The following sections address important information regarding the 2025 tax season. Unless otherwise stated, all changes are effective for 1040 returns only. You can review detailed information about the changes under the new tax bill at Congress.gov and IRS.gov.
Personal Exemption
Personal exemptions are permanently eliminated.
Standard Deduction
The higher standard deduction is no longer set to expire. Amounts will adjust annually after 2025.
2025 amounts:
- $31,500 – Married filing jointly (MFJ) and qualifying surviving spouse
- $23,625 – Head of household (HOH)
- $15,750 – Single or married filing separately (MFS)
Senior Deduction
New temporary deduction for seniors available for tax years 2025–2028.
This is in addition to the standard deduction and can be taken by both itemizers and non-itemizers.
- $6,000 per qualified individual
- Taxpayers must be 65 or older by the end of the year
- Subject to phaseout if MAGI exceeds:
- $75,000 (single/HOH)
- $150,000 (MFJ)
Note: If married, taxpayers must file MFJ to claim the deduction.
SALT Deduction (State & Local Taxes)
Temporary increase in SALT deduction cap to $40,000 in 2025.
Subject to income-based reduction if MAGI exceeds:
- $500,000 (single/joint)
- $250,000 (MFS)
Adjustments to limits and thresholds continue through 2029.
After 2029, the limitation will revert to $10,000 with no threshold.
Deduction for Qualified Tips
Both itemizers and non-itemizers can deduct qualified tips.
Maximum deduction: $25,000
Phaseout if MAGI exceeds:
- $150,000 (single/HOH)
- $300,000 (MFJ)
For self-employed individuals, deduction cannot exceed net income from the trade or business where tips were earned.
Deduction for Qualified Overtime
Taxpayers with qualified overtime compensation can deduct up to:
- $12,500 (single/HOH)
- $25,000 (MFJ)
Phaseout if MAGI exceeds:
- $150,000 (single/HOH)
- $300,000 (MFJ)
Available to both itemizers and non-itemizers.
Deduction for Car Loan Interest
Covers qualified passenger vehicle loan interest up to $10,000.
Requirements:
- Loan must originate after December 31, 2024
- Vehicle must be for personal use
- Used vehicles not eligible
- Loan must be secured by a lien on the vehicle
- Final assembly must occur in the United States
Additional details available on the IRS website.
Phaseout:
- Reduced $200 for each $1,000 of MAGI over:
- $100,000 (single/HOH)
- $200,000 (MFJ)
This deduction can be claimed by itemizers and non-itemizers.
Clean Vehicle Incentives
Credits repealed for purchases after September 30, 2025:
- Up to $7,500 new clean vehicle credit
- Up to $4,000 previously-owned clean vehicle credit
Child Tax Credit (CTC)
Maximum CTC increased to $2,200 per child beginning in 2025.
- Adjusted for inflation in future years
- Refundable portion up to $1,700 in 2025
- Both child and taxpayer must have valid SSNs issued before the tax return due date
Other Dependent Credit (ODC)
Permanent credit of $500 for dependents not qualifying for the Child Tax Credit.
Child & Dependent Care Credit
Credit percentage range changed:
- Up to 50% for AGI $15,000 or less
- Minimum 20% for AGI over:
- $103,000
- $206,000 (MFJ)
Expense limits remain:
- $3,000 (one qualifying person)
- $6,000 (two or more)
Adoption Credit
Adoption credit is now refundable up to $5,000.
100% Bonus Depreciation
100% Bonus Depreciation under Section 168(k) is permanent for qualified property placed in service after January 19, 2025.
Section 179 Deduction
2025 limits:
- $2.5 million deduction limit
- $4 million investment limit
Both adjusted annually for inflation.
Energy Credits and Deductions
Certain energy incentives are ending:
- Energy efficient home improvement credit – not allowed for property placed in service after Dec 31, 2025
- Residential clean energy credit – not allowed after Dec 31, 2025
- Previously-owned clean vehicle credit – ends Sept 30, 2025
- New clean vehicle credit – ends Sept 30, 2025
- Alternative fuel vehicle refueling property credit – ends June 30, 2026
- New energy efficient home credit – ends June 30, 2026
- Qualified commercial clean vehicle credit – ends Sept 30, 2025
- Energy efficient commercial building deduction – ends for projects beginning after June 30, 2026
Paper Checks
The IRS will phase out paper checks beginning September 30, 2025.
Form and Schedule Changes (2025)
Form 1040
New check boxes include:
- Filed pursuant to section 301.9100-2
- Combat zone
- Deceased (taxpayer or spouse)
- Main home in U.S. for more than half the year
- MFS/HOH separation status
- Child dividend reporting
- Rollover/QCD indicators
- Pension or annuity rollover
- Married filing separately lived apart entire year
- Schedule D not required
- Clergy filing Schedule SE
- Opt-out of EIC
- Opt-out of ACTC
New lines include:
- 13b – Additional deductions from Schedule 1-A
- New line below 26 for estimated payments with former spouse
- Line 30 changed to refundable adoption credit
Other updates:
- Standard deduction section removed (moved to reformatted line 12)
- Dependents section reformatted with more details
Schedule 1
- Field added for unemployment repayment
- New check box on line 14 for storage fees only
Schedule 1-A (New)
Reports detailed information for:
- No tax on tips
- No tax on overtime
- No tax on car loan interest
- Enhanced deduction for seniors
Schedule 2
- New check boxes on line 4 indicating SE tax exemption
- Line 10 reserved for future use
Schedule A
Changes due to new tax law provisions.
Form 4562
- Now three pages
- New field for 50-year property
- Line 23 now has two parts
- New line 24c for aircraft (own, lease, or charter)
Form 1099-K
Third-party settlement organizations must file Form 1099-K if:
- Total payments exceed $20,000, and
- Number of transactions exceeds 200 in a calendar year
State Forms
Arkansas
New forms:
- AR-KREC – Members Reconciliation of Income, Deductions, Credits, and Other Items
- AR1100-REC – Reconciliation Schedule
- AR1100-WH – Withholding Summary
