2025 Deductions Include: Overtime; Tips; Seniors; Car Loan Interest
It’s that time again! As you begin gathering tax documents for your preparer, this article highlights several new deductions available for the 2025 tax year and explains what documentation you may need to claim them, as it may not be readily available. These include the Senior Deduction, Overtime Deduction, Tips Deduction, and Car Loan Interest Deduction.
Senior Deduction
Many taxpayers were told that Social Security income would no longer be taxable. While that is not the case, the One Big Beautiful Bill Act introduced a new deduction for taxpayers who are age 65 or older by the end of 2025.
No additional documentation is required to claim this deduction. However, married taxpayers must file a joint return in order to qualify.
Overtime Deduction
The overtime deduction applies only to the portion of overtime pay that exceeds your regular hourly rate.
For example, if your regular rate is $20 per hour and your overtime rate is $30 per hour (time-and-a-half), only the $10 premium portion is eligible for the deduction.
Employers may not separately report overtime-eligible wages on Form W-2. If this information is not clearly shown, you will need to provide supporting documentation for your tax preparer, such as:
- Pay stubs
- Payroll summaries
- Your own calculations and logs showing eligible overtime wages
Tips Deduction
Taxpayers who receive cash tips may be eligible for the new tips deduction only if their occupation appears on the IRS-approved list of tipped occupations - IRS Tips Occupations. If your occupation does not appear on this list, you are not eligible for the deduction.
Employers or clients may not report the eligible tips on Forms W-2 or 1099. Your employer is not required to furnish this information to you for tax year 2025 but will be required for tax year 2026. If you have maintained your own records, those may be used as support. If you plan to claim the tips deduction, please provide any documentation used to track your tips, such as:
- Daily tip logs
- Receipts
- Pay stubs
- Other supporting records
Car Loan Interest Deduction
For certain eligible passenger vehicles acquired in 2025, interest paid may be deductible.
To qualify:
- The vehicle must be new (not previously owned)
- It must be assembled in the United States
- Eligible vehicles include cars, minivans, vans, SUVs, pickup trucks, and motorcycles
- The vehicle must have a gross vehicle weight under 14,000 pounds
To verify eligibility, you must provide your tax preparer with the vehicle’s make, model, and VIN. The VIN is required to claim the deduction.
For 2025, lenders are not required to issue Form 1098-VLI reporting vehicle loan interest paid. However, they must make this information available through:
- An online account portal
- Monthly or annual statements
- Other comparable documentation
If you intend to claim this deduction, please locate and submit this information to your tax preparer.
Please reach out to Holsinger, P.C. with any questions.
