Tax season is here, and new rules could put thousands of dollars back in your pocket. Filing early and knowing these deductions can help you maximize your refund.
Schedule 1-A is a new IRS form for 2025-2028, filed with Form 1040, that lets taxpayers claim four deductions—tips, overtime, car loan interest, and an enhanced senior deduction—reducing taxable income whether taking the standard deduction or itemizing.
1. Senior Deduction
Taxpayers 65 and older can deduct up to $6,000 from their taxable income. Joint filers over 65 may deduct up to $12,000. The deduction phases out for individuals with adjusted gross income over $75,000 or $150,000 for joint filers.
2. Car Loan Interest
Interest on new car loans for vehicles is deductible, up to $10,000, but there is a catch: the vehicles must be assembled in the U.S. to qualify. Leases do not qualify. The deduction phases out for incomes above $100,000 individually or $200,000 jointly.
3. No Tax on Tips and Overtime
Employees and self-employed workers can deduct qualified tips up to $25,000 and overtime up to $12,500 individually, or $25,000 jointly. Detailed records are required to qualify. Tip and overtime deductions are temporary, available through 2028.
4. Increased Child Tax Credit
The child tax credit rises to $2,200 per child under 17. Children must live with the taxpayer more than half the year and have a valid Social Security number. Additionally, at least one parent must have a valid Social Security number.
Additional deductions, including state and local tax adjustments, could add around $1,000 more for some taxpayers. Filing electronically with direct deposit ensures faster refunds. Filing early increases the likelihood of a larger return. Our advice: Document your deductions, file early, and use Schedule 1-A with your federal return to get the most from this tax season.
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