Tax Law Highlights TY25

Tax-Aide Scope Additions

Form 1040 Sched 1-A (additional deductions)

Form 1098-VLI (vehicle loan interest)

Form 1099-INT box 13 (bond premium on tax-exempt bond)

Form 1099-R, box 7 code 8 (corrective distribution taxable in current year)

Form 1099-G, new box 10 (family leave benefits)

Virginia TY25 Updates

Tax Relief for Working Virginians

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

Standard Deduction

S/MFS:  $8,750 MFJ:  $17,500

Refundable EITC increased to 20% of federal EITC

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

Eligible Educator Expense Deduction - expired

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

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

MFJ/QSS/MFS:  $1,600

S/HOH:  $2,000

Gross income limit for qualifying relative $5,200

Additional Deductions Below the AGI Line

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 (reported on Form 1098-VLI) 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; first digit 1, 4, or 5 indicates U.S. assembly); "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 reverts 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 (OOS)

Expenses

Standard mileage rates:  

$0.70 business; $0.21 medical; $0.14 charitable

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

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

Charitable contributions to Veterans Services Organizations now deductible

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 under 17; $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

IRA deduction amount $7,000 ($8,000 for 50+)

Kidde Tax - unearned maximum income $2,700

IRS to phase out paper tax refund checks 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

Social Security Fairness Act - Effective January 1, 2024, will result in lump sum payments for 2024 on 2025 SSA-1099s. 

Policy and Procedures

Para 6.25 Preparing Friends and Family Returns - If the Counselor chooses to use the IRS provided tax preparation software to prepare an out-of-scope return and/or is preparing the return outside of AARP Foundation Tax-Aide Policies and Procedures, they are no longer protected by the Volunteer Protection Act of 1997 for that return. 

Tax Law Highlights TY24

Tax-Aide Scope Changes 

Schedule 1 line 8m, Olympic and Paralympic medals and USOC prize money

Schedule 1 line 24c, Nontaxable amount of the value of Olympic and Paralympic medals and USOC prize money reported on line 8m. If AGI is not more than $1,000,000 ($500,000 MFS), a corresponding adjustment to remove the income is made here. 

Schedule C expenses allowed increased from $35,000 to $50,000 (announced 1/24/25). 

Virginia TY24 Updates

Standard Deduction - 

S/MFS:  $8,500 MFJ:  $17,000

Military retiree benefits subtraction (code 60) up to $30,000 regardless of age

Form 1099-K VA state threshold $600 regardless of transaction volume

Federal TY24 Updates (IRS list)

New Intake/Interview Booklet - Draft IRS Form 13614-C, Intake/Interview and Quality Review Sheet

Form 1099-R box 7 code G for employer contribution to Roth with box 2a taxable amount

Form 1040 - Due by April 15, 2025

Federal Standard Deduction

S or MFS:  $14,600 MFJ or QSS:  $29,200 HoH:  $21,900

Additional for Age (65+) or Blindness

Married/QSS: $1,550 S/HOH:  $1,950 for each

Gross income limit for qualifying relative $5,050

Adjustments

HSA individual contribution limit $4,150. Family limit $8,300.

Income

Form 1099-K from third-party settlement networks (e.g., PayPal, VISA, Mastercard, Venmo) if paid over $5,000 for goods and services regardless of transaction volume

Social Security annual wage base $168,600

Pension

 May withdraw $1,000 for emergencies without penalty - income tax still due. 

IRA maximum contribution $7,000 plus $1,000 for 50 and older.

Expenses

Standard mileage rates:

$0.67 business; $0.21 medical; $0.14 charitable 

Tax Credits

Earned Income Tax Credit: Maximum investment income $11,600.