Some major tax changes could be coming—if the Senate signs off. The House has passed a bill introducing several new deductions aimed at workers, seniors, and car buyers. Here’s a quick overview of what’s in the proposal:
Tip Deduction
Starting in 2025, tipped workers may qualify for a new deduction, though tips will still count as taxable income; this would allow a deduction for the amount reported as tips.
- Applies to voluntary cash tips in industries where tipping is customary, like restaurants, salons, or spas.
- Not available to high earners (over $160,000 in 2025) or those in professional services (e.g., law, finance).
- Must have a valid Social Security number.
- Individuals will not need to itemize to claim the deduction.
Bonus for Employers: The FICA tip credit would expand beyond the food and beverage industry to include businesses in the beauty service industry.
Overtime Pay Deduction
- Employees earning overtime (excluding tips) may be eligible for a deduction from 2025–2028. As with tips, income limits, and other eligibility rules would apply.
- Individuals will not need to itemize to claim the deduction.
Extra Deduction for Seniors
Taxpayers 65 and older could deduct an additional $4,000:
- Income Limitation – phases out at $75,000 (single) / $150,000 (joint).
- Must have a valid Social Security number.
This proposal is seen as a creative workaround to lower taxes on Social Security income – something that’s been politically challenging to do directly.
Auto Loan Interest Deduction
Car buyers could deduct up to $10,000 in auto loan interest, but:
- The vehicle must be assembled in the U.S.
- Does not apply loans to purchase business-use vehicles.
- Income Limitation – phases out at $100,000 (single) / $200,000 (joint).
- Individuals will not need to itemize to claim the deduction.
What’s next? The Senate still needs to weigh in, so these aren’t law yet—but change is on the horizon. We’re watching closely and will keep you updated.
