Tax Deduction Overview – Updated for 2025
Includes provisions from the One Big Beautiful Bill Act (OBBBA)
Medical Expenses
- Deduction threshold remains at 7.5% of AGI for both regular tax and AMT
- Self-employed health insurance remains 100% deductible
- Applies to expenses paid for yourself, spouse, and dependents
- Timing matters: Expenses are deductible when paid, including by credit card
- New for 2025:
- Expanded eligibility for Health Savings Accounts (HSAs)
- Broader list of qualified medical expenses, including over-the-counter items and menstrual care products
- CHOICE accounts introduced for flexible health coverage (similar to HSAs)
Taxes
Deductible Taxes
- State & local taxes (SALT) capped at:
- $10,000 ($5,000 if Married Filing Separately) through 2024
- $40,000 cap for 2025, indexed for inflation through 2029 under OBBBA
- Phaseout begins at $500,000 AGI (cannot reduce deduction below $10,000)
- Real estate taxes deductible in the year paid (allocated between buyer/seller)
- Equitable ownership exception still applies
- Foreign real estate taxes remain non-deductible
Non-Deductible Taxes
- Customs/import duties
- Estate & gift taxes
- Fines & penalties
- Social Security & Medicare taxes
Interest Deduction Rules
Non-Deductible Interest
- Personal loans (credit cards, car loans, overdraft fees)
- Home equity loan interest (unless used to buy/build/improve a home)
Mortgage Interest
- Deduction limited to $750,000 acquisition indebtedness ($375,000 MFS)
- Exception: $1 million limit applies if contracted before 12/15/17 and closed before 4/1/18
- OBBBA makes this limitation permanent
New for 2025
- Car loan interest deduction: Up to $10,000 for personal-use vehicles purchased after 12/31/2024
- Vehicle must be new, assembled in the U.S., and secured by a lien
- Deduction phases out above $100,000 AGI ($200,000 MFJ)
Casualty & Theft Losses
- Deductible only for federally declared disaster areas
- OBBBA expands eligibility to include certain state-declared disasters
- Losses from income-producing property remain deductible
Charitable Contributions
Deductible
- Up to 100% of AGI, depending on donation type and recipient
- Mileage for charitable service: 14¢ per mile
- Volunteer expenses: uniforms, travel, supplies
New for 2025
- Non-itemizers may claim up to:
- $1,000 (Single)
- $2,000 (Married Filing Jointly)
- Applies to cash donations to qualifying charities
Non-Deductible
- Civic leagues, unions, HOA dues
- Lobbying groups and political contributions
- Tuition, raffle tickets, blood donations, and donated time/services
Miscellaneous Deductions
Repealed (2018–2024, now permanent under OBBBA)
- Investment expenses
- Employee business expenses
- IRA custodial fees
- Job-hunting costs
- Professional dues
- Tax preparation fees
Fully Deductible
- Casualty & theft losses (from income-producing property)
- Gambling losses (up to winnings)
- Special job-related expenses (for handicapped individuals)
Non-Deductible
- Club dues
- Commuting costs
- Funeral expenses
- Political contributions
- HOA fees
- Home repairs
Bottom Line
The One Big Beautiful Bill Act reshapes several deduction rules for 2025—especially around SALT, car loan interest, charitable giving, and medical accounts. Staying current and keeping detailed records is key to maximizing your deductions and filing accurately.