This year’s filing season brings a number of new tax credits and deductions you should be aware of. Here are a few new deductions from the IRS website which may be of particular interest. For more information regarding these tax benefits or to view the full list, visit www.irs.gov.
Deduction for Seniors (IRS Section 70103)
Overview of the Deduction
• Effective 2025 through 2028, individuals age 65 and older may claim an additional $6,000 deduction.
• This is in addition to the standard deduction for seniors available under existing law.
• Applies per eligible individual (or $12,000 for a married couple if both spouses qualify).
• Phases out for taxpayers with modified adjusted gross income over $75,000 ($150,000 for joint filers).
Who Qualifies
• You must be age 65 on or before the last day of the tax year.
• Available for eligible taxpayers (both itemizing and non-itemizing).
How to Claim the Deduction
• Include your Social Security number on the return.
• File jointly, if you’re married.
No Tax on Tips (IRS Section 70201)
Overview of the Deduction
• Effective 2025 through 2028, employees and self-employed individuals may deduct qualified tips they received in occupations the IRS identified as “customarily and regularly receiving tips” on or before December 31, 2024, and are reported on a Form W-2, Form 1099, another statement furnished to the individual, or on Form 4137 if the individual directly reports the tips.
• “Qualified tips” include voluntary cash or charged tips received from customers, including shared tips.
• Maximum annual deduction is $25,000.
• For self-employed individuals, deduction cannot exceed net income (before this deduction) from the trade or business where tips were earned.
• Phases out for taxpayers with modified adjusted gross income over $150,000 ($300,000 for joint filers).
Who Qualifies
Individuals who:
• Have a Social Security number (SSN)
• Claim itemized or non-itemized deductions
Who Doesn’t Qualify
Individuals who are:
• Self-employed in a Specified Service Trade or Business (SSTB) under Section 199A
• Employees of an employer in an SSTB
How to claim the deduction
• Include your Social Security number on the return
• File jointly if you’re married
No Tax on Overtime (IRS Section 70202)
Overview of the deduction
• Effective 2025 through 2028, individuals may deduct the portion of qualified overtime pay that exceeds their regular rate of pay (for example, the “half” portion of “time-and-a-half”).
• Overtime must be reported on Form W-2, Form 1099, another statement furnished to the individual, or directly by the individual.
• Maximum annual deduction is $12,500 ($25,000 for joint filers).
• Phases out for taxpayers with modified adjusted gross income over $150,000 ($300,000 for joint filers).
Who qualifies
Taxpayer who:
• Have a Social Security number (SSN)
• Claim itemized or non-itemized deductions
How to claim the deduction
• Include your Social Security number on the return.
• File jointly if you’re married.
No Tax on Car Loan Interest (IRS Section 70203)
Overview of the new deduction
• Effective 2025 through 2028, individuals may deduct interest paid on a loan used to purchase a qualified vehicle for personal use that meets other eligibility criteria. Lease payments do not qualify.
• Maximum annual deduction is $10,000.
• Phases out for taxpayers with modified adjusted gross income over $100,000 ($200,000 for joint filers).
What counts as qualified interest
Interest must be paid on a loan that:
• Originated after December 31, 2024
• Was used to purchase a vehicle originally used by the taxpayer
• Was secured by a lien on the vehicle
• Was for a personal-use (nonbusiness) vehicle
If a qualifying vehicle loan is later refinanced, interest paid on the refinanced amount is generally eligible for the deduction.
What counts as a qualified vehicle
A qualified vehicle is a car, minivan, van, SUV, pickup truck or motorcycle that:
• Has a gross vehicle weight rating of less than 14,000 pounds
• Underwent final assembly in the United States.
To verify final assembly, check one of these:
• The vehicle label at the dealership
• The vehicle identification number (VIN) · The National Highway Traffic Safety Administration, NHTSA VIN Decoder (verify vehicle assembly location)
Who qualifies
• Available to both itemizing and non-itemizing taxpayers.
• You must include the VIN on your return for any year you claim the deduction.
Need Help?
If you have more questions, we have the answers at Dakotaland Financial Services. To get one of our tax experts on your team, give us a call at 605-353-8777 or visit us at www.DakotalandFS.com or stop by 1371 Dakota Ave S., Suite 100 Huron, SD 57350.
*Dakotaland Financial Services, LLC is a (CUSO) Credit Union Service Organization, a Separate Entity of Dakotaland Federal Credit Union.
