The passage of the “One Big Beautiful Bill Act” this past July has brought a wave of changes to the tax code starting in 2025 and beyond. To separate some of the facts from the fiction, we’ve highlighted some of the biggest changes below as well as some important reminders about our own tax preparation services.

Client Organizer: We will begin mailing paper organizers in January. Please be on the lookout if you have traditionally received one or requested one for this year. For clients receiving an e-organizer, we’ll begin sending access links via email in early January.

Upgraded client portal: Over the past year, we’ve migrated our client portal to a new system called SmartVault. Using SmartVault, you’re able to securely send/receive documents to your preparer as well as access your prior year returns and source material. More info to come!

Increased SALT deduction: In 2018, the deduction for state and local taxes was capped at $10,000 resulting in a significant double-taxation issue for residents in high-tax states, like California. Thankfully, starting in 2025, the SALT cap has been lifted to $40,000. This should result in many homeowners and medium-high income earners being able to itemize their deductions and further reduce their tax liability.    

Is Social Security still taxable? It depends! Just like in years past, the extent your Social Security income is taxed depends on your total other income. That being said, the OBBBA did create a new, but temporary, additional senior tax deduction that allows seniors to lower their total taxable income, and so by extension, the amount of their social security benefit subject to tax, hence the campaign promise. The additional deduction is $6,000 for single seniors and $12,000 for married couples. The additional deduction begins to phase out for singles with an adjusted gross income greater than $75,000 and $150,000 for married couples.  

Do I still pay taxes on my overtime pay? Yes, mostly. Taxpayers who receive overtime pay under federal law, not state law or a collective bargaining agreement, will be able to deduct the “half” portion of the time-and-a-half part of their overtime pay, up to $12,500. Your employer is required to provide a breakdown of what portion of your overtime pay is eligible for this deduction. We anticipate this to be one of the more confusing & difficult changes to administer and will be available to help clarify what information we need to claim the deduction on your return.  If you think this applies to you, please feel free to reach out.

Ok, so what about tips? This is another area that is likely to cause some confusion and administrative headaches.  To qualify, you must meet specific criteria as follows: you must be employed in an occupation that "customarily and regularly" received tips on or before December 31, 2024 (the IRS has published a list of eligible occupations). The tips must be voluntary. The tips must be reported on Form W-2, Form 1099, or on Form 4137. If your tip income meets the requirements, you could be able to deduct up to $25,000 annually from your federal adjusted gross income.  The deduction begins to phase out for taxpayers with a modified adjusted gross income (MAGI) over $150,000 (single filers) or $300,000 (married couples filing jointly).  The federal law does not affect state or local tax laws, so these may still apply depending on where you live. If you think this deduction applies to you, and you need more information to help calculate what your deduction should be, please reach out to the office.   

Is the EV Tax Credit really gone? Yes, the $7,500 credit for purchase of a new EV was available for purchases completed prior to September 30, 2025. If you purchased an EV after this date, no credit is available. In 2025, many buyers chose to take the credit at the time of purchase to reduce the overall price, rather than wait to claim the credit on their tax return. For tax purposes though, the purchase of the EV must be reported on your 2025 tax return whether you took the credit at the time of purchase or plan to claim it on your return to verify income eligibility.

 You’re eligible to claim the credit if your AGI from either the current or previous tax year falls below the following limits:

·        $300,000 for married filing joint

·        $225,000 for head of household

·        $150,000 for single

Gift Giving: The annual gift tax exclusion for 2025 is $19,000 and remains the same for 2026. Those amounts are doubled for married couples. If you are planning to gift money above these thresholds, consider breaking the gift up between calendar years to avoid any filing requirements associated with the gift. Gifts above these thresholds can still be made tax free, but a gift tax return must be filed for such to document the transaction with the IRS. We’d be happy to assist you with such a filing if applicable.

As always, we really appreciate your business. If you need any assistance, please let us know.