There are indeed some beautiful provisions for individuals in the new tax act.
“Qualified Tips” are Deductible from Income Effective in 2025, taxpayers may deduct tips. Maximum deduction is $25,000. Tips must be received in occupations which appear on the IRS List of Occupations which Receive Tips. The tips must be reported on Form W-2 or 1099. Deduction phased out for taxpayers with Modified Adjusted Gross Income (MAGI) over $150,000.
New Deduction for Overtime Pay Employees may deduct the overtime pay that exceeds their regular rate of pay (the “half” portion of “time and a half”). Overtime must be separately reported on Form W-2 or 1099. Maximum annual deduction is $12,500 ($25,000 for joint filers). Deduction available for itemizing and non-itemizing taxpayers. Effective for 2025. Deduction is phased out for taxpayers with Modified Adjusted Gross Income (MAGI) over $150,000.
Deduction for Seniors Individuals 65 or older may claim an additional $6,000 deduction. Married couples can receive a $12,000 deduction. The deduction is available for itemizing and non-itemizing taxpayers, effective in 2025. Deduction phases out for taxpayers with MAGI between $75,000 -$175,000 ($150,000-$250,000 for joint filers).
Child Tax Credit For 2025, the Child Tax Credit increased from $2,000 per child to $2,200.
Charitable Deduction for Non-Itemizers Charitable deduction for cash gifts up to $1,000 for single filers and $2,000 for joint filers available to non-itemizers. Effective starting 2026.
Interest Deduction for Car Loans Interest paid on a loan for a “qualified” vehicle may be deductible. A qualified vehicle is a new vehicle whose final assembly was in the US. Effective for 2025 for loans originating after Dec. 31, 2024. Maximum deduction is $10,000 and is available for itemizers and non-itemizers. Deduction phases out for taxpayers with AGI over $100,000 ($200,000 for joint filers)
SALT Deduction Increased For 2025, the SALT deduction cap is $40,000. For years 2026 -2029, cap increases 1% a year. Cap phases down if Modified Adjusted Gross Income exceeds $500,000.
529 Plan Expansion The use of 529 plans was expanded effective 2025 and includes curriculum materials, books, test fees, tutoring and educational services for students with disabilities. The K-12 education distribution limit increases from $10,000 to $20,000 per child, starting with distributions made after Jan. 1, 2026.
Please consult with a tax professional at Urbach & Avraham, CPAs to help you analyze the impact of these new provisions on your personal situation.
