The 2025 federal tax law added temporary deductions for qualified tips (up to $25,000), qualified overtime (up to $12,500, or $25,000 joint), an additional $6,000 deduction for individuals 65 and older, and up to $10,000 of interest on a qualifying new vehicle loan, each with income phaseouts.
The federal tax legislation enacted in July 2025 created four temporary deductions that apply for tax years 2025 through 2028. The IRS describes them on its Working Families Tax Cuts pages.
Qualified tips: a deduction of up to $25,000 per year for tips received in occupations that customarily receive them, phasing out for modified adjusted gross income over $150,000 ($300,000 for joint filers). Qualified overtime: a deduction of up to $12,500 ($25,000 for joint filers) for the premium portion of overtime pay required under the Fair Labor Standards Act, with the same phaseout thresholds.
Seniors: an additional $6,000 deduction for each individual who is 65 or older by year end ($12,000 for a married couple where both qualify), phasing out over $75,000 ($150,000 for joint filers). Car loan interest: a deduction of up to $10,000 of interest on a loan for a new personal use vehicle assembled in the United States, phasing out over $100,000 ($200,000 for joint filers).
Practical points for Dearborn Heights and Metro Detroit clients: restaurant, salon, and service workers should keep tip records and confirm their employer reports tips and overtime separately on Form W-2; the senior deduction is available whether or not you itemize; and the car loan deduction depends on where the vehicle was assembled, so keep the window sticker or the VIN based confirmation.
Information here is general and is not advice for your situation. For advice about your situation, contact us.
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