New Tax Law Information
*The below is only a partial list of the most common updates.
- NO TAX ON TIPS
This is a new, temporary, deduction allowing some workers to deduct up to $25,000 of qualified tip income when applicable. The IRS has published a list of qualified jobs Tipped-Occupations-Detailed-8-27-2025.pdf. This deduction is available to both itemizer and non-itemizer taxpayers. The maximum amount of this deduction is $25,000 but is reduced by $100 for each $1,000 that the taxpayers Modified Adjusted Gross Income (MAGI) exceeds $150,000 ($300,000 for joint filers). You’ll need to report all of your tips to your employers, as tips are still subject to Social Security and Medicare Tax.
- NO TAX ON OVERTIME
- For tax years 2025 through 2028, individuals who receive overtime compensation may be able to deduct the pay that exceeds their regular rate of pay (generally the “half” portion of “time-and-a-half” compensation) that is required by the Fair Labor Standards Act and reported on a Form W-2, Form 1099, or other specified statement furnished to the individual.
- The maximum annual deduction is $12,500 ($25,000 for joint filers).
- Deduction phases out for taxpayers with a modified adjusted gross income over $150,000 (single filer), $300,000 (joint filers).
- The deduction is available for both itemizers and non-itemizers.
- For 2025, during this transition period, employers are not required to show overtime separately on your W-2 in box 14. If it is not listed on your W-2, please bring your final paystub for 2025 so that we can calculate the deductible amount. Starting for tax year 2026, your W-2 will show any overtime that can be deducted or you will be provided with a written statement containing this information. There has been guidance provided by the IRS (Notice 2025-69) with a “reasonable method” on how to calculate the deductible overtime amount if it is now provided to you.
- NEW VEHICLE INTEREST DEDUCTION Effective 2025 through 2028, individuals may deduct interest paid on a loan that is used to purchase a new qualified vehicle (personal use only) and whose final assembly is the the U.S. and that meets other eligibility criteria. Lease payments do not qualify. Please provide tax form 1098-VLI to calculate this deduction (see https://www.irs.gov/newsroom/one-big-beautiful-bill-act-tax-deductions-for-working-americans-and-seniors) for more info.
- Maximum annual deduction is $10,000.
- Phases out for taxpayers with modified adjusted gross income over $100,000 ($200,000 for joint filers).
- TAX ON SOCIAL SECURITY BENEFITS
Social security benefits will continue to be taxable up to 85% of the benefits received, however, there is a tax deduction for taxpayers age 65 or older of $6,000 each. If you are married and file jointly and both are over age 65, this results in a $12,000 deduction on your tax return. This deduction starts to phase out if your income exceeds $75,000 (single filer) and $150,000 (joint filers). This deduction will be available to both itemizers and non-itemizers.
- SALT (STATE AND LOCAL TAX) CAP DEDUCTION
The new temporary law increased the cap on state and local tax deductions on Schedule A (for itemizers) from $10,000 to $40,000.
- CHILD TAX CREDIT INCREASE
The child tax credit has increased to $2,200 ($2,000 in 2024)
New Tax Law Information
*The below is only a partial list of the most common updates.
- NO TAX ON TIPS
This is a new, temporary, deduction allowing workers to deduct up to $25,000 of tip income when applicable. The IRS has published a list of qualified jobs Tipped-Occupations-Detailed-8-27-2025.pdf. This deduction is available to both itemizer and non-itemizer taxpayers. You’ll need to report all of your tips to your employers, as tips are still subject to Social Security and Medicare Tax.
NO TAX ON OVERTIME
For tax years 2025 through 2028, individuals who receive overtime compensation may deduct the pay that exceeds their regular rate of pay (generally the “half” portion of “time-and-a-half” compensation) that is required by the Fair Labor Standards Act and reported on a Form W-2, Form 1099, or other specified statement furnished to the individual.
The maximum annual deduction is $12,500 ($25,000 for joint filers).
Deduction phases out for taxpayers with a modified adjusted gross income over $150,000 (single filer), $300,000 (joint filers).
The deduction is available for both itemizers and non-itemizers.
For 2025, during this transition period, employers are not required to show overtime separately on your W-2 in box 14. If it is not listed on your W-2, please bring your final paystub for 2025 so that we can calculate the deductible amount. Starting for tax year 2026, your W-2 will show any overtime that can be deducted or you will be provided with a written statement containing this information. There has been guidance provided by the IRS (Notice 2025-69) with a “reasonable method” on how to calculate the deductible overtime amount if it is now provided to you.
NEW VEHICLE INTEREST DEDUCTION Effective 2025 through 2028, individuals may deduct interest paid on a loan used to purchase a qualified vehicle for personal use that meets other eligibility criteria. Lease payments do not qualify.
Maximum annual deduction is $10,000.
Phases out for taxpayers with modified adjusted gross income over $100,000 ($200,000 for joint filers).
TAX ON SOCIAL SECURITY BENEFITS
Social security benefits will continue to be taxable up to 85% of the benefits received, however, there is a tax deduction for taxpayers age 65 or older of $6,000 each. If you are married and file jointly and both are over age 65, this results in a $12,000 deduction on your tax return. This deduction starts to phase out if your income exceeds $75,000 (single filer) and $150,000 (joint filers). This deduction will be available to both itemizers and non-itemizers.
SALT (STATE AND LOCAL TAX) CAP DEDUCTION
The new temporary law increased the cap on state and local tax deductions on Schedule A (for itemizers) from $10,000 to $40,000.
CHILD TAX CREDIT INCREASE
The child tax credit has increased to $2,200 ($2,000 in 2024)