A wave of tax policy changes is set to reshape the filing landscape this season, following the passage of last summer’s wide-ranging tax and spending bill. For many Americans, these changes mean the opportunity to claim new deductions (even without itemizing) with increased eligibility thresholds and revised benefit structures.
This year’s tax filing season begins Monday and runs through April 15. Among the new provisions: deductions for tips, overtime pay, and auto loan interest, as well as enhanced breaks for senior citizens and a higher standard deduction. While the law offers broader tax relief, especially for middle- and high-income earners, it also raises questions about its long-term equity and fiscal impact.
New Deductions Expand Eligibility for Workers and Consumers
Workers in several service industries will now be able to deduct up to $25,000 in tip income from their taxable earnings. According to The Washington Post, the deduction applies to a broad range of occupations including bartenders, babysitters and tailors, provided they file jointly if married and earn under $150,000 individually or $300,000 as a couple. Eligibility requires a valid Social Security number, excluding some immigrant workers.
Overtime pay is also partly shielded from taxes under the same income limits, with a cap of $12,500 for individual filers and $25,000 for joint returns. This deduction applies to the “half” portion of time-and-a-half earnings typically paid for extra hours worked. As with tips, taxpayers will need to calculate these amounts themselves this year due to a delay in IRS form updates.
Consumers who financed new vehicle purchases in 2025 can now deduct up to $10,000 in auto loan interest, as long as the car’s final assembly took place in the United States. According to the Congressional Budget Office, this provision was included in response to rising vehicle costs, with average prices for new cars surpassing $50,000. The deduction phases out for individuals with incomes over $100,000 and couples earning more than $200,000.
These deductions, while not contingent on itemizing, reflect a broader effort to ease tax burdens amid inflation and rising consumer expenses. The IRS expects about six million filers to benefit from the tip deduction alone.
Seniors and Families Receive Boosted Write-Offs under New Law
Americans aged 65 and older will benefit from an expanded deduction of $6,000 under the revised policy, regardless of whether they itemize. According to the Joint Committee on Taxation, the change applies to individuals earning up to $75,000 and couples earning up to $150,000, aiming to reduce taxable income for moderate-income seniors.
The decision to increase the deduction rather than exempt Social Security benefits from taxation, as proposed by President Donald Trump, was framed as a more targeted approach. As a result, fewer seniors are expected to owe federal tax on their benefits this year.
Meanwhile, the standard deduction has risen significantly: $15,750 for individual filers, $23,625 for heads of household, and $31,500 for joint filers. The bill also raised the Child Tax Credit to $2,200 per child and lifted the cap on state and local tax (SALT) deductions from $10,000 to $40,000, according to the Institute on Taxation and Economic Policy.
Despite the broad relief, independent analysis indicates the new law disproportionately benefits higher earners. The top 1% of households, those earning more than $916,900, are expected to save $64,590 on average, while the bottom 20% will see a $110 cut, a difference that reflects how the legislation reallocates tax advantages.
With the filing window now open, taxpayers are being urged to review their eligibility under the new rules carefully. The absence of updated IRS forms for several deductions means individual calculation will be key to claiming full benefits this year.
