2025–2028 Federal Tax Update Summary

Key Changes Every Taxpayer Should Know

1. Tip Income Deduction (Up to $25,000)

• Up to $25,000 of reported tip income may be deducted from taxable income

• Applies to qualifying service industries and some self-employed taxpayers

• Deduction phases out at $150,000 / $300,000 MAGI

• Tip income remains subject to FICA

  
  

2. Overtime Premium Deduction (Up to $12,500 / $25,000)

• Deduction applies to the premium portion of overtime pay

• Limits: $12,500 (Single) / $25,000 (MFJ)

• Same income phase-out as tip deduction

• Employees only (not self-employed)

  
  

3. Auto Loan Interest Deduction (Up to $10,000)

• Up to $10,000 annual deduction for interest on qualifying new personal-use vehicles

• Vehicle must be assembled in the U.S.

• Loan must begin after Dec 31, 2024

• Phases out at $100,000 / $200,000 MAGI

  
  

4. SALT Deduction Cap Increased to $40,000

• State and Local Tax (SALT) deduction raised from $10,000 → $40,000

• Applies beginning 2025

• High-income households may receive reduced limits

• Minimum cap never drops below $10,000

  
  

5. Senior Deduction: Additional $6,000 (Age 65+)

• Taxpayers age 65+ receive $6,000 additional deduction

• Married couples 65+ may receive $12,000

• Phases out at $75,000 / $150,000 MAGI

  
  

6. Child Tax Credit Increased to $2,200

• CTC increased to $2,200 per qualifying child under age 17

• Refundable and non-refundable portions continue

• SSN required for the child

• Phase-out begins at $200,000 / $400,000

  
  

7. QBI Deduction Increased to 23% & Made Permanent

• Qualified Business Income (199A) deduction becomes permanent

• Percentage increased from 20% → 23%

• SSTB phase-out rules remain

• Applies to S-corp owners, partnerships, Schedule C, and qualifying rental businesses

  
  

8. Electronic Refund & Payment Transition (2025–2026)

• IRS moving toward eliminating paper refund checks

• Refunds issued via direct deposit, prepaid debit card, or digital wallet

• Tax payments also shifting to electronic formats

• Limited hardship exceptions

  
  

9. Estate & Gift Tax Exemption Increased

• New exemption levels effective 2026:

  • $15 million (Single)

  • $30 million (Married filing jointly)

• Indexed for inflation

  
  

10. 1% Federal Tax on Personal Remittances to Foreign Recipients

• Applies starting Jan 1, 2026

• 1% excise tax on personal funds transferred from the U.S. to foreign individuals

• Business, education, and emergency exceptions may apply