If you're a W-2 employee, you've probably assumed that most juicy tax deductions are reserved for someone else—business owners, real estate investors, or people with LLCs and yachts.
But this year? That narrative just got flipped.
Thanks to the newly proposed “One Big Beautiful Bill,” 2025 is shaping up to bring some unexpected wins for W-2 workers. While much of the tax world is still buzzing about the big-picture changes, a few quiet but powerful deductions have been tucked into the new legislation—and they could directly benefit you or someone in your household.
1. No Tax on Tips (Up to $25,000)
For the first time ever, tip income can be tax-free—up to:
- $25,000 if you're Married Filing Jointly
- $12,500 for all other filers
To qualify, your job must fall under a yet-to-be-published list of “tipped professions” (likely including restaurant workers, baristas, hotel staff, and others in hospitality).
If you or someone in your family earns tips, this could be a significant savings opportunity.
2. No Tax on Overtime Pay
Yes, you read that right—overtime income may now be deductible.
This deduction is also capped at $25,000, and while the IRS is still ironing out the details, early guidance suggests:
- Employers may need to report overtime separately on your W-2
- You might see additional payroll breakdowns from HR starting in 2025
If you regularly log extra hours at work, this could be a major tax benefit.
3. Deduct Auto Loan Interest (Up to $10,000)
Planning to buy a car in 2025?
If it’s assembled in the U.S., you could deduct up to $10,000 in auto loan interest—even if you don’t itemize deductions.
This deduction encourages investment in domestic manufacturing, but more importantly for everyday taxpayers, it gives W-2 employees a powerful new write-off in a place it’s never existed before.
What Should You Do Next?
These new deductions are big news—but you’ll only benefit if you understand how to navigate the fine print and plan your 2025 income strategy accordingly.
Want to know if you or a family member qualifies?
Curious how these rules could impact your withholdings or tax return next year?
Let’s talk. I’d be happy to walk you through what’s changing and help you maximize every dollar.
Email me at kim@kimberlybagleycpa.com or book a call with me here to get clear on your tax game plan before the year ends.