Tax Law Highlights TY25

Tax-Aide Scope Changes

TBD

Virginia TY25 Updates

Standard Deduction -

S/MFS:  $8,750 MFJ:  $17,500

Virginia rebate up to tax liability (max $200 per taxpayer) for returns filed by Nov. 3, 2025 - may be taxable if itemized in TY24 and benefited

Refundable EITC increased to 20% of federal EITC

Estimated tax payment threshold increased to $1,000

Military retiree benefits subtraction (code 60) up to $40,000 regardless of age

Eligible Educator Expense Deduction $1,500

Form 1099-K VA reporting threshold still $600 (as of September 1, 2025)

Virginia conformity to new federal items to be determined

Federal TY25 Updates (IRS List)

Tax Brackets

10%, 12%, 22%, 24%, 32%, 35%, and 37% now permanent (no expiration date)

Federal Standard Deduction

S or MFS:  $15,750  MFJ or QSS:  $31,500 HoH:  $23,625

Additional for Age (65+) or Blindness

Married/QSS: $1,600 S/HOH:  $2,000

Gross income limit for qualifying relative $5,200

Additional Deductions

Age 65+ deduction of $6,000 for itemizers and non-itemizers subject to $60 per $1,000 phaseout range of AGI $75,000-$175,000 ($150,000-$250,000) with valid SSN; must file MFJ if married; MFS not eligible; "below-the-line" deduction does not affect AGI

Tip income (as shown on Form W-2, Form 1099, or other specified statement furnished to the taxpayer or reported directly by the taxpayer on Form 4137) deduction up to $25,000 per return for listed qualifying occupations for itemizers and non-itemizers subject to $100 per $1,000 phaseout starting at AGI $150,000 ($300,000) with valid SSN; must file MFJ if married; MFS not eligible; "below-the-line" deduction does not affect AGI

Premium portion of overtime (as shown on Form W-2, Form 1099, or other specified statement furnished to the taxpayer) deduction up to $12,500 ($25,000) for itemizers and non-itemizers subject to $100 per $1,000 phaseout starting at AGI $150,000 ($300,000) with valid SSN; must file MFJ is married; MFS not eligible; "below-the-line" deduction does not affect AGI

Vehicle loan interest deduction for itemizers and non-itemizers up to $10,000 for a qualified vehicle (new car, minivan, van, SUV, pick-up truck, or motorcycle with gross vehicle weight less than 14,000 pounds) purchased for personal use with final assembly in the U.S. with phaseout of $200 per $1000 over range of AGI $100,000-$150,000 ($200,000-$250,000); VIN required (can be used to determine plant of manufacturer); "below-the-line" deduction does not affect AGI

Forms

Form 1040-SR - draft 9/8/25

Form 1040 Schedule 1-A, Additional Deductions - draft 9/8/25

Form 1040 Schedule A, Itemized Deductions - draft 9/11/25

Form 1099-K reporting requirements reinstated to previous threshold of $20,000 and 200 transactions. 

Form 1099-R box 7 distribution code Y for qualified charitable distribution - box 2a will not show a reduction for the QCD

Form 1099-DA, Digital Asset Proceeds from Broker Transactions

Expenses

Standard mileage rates:  

$0.70 business; $0.21 medical; $0.14 charitable

HSA contribution $4,300 (self) and $8,550 (family) with 55+ $1,000

State and local taxes (SALT) deduction maximum $40,000 (MFS $20,000) with AGI up to $500,000 ($250,000 MFS)

Tax Credits

Home energy tax credit requires Qualified Manufacturer Identification Number on Form 5695 - credit repealed after December 31, 2025

Earned Income Tax Credit: Maximum investment income $11,950

Child tax credit $2,200 per child; $1,700 refundable per child; a parent and the child must have valid SSN; no credit for MFS; phaseout AGI $200,000 ($400,000) at $50 per $1,000 AGI above the limits

Adoption credit up to $5,000 now refundable (OOS)

Other Items

Treasury announces federal government will phase out paper checks on September 30.

NATP reports (as of 9/5/25) IRS will apply real time validation of SSN for e-filing. Will reject e-filed return with restricted SSN "valid for work only with DHS authorization" if work authorization expired and claiming certain credits

Policy and Procedures

Para 4.6.3 Taxpayer should initial bank account information found on Form 1040 (refund only) or Client Form Listing Summary page in QR print set.