What’s new for the 2025 tax filing season?

by J. Christian Manalli, Partner, SFBBG

J. Christian Manalli is a partner in the Chicago law firm of Schoenberg Finkel Beederman Bell Glazer LLC. Manalli concentrates his practice on federal tax, estate planning, probate and general business matters. Manalli can be reached at 312- 648-2300, or by email at christian.manalli@sfbbg.com.

For tax year 2025, significant changes result from the “One Big Beautiful Bill Act,” including increased limits for state and local income tax (SALT) deductions, new deductions for tips, overtime pay and car loan interest, along with increased standard deductions and child tax credits.

Key tax changes for individual filers for 2025

New temporary deductions are available for qualifying income and expenses:

Tip income. An above-the-line deduction (which means it reduces adjusted gross income) for up to $25,000 in qualified tip income. This deduction phases out for higher earners starting at $150,000 and phases out completely at $400,000 for single filers; the phase-out starts at $300,000 for married filers and phases out completely at $550,000.

Overtime pay. An above-the-line deduction for the “half” portion of time-and-a-half overtime pay, up to $12,500 for single filers or $25,000 for joint filers. The deduction is gradually reduced (phased out) for taxpayers with income over $150,000 (single filers) or $300,000 (married couples filing jointly).

Car loan interest. A deduction of up to $10,000 in interest paid on loans for new, U.S.- assembled personal vehicles.

Seniors. An additional $6,000 bonus deduction for eligible single filers age 65 and older (or $12,000 for eligible married couples).

Standard deduction. The standard deduction amounts have increased and are now permanent: single: $15,750; married filing jointly: $31,500; head of household: $23,625.

Child tax credit. The maximum credit has increased to $2,200 per qualifying child, with up to $1,700 being refundable. A valid Social Security number is required for the child and at least one spouse if filing jointly.

State and local taxes (SALT). The cap on the itemized deduction for SALT has temporarily increased to $40,000 for married couples filing jointly with phaseouts based on income over $500,000 for joint filers and $250,000 for single filers.

Retirement contributions. The total 401(k) contribution limit increased to $23,500 in 2025, with a higher catch-up limit of $11,250 for those aged 60-63. Clean energy credits. Many clean energy tax credits, including those for new and used electric vehicles, were accelerated for expiration after September 30, 2025. Credits for home improvements expire at the end of 2025.

Digital assets. Brokers and exchanges are now required to report crypto transactions to the IRS and taxpayers using the new Form 1099-DA. 2025 federal income tax brackets See Table 1 for changes to federal income tax brackets. This article highlighted a few of the key changes for tax year 2025. If you have any questions about these other changes for 2025, please feel free to contact me.