The IRS has made important updates for the 2025 tax year. These changes come from the One Big, Beautiful Bill Act (Public Law 119-21), signed on July 4, 2025. This includes the rollback of the $600 Form 1099-K rule and several new tax deductions for individuals. This blog is a summary of what taxpayers, platforms, and employers should be aware of as the IRS begins implementation.
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Form 1099-K Threshold Changes in 2025
Starting in tax year 2025, platforms like PayPal, Venmo, Etsy, and eBay will only send Form 1099-K if both of these apply:
- You get over $20,000 in payments, and
- You make more than 200 transactions in the year.
This means many people who sell personal items or get paid through apps will not receive a 1099-K unless they cross both limits.
Why Was the $600 Rule Removed?
The $600 rule was introduced in 2021 to track digital income. But it caused confusion and complaints:
- People received forms for personal payments or used item sales.
- Platforms had to prepare millions of extra forms.
- Many taxpayers were unsure if they owed tax or not.
The IRS delayed the rule for two years. Now, the original $20,000/200 rule is back starting 2025.
Important:
Even if you don’t get a 1099-K, you must still report all taxable income. If you sell items at a loss (for less than you paid), you usually don’t owe tax, but you should keep records.
New Tax Deductions for 2025 to 2028
The same law also created temporary tax breaks for individuals. These apply from 2025 to 2028.
1. No Tax on Tips
You can deduct up to $25,000 per year in tips if:
- You work in a job that normally receives tips (as listed by the IRS).
- You report the tips on your Form W-2, 1099, or IRS Form 4137.
This deduction is not for people in certain professional service fields (called SSTBs). It is also not for employees who work for SSTB employers.
Income Limits:
Phases out if you earn more than $150,000 (or $300,000 for joint filers).
2. No Tax on Overtime Pay
You may deduct the extra pay you earn from working overtime.
This includes the extra “half” part of “time-and-a-half” pay.
- Max deduction: $12,500 per person, $25,000 for joint filers.
- Applies only to FLSA-qualified overtime.
- Must be reported on W-2 or 1099.
Income Limits:
Same phase-out as the tip deduction.
3. No Tax on Car Loan Interest
You can deduct up to $10,000 of interest paid on a car loan if:
- The car is new (not used) and assembled in the U.S.
- You bought it after December 31, 2024 for personal use.
- The loan is secured by the vehicle.
Used cars and leases do not qualify.
You must include the Vehicle Identification Number (VIN) on your tax return.
Income Limits:
Phases out at $100,000 for individuals and $200,000 for joint filers.
4. Extra Deduction for Seniors
If you are 65 or older, you can claim an additional $6,000 deduction.
- Married couples where both spouses are 65+ can claim $12,000.
- This is in addition to the current senior standard deduction.
Income Limits:
Phases out at $75,000 for individuals and $150,000 for joint filers.
New IRS Reporting Rules
For all the deductions above, the IRS will give more details later in 2025. Employers, lenders, and platforms must:
- Send tax forms to the IRS and to you.
- Include tip amounts, overtime pay, interest paid, and occupation (if needed).
The IRS will also give transition help for 2025 so people can adjust to the new rules.
Summary of Key Tax Changes for 2025
| Tax Update | Max Deduction | Income Phase-Out Begins | Applies To |
|---|---|---|---|
| Form 1099-K Threshold | $20,000 + 200 txs | N/A | Platforms like PayPal, Etsy, etc. |
| Tip Deduction | $25,000 | $150k / $300k | Employees/self-employed in tip jobs |
| Overtime Deduction | $12,500 / $25,000 | $150k / $300k | W-2 and 1099 workers with OT pay |
| Car Loan Interest | $10,000 | $100k / $200k | New U.S. vehicles for personal use |
| Senior Deduction | $6,000 / $12,000 | $75k / $150k | Age 65+ taxpayers |
Final Notes
These changes aim to reduce tax confusion and support working individuals. The rollback of the $600 rule makes 1099-K reporting simpler for platforms and users.
The new deductions can help lower your tax bill if you qualify. Be sure to:
- Keep good records
- Report all income
- Check if you’re eligible for any of the new deductions
For easy and accurate filing, visit Form1099online.com. We help you stay updated and file your 1099 forms without stress.