2025 Federal Tax Credits and Deductions with Income Phaseouts
The following are the major U.S. federal tax credits for the 2025 tax year, highlighting phaseout thresholds and credit amounts by filing status:
1. Earned Income Tax Credit (EITC)
The Earned Income Tax Credit (EITC) is a refundable credit for low- to moderate-income working individuals and families. Credit amount and phase-out thresholds vary based on the number of qualifying children.
| Income Phaseout Level | |||||
| Earned Income Tax Credit | Maximum Credit | Start (Single/HoH) | End (Single/HoH) | Start (MFJ) | End (MFJ) |
| No Children | $ 649 | $ 10,620 | $ 19,104 | $ 17,730 | $ 26,214 |
| One Child | $ 4,328 | $ 23,350 | $ 50,434 | $ 30,470 | $ 57,554 |
| Two Children | $ 7,152 | $ 23,350 | $ 57,310 | $ 30,470 | $ 64,430 |
| Three+ Children | $ 8,046 | $ 23,350 | $ 61,555 | $ 30,470 | $ 68,675 |
2. Child Tax Credit (CTC)
The CTC is worth up to $2,200 per child under 17. It begins to phase out at $200,000 AGI for single/HoH filers and $400,000 for married filing jointly. A portion of the credit is refundable up to $1,700.
| Income Phaseout Level | ||||
| Maximum Credit | Start (Single/HoH) | End (Single/HoH) | Start (MFJ) | End (MFJ) |
| $ 2,200 | $ 200,000 | $ 240,000 | $ 400,000 | $ 440,000 |
3. Credit for Other Dependents (ODC)
The ODC provides a $500 nonrefundable credit for dependents not qualifying for the CTC. The phase-out thresholds mirror the CTC thresholds.
| Income Phaseout Level | ||||
| Maximum Credit | Start (Single/HoH) | End (Single/HoH) | Start (MFJ) | End (MFJ) |
| $ 500 | $ 200,000 | N/A | $ 400,000 | N/A |
4. American Opportunity Tax Credit (AOTC)
The AOTC offers up to $2,500 per student for the first four years of college. It phases out between $80,000–$90,000 for single/HoH and $160,000–$180,000 for MFJ.
| Income Phaseout Level | ||||
| Maximum Credit | Start (Single/HoH) | End (Single/HoH) | Start (MFJ) | End (MFJ) |
| $ 2,500 | $ 80,000 | $ 90,000 | $ 160,000 | $ 180,000 |
5. Lifetime Learning Credit (LLC)
The LLC provides up to $2,000 per return for qualified education expenses. Phase-out ranges are the same as the AOTC.
| Income Phaseout Level | ||||
| Maximum Credit | Start (Single/HoH) | End (Single/HoH) | Start (MFJ) | End (MFJ) |
| $ 2,000 | $ 80,000 | $ 90,000 | $ 160,000 | $ 180,000 |
6. Adoption Credit
This credit provides up to $17,280 for qualified adoption expenses. It phases out between $252,150 and $292,150 MAGI for all filing statuses. Up to $5,000 of the credit is refundable.
| Income Phaseout Level | ||||
| Maximum Credit | Start (Single/HoH) | End (Single/HoH) | Start (MFJ) | End (MFJ) |
| $ 17,280 | $ 252,150 | $ 292,150 | $ 252,150 | $ 292,150 |
7. Premium Tax Credit (PTC)
The PTC helps lower the cost of ACA marketplace insurance. Eligibility is based on income between 100% – 400% of the Federal Poverty Level (FPL).
| Income Phaseout Level | ||||
| Maximum Credit | Start (Single/HoH) | End (Single/HoH) | Start (MFJ) | End (MFJ) |
| Variable | 100% FPL | 400% FPL | 100% FPL | 400% FPL |
8. Child & Dependent Care Credit
Provides a credit based on up to 50% of care expenses ($3,000 for one child, $6,000 for two or more). Qualifying care includes daycare, babysitters, summer day camps, and adult care programs (not overnight camps). Married couples must file jointly to qualify.
| Feature | Description |
| Credit Rate | Ranges from 20% to 35% of qualifying expenses |
| Qualifying Expenses Limit | Up to $3,000 for one child/dependent, $6,000 for two or more |
| Max Credit Amount | $1,050 (35% of $3,000) or $2,100 (35% of $6,000) |
| Refundable? | Not refundable (unlike CTC or EITC) |
| Income-Based Phaseout | Yes – credit rate reduces as income increases |
Unlike credits with a fixed phaseout threshold, the CDCC uses a sliding scale to determine the credit percentage based on your Adjusted Gross Income (AGI). Here’s how it works:
| AGI Range | Credit Percentage |
| $0–$15,000 | 35% |
| $15,001–$43,000 | Gradually reduced from 35% to 20% |
| Over $43,000 | Flat 20% |
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The following are some of the more common U.S. federal tax deductions for the 2025 tax year, highlighting phaseout thresholds and credit amounts by filing status (these phaseout thresholds are not final and are subject to potential changes). Note that many of these amounts are based on MAGI which is typically your AGI with a few small modifications:
9. Student Loan Interest Deduction
For 2025, the student loan interest deduction (up to $2,500) phases out for single filers with Modified Adjusted Gross Income (MAGI) between $85,000 and $100,000, and for those married filing jointly between $170,000 and $200,000.
10. Traditional IRA Deductions
If you’re covered by a workplace retirement plan, your ability to deduct traditional IRA contributions phases out at certain MAGI levels based on your filing status. For 2025, this limit is:
• Single/Head of Household filers: MAGI between $79,000 and $89,000
• Married Filing Jointly: MAGI between $126,000 and $146,000.
• If your spouse is covered by a retirement plan but you are not, the phaseout range for your deduction is MAGI between $230,000 and $240,000.
11. Itemized Deductions (for high-income earners)
Before the Tax Cuts and Jobs Act of 2017, high earners faced what’s known as the Pease limitation, which reduced the value of their itemized deductions once income surpassed a certain threshold. That rule was suspended under the Tax Cuts and Jobs Act and now, starting in 2025, a new rule replaces it: the 2/37 Limitation on Itemized Deductions, introduced as part of the Big Beautiful Bill. This updated rule reduces total itemized deductions by 2 cents for every $1 of income above $370,000 (single) or $740,000 (married filing jointly).
12. Charitable Deduction for Non-Itemizers
Taxpayers that don’t itemize can now take advantage of a new above-the-line charitable deduction of up to $1,000 for single filers and $2,000 for married filing jointly. This not only provides a way for individuals to lower their tax liability, but also incentivizes non-itemizers to make more charitable contributions.
13. State and Local Tax (SALT) Deduction
Under new tax legislation in 2025, the SALT deduction limit has increased to $40,000. However, this deduction begins to phase out as MAGI increases.
| Filing Status | Base Cap | Phase‑Out Starts at MAGI | Fully Reverts to $10K at MAGI |
| Single/HoH | $ 40,000 | $ 250,000 | $ 590,000 |
| MFJ | $ 40,000 | $ 500,000 | $ 840,000 |
| MFS | $ 20,000 | $ 250,000 | $ 590,000 |
14. Additional Senior Deduction
For 2025 through 2028, a temporary deduction of $6,000 (or $12,000 for joint filers where both are age 65 or older) is available to seniors aged 65 or older. This deduction phases out at 6% of the household’s MAGI over $75,000 (single) or $150,000 (joint). The deduction fully phases out once MAGI reaches $175,000 (single) or $250,000 (joint).
15. Car Loan Interest Deduction
A new deduction for “qualified passenger vehicle loan interest” capped at $10,000 per year for 2025 through 2028 is introduced. This deduction phases out when the taxpayer’s MAGI exceeds $100,000 (single) or $200,000 (Married Filing Jointly) and is completely eliminated at MAGI of $150,000 (single) or $250,000 (MFJ). The vehicle must be a U.S.-assembled vehicle to qualify.
16. Tips and Overtime Deductions
Temporary deductions for certain tips received, up to $25,000 (single) or $50,000 (joint) and overtime pay (up to $12,500 for single filers, $25,000 for joint filers) are available from 2025 through 2028. These deductions phase out for single filers with MAGI over $150,000 and $300,000 for joint filers.
17. Qualified Business Income Deduction (QBI)
Introduced in the Tax Cuts and Jobs Act and now made permanent, this deduction allows eligible owners of pass-through entities (sole proprietorships, partnerships, S corporations, and some trusts and estates) a deduction up to 20% of their qualified business income. The deduction begins to phase out for certain service-based businesses (like health, law, accounting, consulting, and financial services professionals) when taxable income exceeds $197,300 for single filers and $394,600 for married couples filing jointly. The deduction fully phases out over a $50,000 range for single filers and a $100,000 range for joint filers. Businesses outside of specified service industries are generally not subject to the phaseout but may be limited by wage and asset-based thresholds.
Additional Miscellaneous Changes:
• Gambling losses are limited to 90% of gambling winnings now.
• Unreimbursed educator expenses can be deducted as a miscellaneous itemized deduction. All other miscellaneous itemized deductions are permanently repealed.
• Energy-efficient Home Improvement Credit – The credit is terminated and does not apply to property placed in service after December 31, 2025.
• Residential Clean Energy Credit – The credit is terminated and does not apply to property placed in service after December 31, 2025.
• All Clean Vehicle Credits (Commercial, New, Used) – All credits are terminated for vehicles acquired after Sept. 30, 2025.