Updated Tax Deduction Limits: What You Need to Know

Ammar Raza

Published: Oct 18, 2025

8.5 min read

Updated: Jan 8, 2026 - 06:01:15

Updated Tax Deduction Limits for 2025: What You Need to Know

For the 2025 tax year, updates from the One Big Beautiful Bill Act and the IRS’s annual inflation adjustments (Rev. Proc. 2025-32) may expand opportunities to reduce federal taxable income. Key changes include new age-based deductions, higher standard deductions, and updated retirement and health savings limits, based on IRS notices and published guidance.

Standard Deduction Up: $15,750 (single), $31,500 (joint), $23,625 (head of household), plus up to $12,000 in additional senior deductions for eligible taxpayers age 65+ under the OBBB rules (subject to income-based phaseouts).
Hidden Deductions Matter: Don’t overlook state sales tax (if you itemize and choose it instead of state income tax), reinvested dividends (basis tracking), charitable or medical mileage (if eligible), jury pay offsets, and student loan interest rules that may apply when parents help with payments.
Retirement & Health Accounts: 401(k) limit rises to $23,500; “super catch-up” for ages 60-63 can add up to $11,250 if your plan adopts it. HSA limits: $4,300 (single) / $8,550 (family); FSA limit $3,300 with $660 carryover (if your employer’s plan allows it).
New OBBB Deductions: Tips (up to $25,000), overtime premium (up to $25,000 joint), and car loan interest (up to $10,000) are temporary federal deductions (generally 2025–2028) with eligibility rules and phaseouts.
Child & Student Benefits: Child Tax Credit is listed as $2,200 per qualifying child for 2025; student loan interest deduction remains capped at $2,500 with income-based phase-outs (rules vary by filing status).

Unfortunately, every tax season many taxpayers overlook deductions and credits that could reduce what they owe. Many focus only on the standard deduction and miss lesser-known items that can matter—especially for taxpayers who itemize or have self-employment income. For 2025, there are two big pillars to watch: provisions enacted in the One Big Beautiful Bill Act and routine IRS inflation adjustments for 2025 (with 2026 updates in Rev. Proc. 2025-32).

Together, these changes—such as revised deduction amounts and temporary targeted deductions described in the IRS OBBB guidance—may create opportunities to reduce taxable income. Below is a concise guide blending official limits and commonly missed deductions, grounded in IRS publications and current law. (This is general information, not tax advice.)

Hidden Deductions Most Taxpayers Miss

Even experienced filers can overlook deductions or adjustments that may reduce taxable income—especially when itemizing or reporting self-employment income:

State Sales Tax: If you itemize deductions, you can generally choose to deduct state and local income taxes or state and local sales taxes (subject to applicable limits). This can be especially relevant in states without an income tax. The IRS’s Sales Tax Deduction Calculator can help compare options, and large purchases (such as a vehicle) may affect the result.

Reinvested Dividends: Dividends automatically reinvested in mutual funds still affect your cost basis. The IRS explains in Publication 550 that tracking reinvested dividends may help avoid overstating gains when you sell shares.

Student Loan Interest Paid by Parents: When parents repay a student loan that their child is legally responsible for, IRS guidance generally treats it as if the parent gave the money to the child, who then paid the loan. In some cases, the student may be able to deduct up to $2,500 of interest on their own return—subject to standard eligibility limits (including filing status and dependent rules). See IRS Topic No. 456 for details.

Job Search Expenses (Self-Employed): Unreimbursed employee job-search expenses are generally not deductible, but self-employed workers may be able to deduct ordinary and necessary business expenses that are directly related to their trade or business (for example, certain marketing, portfolio, or professional services used to obtain business).

Jury Duty Pay Surrendered to Employer: If your employer continues to pay your salary while you serve on a jury but requires you to remit your jury duty pay, you generally must report the jury pay as income. However, you may be able to claim an offsetting adjustment for the amount you turned over, consistent with IRS Publication 525.

Charitable Mileage: Miles driven for qualifying charitable service are deductible for taxpayers who itemize and keep adequate records. For 2025, the rate is 14 cents per mile.

Medical Miles: Transportation for medical purposes can be deductible if you itemize and meet the medical expense threshold rules. For 2025, the medical mileage rate is 21 cents per mile.

Tax Preparation Fees (for Self-Employment): Personal tax prep fees are generally not deductible, but taxpayers with self-employment income may be able to treat the business-related portion (such as Schedule C preparation) as a business expense when properly allocated and documented.

Standard Deduction (2025 Tax Year)

For 2025, the standard deduction reflects inflation adjustments and changes under the One Big Beautiful Bill (OBBB):

Single filers: $15,750
Married filing jointly: $31,500
Head of household: $23,625

Taxpayers age 65 and older can add the existing additional standard deduction amounts described in IRS Revenue Procedure 2024-40, subject to the usual eligibility rules.

New for 2025–2028: Under the One Big Beautiful Bill, there’s an additional $6,000 deduction for individuals aged 65 and older, phasing out at modified adjusted gross income above $75,000 for singles and $150,000 for joint filers. Couples where both qualify can claim up to $12,000 total, and this additional deduction may be available whether you itemize or take the standard deduction.

Retirement Contribution Limits

Under IRS Notice 2024-80, the agency announced inflation-adjusted contribution limits for 2025 across major retirement savings plans. The annual elective deferral limit for 401(k), 403(b), and 457 plans rises to $23,500. Workers aged 50 and older can generally make an additional $7,500 catch-up contribution (subject to plan rules).

A key change for 2025 is the introduction of a “super catch-up” provision for ages 60–63, allowing eligible participants to contribute an extra $11,250 beyond the standard limit, provided their employer’s plan adopts this feature under the SECURE 2.0 Act.

For traditional and Roth IRAs, the annual contribution limit stays at $7,000, with an additional $1,000 catch-up for those aged 50 and above. Income limits for Roth IRA eligibility can change annually, so confirm the applicable phase-out ranges for your filing status before contributing.

These adjustments can help savers plan contributions, but the best approach depends on your income, cash flow, and overall tax situation.

Health and Flexible Spending Accounts

For 2025, Health Savings Accounts (HSAs) allow individuals to contribute up to $4,300 for self-only coverage and $8,550 for family coverage, according to IRS Revenue Procedure 2024-25. Individuals aged 55 or older can make an additional $1,000 catch-up contribution if eligible. These limits include both employee and employer contributions combined. To qualify for an HSA, a person must be enrolled in a high-deductible health plan (HDHP) and meet other eligibility requirements, including Medicare rules.

For Flexible Spending Accounts (FSAs), the IRS increased the 2025 contribution limit to $3,300 per person, as confirmed by the IRS 2025 inflation adjustments. Employees may also carry over up to $660 of unused funds into the next plan year if their employer’s plan allows carryovers. Plan rules vary.

In summary, 2025 HSA limits are $4,300 (individual) and $8,550 (family), while the FSA contribution limit is $3,300, with a carryover cap of $660 where permitted.

Student Loan Interest Deduction

For tax year 2025, taxpayers can deduct up to $2,500 in student loan interest paid, or the actual amount paid if less. This deduction is an above-the-line adjustment to income, meaning it can be claimed whether or not you itemize deductions. The benefit begins to phase out for individuals with a modified adjusted gross income (MAGI) above $85,000 and is fully eliminated at $100,000.

For married couples filing jointly, the phase-out range runs from $170,000 to $200,000. To qualify, the loan must be a qualified student loan taken out for higher education expenses, and you cannot claim the deduction if your filing status is Married Filing Separately or if you (or your spouse) are claimed as a dependent on someone else’s return. These 2025 limits reflect the inflation-adjusted thresholds outlined in recent IRS guidance.

Child Tax Credit

For tax year 2025, the Child Tax Credit (CTC) is listed as $2,200 per qualifying child under age 17. A portion of the credit may be refundable (often discussed as the Additional Child Tax Credit), subject to eligibility rules. The credit begins to phase out at $200,000 of modified adjusted gross income (MAGI) for single filers and $400,000 for married couples filing jointly, with the credit generally reduced by $50 for every $1,000 of income above those thresholds.

New Deductions Introduced by the One Big Beautiful Bill (2025–2028)

The newly enacted One Big Beautiful Bill introduced several temporary deductions that may reduce federal taxable income for eligible taxpayers during 2025–2028:

Tips Deduction: Employees and self-employed workers in tip-based jobs may be able to deduct qualified tips up to $25,000 annually, subject to occupation rules, reporting requirements, and income-based phaseouts.
Overtime Deduction: Eligible workers may deduct the premium portion of overtime pay (the “half” in “time-and-a-half”), with a maximum deduction of $12,500 for singles or $25,000 for joint filers. Phase-out thresholds begin at $150,000 (single) and $300,000 (joint).
Car Loan Interest Deduction: Eligible borrowers may deduct up to $10,000 in interest paid on loans used to purchase a qualified vehicle for personal use, subject to the law’s requirements. The deduction phases out starting at $100,000 for singles and $200,000 for joint filers.

Looking Ahead: The 2026 Tax Year

According to the IRS inflation adjustments for tax year 2026, the standard deduction will rise to $16,100 for single filers (and married filing separately), $32,200 for married couples filing jointly, and $24,150 for heads of household. These increases reflect continued inflation indexing under the One Big Beautiful Bill (OBBB).

However, many taxpayers benefit more from the standard deduction than itemizing. Since the standard deduction increased significantly under the Tax Cuts and Jobs Act of 2017, itemizing is generally most useful when total eligible deductions (such as mortgage interest, charitable contributions, and allowable state and local taxes) exceed the standard deduction.

For tax year 2025, the IRS confirms that the standard deduction is $15,750 for single filers, $31,500 for joint filers, and $23,625 for heads of household. Thus, itemizing is generally beneficial only when total itemized deductions exceed those amounts.

Final Thoughts

The 2025 tax landscape includes several noteworthy updates, particularly for seniors and workers who may qualify for temporary deductions (such as tips or overtime) and for taxpayers using retirement and health accounts. Planning early and keeping clean records can make it easier to claim what you’re eligible for.

When preparing your return, cross-check key numbers and eligibility rules with official IRS publications, and don’t rely solely on software defaults. Even smaller items—like charitable mileage or jury pay offsets—can matter if you meet the requirements. As the 2026 filing season approaches, careful recordkeeping and awareness of law changes can help you file accurately and avoid surprises.