Ed. Note: Bill Conlan is a longtime tax preparer who has assessed the changes in tax requirements under the Big, Beautiful Bill, signed into law earlier this month. A contributor to the Voice, he offers what he has learned.
President Trump signed the “Big, Beautiful Bill” into law and it made many changes to the tax code for this year and many years to come. I will attempt to cover many of the important changes for this year, and just mention that other changes are in store for other years.
One timely change for this year is the sunsetting of all green energy credits (storm windows and doors, air conditioners, furnace, hot water heaters, etc,) are all scheduled to be eliminated at the end of this year in 2025.
The extension of reduced income tax rates due to TCJA which were scheduled to expire after 12/31/2025, are now extended and will remain in effect at this time.
The standard deduction for MFJ is increased from $30,000 to $31,500 , and for single filers it is increased from $15,000 to $15, 750.
The personal exemption amount of $4,050 is now permanent, although not allowed by any taxpayer or dependents, except for the new senior deduction of $6,000 for each taxpayer or $12,000 on a joint return for any taxpayer reaching age 65 before the end of 2025.
The child tax credit of $2,000 per child is now increased to $2,200.
The limitation of certain deduction for state and local taxes (SALT) of $10,000 is now increased to $40,000, with some eligibility requirements of MAGI not over $500,000 or 250,000 for single taxpayers. This change will allow many more taxpayers to itemize now.
The new no tax on tips provision allows taxpayers to deduct tips from taxable income with certain caps of $25,000 per year, and phases out with MAGI of $150,000 for individuals and $300,000 for joint filers.
The new no tax on overtime is allowed with a cap of $12,500 for single filers and $25,000 for joint filers, and the deduction is reduced if MAGI exceeds $150,000 for single and $300,000 for married taxpayers. This is an above the line deduction and taxpayers do not have to itemize to take advantage of this deduction.
There is a new deductible car loan interest deduction, and the VIN # must be included. The deduction is capped at $10,000, with a phaseout of $100,000 for single or $200,000 for joint filers. This deduction is also available to non-itemizers.
The new bill allows for mortgage interest deductions which were scheduled to expire this year, and also allows mortgage insurance premiums (PMI) to be deductible.
The bill also allows for Trump accounts for persons under 18. A one time $1,000 deposit will be made to the account, however any distributions cannot be made before age.
The adoption credit has been made refundable, meaning it can now reduce income tax liability to zero if needed.
Certain treatment of disaster related casualty losses has been updated to include state sponsored casualty losses and is effective after July 4, 2025.
Many other changes have been included in this bill, affecting enhanced child and dependent tax credits, enhanced charitable deductions, enhanced teacher deductions, enhanced 529 deductions, enhanced AMT deductions, enhanced moving expenses, changes to gambling winnings, changes to student loans, and changes to the premium tax credit, however they are not included here because they do not affect this filing year.
This bill represents a significant change in your taxes for this filing season, with provisions that affect nearly every taxpayer, including low income, seniors, and self-employed individuals. It includes many above the line deductions, and will require many changes to the tax forms and schedules that were in effect last year, and I will update you during the year as needed.
Bill Conlan 203-934-9525