New IRS Tax Form Makes Claiming Deductions Easier for 2025

The IRS is introducing a new form, called Schedule 1-A, for the 2025 tax season. This new form is designed to help Americans claim more deductions and make tax filing easier.
 

What’s New?

For the first time, employees can get tax deductions for things like:
 

• Overtime pay
• Tips earned on the job
• Interest paid on car loans (for new, American-made cars)
• Pension-related benefits

These changes are part of a new law known as the “One Big Beautiful Bill,” which aims to simplify taxes for millions of people starting this year.
 

How Will It Work?

Schedule 1-A is used with the usual tax forms (Form 1040 and 1040-SR). Experts say the form makes it easier for working Americans to claim deductions that weren’t available before.

Here are some important deductions:
 

• Tips Deduction: Service workers can deduct up to $25,000 of tips. Deductions start decreasing once income reaches $150,000 (for single filers) or $300,000 (for couples).
• Overtime Deduction: Only the extra pay earned from overtime (“premium” pay) can be deducted, limited to $12,500 for singles and $25,000 for couples.
• Car Loan Interest: Homeowners can deduct up to $10,000 in interest on loans for new American-made cars. Used cars and leases are not included.
• Senior Benefits: Americans aged 65 and older get a $6,000 boost to their standard deduction. Couples can double this amount if both are eligible.

 

Who Benefits Most?

These changes mainly help service workers, hourly employees, car buyers, and retirees. For restaurant and retail workers, the tips deduction is seen as a long-overdue change.

Seniors on fixed incomes can also benefit from a larger deduction, helping to offset rising living costs.
 

Limitations and Requirements:

Not everyone will qualify for these deductions. All deductions decrease as income goes up, and the rules are strict:
 

• You need official paperwork to prove overtime and tips.
• Car loan interest can only be claimed for specific purchases.

Tax experts say it’s important to keep all your documents, like pay stubs and loan contracts, ready. The IRS will check these closely, and more instructions will come soon.
 

Important Notes:

 

• These deductions are temporary. They are set to end after the 2028 tax year, unless Congress extends them.
• This is an unusual opportunity for ordinary workers to receive tax relief, potentially saving hundreds or thousands of dollars.

 

What Should Taxpayers Do?

With tax season coming up, experts recommend that Americans start gathering documents early. If you want to benefit from these new deductions, make sure your paperwork is complete and accurate.

Take advantage of this opportunity to reduce your taxes and manage the rising cost of living.

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