Tax Law Changes
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!!! SPECIAL NOTE: The “One Big Beautiful Bill Act” (OBBBA) made quite a number of changes to our tax code and the IRS has not had the time yet to process all the new regulations. Our information is PRELIMINARY and is subject to change. (webmaster)
No Tax on Social Security
Well, sort of. Effective for 2025 through 2028, individuals who are age 65 and older may claim an additional deduction of $6,000 ($12,000 per qualifying couple). Deduction phases out for taxpayers with modified adjusted gross income over $75,000 ($150,000 for joint filers).1
No Tax on Tips
New deduction: Effective for 2025 through 2028, employees and self-employed individuals may deduct qualified tips received in occupations that customarily and regularly receiving tips on or before December 31, 2024, and that are reported on a Form W-2, Form 1099, or other specified statement furnished to the individual or reported directly by the individual on Form 4137.1
No Tax on Overtime
New deduction: Effective for 2025 through 2028, individuals who receive qualified overtime compensation may deduct the pay that exceeds their regular rate of pay – such as the “half” portion of “time-and-a-half” compensation. W-2 forms will not have details until next year, so taxpayers must supply documentation to support this deduction. A year end pay stub may have the information necessary to calculate this deduction.1
No Tax on Car Loan Interest
New deduction: Effective for 2025 through 2028, individuals may deduct interest paid on a loan used to purchase a qualified vehicle, provided the vehicle is purchased for personal use and meets other eligibility criteria. (Lease payments do not qualify.) A qualified vehicle is a car, minivan, van, SUV, pick-up truck or motorcycle, with a gross vehicle weight rating of less than 14,000 pounds, and that has undergone final assembly in the United States.1
Child Tax Credit
The Child Tax Credit was increased from $2,000 to $2,200 per child. Additionally, you may qualify for the Additional Child Tax Credit of up to $1,700 per qualifying child depending on your income. You may be able to claim the credit even if you don’t normally file a tax return. This credit is now “permanent” (i.e. does not automatically expire) and is indexed to inflation.2
State and Local Taxes (SALT)
The SALT deduction affects few of our clients. It allows taxpayers who itemize to subtract certain state and local taxes from their federal taxable income. The SALT deduction cap temporarily increases to $40,000 per household, and implements a five-year sunset cap which reverts to $10,000 in 2030.1
Trump Accounts
The OBBA allows the creation of a new type of individual retirement account (IRA) in the name every eligble child born in 2025 – 2028.1 The US Treasury will deposit $1,000 into each account which cannot be withdrawn until the child reaches 18 years of age. There is NO EFFECT on your 2025 taxes, but before we see you again you will have had the opportunity to deposit additional money into these accounts on behapf of the child. More information at the IRS Website Guidance Trump Accounts
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Notes:
1 Restrictions apply. More details are available on the IRS website (OBBBA Fact Sheet)
2 Restrictions apply. More information is available on the IRS website (Child Tax Credit)
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