"No tax on tips" oversells it — the fine print decides whether you get $25,000 or $0. The real rules for all five new deductions: who qualifies, the phase-outs, why payroll tax still applies, and what to document before your W-2 lets you down.
The new tax law added five deductions that most people have heard of and almost nobody understands precisely. The headlines — “no tax on tips,” “no tax on overtime” — oversell what the law does, and the fine print decides whether you get $10,000 or $0. Here is each one, with the rules that actually matter.
| Deduction | Max amount | Years | Phase-out begins (MAGI) |
|---|---|---|---|
| Tip income | $25,000 | 2025–2028 | $150,000 / $300,000 joint |
| Overtime pay | $12,500 / $25,000 joint | 2025–2028 | $150,000 / $300,000 joint |
| Seniors (65+) | $6,000 per person | 2025–2028 | $75,000 / $150,000 joint |
| Car loan interest | $10,000 | 2025–2028 | $100,000 / $200,000 joint |
| SALT cap increase | $40,000 cap (2025) | 2025–2029 | Phases down above $500,000 |
One structural point before the details: the first four are available whether or not you itemize — they sit alongside the standard deduction. SALT is the exception: it only helps if you itemize.
Workers in occupations the Treasury recognizes as customarily tipped can deduct up to $25,000 of voluntary cash and charged tips per return. The catches:
This one is the most oversold. The deduction covers only the premium portion of overtime required by the federal Fair Labor Standards Act — the extra half of “time-and-a-half.” If you earn $30/hour and $45 on overtime, only the $15 premium is deductible, capped at $12,500 ($25,000 joint). Overtime that isn’t FLSA-required — for example, premiums that exist only because of a union contract or a state law — generally doesn’t count. Salaried workers exempt from FLSA overtime get nothing here. Like tips, the 2025 W-2 won’t necessarily show the qualifying amount, so pay stubs matter this year.
Everyone 65 or older gets up to $6,000 more deducted — each. A married couple both 65+ can take $12,000, on top of the standard deduction and the existing age-65 add-on. It phases out above $75,000 of income ($150,000 joint), which makes income timing matter: a large IRA withdrawal or capital gain in one year can wipe out the deduction for that year. For retirees doing Roth conversions, this adds a new line to the math through 2028.
Up to $10,000 of interest on a loan for a personal vehicle is deductible if every box is checked: the vehicle is new (not used), finally assembled in the United States, under 14,000 pounds, and the loan was taken out after December 31, 2024. Leases don’t qualify. The assembly requirement is the trap — plenty of “American” models are assembled abroad and plenty of foreign brands are built in Alabama or Texas. The window sticker and VIN decode settle it. Phase-out starts at $100,000 MAGI ($200,000 joint) and is steep.
The state-and-local-tax cap quadrupled from $10,000 to $40,000 for 2025 (rising slightly each year through 2029, then reverting to $10,000 in 2030). If you stopped itemizing years ago because the old cap made it pointless, that decision deserves a rematch: property tax plus state income tax above $10,000 was common even in mid-tax states. The catch for high earners: above $500,000 of income the cap phases back down toward $10,000. If that’s you and you own a pass-through business, a state PTET election may do what the personal SALT deduction can’t.
Every one of these deductions expires after 2028 except SALT’s schedule — Congress built them as a four-year window. Use the window.
Talk it through with a licensed US tax professional — we'll tell you honestly whether it applies to your situation.
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