What’s New

Standard mileage rate. For 2025, the standard mileage rate for the cost of operating your car for business use is 70 cents per mile.

Energy efficient commercial buildings deduction. The expense is now reported on line 27a.

Other expenses (from line 48). The expense is now reported on line 27b.

Bonus depreciation. Certain qualified property acquired and placed in service after January 19, 2025, can take a 100% bonus depreciation. You can also elect to use the previous bonus depreciation phase-down rates instead of 100% expensing. See the Instructions for Form 4562 for more information.

Section 179 deduction dollar limits increased. Beginning in 2025, the maximum section 179 expense deduction is $2.5 million. This limit is reduced by the amount by which the cost of section 179 property placed in service during the tax year exceeds $4 million. See the Instructions for Form 4562 for more information.

Domestic research and experimental expenditures. Beginning in 2025, you can deduct your domestic research and experimental expenditures as current business expenses or you can elect to capitalize and amortize the expenditures ratable over a period of 60 months or more. See Revenue Procedure 2025-28 for more information.

Qualified sound recording productions. You may be eligible to deduct up to $150,000 of qualified sound recording production costs. This applies to costs starting after July 4, 2025, but before January 1, 2026. See section 181 for more information.

No tax on qualified tips. Beginning in 2025, you may be eligible to take a deduction for qualified tips you received in 2025. You can’t deduct more than $25,000 of those tips. The deduction is claimed on Schedule 1-A (Form 1040) not on your Schedule C. See Schedule 1-A (Form 1040) and its instructions for more information.

No tax on qualified overtime. Beginning in 2025, if you earned qualified overtime pay you may be eligible to deduct up to $12,500 ($25,000 if married filing jointly) of your qualified overtime compensation. The deduction is claimed on Schedule 1-A (Form 1040) not on your Schedule C. See Schedule 1-A (Form 1040) and its instructions for more information.

No tax on car loan interest. If you are self-employed and use your vehicle for personal and business use, you may be eligible to take a deduction for the interest for the personal use on Schedule 1-A (Form 1040). You can only deduct the part of the interest expense that represents the business use of your vehicle on Schedule C. See Schedule 1-A (Form 1040) and its instructions for more information.