Key Highlights for Tax Year 2025
- No changes to Form W-2, Form 1099, Form 941, or other payroll return forms
- Federal income tax withholding tables remain unchanged
- Employers and payroll providers should continue using current reporting and withholding procedures
The agency has stated that these decisions are intended to avoid disruptions during the tax filing season and to give the IRS, business and tax professionals enough time to implement the changes effectively.
What’s Coming in 2026
The IRS is actively developing new guidance and updated forms for Tax Year 2026, including changes to how tips and overtime pay are reported. Coordination with employers, payroll providers, and tax professionals is underway to ensure a seamless rollout.
More details will be released in the coming months on how taxpayers can claim OBBBA-related benefits when filing their 2025 returns in 2026.
Inside the One Big Beautiful Bill Act of 2025
The OBBBA introduces several new deductions effective from 2025 through 2028, aimed at easing the tax burden for working Americans and seniors:
The OBBBA introduces several new deductions effective from 2025 through 2028, aimed at easing the tax burden for working Americans and seniors:
No Tax on Tips (Sec. 70201)
- Deduction of up to $25,000 for qualified tips received in eligible occupations
- Applies to both employees and self-employed individuals
- Phases out for modified AGI over $150,000 ($300,000 for joint filers)
- IRS to publish a list of eligible occupations by 2 October 2025
No Tax on Overtime (Sec. 70202)
- Deduction of up to $12,500 ($25,000 for joint filers) for qualified overtime pay
- Applies to compensation exceeding regular pay rates under FLSA
- Same income phase-out for modified AGI thresholds as tip deduction
No Tax on Car Loan Interest (Sec. 70203)
- Deduction of up to $10,000 for interest on loans used to purchase new personal-use vehicles
- Vehicle must be newly purchased, assembled in the U.S., and secured by a lien
- Phases out for modified AGI over $100,000 ($200,000 for joint filers)
Deduction for Seniors (Sec. 70103)
- Additional $6,000 deduction per eligible individual aged 65 or older
- Available to both itemizing and non-itemizing taxpayers
- Phases out for modified AGI at $75,000 ($150,000 for joint filers)
Reporting & Compliance
Employers, lenders, and other payors will be required to file new information returns and furnish statements to taxpayers detailing eligible amounts. The IRS will provide transition relief for Tax Year 2025 to ease compliance burdens.
Further detailed guidance can be found in the IRS Internal Revenue Bulletin
Next Steps
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