Personal Taxes

The IRS began accepting 2025 returns on January 26 and many will see increased refunds. Here's what's new:

The Standard deduction has increased to $15,750 single and $31,500 MFJ. this is a 7.3% increase over last year.

Car loan interest up to $10,000 is now deductible. Even if you don't itemize, but its only for new cars purchased after 2024 and only for cars assembled in the US (you need to provide the VIN and it get verified). This will be a boon to car makers, a subsidy to buy a new car. Phases out at $100,000 single and $200,000 MFJ.

$25K of Tips is now tax deductible. Must be in a "tipped occupation" and must be voluntary - meaning the customer freely chose the amount. Service charges, automatic gratuities, and other mandated fees do not qualify. Phases out at AGI of $150,000 single and $300,000 MFJ.

Overtime is now tax-deductible. But its complicated. Only the 'premium' portion of overtime. If you get "time and a half" for overtime, then its just the "and a half" that is tax deductible. If you work overtime and get straight pay for it, you don't get any benefit from this new rule. You're limited to $12,500 as a single filer and $25,000 as married filing jointly. Phases out starting at AGI of $150,000 single and $300,000 MFJ.

Trump Accounts and new baby credits under the Working Families Tax Cuts. This gives you a free $1000 deposit into a new account you must set up for them. Sounds simple enough, but of course its a rabbit hole. Here's how they work:

• Parents, guardians, or others can establish a Trump Account for an eligible child

• Trump Accounts cannot be funded before July 4, 2026

• The federal government will make a one-time $1,000 contribution for each eligible child’s account

• Authorized contributions from individuals and employers are allowed up to $5,000 per year

• Employers can contribute up to $2,500 per year toward an employee’s or dependent’s Trump Account without it counting as taxable income for the employee

• Funds must be invested in certain mutual funds or exchange-traded funds that track a U.S. stock index such as the S&P 500

• Generally, money cannot be withdrawn before the year the child turns 18

• After that point, the account is treated like a traditional IRA with similar tax rules

Basically, new US Citizen babies born after January 1, 2025, have a retirement account.

Several Electric vehicle and home energy credits are eliminated, including:

• New Clean Vehicle Credit (30D): Not allowed for any vehicle acquired after Sept. 30, 2025

• Used Clean Vehicle Credit (25E): Not allowed for any vehicle acquired after Sept. 30, 2025

• Qualified Commercial Clean Vehicle Credit (45W): The credit will not be allowed for any vehicle acquired after Sept. 30, 2025

• Energy Efficient Home Improvement Credit (25C): Not allowed for any property placed in service after Dec. 31, 2025

• Residential Clean Energy Credit (25D): Not allowed for any expenditures made after Dec. 31, 2025

The SALT (State and Local Tax) deduction limit is increased from $10,000 ($5,000 single) to $30,000 ($15,000 single) and starts phasing back down to $10,000 ($5,000 single) at a MAGI of $400,000 ($200,000 single).

If you make use of Health Savings Accounts, you will find several expansions to what can be included.

Other changes that impact only some people include credits for adopting, clarification and wind-down of PTC credits if you received overpayments.