If you like saving money, you might actually enjoy filing your federal income tax return this year. Well, OK, that’s probably a stretch—nobody really likes doing their taxes. But you still might crack a smile when you see the four brand new tax deductions on this year’s return.
The new deductions were enacted as part of the “One Big Beautiful Bill” (OBBB), which was signed into law last July. They will help millions of Americans cut their federal income tax bill, starting with the 2025 tax year (you’ll file your return for the 2025 tax year in 2026). However, the deductions are only temporary, so you won’t be able to take advantage of them for very long (unless they’re extended down the road).
Here’s a quick rundown of the four new tax deductions available for the first time on the tax return you’ll file this year. Take a look to see if you can claim any of them. If so, you might be able to cut your tax bill by hundreds—or even thousands—of dollars!
1. ‘No Tax on Tips’
The first new deduction is for up to $25,000 in cash tips you received in 2025.
However, if your income is too high, you won’t qualify for the full amount. The $25,000 maximum is gradually reduced if your modified adjusted gross income (MAGI) exceeds $150,000 ($300,000 if you’re married and filing a joint return). The deduction is completely phased out if your MAGI is at least $400,000 ($550,000 for joint filers).
Young and the Invested Tip: For all the new deductions, MAGI is equal to the adjusted gross income reported on your tax return, plus any (1) foreign earned income or housing costs exempt from tax, and (2) income exempt from tax for residents of Guam, American Samoa, the Northern Mariana Islands, or Puerto Rico.
You can only deduct tips received “in an occupation which customarily and regularly received tips” before 2025. The IRS has a list of jobs that satisfy this requirement on its website.
You can claim the deduction whether you itemize or take the standard deduction. But you must have a Social Security number that’s valid for employment and include it on your tax return. If you’re married, you can’t claim the deduction if you and your spouse file separate returns (in other words, you must file a joint return).
The tip deduction is temporary. It only applies to the 2025 to 2028 tax years.
2. ‘No Tax on Overtime’
There’s also a new deduction for overtime pay. But it’s important to remember that it only applies to the “half” portion of “time-and-a-half” overtime compensation. So, for example, if you’re paid $20 per hour for the first 40 hours you work during a week, but you get $30 for each hour over 40, you can only deduct $10 for each hour of overtime worked.
The overtime deduction is capped at $12,500 ($25,000 for joint filers). However, the maximum amount is gradually reduced if your MAGI exceeds $150,000 ($300,000 in the case of a joint return). The deduction is reduced to $0 once your MAGI hits $275,000 ($550,000 for joint filers).
As with the deduction for tips, the overtime deduction is allowed regardless of whether you claim the standard deduction or itemize. Married couples also have to file a joint return in order to claim the deduction. Plus, you must have a Social Security number that’s valid for employment—and include it on your tax return—if you want to deduct overtime pay (ditto for a spouse claiming the deduction).
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3. Senior Deduction
A new tax deduction for seniors is available for the 2025 to 2028 tax years. Anyone who is at least 65 years old by the end of the tax year is eligible for the deduction.
If you’re married, you must file a joint return to claim the deduction—but your spouse can claim it, too, if they’re 65 or older. Again, you can claim the deduction whether you itemize or take the standard deduction. However, you must have a Social Security number valid for employment and provide it on your tax return (so does a spouse who’s claiming the deduction on a joint return).
The maximum deduction amount is $6,000 per eligible senior. So, for example, if you’re married and your spouse is at least 65, you can claim a combined deduction of up to $12,000 on a joint return. However, the $6,000 deduction for each person is gradually phased out when your MAGI surpasses $75,000 ($150,000 for joint filers). It’s whittled down to $0 when your MAGI exceeds $175,000 ($250,000 for joint filers).
Related: 11 Ways to Avoid Taxes on Social Security Benefits
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4. Car Loan Interest Deduction
The final new deduction is for up to $10,000 of interest paid on loans for the purchase of a new car, van, minivan, SUV, pickup truck, or motorcycle.
But the car loan interest deduction comes with several important restrictions.
For instance, the deduction is only available if you buy a vehicle after 2024. Final assembly of the vehicle must take place in the U.S., too. And the deduction doesn’t apply if you lease a vehicle, or for interest on loans to buy either:
— Commercial vehicles that aren’t used for personal purposes
— Fleet vehicles
— Vehicles with a salvage title
— Vehicles intended to be used for scrap or parts
If your MAGI exceeds $100,000 ($200,000 for married couples filing a joint return), the deduction begins to phase out at a rate of $200 for every $1,000 you make over the MAGI limit. It’s completely eliminated once your MAGI reaches $150,000 ($250,000 for joint filers).
The deduction is available whether you itemize or claim the standard deduction. But it’s only available for the 2025 to 2028 tax years.
Related: When and How to Adjust Your Tax Withholding
How to Claim the New Deductions
Use Schedule 1-A, which is a new form created by the IRS, to calculate and claim the four new deductions. The first part of Schedule 1-A is used to calculate your MAGI. That’s followed by additional parts for figuring each of the new deductions. Finally, the amount of all four deductions is combined into one amount, which is reported on Line 13b of Form 1040.
You must file Schedule 1-A with the IRS along with your 1040 form.
Young and the Invested Tip: All of the new deductions are “below-the-line” deductions. That means they’re reported on Form 1040 below the line showing your adjusted gross income (AGI). Since they don’t affect your AGI, they can’t help you qualify for other tax breaks (or for larger tax breaks) that have AGI-based qualifications or phase-outs. However, below-the-line deductions still lower your taxable income, which will help reduce your tax bill or increase your tax refund.
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Related: 15 Best Long-Term Stocks to Buy and Hold Forever
As even novice investors probably know, funds—whether they’re mutual funds or exchange-traded funds (ETFs)—are the simplest and easiest ways to invest in the stock market. But the best long-term stocks also offer many investors a way to stay “invested” intellectually—by following companies they believe in. They also provide investors with the potential for outperformance.
So if you’re looking for a starting point for your own portfolio, look no further. Check out our list of the best long-term stocks for buy-and-hold investors.
Related: 10 Best Monthly Dividend Stocks for Frequent, Regular Income
The vast majority of American dividend stocks pay regular, reliable payouts—and they do so at a more frequent clip (quarterly) than dividend stocks in most other countries (typically every six months or year).
Still, if you’ve ever thought to yourself, “it’d sure be nice to collect these dividends more often,” you don’t have to look far. While they’re not terribly common, American exchanges boast dozens of monthly dividend stocks.
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