IRS Announces Key Updates for 2025 Tax Year Filing

The IRS advised taxpayers to get ready to file their tax year 2025 returns, detailing key changes from the “Big Beautiful Bill” for the upcoming 2026 filing season.

“One of the most important steps taxpayers can take is to access their IRS Individual Online Account. IRS Individual Online Accounts are available 24/7, to view account information, make payments, manage communication preferences and protect tax information,” IRS said.

Paper Refund Checks Phased Out

The IRS reminded taxpayers that paper tax refund checks are being phased out due to a March 25 executive order from President Donald Trump. The order mandated that all federal disbursements and receipts be transitioned to electronic payments, citing “unnecessary costs; delays; and risks of fraud, lost payments, theft, and inefficiencies” associated with paper-based payments.

Taxpayers who do not yet have a bank account are encouraged to open one for receiving tax refunds via direct deposit.

Review of 2025 Tax Law Changes

The agency advised people to review the new 2025 tax law changes contained in the One Big Beautiful Bill Act, which Trump signed into law in July.

The updates include “several new deductions and credits that may reduce tax bills or increase refunds,” it said.

Eligibility Requirements for Certain Credits

“Beginning in 2025, to be eligible to claim certain credits for other dependents, the taxpayer and their spouse, if filing jointly, must have valid Social Security numbers or Individual Taxpayer Identification Numbers issued on or before the due date of their returns (including extensions).”

Standard Deduction Increases for 2025

Under the One Big Beautiful Bill Act, for tax year 2025, the standard deduction has been set at $15,750 for single filers and married individuals filing separately, according to an IRS update on Dec. 29. For couples filing jointly, the deduction is $31,500.

Additional Deductions for Seniors

Effective 2025 through 2028, individuals aged 65 and older may claim an additional $6,000 deduction, which is in addition to the standard deduction for seniors available under existing law. For married couples where both spouses qualify, the deduction limit is $12,000.

The benefit phases out for taxpayers with modified adjusted gross income of over $75,000 for single individuals, and $150,000 for joint filers.

New Deductions for Tips and Overtime Pay

Beginning in tax year 2025, the One Big Beautiful Bill Act allows taxpayers to deduct qualified tips they received, in occupations the IRS identified as “customarily and regularly receiving tips” before Dec. 31, 2024. A maximum of $25,000 in tips can be deducted annually.

Similarly, the One Big Beautiful Bill Act allows individuals to deduct a portion of their qualified overtime pay beginning in 2025. The maximum allowable annual deduction is $12,500 for single filers, and $25,000 for joint filers.

For both tips and overtime pay, the deductions start to phase out once modified adjusted gross income crosses $150,000 for single filers, and $300,000 for joint filers.

Vehicle Loan Interest Deduction

Moreover, for 2025 to 2028, taxpayers can deduct any interest paid on a loan used to buy a qualified vehicle for personal use, with a maximum annual deduction set at $10,000.

This provision is applicable to loans that originated after Dec. 31, 2024. The vehicle must have undergone final assembly in the United States, with a gross vehicle weight rating below 14,000 pounds.

Expanded Access to Telehealth Benefits

The One Big Beautiful Bill Act also allowed taxpayers to benefit from telehealth and remote care services before meeting deductible thresholds under high-deductible health plans.

New Trump Accounts for Children

In its latest statement, the IRS talked about Trump Accounts, which is a new retirement savings vehicle for children with a valid Social Security number who are under the age of 18.

The accounts allow families and community members to contribute up to $5,000 per year. Employers can contribute up to $2,500 per annum for an employee’s child. Contributions from the government or philanthropic institutions are uncapped.

Accounts for children born between Jan. 1, 2025, and Dec. 31, 2028, will receive a $1,000 deposit from the government. The accounts will officially launch on July 5.

Reporting Gig, Part-Time, and Online Income

The IRS reminded taxpayers that “all income from part-time work, gig activities or sales of goods and services is taxable.”

This includes income from payment apps and online sales. Payment card companies, apps, and online marketplaces are required to fill out Form 1099-K, which details such transactions and sends copies to the IRS and the taxpayer. A taxpayer can use the form to figure out the income to report on their return.

According to the IRS, the form will typically be issued to a taxpayer when their receipts exceed $20,000, and there are more than 200 transactions in a year.

Reporting Digital Asset Transactions

Finally, the IRS asked taxpayers who bought, received, or sold digital assets, such as cryptocurrencies, to report such transactions to the agency, including related income, gains, or losses.

“Take a few steps today, reviewing tax law changes, gathering documents and using online tools, to help ensure a smoother less stressful experience when filing taxes in 2026,” the agency said.

–The Epoch Times News Service