💵 No Tax on Tips

Service industry workers can now deduct qualified tips from their federal taxable income. This is a deduction, not a complete exemption—payroll taxes (Social Security and Medicare) still apply.

• Applies to food service, hospitality, gaming, entertainment, and gig economy workers (Uber, Lyft, etc.)
• Deduction phases out for income over $150,000 ($300,000 for married filing jointly)
• Keep a daily tip log or use pay stubs to document your tip income
• Note: Illinois has not yet adopted this deduction—state taxes may still apply to tips

⏰ No Tax on Overtime

Hourly workers can deduct the "premium" portion of overtime pay (the extra 0.5x in time-and-a-half) from federal taxable income. Like the tips provision, payroll taxes still apply.

• Applies to FLSA non-exempt workers (typically hourly employees)
• Only the "premium" portion is deductible—not your regular hourly rate
• If your pay stub shows combined overtime, use 1/3 of that amount as your deductible premium
• Deduction phases out for income over $150,000 ($300,000 for married filing jointly)
• Salaried exempt employees generally do not qualify

👴 Additional Deduction for Seniors

Taxpayers age 65 or older can claim an additional deduction on top of the standard deduction. This helps offset taxes for retirees, though it does not eliminate taxes on Social Security benefits entirely.

• Available whether you itemize or take the standard deduction
• Phases out at 6% rate for income over $75,000 (single) or $150,000 (married)
• Fully phases out at $175,000 (single) or $250,000 (married)
• This is in addition to the existing senior standard deduction increase

🚗 Auto Loan Interest Deduction

A new deduction allows taxpayers to deduct interest paid on auto loans for American-made vehicles. This applies to cars manufactured in the United States.

• Vehicle must be manufactured in the USA
• Deduction applies to interest paid on the loan, not the vehicle price
• Contact us for details on eligibility and documentation requirements

👤 Single Filers

The standard deduction for single filers has increased significantly under the extended TCJA provisions.

👫 Married Filing Jointly

Couples filing together see a proportional increase in their standard deduction.

🏠 Head of Household

Single parents and those supporting dependents benefit from a higher deduction.

💰 Lower Tax Rates Extended

The 2017 Tax Cuts and Jobs Act (TCJA) provisions that were set to expire have now been made permanent. This means the lower tax rates you've enjoyed since 2018 will continue.

What this means for you: Without this extension, rates would have increased (e.g., the 12% bracket would have returned to 15%, the 22% to 25%, etc.). The permanent extension locks in these savings.

👶 Child Tax Credit

The Child Tax Credit remains at $2,000 per qualifying child under age 17. Up to $1,700 of this credit is refundable (meaning you can receive it even if you owe no tax).

• Child must be under 17 at end of 2025
• Child must have a valid Social Security number
• Income phase-out begins at $200,000 (single) or $400,000 (married filing jointly)

🍼 Child and Dependent Care Credit

If you pay for childcare or dependent care so you can work, you may qualify for a credit of up to $3,000 for one dependent or $6,000 for two or more.

The credit percentage ranges from 20% to 35% of your expenses, depending on your income.

🎓 Education Credits

American Opportunity Credit: Up to $2,500 per eligible student for the first four years of college. 40% is refundable (up to $1,000).

Lifetime Learning Credit: Up to $2,000 per return for any level of education, including graduate school and professional courses.

📝 Qualified Business Income (QBI) Deduction

Self-employed individuals and small business owners (sole proprietors, S corps, partnerships) can still deduct up to 20% of their qualified business income.

• Applies to pass-through businesses (Schedule C, S Corps, Partnerships)
• Income limits apply for certain service businesses
• No change to the 20% rate for 2025

🚗 Standard Mileage Rate

If you use your personal vehicle for business, the IRS standard mileage rate for 2025 is 70 cents per mile for business use.

Medical and moving mileage (for active military): 21 cents per mile. Charitable mileage remains at 14 cents per mile.

💼 Self-Employment Tax

The Social Security wage base increased to $176,100 for 2025. This is the maximum amount of earnings subject to Social Security tax (12.4% combined rate for self-employed).

Medicare tax (2.9% for self-employed) continues to apply to all earnings with no cap.

💵 401(k) and 403(b) Contribution Limits

Catch-up contributions (age 50+): Additional $7,500 allowed.

🏛️ IRA Contribution Limits

The annual IRA contribution limit remains at $7,000 for 2025 ($8,000 if age 50 or older).

• Traditional IRA contributions may be tax-deductible
• Roth IRA contributions are not deductible but grow tax-free
• Income limits apply for Roth IRA eligibility and Traditional IRA deductibility

📅 Key Deadlines for 2025 Returns

• April 15, 2026: Individual tax returns due (Form 1040)
• March 15, 2026: S Corp and Partnership returns due (Forms 1120-S, 1065)
• April 15, 2026: First quarterly estimated payment for 2026

📱 Electronic Filing & Payments

The IRS continues to encourage electronic filing and payment. Paper refund checks are being phased out, with electronic payment requirements expected by 2027.

We recommend: Set up your IRS online account at irs.gov/account to view your tax history, make payments, and manage your account.