New tax code changes could affect refunds for tipped workers, overtime earners, seniors and some car buyers filing their 2025 taxes.
1040 income tax form and w-2 wage statement with a federal Treasury refund check. Closeup with selective focusing. Tax season is officially underway, and several changes to the federal tax code could affect how much money some taxpayers get back — or owe — when they file.
The updates are part of President Trump’s Big Beautiful Bill and apply to Tax Years 2025-28. The changes impact people who earn tips or overtime, seniors and those who purchased certain vehicles in 2025.For tipped workers like Argelia Ventura, those changes could make a noticeable difference. She works long hours at her family owned restaurant and said tips help her get through lean months. Argelia Ventura is all smiles about the"No Tax on Tips" tax code that will allow her to deduct when she files. “When they give you that extra tip, it’s like, 'Oh God, did you make a mistake, are you sure?'"Ventura said, blushing and laughing."It gives you goosebumps.”“A lot of people ask, 'So does that mean that tips no longer get taxed?' Well, not exactly," explained Octavio Saenz with the IRS."It is not that we don’t report tips anymore — that’s not the thing." Octavio Saenz of the IRS said there is confusion among taxpayers regarding some of the bigger changes to the tax code. Taxpayers must still report all tips when filing their earnings. The deduction applies only to federal income taxes and does not cover state taxes, Medicare or Social Security contributions.The deduction is capped at $25,000 per year, applies only to voluntary tips — not automatic gratuities — and is limited to jobs that regularly receive tips. The provision runs through Tax Year 2028. “It focuses on the extra amount, the amount over your regular rate, the premium part,” Saenz explained. For example, if a worker earns $20 an hour and makes $30 an hour during overtime, the extra $10 per hour is the portion that may qualify for the federal deduction. The maximum deduction is $12,500 for single filers and $25,000 for joint filers. Saenz warned that this information may not appear clearly on a W-2, so you may have to go back to your last paycheck. “There’s a real good tip that we tell people: Keep your pay stub and pay breakdown, because what matters is separating the regular pay from the qualified overtime component,” Saenz said.for interest paid on loans for new vehicles purchased in 2025 that were manufactured in the United States, as well as a new senior deduction of $6,000 — or $12,000 for married couples — for those 65 and older. While not all of the changes apply to Ventura, she said she’s eager to see how the updates affect her return when she files for 2025. Experts recommend working with a trusted tax professional or reliable tax software to understand how the new rules apply to individual situations. This story was originally reported for broadcast by NBC San Diego. AI tools helped convert the story to a digital article, and an NBC San Diego journalist edited the article for publication.
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