What’s New for 2025 Taxes? Key Deductions and Credits to Know

New deductions starting in 2025 through 2028

No tax on tips” deduction (up to $25,000)

If you earn tipped income, a new deduction may allow up to $25,000 of qualified tips to be deducted, with a phaseout beginning at $150,000 MAGI (single) / $300,000 MAGI (married filing jointly).

Who this may help: hospitality workers, service professionals, and anyone receiving substantial reported tips.

No tax on overtime deduction (premium portion only)

A second new deduction may allow you to deduct the overtime premium portion—up to $12,500 (single) / $25,000 (MFJ)—with the same $150k/$300k MAGI phaseout.

Who this may help: hourly employees working significant overtime (manufacturing, logistics, healthcare, public safety, and similar industries).

Personal car loan interest deduction (up to $10,000/year)

A new deduction may allow up to $10,000 per year of personal-use car loan interest, but only for U.S.-final-assembly vehicles, with a phaseout beginning at $100,000 MAGI (single) / $200,000 MAGI (MFJ). You’ll generally need the VIN on the return.

Who this may help: taxpayers financing a vehicle for personal use who are under the income thresholds.

Itemizers: SALT cap increases significantly

For taxpayers who itemize, the SALT deduction cap (state and local taxes) is described as increasing to $40,000 (or $20,000 if married filing separately), up from $10,000 / $5,000, with a reduction beginning at $500,000 MAGI (or $250,000 MFS).

Who this may help: homeowners in higher property-tax areas, high earners with significant state income tax, and taxpayers whose itemized deductions are more likely to exceed the standard deduction.

Families: Child Tax Credit increases to $2,200

The Child Tax Credit maximum is listed as $2,200 per qualifying child for tax years beginning in 2025, with inflation indexing after 2025.

Who this may help: families with qualifying children—especially those optimizing withholding, dependent reporting, and credits.