The passage of the One Big Beautiful Bill Act last year will mean significant changes for some taxpayers this season.
Laura Hendrix, extension associate professor of personal finance and consumer economics for the University of Arkansas System Division of Agriculture, said the changes include no tax on tips, no tax on overtime and an enhanced deduction for seniors age 65 and older.
Hendrix said some of the new changes include the following:
Increased standard deduction amounts for tax year 2025:
- $31,500 for married couples filing jointly.
- $15,750 for single filers and married individuals filing jointly.
- $23,625 for heads of household.
Elimination of taxes on:
- Overtime (for qualified overtime income up to $12,500 or $25,000 for joint filers).
- Tips (for tips totaling up to $25,000).
- This phases out for incomes above $150,000 (or $300,000 for joint filers).
Deduction for seniors:
- Effective from 2025 through 2028, individuals age 65 and older may claim an additional $6,000 deduction.
- This is in addition to the standard deduction for seniors available under existing law.
- This applies per eligible individual (or $12,000 for a married couple if both spouses qualify).
- This phases out for taxpayers with modified adjusted gross income over $75,000 (or $150,000 for joint filers).
- Filers must be 65 or older on or before the last day of the tax year.
- This is available for both itemizing and non-itemizing taxpayers.
Increased State and Local Taxes, or SALT, cap:
- The maximum itemized deduction for state and local taxes is temporarily raised to $40,000 (or $20,000 for married filing separately), with a phaseout for high-income earners.
1099-K and 1099-DA:
- “Taxpayers who received more than $20,000 in payments for goods and services in more than 200 transactions through an online marketplace or payment app in 2025 should expect to receive a Form 1099-K in January 2026,” Hendrix said. “The IRS will also receive a copy of your Form 1099-K. 1099-DA is used for reporting digital assets.”
Hendrix said taxpayers should use the new Schedule 1-A to claim recently enacted tax deductions.
Some energy-efficient deductions and credits are being eliminated or capped in 2025, Hendrix said, including the following:
- Home improvements, such as energy-efficient windows, doors and solar installations, sunset after 2025.
- Electric vehicle credits (up to $7,500) go away for EVs purchased after Sept. 30, 2025.
Start early for smooth filing
The Internal Revenue Service announced it will begin accepting and processing 2025 tax year returns on Jan. 26, with a deadline of April 15. Hendrix recommends preparing early for a smooth tax filing process. Hendrix said consumers should gather the following documents and information to prepare for filing:
- Bank account information for returns via direct deposit
- W-2s from employers
- 1099s from banks and other payers
- Records of digital asset transactions
- Other documents as needed to verify qualifying tax credits or adjustments
Failure to pay taxes by the deadline can result in penalties, but filing extensions are available.
“If you can’t file by the due date of your return, you can request an automatic six-month extension of time to file,” Hendrix said. “However, it’s important to note that an extension of time to file is not an extension of time to pay. You should pay any owed taxes by your original due date to avoid the penalties.”
Those who wish to file an extension should file Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return, by the original due date of their return.
Optimizing filing status
Hendrix said that for most married people, filing jointly has benefits, but that is not always the case.
“The best way to find out if you should file jointly or separately is to prepare your tax return both ways,” Hendrix said. “Some couples may prefer to keep their finances separate. Filing separately can limit your liability for your spouse’s tax obligations or debts. Some couples may qualify for more tax credits by filing jointly.”
Major life events can also impact taxes, including marriage, divorce, a new job, having children or buying a home, Hendrix said. Visit irs.gov/individuals/managing-your-taxes-after-a-life-event to learn more.
Taxpayers should also be cautious of calls and emails, as scams are rampant during filing season. To learn more about tax-related scams, visit irs.gov/help/tax-scams.
Tax credits for 2025
Hendrix said a few common tax credits for the 2025 tax year include the following:
Child Tax Credit: Up to $2,200 per qualifying child under age 17. Income limits and other qualifications apply.
Child and Dependent Care Credit: For the care of a qualifying child under age 13 or a dependent who cannot care for themselves.
Earned Income Tax Credit: This is a refundable credit for working filers. The maximum amount of credit is as follows:
- No qualifying children: $649
- One qualifying child: $4,328
- Two qualifying children: $7,152
- Three or more qualifying children: $8,046
Adoption Credit: This is for qualified expenses paid to adopt an eligible child. For 2025, the maximum credit is up to $17,280.
Education Expenses Tax Credits:
- American Opportunity Tax Credit, or AOTC: Up to $2,500 per eligible student per year. Up to 40 percent (or $1,000) of the credit may be refundable, meaning you can get money back even if you owe no tax.
- Lifetime Learning Credit, or LLC: Up to $2,000 per tax return per year, non-refundable. The LLC is nonrefundable, meaning it can reduce your tax bill to $0 but won’t result in a cash refund.
“You cannot claim both credits for the same student in the same year, but you can claim different credits for different students in the same year,” Hendrix said. “For example, you could claim AOTC for one child and LLC for another. You also cannot claim these credits if you are claimed as a dependent on someone else’s return.
“Visit IRS.gov to see details of expenses that qualify for each type of education tax credit and income limits,” Hendrix said.
See more details and find other tax credits and deductions at IRS.gov/credits-and-deductions.
Filing resources
Depending on an individual filer’s circumstances, Hendrix recommended several filing resources.
“AARP is for filers age 50 and older, and MilTax is for military service members,” Hendrix said. “Income limits apply for most types of free filing.”
Other recommended resources include:
- IRS Free File: gov/filing/irs-free-file-do-your-taxes-for-free
- My Free Taxes: myfreetaxes.com
- Find sites for VITA and Tax Counseling for the Elderly, or TCE: for.irs.gov/s/sitelocator
- MilTax: mil/financial-legal/taxes/miltax-military-tax-services
- AARP: org/money/taxes/aarp-taxaide/
For more information about money management and personal finances, visit the uaexMoney page on the Cooperative Extension Service website.
PHOTO: Women doing paperwork for paying taxes. (Photo: Adobe Stock │ #352198814 – Pcess609)
