The 2025 tax year brings new opportunities and important updates for taxpayers, including targeted deductions for overtime pay, tip income, and seniors. Expanded through the “One Big Beautiful Bill Act,” these changes aim to support working Americans and retirees as they prepare for next year’s tax season.
Deductions for Overtime and Tip Income
Workers earning overtime in 2025 can deduct up to $12,500 (single) or $25,000 (married filing jointly) from federal taxable income, but only the “bonus” or extra half-time portion of overtime pay qualifies—not regular wages. Similarly, employees who earn tips can now deduct up to $25,000 in qualified tip income. Both deductions phase out at $150,000 for singles and $300,000 for married filers, and are available through 2028.
New Senior Bonus Deduction
Taxpayers age 65 or older can claim a $6,000 “bonus” deduction (or $12,000 for married senior couples) even if they itemize—a change expected to provide meaningful relief for retirees. The benefit phases out at $75,000 for singles and $150,000 for couples, supplementing (not replacing) the existing senior standard deduction.
State-by-State Considerations
Not all states conform with these new federal deductions. Some states, such as California and New York, do not recognize the overtime or senior bonus tax deductions in state tax returns, potentially reducing the overall tax break depending on residency. Taxpayers should check with state tax authorities before filing.
Final Tips for 2025 Filers
Tax experts recommend collecting pay stubs, employer documentation, and consulting IRS Schedule 1-A (for overtime and tip deductions) and Schedule S (for senior bonus) to ensure full eligibility and compliance. Strategic planning and early preparation can help Americans make the most of these new rules in the months ahead.