Are you ready to uncover the secrets of the new tax breaks that could potentially save you money? While the average U.S. taxpayer can expect a refund increase of $300 to $1,000 this tax season, some of the most talked-about tax breaks are unlikely to benefit most people. But here's where it gets controversial... Let's dive into the details and explore which taxpayers might actually qualify for these new deductions.
'No Tax on Tips' - A Sliver of Taxpayers Benefit
Most taxpayers knew this wouldn't affect them, as only about 2.5% of workers receive tips, according to The Budget Lab at Yale. Similarly, the Tax Policy Center estimated that about 3% of U.S. households will avoid tax on tips, with the average household saving around $40. This group includes food servers, bartenders, hairdressers, Uber drivers, and tour guides. However, there are restrictions: tipped workers can claim no more than $25,000 in tips for the year, and the benefit phases out for single filers with modified adjusted gross incomes over $150,000 per year, and $300,000 for joint filers.
'No Tax on Overtime' - Fewer Than 1 in 10 Workers Benefit
'No tax on overtime' is expected to benefit about 9% of U.S. workers, according to The Tax Policy Center. However, this benefit excludes salaried employees and hourly employees who never get a chance to work more than 40 hours per week. Among the group of overtime workers who will benefit from this tax break are city and county employees in Oregon's most populous county, including firefighters, police officers, and jail deputies. But many people who log loads of overtime may run into a wall with this deduction, as the IRS is allowing up to $12,500 in overtime to be deducted for single filers, or $25,000 for joint filers.
About Half of Older Taxpayers Will Save Hundreds
The Tax Policy Center estimated that about half of taxpayers 65 and older will benefit from a new $6,000 deduction tailored just for their older age group. Analysts estimate it'll benefit the average elderly taxpayer with $450 more back in their pocket. The deduction starts phasing out for single filers with a modified adjusted gross income of $75,000 or $150,000 for joint filers.
Most Car Buyers Don't Qualify for 'No Tax on Car Loan Interest'
This deduction also will exclude most people with car loans because it doesn’t apply to the approximately three out of four cars sold that are used cars. This new break applies only to taxpayers who bought a new car in 2025, and in future tax years, through 2028. The benefit also doesn’t apply to people leasing cars. Taxpayers who do qualify for this break can deduct up to $10,000 per year in interest.
Small Boost in Store for 90% of Taxpayers
Historically, close to 90% of taxpayers take the standard deduction, which is a set amount that a person doesn’t have to pay taxes on. So this year’s increase of 10% — that’s faster than inflation, which stood at about 3% — will affect most taxpayers. The standard deduction for the 2025 tax year will rise by $750 — to $15,750 — for single filers or married people filing separately. It’ll increase by $1,500 for married couples filing jointly, to $31,500.
Money for Families with Children Benefits Tens of Millions
The Child Tax Credit, too, will affect a wide cross-section of U.S. taxpayers — tens of millions of them. For tax year 2025, the credit grows by $200 year over year, to $2,200 per child. However, the credit only applies to single filers with annual incomes up to $200,000, or $400,000 for joint filers. Above those thresholds, parents may be able to claim a partial credit.
To Claim Most of These Deductions, You Must Fill Out This New Form
The IRS has released its new Schedule 1-A form, which taxpayers must complete to claim any four of the new tax breaks: 'no tax on tips', 'no tax on overtime', the $6,000 deduction for elderly taxpayers, and 'no tax on car loan interest'. The form can be found here. So, are you ready to take advantage of these new tax breaks? Remember, it's important to carefully review the details and ensure you qualify before filing your taxes. Don't miss out on potential savings! What do you think about these new tax breaks? Do you think they go far enough to help taxpayers, or are there other changes you'd like to see?
