Tax changes for 2025: New deductions for seniors, car buyers and families

Another same-old, same-old Form 1040 year?

Definitely not, say experts who point to a number of significant differences between 2024 and 2025 tax returns, with implications for seniors and car buyers, among others.

“This is a big year for changes because of the Big Beautiful Bill signed into law on July 4, 2025,” College of DuPage accountancy Professor Mark Yahoudy explained.

Clients are “curious about the new tax act and what effect it will have on them,” said Jeff Pruyn, president of an accounting firm and the mayor of Itasca.

Here’s a look at changes that may impact your 2025 return, due on April 15.

Senior deductions

Many seniors age 65 and older will qualify for an extra deduction of $6,000 for individuals or $12,000 for married couples filing jointly.

“This is a brand new deduction that never existed before,” said Yahoudy, site coordinator at COD’s free tax clinic. “As a result, we’re seeing a lot of senior citizens get bigger refunds on their returns.”

Yahoudy noted that the change does not eliminate taxes on Social Security but offsets the taxability.

Lower-income seniors will see the most relief. The deduction phases out for individuals with adjusted gross incomes over $75,000 or $150,000 for joint filers.

“Wealthy seniors aren’t getting the advantage of that deduction,” Pruyn noted.

A perk for car buyers

Taxpayers who purchased a new car or pickup truck in 2025 and took out a loan will be able to deduct a maximum of $10,000 of interest on vehicles with final assembly in the U.S.

A number of Pruyn’s clients were unaware of the deduction, which has caused some drama during consultations.

“I’ve had several clients run out to their vehicle to see what their VIN number was,” which indicates where the car was assembled, he said.

Relief on itemizing

Those who itemize deductions for state, local and real estate taxes will see the cap rise from $10,000 to $40,000, Yahoudy said.

“A lot of people who couldn’t itemize are able to itemize now,” he noted. “It’s a big deal,” which should cause rejoicing among homeowners with high property taxes.

There’s also a new deduction for overtime pay of up to $12,500 for individuals or $25,000 for joint returns.

“It’s a great deduction,” Yahoudy said. But because the law wasn’t signed until July and regulations weren’t released until late 2025, there’s a lot of discrepancies in how employers are reporting the extra earnings.

“Hopefully in 2027, this will be a lot easier,” Pruyn said.

The overtime tax break only applies to extra pay earned, not base wages, the two CPAs explained. And many union members working under collective bargaining agreements are not eligible.

Another change has the Internal Revenue Service easing taxes on tips with a deduction of up to $25,000 for most waitstaff and others who receive gratuities.

Help for families

The tax credit for kids under age 17 is increasing from $2,000 per child to $2,200. “That’s a direct dollar-for-dollar reduction in income tax,” Pruyn said.

This year also marks the kick-off of “Trump Accounts,” which are similar to an individual retirement accounts (IRA) but for children.

Families can create accounts when they file their taxes and contribute up to $5,000 a year. Minors can access their accounts at age 18.

Under a pilot program, the government will deposit $1,000 into the accounts of children born between Jan. 1, 2025, and Dec. 31, 2028, who are U.S. citizens.

Like an IRA, “the money stays in a separate account. The money it makes is not subject to tax,” Yahoudy said. “The idea is by the time they’ve reached 18, they’ll have a lot of money in there.”

Young adults can let the account accumulate or withdraw savings for eligible expenses such as college.

College of DuPage’s free tax clinic is coordinated with the IRS. Accountancy program students supervised by faculty offer help to taxpayers throughout the region, regardless of income.

To learn more about the COD VITA-Free Tax Prep program or register for an appointment, visit cod.edu/academics/areas/accountancy/tax-prep.