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Procrastinators, beware: Tax Day is April 15, less than a month away. Before you file a return, make sure you're up to date on all of the new deductions that are available for the first time. Then, take advantage of the ones that apply to you.
These tax breaks offer easy ways to pocket more cash. Here are the new deductions you should understand before filing your return.
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Deduction for tipped workers
Workers who earn tips will get an extra tax break from 2025 through 2028. Qualified tips include both cash and charged tips, including shared tips. The maximum deduction is $25,000, and the amount cannot exceed the worker's net income.
It's important to note that this tax break is available for those in occupations that "customarily and regularly" receive tips, according to the IRS. The agency has a list of such job categories on its website.
In addition, the tax break begins to phase out for single taxpayers with a modified adjusted gross income (MAGI) over $150,000 — or $300,000 for joint filers.
Overtime pay deduction
If you work a lot of overtime, you might get a nice tax break due to a new rule for those who log extra hours. For the years 2025 to 2028, you can deduct the portion of your pay that is above your regular pay rate. The IRS notes that this is the "half" portion of "time-and-a-half."
The top deduction is $12,500 — or $25,000 for joint filers. The phase-out rules are the same as for the deduction for tipped workers.
Enhanced deduction for seniors
Seniors who are 65 or older may be eligible to claim an extra $6,000 deduction in addition to the standard deduction already available to seniors. Each senior can claim the break, which means older married couples can count on an extra $12,000 deduction.
This tax break is in effect for the tax years 2025 through 2028. The perk begins to phase out for single taxpayers with a MAGI above $75,000 — or $150,000 for joint filers.
The enhanced deduction means seniors 65 and older can shelter a much larger proportion of their income from income taxes than younger folks. For example, it's possible a senior could take all of the following deductions:
- Standard deduction: $15,750
- Additional standard deduction for seniors: $2,000
- New senior deduction: $6,000
That is a total of $23,750 in deductions.
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Car loan interest deduction
If you have a car loan between the years 2025 and 2028, you can deduct up to $10,000 in interest paid on the loan annually. To qualify, you must purchase the vehicle for personal use. If you lease a car, you cannot take advantage of the tax break.
In addition, only cars that had "final assembly" in the United States qualify for the deduction.
This deduction begins to phase out for single taxpayers with a MAGI above $100,000 — or $200,000 for joint filers.
Higher SALT deduction cap
The cap on the "state and local taxes" deduction — commonly known as SALT — is being raised temporarily between the years 2025 and 2029.
The deduction cap is jumping from $10,000 to $40,000. The process will be gradual over a number of years and will top out in 2029. Unless the new rule is extended, the cap will drop back to $10,000 after that.
The SALT deduction is particularly valuable to taxpayers who live in states with high taxes. However, you have to itemize to get the tax break. In addition, full deduction phases out for filers with a MAGI above $500,000.
Bigger standard deduction
Standard deduction amounts ballooned in the wake of the 2017 Tax Cuts and Jobs Act. Although the higher standard deduction was supposed to be temporary, the 2025 One Big Beautiful Bill Act made the larger deductions permanent.
In addition, the deduction amounts have been adjusted higher for 2025. They are now as follows:
- Single or married filing separately: $15,750
- Head of household: $23,625
- Married filing jointly or qualifying surviving spouse: $31,500
Coming soon: Charitable gift deduction for 2026
You will have to wait one more year to take a new charitable gift deduction. For the 2026 tax year, individuals who take the standard deduction can take up to a $1,000 deduction for gifts to a qualified charity. For married couples, the amount is $2,000.
Previously, you had to itemize to take the charitable deduction.
It's important to note that this new charitable deduction is not available for the 2025 tax year. That means you cannot take this deduction until you file a return in early 2027.
Talk to a tax professional about the new deductions
The new deductions come with rules about who qualifies and how much they can deduct. If that sounds a bit overwhelming, know that you don't have to try to figure it out on your own.
Instead, consult a tax professional who can guide you through the process.
Bottom line
This year's new deductions can offer real savings, especially if you are still trying to get out of tax debt you accumulated in previous years.
To make sure you take advantage of these and all other deductions and credits, consider consulting with a tax professional who can help you cut your obligation to the government.
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