New federal tax changes will affect some seniors and car buyers beginning in the 2025 tax year, providing potential deductions on income for seniors and certain vehicle purchases, according to Andrew Zumwalt, director of the University of Missouri’s Personal Financial Planning program.
Deduction for filers 65 and older
For taxpayers age 65 or older by the end of the year, the law allows a deduction of up to $6,000 for single filers and $12,000 for married couples filing jointly, assuming both spouses are age 65 or older.
“While this tax benefit is often referred to as ‘no tax on Social Security,’ it doesn’t have any connection to receiving Social Security, Zumwalt said.
The benefit phases out for single taxpayers with modified adjusted gross incomes above $75,000 and married couples filing jointly above $150,000. The deduction is in addition to the standard deduction and is in effect for tax years 2025 through 2028.
“Many seniors will see a reduction in their federal taxable income because of this change,” he said. “But it’s important to remember this doesn’t change Social Security payments themselves, and it doesn’t reduce state income taxes in Missouri.”
Deduction for qualifying car loan interest
The new law also provides a deduction for interest paid on loans for certain new vehicles purchased after Dec. 31, 2024, for personal use. Taxpayers can deduct up to $10,000 of interest per year. Eligible vehicles include cars, minivans, SUVs, pickup trucks and motorcycles. Vehicles must weigh less than 14,000 pounds, and final assembly must take place in the United States. Lenders must provide a statement of interest paid for tax filing purposes.
The deduction begins to phase out for single filers with incomes above $100,000 and married couples filing jointly with incomes above $200,000. Like the senior exemption, this deduction is “below the line” and does not affect state tax returns in Missouri.
Zumwalt emphasized that both changes are intended to simplify tax benefits while keeping them separate from state tax calculations. Taxpayers claiming these deductions should maintain proper documentation, including tax returns and lender interest statements, to support their filings.
Zumwalt discussed these and other changes to federal income tax law at a recent training for volunteers in the Volunteer Income Tax Assistance (VITA) program, in which IRS-certified volunteers discuss and prepare tax returns for free.
PHOTO: Blank 1040 us tax form with calculator and keyboard on office desk. (Photo: iStock │ #1469972260 – alfexe)
