Here are the important changes that affect your 2025 taxes and beyond:
Increase in Deductibility for State / Local Taxes
What changes: Before 2025, state, real estate, and excise taxes combined were only deductible up to $10,000 in aggregate. That limit is now $40,000.
Further Restrictions: N/A
Income Limit: Yes, if your income is greater than $500,000, the excess deduction is phased down.
Increased Standard Deduction for Senior Citizens
What changes: There is an additional deduction of up to $6,000 for each person who is over 65 by year-end.
Further Restrictions: N/A
Income Limit: Yes, if your income is greater than $75,000 ($150,000 married), the deduction is phased down.
No Tax on Tips
What changes: There is a deduction of up to $25,000 on tips earned (provided they were properly reported as income on W-2).
Further Restrictions: Only applies to industries where tips are customary (restaurant staff, Uber drivers, etc).
Income Limit: Yes, if your income is greater than $150,000 ($300,000 married), the deduction is phased down.
No Tax on Overtime Premium
What changes: There is a deduction for overtime premium up to $12,500 ($25,000 married).
Further Restrictions: Only applies to the “extra” pay earned. For example, if you get 1.5x pay for OT, it’s only the “0.5”. Extra work may be required to determine the appropriate amount.
Income Limit: Yes, if your income is greater than $150,000 ($300,000 married), the deduction is phased down.
Deduction for Car Loan Interest
What changes: There is a new deduction for interest on a new car purchased in 2025, up to $10,000.
Further Restrictions: The loan must be secured by the vehicle; the vehicle must be a new car; have had final assembly in the US; and be under 14,000 lbs. Use the VIN Decoder website at: https://www.nhtsa.gov/vin-decoder to see if it qualifies.
Income Limit: Yes, if your income is greater than $100,000 ($200,000 married), the deduction is phased down.
Charitable Contributions
What changes: Taxpayers who do not itemize their deductions can still deduct up to $1,000 ($2,000 if married) in charitable contributions and still take the standard deduction.
Further Restrictions: Taxpayers who do itemize will have their allowable deductions reduced. Only contributions greater than 0.5% of income will be allowed as a deduction.
Income Limit: None
“Trump Accounts”
What changes: A new type of account that allows for tax-deferred contributions. The government will fund the account with $1,000 for children born 2025 to 2028.
Further Restrictions: N/A
Income Limit: None
401k, IRA, ROTH Increased Contribution Limits
What changes: Starting in 2026: contribution limits increase to $24,500 (for 401k), $7500 (IRAs & ROTHs). “Catch-up” limits for people over 50 is an additional $8,000 (401k) and $1,100 (IRAs & ROTHs)
Further Restrictions: If you’re age 60 – 63, you can make a super-charged catch-up contribution of $11,250 instead of $8,000. This is for 401k plans only.
Income Limit: No income restrictions for 401(k)s. There are various restrictions for IRAs / ROTHs. We can help navigate those for you.
We hope this helps. Perhaps it just caused more confusion. That’s OK! That’s why we have the tax team. And it’s even bigger this year. So fire away with any questions. We’re ready for them.
Cheers,
Your Great Oak Team