Paying taxes may be one of life's few guarantees, but “simple" has never been part of the deal. The rules shift, the forms evolve and the approach that worked last year can fall flat the next time you file. Major tax changes roll out regularly—sometimes through sweeping legislation, other times through quieter updates that still pack a punch.
Either way, staying in the loop matters because these adjustments can shape how you report your income, claim deductions and plan for the future. To help you navigate what's new and what actually affects your wallet, here are answers to the most common questions about the latest tax year updates so you can file with confidence when the time comes.
1. Tax Filing Deadlines and Extensions
Understanding when your taxes are due and how extensions work can save you stress, money and a few unnecessary gray hairs. Here's how the key deadlines break down.
When are the tax filing deadlines for 2025?
The tax filing deadline for the 2025 tax year is Wednesday, April 15, 2026. This is also the deadline for requesting a filing extension.
Can I get an extension to file my taxes? How does it work?
If you need more time to finish your return, you can file Form 4868 by April 15 to receive a six-month extension to file. An extension gives you more time to submit your paperwork, but not more time to pay any taxes you owe. To avoid penalties and interest, make sure your withholding and estimated payments made by April 15 cover at least 90% of the tax you owe for the year.
What are the penalties for filing late or paying late?
Taxpayers who owe tax and do not file on time or request an extension may face a failure-to-file penalty. If you need more time, make sure to submit Form 4868 by the April 15 deadline to avoid late-filing penalties.
2. What Tax Law Changes Will Affect 2025 Tax Returns?
In July 2025, Congress signed new tax rules into law as part of the 2025 Reconciliation Act, also known as the One Big Beautiful Bill Act. This new legislation includes several updates to the tax code that will affect how Americans file their taxes this year and for years to come. Here are the highlights:
Tax brackets
- The seven federal tax brackets are now permanent.
- The income ranges that trigger each bracket will be adjusted each year for inflation so the thresholds shift upward.
New or expanded deductions and credits
- New senior deduction (2025–2028): Taxpayers age 65 and older qualify for an additional $6,000 deduction.
- State and Local Tax (SALT) deduction adjustments (2025–2029): The cap on deductible state and local taxes increases to $40,000 for qualifying taxpayers, then rises by 1% each year through 2029 before reverting to the original $10,000 limit in 2030.
- The Child Tax Credit increases to $2,200 per child for those who qualify.
- Car loan interest deduction (2025–2028): Purchasers of qualifying new vehicles can deduct up to $10,000 in interest paid on eligible car loans.
- Changes to energy credits: Tax credits previously available for electric vehicle purchases and certain energy-efficient home improvements have been eliminated.
- Overtime and tips (2025–2028): Eligible workers can deduct set amounts of their overtime pay and tips—up to certain limits—even though that money still counts as income. The deduction lowers how much of it gets taxed.
3. What Types of 2025 Income Must I Report?
If you made money, the IRS wants to hear about it. Most income is taxable and needs to show up on your return. That includes:
- Wages and salaries
- Interest from bank accounts
- Dividends
- Capital gains
- Retirement income
- Taxable Social Security benefits
- Unemployment benefits
- Gambling winnings
- Prizes and awards
And yes, digital assets count, too. If you bought, sold, traded or got paid in crypto or other digital assets, you'll need to report it to the taxman. Just answer the digital assets question on Form 1040 and follow the prompts.
READ MORE: How Does Investing Money Affect Your Taxes?
4. What Tax Deductions and Tax Credits Can I Take?
Deductions and credits are some of the few bright spots in the tax discussion. When you qualify, they can help you save money on your tax bill. Deductions allow you to lower the amount of your taxable income, and tax credits allow you to subtract from the amount of tax you owe.
What are the standard deduction amounts this year?
The standard deduction is a flat amount everyone can subtract from their income before taxes. Most people take it because it's simple and usually lowers their tax bill more than itemizing does. For 2025, the standard deduction is $15,750 for individuals and $31,500 for married couples filing jointly (or surviving spouses).
If you have a lot of deductible expenses—such as expenses for childcare costs, self-employment, student loan interest or college tuition—it may be worth your time to skip the standard deduction and itemize deductions instead.
How do I qualify for the Earned Income Tax Credit (EITC) this year?
The Earned Income Tax Credit is available to workers with low to moderate incomes. To qualify, you need earned income, you must meet the IRS income limits for your filing status, and the amount you can receive depends on how many qualifying children you have, if any.
Are homeschooling expenses, remote work expenses or childcare costs deductible?
Homeschooling expenses and most remote work costs generally aren't deductible. Childcare costs aren't deductible either, but some families may qualify for the Child and Dependent Care Credit, which can reduce your tax bill if you meet the IRS rules.
Can I deduct student loan interest or education expenses?
You may be able to deduct student loan interest if you meet the IRS income and filing requirements. The deduction is capped each year.
And if you're paying college tuition or other postsecondary education expenses, you may qualify for an education-related tax credit, such as those for tuition and other higher education costs.
5. Filing Status and Dependents
Choosing the right filing status matters because it affects your tax rate and what credits you can claim. Dependents also play a role, since the IRS rules for who qualifies haven't changed much, but the tax benefits tied to them have.
How do I determine the correct filing status?
Your marital status is determined based on your marital status on December 31 of the tax year. If you're eligible for more than one filing status—such as married filing jointly or married filing separately—you can compare the tax you would owe in each scenario and choose the one that provides the lowest tax.
How has the definition of a “dependent" changed, if at all?
The definition of a dependent hasn't meaningfully changed in recent years. The IRS still recognizes two groups: qualifying children and qualifying relatives, each with longstanding requirements related to relationship, age or income limits, residency and the support you provide.
What has shifted over time is how dependents affect your tax return. Personal exemptions, which used to reduce your taxable income for each dependent you claimed, were eliminated under the Tax Cuts and Jobs Act. These days, dependents mainly matter for credits, such as the Child Tax Credit and the Credit for Other Dependents, each with its own eligibility requirements.
In short, the rules for who counts as a dependent are essentially the same, but the tax benefits associated with dependents have evolved.
Can I claim a dependent even if they earn income?
Yes, you can sometimes claim someone as a dependent even if they earn income. What matters is whether they meet all IRS rules for dependents, including limits on their income and the amount of support you provide.
6. Retirement Contributions and Withdrawals
If you contribute to a tax-advantaged retirement plan, your contributions may be tax-deductible.
What are the contribution limits for IRAs and 401(k)s this tax year?
For 2025, the employee contribution limit for 401(k) plans is $23,500. If you're 50 or older, you can make an additional $7,500 catch-up contribution. The IRA contribution limit for 2025 is $7,000, with a $1,000 catch-up allowance for those 50 and older.
Are there penalties for early withdrawal from retirement accounts?
Yes. Early withdrawals from most tax-advantaged retirement accounts generally come with a 10% penalty if you take money out before age 59½, and the amount you withdraw is usually taxed as ordinary income. Certain exceptions exist, but in most situations, tapping retirement savings early will cost you.
How do retirement account distributions impact my taxable income?
Retirement account distributions can affect your taxable income, depending on the type of account. Withdrawals from traditional retirement accounts are generally taxed as ordinary income, while qualified withdrawals from Roth accounts are typically tax-free and don't increase your taxable income.
7. Self-Employed and Small Business Filers
If you own a business or you're self-employed, you may be able to take additional business-related tax deductions. You'll probably also need to make estimated tax payments rather than paying all your taxes when you file in the spring.
What expenses can self-employed individuals deduct this year?
Self-employed individuals can generally deduct ordinary and necessary business expenses to reduce their taxable income. This can include costs for things like a home office, business use of a vehicle, health insurance premiums, and the employer portion of self-employment tax, along with other expenses reported on Schedule C.
Are there any changes to the home office deduction rules?
No. For the 2025 tax year, the IRS has not announced any changes to the simplified home office deduction. The simplified method remains $5 per square foot for up to 300 square feet, allowing a maximum deduction of $1,500.
If you don't want to use the simplified method, you can use the regular method: Deduct a percentage of actual home expenses like rent and utilities based on the percentage of your home that's used for business. This method may result in a larger deduction, but to get it, you must provide detailed documentation on Form 8829.
READ MORE: Tax Credits vs. Deductions: Key Differences and Similarities
How do I handle estimated tax payments?
If you work for yourself or earn income without tax withheld, you may need to make estimated tax payments during the year. These payments can help you stay on track for what you'll owe at tax time.
Some third-party platforms are only required to issue a Form 1099-K when certain reporting thresholds are met—and those thresholds can change over time. But even if you don't receive a tax form from a platform, you're still required to report all the income you earn.
8. Stimulus Payments and Relief Programs
During and after the pandemic, any stimulus payments you received had to be considered when filing taxes. But now, several years past the onset of the pandemic, this is no longer an important part of tax filing. However, if you live in an area that has been affected by a natural disaster and has been declared a federal disaster area, you may qualify for disaster tax relief.
Do I need to report stimulus payments on my tax return?
No, stimulus payments—such as the Economic Impact Payments distributed during the COVID-19 pandemic—are not considered taxable income, so you don't have to report them.
How do Recovery Rebate Credits work if I didn't receive full stimulus payments?
Even if you didn't get full stimulus payments in 2020 and 2021, it is now too late to claim the Recovery Rebate Credit. Those rebate credits were part of a COVID-19 stimulus package, and the final deadline to file a tax return to claim the credit was April 15, 2025.
Are any new relief programs impacting this year's tax filing?
The newest tax relief programs included in the One Big Beautiful Bill Act, passed in July 2025, are all in the form of tax deductions and tax credits. There are no new stimulus payments for this year.
9. Filing Electronically and Payment Options
Filing your taxes and paying what you owe doesn't have to be complicated. The IRS offers straightforward options for both.
What are the safest and easiest methods to file taxes electronically?
The IRS encourages taxpayers to file taxes electronically, as it's more secure than filing by mail. You can file directly through the IRS website with IRS Free File. For more complicated tax situations, you can file electronically with tax filing software or by hiring a professional tax preparer.
Can I make payments directly through the IRS website?
If you owe tax, you can make payments through the IRS website with a credit card, debit card, digital wallet or electronic funds transfer.
What options do I have if I cannot pay my full tax bill?
If you are not able to pay your tax bill in full, you can apply for a payment plan through the IRS. A payment plan will allow you more time to pay your tax bill in full but may include interest or other fees.
10. Common Tax Filing Mistakes To Avoid
Filing taxes may not be your idea of fun, but avoiding a few classic mistakes can save you a lot of stress—and keep your tax refund from getting stuck in IRS limbo.
What are common mistakes filers make that could delay refunds?
A surprising number of delays can come from tiny slip-ups, like:
- Mixing up your personal information or typing in the wrong Social Security number.
- Forgetting to sign your return (yes, it happens).
- Leaving out income or reporting something that doesn't match what your employer sent the IRS.
- Making simple math mistakes.
- Paper filing instead of e-filing. Electronic filing is faster, cleaner and way less error-prone.
Think of these as the tax version of accidentally leaving your keys in the fridge—easy to avoid once you're paying attention.
How do I correct an error after submitting my return?
After submitting your tax return, if you realize you made an error, you can file an amended return to correct the error. To do that, you'll need to file Form 1040-X, which can be filed electronically using tax software.
What should I do if I receive a notice from the IRS?
If you receive a notice from the IRS, try not to panic. Such notices are often intended to correct mistakes or request more information. Read the notice and if a response is requested, respond by the deadline. If you don't agree with the notice, respond with documentation to support your viewpoint.
Be Prepared for Tax Season
Aside from keeping up with the latest tax changes, the real secret to surviving tax season is staying organized before things get messy. Toss all your forms and receipts into one spot as they come in. Future-you will thank present-you for not making them crawl through email archives at midnight.
And if you already suspect you'll owe something, don't wait for April panic mode. Start stashing a little cash now. Parking it in a separate savings account—say, with Synchrony—keeps it out of your “accidentally spent it" zone and lets it earn a bit while it sits there behaving itself.
READ MORE: Taxes on Savings Accounts: What You Need to Know