7 New Tax Deductions Starting in 2025 (Some Are Easy To Qualify For)

While a lot of attention has been paid to how President Donald Trump's One Big Beautiful Bill Act (OBBB) reshapes health care and social programs, relatively few have noticed that the law brings some of the most significant changes to the U.S. tax code in decades.

The OBBB includes a number of new tax deductions that could put more money back in the pockets of everyday Americans, especially those struggling with tax debt. Many of these deductions are "above-the-line," meaning you don't have to itemize to claim them. That's great news for the majority of taxpayers who take the standard deduction.

Here are seven of the most notable new deductions and what they could mean for your finances.

For the first time, a portion of income from tips will be deductible on your federal income taxes. Specifically, you will be able to claim a deduction for up to $25,000 in tip income.

The OBBB says the deduction applies to those who "customarily and regularly" receive tips, and that the Treasury Department will later release a list of qualifying jobs. While this provision does not completely eliminate taxes on tips, the deduction will likely save workers in the restaurant, hospitality, and service industries hundreds of dollars per year in federal income tax.

In another first, workers who put in extra hours will be able to deduct up to $12,500 of qualified overtime pay ($25,000 for joint filers).

All employees who earn overtime pay qualify, although there is a modified adjusted gross income (MAGI) cap of over $150,000 for single filers and over $300,000 for joint filers — limits that also apply to the new tip deduction. Keep in mind the deduction is only for the "premium" portion of overtime pay (the extra half-time pay) and only for overtime mandated by federal law, not state laws or company policies.

Starting with the 2025 tax year, car buyers will be able to deduct up to $10,000 per year on the interest they pay on their auto loans. However, this only applies to loans on new, U.S.-assembled vehicles.

The auto loan deduction is available for personal-use vehicles only. It phases out for single filers with a MAGI over $100,000 and joint filers with a MAGI exceeding $200,000. Most taxpayers who are eligible for this deduction will likely save a few hundred dollars per year, although exact figures depend on how much interest you pay and your tax bracket.

Taxpayers aged 65 and older with a MAGI of less than $75,000 (single) or $150,000 (joint) now qualify for what's being called the "senior bonus" deduction.

This is an additional deduction of up to $6,000 for single filers and $12,000 for married couples filing jointly where both spouses are 65 or older. Savings will depend on your tax liability, but the right individual or joint filers could potentially pay thousands less in federal taxes.

The OBBB increases the cap on the SALT (state and local tax) deduction from $10,000 to $40,000 per household. This is a win for taxpayers who live in high-tax states and itemize their deductions.

For example, a couple that pays $40,000 in property taxes and state income taxes could now deduct the full amount, potentially saving them thousands on their federal tax bill. Keep in mind, however, this is not a full repeal of the SALT cap some politicians have called for, and it's scheduled to revert to $10,000 in 2030.

While gifts to charities have long qualified as tax deductions, the OBBB revises a pandemic-era rule to make cash gifts easier to claim.

The new provision allows those who don't itemize their taxes and take the standard deduction to deduct cash gifts of up to $1,000 ($2,000 for joint filers), up from $300 and $600 during the COVID-19 pandemic. Only cash donations to recognized charities qualify, and you will need a written acknowledgement of your gift.

Although OBBB doesn't specifically introduce any new deductions related to child care, it does expand three related subsidies that can potentially lower your tax liability.

The Act increases the child and dependent care tax credit for some families, raises the cap on how much employees can set aside tax-free for child care, and enhances a business tax credit that encourages employers to offer child care. While the changes are modest, they all help offset an expense many parents struggle with.

New tax deductions are always welcome, and the One Big Beautiful Bill Act delivers several that can actually lower the federal tax bills of millions of Americans. However, some of these new deductions are only temporary at this point.

The deductions on tips, overtime pay, and auto loan interest are all set to expire in 2028. While the next administration could renew these provisions, you shouldn't count on that to get ahead financially. Take advantage of the savings now, and let your representatives know which ones matter to you.