A few highlights of tax provisions for 2025:
The "One Big Beautiful Bill Act" (OBBBA or OB3) made permanent a variety of 2017 tax law provisions that were set to expire, as well as introducing several new tax rules- No tax on tips and overtime
- New provisions all some individuals to deduct tips and overtime pay they received in 2025.
- Only overtime reported on a W-2 or similar form qualifies for the deduction. Also, the overtime must be for work over 40 hours per week -- daily extended shift time is not eligible. And, the deduction is just for the pay above the regular rate: overtime paid at time and a half can get a deduction for the half amount.
- Tips also must be reported on a W-2, 1099-NEC, 1099-K or statement. Tips that were not reported to employers do not count. Additionally, the tips must be for one of the 184 designated occupations listed by IRS.
- Both the tips and overtime deductions are subject to income limitations as well as dollar limits ($12,500 per person overtime pay and $25,000 for tips).
- Standard deductions
- Standard deductions and tax brackets rose with Cost of Living Adjustments (COLAs). Standard deductions are $15,750 for single filers, $23,625 for heads of household and $31,500 for married couples filing jointly.
- Taxpayers age 65 or older get an additional $2,000 standard deduction, $1,600 each for married taxpayers.
- On top of that, taxpayers age 65 or older may also get a $6,000 per person "senior deduction." This break is for those whose incomes are less than $75,000 ($150,000 married filing jointly), and is just for years 2025 through 2028.
- Capital gains
- Capital gains brackets also rose slightly. Capital gains are not taxable (0% rate) for individual taxpayers with taxable incomes up to $48,351, or $96,701 for joint returns.
- Tax deduction for charitable contributions
- A deduction for charitable contributions if you don't itemize has been reinstated starting in 2026. It is not available for 2025.
- A new nonrefundable federal income tax credit was added for contributions to state-certified scholarship-granting organizations (SGOs). The maximum annual credit is $1,700 per taxpayer and is reduced by any state tax credits received for the same contribution.
- Arizona has raised the additional deduction for nonitemizers to 34% of the donations.
- And don't forget the dollar-for-dollar Arizona tax credit charities. For most, you can donate up to Apr. 15 and deduct on last year's return. Find out more at Arizona Tax Credits page.
- Itemized deductions
- Several changes to itemized deductions -- including charitable contributions and mortgage interest -- take effect for 2026 and do not affect 2025 returns.
- However, itemizers may claim car loan interest for 2025 through 2028.
- Clean energy credits
- Electric vehicle credits ended Sept. 30, 2025, and residential energy credits (solar, etc.) ended Dec. 31, 2025. You may be able to claim the credits for 2025 if you purchased before the end dates.
- Student loan interest
- Federal student loan borrowers may deduct up to $2,500 of student loan interest, and the exclusion for employer-paid student loan assistance is now permanent.
- Forgiveness of student loan debt exempt from federal taxes was due to expire in 2025 but has been extended permanently. Arizona conforms to federal rules so foregiven loan amounts are exempt on Arizona returns but are taxable for some other states.
- Required minimum distributions
- The age to start taking Required Minimum Distributions (RMD's) rose to age 73 in 2023 for those who haven't yet started taking RMD's. The table to calculate the distributions has been revised, lowering required amounts and allowing more money to stay in retirement plans.
- The age limit for contributions is gone. If you are still working, you now may contribute to an IRA or 401(k) even if you are required to take RMD's.
- Cryptocurrency
- As Bitcoin and other "cryptocurrency" investing grows, IRS is looking to track it. If you had any cryptocurrency transactions, make sure you include those records with your tax documents.
- Arizona has flat tax
- Arizona changed from a "progressive" tax (where higher income people pay a higher tax rate) to a "flat" tax (where everybody pays the same tax rate) in 2023. Now, Arizona has only one tax rate: 2.5%.