduction amounts:
Single / Married Filing Separately: $15,750
Married Filing Jointly / Surviving Spouse: $31,500
Head of Household: $23,625
EXPANDED 2025 TAX CREDITS
Significant changes were made to several tax credits:
Child Tax Credit (CTC): Increased to $2,200 per qualifying child under
17, with up to $1,700 being refundable.
Adoption Credit: The maximum credit is $17,280 per child, with up to
$5,000 being refundable.
SALT Deduction Cap: Temporarily raised to $40,000 for married couples
filing jointly with MAGI up to $500,000.
EXPIRED OR ELIMINATED CREDITS
They phase out or eliminated certain clean energy incentives:
Electric Vehicle (EV) Credits: Eliminated for vehicles purchased after
September 30, 2025.
Residential Energy Credits: Incentives for home energy improvements
expire on December 31, 2025.