The IRS said on January 8, 2026, that it will begin accepting and processing 2025 federal returns on Monday, January 26, with a filing deadline of Wednesday, April 15. The agency expects about 164 million individual returns. This is the first filing season shaped by the 2025 tax law known as the One, Big, Beautiful Bill Act, and several of its changes apply retroactively to income earned last year.
What changed on the 2025 return
The most visible addition is Schedule 1-A, a new form the IRS says will carry four deductions created by the law: no tax on tips, no tax on overtime, no tax on car loan interest, and an enhanced deduction for seniors. Each is available whether or not a household itemizes, and each has its own income limits, according to an IRS fact sheet on the provisions:
- Tips: up to $25,000 a year, phasing out above $150,000 of modified adjusted gross income ($300,000 joint).
- Overtime: the premium portion of overtime required by federal wage law, up to $12,500 ($25,000 joint), with the same $150,000 and $300,000 phaseout thresholds.
- Car loan interest: up to $10,000 on loans for new US-assembled personal vehicles, phasing out above $100,000 ($200,000 joint). The vehicle identification number must appear on the return.
- Seniors: an extra $6,000 per person age 65 or older, phasing out above $75,000 ($150,000 joint).
For itemizers, the larger change sits elsewhere. The law raised the cap on the state and local tax deduction, known as SALT, from $10,000 to $40,000 for taxpayers earning under $500,000, according to the Tax Foundation. The law also raised the standard deduction by $750 for single filers and $1,500 for joint filers.
Administrative changes matter too. The IRS is phasing out paper refund checks and urging filers to supply direct deposit information. Brokers now report digital asset sales on the new Form 1099-DA. The agency also highlighted the new Trump Account option, which lets parents and guardians set up a retirement-style account for children. IRS Free File opened January 9 for eligible taxpayers.
Who is affected
High earners in high-tax states are the group most likely to see a different bottom line this year. A household in New York, New Jersey or California paying well above $10,000 in state income and property taxes had little reason to itemize under the old cap. With a $40,000 limit, many will now clear the standard deduction and itemize again, provided income stays under the $500,000 level where the larger cap applies in full.
The Schedule 1-A deductions, by contrast, are largely out of reach for affluent families because of their phaseouts. The exception is households with a retired parent, an hourly-wage family member or a younger adult child filing separately, where the senior, overtime or car loan deductions may apply on that person's own return.
The after-tax math
Example, using round numbers: a married couple with $400,000 of income pays $30,000 in state income tax and $15,000 in property tax on their home, for $45,000 in total. Under the old $10,000 cap, only $10,000 of that counted. For 2025, $40,000 counts, adding $30,000 of itemized deductions.
| Item (example) | Old rules | 2025 return |
|---|---|---|
| State and local taxes paid | $45,000 | $45,000 |
| Deductible SALT | $10,000 | $40,000 |
| Additional deduction | None | $30,000 |
The federal tax saved equals the extra $30,000 multiplied by the couple's top marginal rate, and it is available only if their total itemized deductions exceed the standard deduction. A couple earning more than $500,000 would not receive the full benefit, since the higher cap is limited above that income level.
Documents worth gathering early
- Year-end pay records showing overtime premiums or tips, since many 2025 Forms W-2 will not break them out separately.
- Lender statements for any new vehicle loan taken out after 2024, along with the vehicle identification number.
- Property tax bills and state estimated tax payment confirmations, which now carry more weight for itemizers.
- Brokerage forms, including any Form 1099-DA for digital asset sales.
- Bank account and routing numbers for direct deposit of refunds.
Households with complex returns, equity compensation or multi-state income may find it worth discussing with a CPA how the new SALT limit interacts with state tax payments made late in 2025.
What to watch
Because the law passed mid-year and many employers did not change withholding, a number of filers may see larger refunds or smaller balances due than in past years. The IRS says e-filed returns show refund status in about 24 hours. Tax software and IRS forms reflecting the new schedule are expected to be finalized before January 26, and further IRS guidance on the new deductions may arrive as the season progresses.
Sources
After TAX is an independent publication. Articles are general information, not tax, legal or investment advice. Consult a licensed professional about your situation.
