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1Repair Windows errors before they cause bigger problems2Scan for outdated or missing drivers - takes under a minute3Clear out junk files and repair common Windows errorsFor tax year 2025, eligible individuals may claim four new deductions under the One Big Beautiful Bill Act: for qualified tips, qualified overtime compensation, interest on certain passenger-vehicle loans, and eligible seniors. These deductions reduce taxable income; they do not make all tips, overtime pay, car-loan costs, or income tax-free. A 2025 return filed in 2026 uses the 2025 rules and figures.
What individual tax deductions did the law add?
The IRS highlights four deductions for individuals, generally available for tax years 2025 through 2028. Each has its own eligibility conditions, income phaseout, and recordkeeping needs. The overview below reflects IRS guidance for these provisions; check the current Schedule 1-A instructions for the rules that apply to your circumstances.
| Deduction | What may qualify | Key restriction |
|---|---|---|
| Qualified tips | Qualified tips in an eligible occupation | Occupation, income, filing status, and self-employment rules apply |
| Qualified overtime compensation | The qualifying overtime premium required under the Fair Labor Standards Act | Not necessarily all overtime wages; income and filing rules apply |
| Passenger-vehicle loan interest | Qualified interest on a qualifying loan for a personal-use passenger vehicle | Loan, vehicle, and income requirements apply; leases do not qualify |
| Enhanced deduction for seniors | An additional deduction for a qualifying taxpayer age 65 or older | Income and filing rules apply |
Do I qualify for the new tax deductions?
Eligibility depends on the particular deduction, not just on whether you had tips, overtime, a car loan, or turned 65. Check the applicable occupation or expense rules, modified adjusted gross income (MAGI), filing status, Social Security number requirements where applicable, and the tax year. The IRS’s Schedule 1-A instructions explain how to calculate each deduction and apply its limits.
Qualified tips
For tax years 2025 through 2028, employees and self-employed individuals may qualify if they received tips in an occupation the IRS identifies as customarily and regularly receiving tips by December 31, 2024. Qualified tips generally include voluntary cash or charged tips from customers, including shared tips; not every amount described as a tip necessarily qualifies.
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The deduction is limited to $25,000 and phases out when MAGI exceeds $150,000, or $300,000 for married taxpayers filing jointly. A married taxpayer must file jointly to claim it. Self-employed taxpayers cannot deduct more than the relevant business net income before this deduction, and specified service trade or business restrictions and other requirements apply.
Qualified overtime compensation
For tax years 2025 through 2028, the deduction applies to overtime compensation required under section 7 of the Fair Labor Standards Act (FLSA) that exceeds the employee’s regular rate. For a qualifying employee paid time-and-a-half, the premium half is generally the potentially deductible amount—not the full overtime paycheck. The IRS defines qualified overtime compensation in its qualified overtime FAQ using this FLSA-based test.
The maximum deduction is $12,500 per return, or $25,000 for a joint return. It phases out above MAGI of $150,000, or $300,000 for joint filers. Applicable filing-status and Social Security number rules also apply; married taxpayers generally must file jointly.
Enhanced deduction for seniors
A taxpayer who is at least 65 by the end of the tax year may qualify for an additional deduction of up to $6,000. It is per eligible person, so a joint return may claim up to $12,000 if both spouses meet the age requirement. The deduction phases out above MAGI of $75,000, or $150,000 for joint filers. Filing and Social Security number rules apply.
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Passenger-vehicle loan interest
For tax years 2025 through 2028, an individual may qualify to deduct up to $10,000 of interest on a loan for a qualifying passenger vehicle used for personal purposes. The loan must have originated after December 31, 2024, and the vehicle and loan must meet additional IRS requirements. Lease payments are not deductible under this provision. The phaseout begins above MAGI of $100,000, or $200,000 for joint filers.
Do not assume that an auto loan, a used vehicle, or a vehicle described as a passenger vehicle automatically meets the criteria. Consult the IRS vehicle requirements and Schedule 1-A instructions; the form calls for vehicle and loan details, including the vehicle identification number (VIN).
How do I claim the deductions, and what tax form do I need?
For a tax year 2025 return, calculate eligible amounts on IRS Schedule 1-A, Additional Deductions, and attach it to Form 1040, Form 1040-SR, or Form 1040-NR, as applicable. The four deductions can be claimed whether you itemize or take the standard deduction. Use instructions for the return’s tax year rather than carrying figures from another year into the calculation.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.How do I work out qualified tips and overtime for 2025?
Tax year 2025 has a transition in employer reporting. IRS guidance includes methods and examples for calculating qualified amounts when standard tax forms do not separately show them. Keep your records and follow the Schedule 1-A instructions and IRS Notice 2025-69 rather than treating every amount reported as tips or overtime as eligible.
Tips records
Gather records showing tips received, including relevant payroll information and your own tip records. Apply the IRS instructions to determine which tips qualify under the occupation and other rules. Self-employed individuals should also calculate the relevant business net income needed to apply the deduction’s limit.
Overtime records
For 2025, employers and payers were not required to report qualified overtime separately on Forms W-2, 1099-NEC, or 1099-MISC. You may need payroll records or other information about hours, regular rates, and overtime pay to use the IRS calculation method. The IRS says forms will be updated for separate reporting beginning with tax year 2026.
Do I have to itemize?
No. These four deductions are available to eligible taxpayers who itemize and to those who claim the standard deduction. The standard deduction figures below are for comparison; use the amount for the tax year shown, not the year you file the return.
| Filing status | Tax year 2025 | Tax year 2026 |
|---|---|---|
| Single or married filing separately | $15,750 | $16,100 |
| Head of household | $23,625 | $24,150 |
| Married filing jointly | $31,500 | $32,200 |
The 2026 amounts generally apply to returns filed in 2027. These standard deduction amounts do not replace the separate eligibility rules for any Schedule 1-A deduction.
Where can I get individual help with my return?
Use the IRS forms and instructions for the applicable tax year, including Schedule 1-A, for filing details. The IRS also directs taxpayers to its Interactive Tax Assistant, Publication 17, and individual provisions information. An IRS online account can provide account-specific information. Because forms and implementation guidance can change, check the current IRS material before filing.
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