While tax season might not top anyone’s list of favorite events, a new IRS change could bring some welcome relief—especially if you’re over 60.

The 2025 tax year will introduce Schedule 1-A, a revamped form filled with expanded deduction options designed to help Americans keep more of what they earn.

These updates could be especially useful for retirees, part-time workers, and anyone navigating rising living costs on a fixed income.


From service industry tips to car loan interest and Social Security breaks, there’s something here for almost everyone.

If you’re hoping to maximize your refund or simply lower your tax bill, here’s what you need to know.

A new form with new opportunities​

The IRS has introduced Schedule 1-A: Additional Deductions for the 2025 filing season.

This updated form includes several expanded or entirely new deductions aimed at helping working Americans, older adults, and those in transition to retirement.

The key takeaway? You might now be able to deduct expenses that weren’t eligible in previous years—if you meet the requirements.

Tip deductions: help for service workers​

If you work in a job where tips are a regular part of your income—such as in restaurants, hotels, or salons—you may now be able to deduct those reported tips from your taxable income.

For 2025, the IRS is allowing qualified service workers to deduct up to $25,000 in tips.

To qualify:

• Tips must be reported to your employer.
• You must work in a customarily tipped occupation.
• The deduction only applies to federal taxes.

Limits:

• The deduction begins phasing out at $150,000 MAGI for single filers, and $300,000 for joint filers.
• If you’re self-employed, you can only deduct up to your net income (before tips).

Why it matters:

This change could benefit seniors working part-time in hospitality or caregiving roles, offering a meaningful way to reduce taxable income.

Also read: IRS issues warning on costly tax credit errors that could cost you $5,000​

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Overtime deductions: rewarding your extra hours​

If you’ve been picking up extra shifts or working beyond your regular hours, there’s now a deduction that recognizes your extra effort.

For qualifying overtime wages above your standard hourly rate, you can deduct up to $12,500 (single filers) or $25,000 (joint filers).

How to claim it:

• Maintain thorough records of your overtime pay and hours.
• Only the portion that exceeds your regular pay is eligible.

Phaseout thresholds:

• $150,000 MAGI for individuals.
• $300,000 MAGI for joint filers.

Why it matters:

Older adults still working—especially to supplement Social Security or boost retirement savings—may see a real tax advantage here.

Also read: IRS employee’s data access request raises concerns over taxpayer privacy​

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Car loan interest deduction: easing the cost of driving​

Purchased a car for personal use after December 31, 2024?

You may now deduct the interest paid on your car loan—up to $10,000 or the total interest paid, whichever is lower.

Eligibility requirements:

• Only applies to vehicle purchases (not leases).
• Vehicle must be purchased after the cutoff date.
• You must provide vehicle and loan details.

Phaseouts:

• Begins at $100,000 MAGI for single filers.
• Begins at $200,000 MAGI for joint filers.

Why it matters:

With auto loan interest rates climbing, this deduction could offer timely relief—especially for seniors financing a new vehicle purchase.

Also read: IRS warns Americans to secure their finances before disaster season heats up​

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Social Security break: enhanced deduction for seniors​

A key highlight for many older Americans is the Enhanced Deduction for Seniors, allowing you to deduct up to $6,000 of your taxable Social Security income.

Who qualifies:

• Any senior with a valid Social Security number.
• Must file jointly to claim the full amount (for married couples).

Good news:

• There’s no income cap on this deduction.
• It’s available through 2028, so you have several years to benefit.

Why it matters:

This update directly supports retirees, helping to protect more of their Social Security income from taxes.

Also read: Uh oh! Your bank account could be seized by the IRS. Here’s why and how.​

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What these deductions mean for your tax return​

When you subtract these new deductions from your total income, your taxable income goes down—resulting in a potentially smaller tax bill or a larger refund.

Example scenario:

• A retired couple receives $30,000 in Social Security.
• One partner earns $5,000 in tips from part-time work.
• They also paid $2,000 in car loan interest.

With Schedule 1-A, they could deduct up to $13,000, possibly reducing their overall tax burden significantly.

Also read: IRS mistake leaves 92-year-old woman unable to cash $11K tax refund—here’s what happened​

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Why refunds matter more than ever​

According to a recent survey of 2,000 US taxpayers, refunds are becoming an essential part of financial planning for many families—especially for basic living costs.

This year’s trends:

• 61% said their refund is essential to their 2025 household budget.
• 72% plan to spend it on necessities like rent, groceries, or debt.
• 62% were pleasantly surprised by their refund—compared to just 40% last year.

With added deductions on the table, refunds could be even higher next tax season.

Also read: Tax chaos could be a goldmine—for the wrong people. Taxpayers at risk amidst as IRS uncertainty​

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Simple steps to make the most of your deductions​

1. Organize your documents early
   Save your receipts, pay stubs, vehicle loan info, and anything related to earnings or deductions.
2. Check your MAGI
   Many of these new deductions phase out at certain income levels, so it’s important to know where you stand.
3. Talk to a tax expert
   Rules change quickly. A professional can help you claim everything you’re eligible for.
4. Don’t delay filing
   Filing early not only means a faster refund—it gives you time to fix errors or gather missing documents.

If you’re hoping to make the most of your money this tax season, the IRS’s latest updates offer a valuable opportunity.

Whether you're still working, easing into retirement, or fully retired, these new deductions could help you keep more of your income where it belongs—with you.

Be sure to review your eligibility, stay organized, and consider speaking with a tax professional to make the most of what 2025 has to offer.

Read next: The truth behind the $2,000 August stimulus rumors


Have you taken advantage of any of these tax breaks before? Will these new deductions change the way you file in 2025? Are you expecting your refund to play a bigger role in your budget this year?

Drop your thoughts and tips in the comments. The GrayVine community thrives on shared knowledge—especially when it helps us all save a little more.