RENO, Nev. – “What this really does is lower taxable income,” notes Bruce McKinnon, a representative from Jackson Hewitt. “If your earnings stay the same as they did last year, your taxable income will drop due to these new deductions. That means you’ll likely owe less tax and possibly see a bigger refund.”
McKinnon is referring to upcoming tax adjustments set to take effect in 2025.
Many of these changes stem from the “Big, Beautiful Bill” that lawmakers passed over the summer.
For instance, the enhanced child tax credit is set to rise from $2,000 to $2,500 per child.
Another noteworthy change involves the auto loan interest deduction. If you buy a new car in 2025, you can deduct up to $10,000 of the interest on that loan. However, the car must weigh less than 1400 lbs, among other criteria.
“The final assembly location must be in the United States,” McKinnon added. You’ll also need this info on your purchase order. It’s essential to provide your vehicle identification number on your tax return.”
This deduction is only applicable for cars that are bought, not leased, and they must be for personal use. Additionally, to qualify, your personal income should not exceed $100,000.
There’s also a new deduction for seniors aged 65 and older, allowing for an extra $6,000 or $12,000 for married couples. The income limits here are $75,000 for individuals and $150,000 for joint filers. Exceeding these thresholds will reduce your deduction.
McKinnon mentioned that this change emerged as a compromise related to candidate Trump’s promise not to tax Social Security benefits.
Perhaps the most significant changes involve tip income. There’s now a tax exemption, allowing workers to deduct up to $25,000 from their tip earnings.
Moreover, overtime pay will not be taxed, permitting workers to deduct up to $12,500. McKinnon points out that reaching that figure can be quite challenging.
To help his clients prepare, he suggests bringing in specific documents:
“The most effective way for someone to confirm their income is by obtaining their last pay stub from their employer,” McKinnon advises. “That way, you can track the progress from the beginning of the year until now.”
He’s referring to the last pay stub for 2025.
Additionally, there’s been a modification regarding tax returns this year.
The government has introduced a new form to report crypto income.
This must be filed using Form 1099-DA.
