Dr. Friday Radio Show – October 25, 2025

This week, Dr. Friday discusses the approaching 2024 tax deadline and dives into significant new tax deductions for 2025 concerning overtime pay and seniors over 65. The show also covers crucial topics such as the tax implications of selling a home, how large income events can trigger higher Medicare (IRMAA) payments, the right way to deduct business mileage, and how to navigate tax filings during a divorce. Dr. Friday offers practical advice for W-2 employees, self-employed individuals, and business owners to help them stay compliant and financially sound.

Key Summary Points

• Approaching 2024 Tax Deadline: Time is running out to file 2024 tax returns. Due to a disaster extension in Tennessee, taxpayers have until November 3, 2025, to file returns and make payments.

• New Overtime Pay Deduction (2025-2028): A new law allows employees to deduct the “premium” portion of their overtime pay (the “half” in time-and-a-half). The deduction is capped at $12,500 for single filers and $25,000 for married couples, with phase-outs for higher earners. Employers will need to track and report this, and employees should update their W-4s to adjust withholding.

• New Deduction for Seniors (2025-2028): Taxpayers aged 65 and older will be eligible for an additional $6,000 deduction ($12,000 for married couples). This is available whether you itemize or take the standard deduction but is phased out for those with higher incomes. This may create an opportunity for strategic IRA withdrawals or Roth conversions.

• Capital Gains on Home Sales: Dr. Friday reminds listeners that the old rule of deferring taxes by reinvesting home sale profits into a new property no longer exists. Gains exceeding the primary home exclusion ($250,000 for single, $500,000 for married) are taxable.

• Medicare IRMAA Surcharges: A large, one-time income event, such as selling a home, can lead to an Income-Related Monthly Adjustment Amount (IRMAA), causing higher Medicare premiums two years later. Dr. Friday notes that successfully waiving this for a home sale under a “life-changing event” is very difficult.

• Business Mileage Deductions: To claim mileage, you must have a clear business purpose for traveling from a specific Point A to Point B. The IRS requires a detailed and timely log including the date, destination, purpose, and mileage for each trip.

• Taxes and Divorce: Filing jointly means both parties are responsible for the tax debt, regardless of what a divorce decree says. If you lack trust in your spouse’s financial reporting, consider filing as “Married Filing Separately” to protect yourself.

• W-4 Withholding Accuracy: Dual-income households should review their W-4s. If both spouses claim “Married” and also claim the children without checking the box indicating their spouse also works, it can lead to significant under-withholding and a surprise tax bill.

• Estimated & Payroll Taxes: Self-employed individuals are reminded that estimated tax payments are mandatory. Due to the disaster extension, the first three quarterly payments for 2025 can be made by November 3rd without penalty. This extension also applies to certain payroll tax deposits, offering a crucial window for businesses to catch up and avoid penalties.

Episode FAQ

Q: What is the new overtime tax deduction for 2025?

For tax years 2025 through 2028, employees can deduct the “premium” portion of federally mandated overtime (e.g., the “half” in time-and-a-half pay). The deduction is limited to $12,500 for individuals and $25,000 for married couples filing jointly and is phased out for higher-income earners.

A: Is there a new tax break for seniors?

Yes, from 2025 to 2028, individuals 65 and older can claim an additional $6,000 deduction ($12,000 for a married couple if both qualify). This can be added to either the standard or itemized deduction but