by Amanda O'Brien | Accounting News, News, Newsletter, Tax, Tax Planning, Tax Planning - Individual
President Trump’s One Big Beautiful Bill (OBBB) introduced several tax changes designed to boost take-home pay and simplify the tax code. Some major adjustments include nontaxable income, gift limits, estate tax exemption, and overtime deductions. Here’s a look at these changes and how they could affect your taxes.
Nontaxable Income
Nontaxable income is income that is excluded from federal taxation by the IRS. Some examples include child support, alimony, workers’ compensation, financial gifts, disaster relief payments, and Roth IRA contributions (not gains). In an effort to simplify tax filings and increase take-home pay for workers, the OBBB broadens the scope of what is treated as “nontaxable” for certain types of income, specifically tips and qualified overtime.
Overtime Pay
Before the OBBB, overtime pay was fully taxable. It was counted as part of a worker’s regular wages for federal income tax. The OBBB implemented a deduction of up to $12,500 ($25,000 for joint filers) in overtime pay. This lowers taxable income for hourly and shift workers. However, this deduction is only valid from 2025 through 2028.
The deduction phases out above $150,000 MAGI (modified adjusted gross income) for single filers and $300,000 for joint filers.
Tip Income
Under the OBBB, eligible workers can deduct up to $25,000 annually from taxable income for “qualified tips.” To qualify, tips must be paid via cash, check, debit or credit card, or electronic payments through an app. Again, this is valid from 2025 through 2028, and tips are still subject to Social Security and Medicare taxes.
It’s important to point out that automatic gratuities, such as those added to large parties, are not considered voluntary, so they won’t qualify for the deduction.
Gift Limits
The annual federal gift tax exclusion increased from $18,000 to $19,000 per individual, meaning a financial gift up to that amount won’t trigger taxes or filing requirements for the benefactor or the recipient.
Estate Tax Exemption
The federal estate tax exemption is the amount that can be passed to heirs without federal estate tax. Beginning in 2026, this amount is increasing from $13.99 million to $15 million per person. This means that married couples can shield up to $30 million from federal estate tax. This exemption is permanent and is tied to inflation, so the limit will rise over time, giving families the ability to pass on more wealth tax-free.
With the OBBB legislation, lawmakers set out to make the tax code simpler and more worker-friendly, with more income treated as nontaxable or deductible, higher gift and estate tax thresholds for family wealth transfers, and some relief for overtime earners and tip workers. It’s not a total overhaul, but these changes could lead to a less painful tax season for some taxpayers.
by Amanda O'Brien | Accounting News, News, Newsletter, Small Business
Economies always run in cycles, which means that, at some point, inevitably, there will be a downturn. And the best time to prepare for an economic downturn is before things start to take a tumble. In this article, we’ll go over strategies you can use to keep your business steady in rough seas and even come out stronger once the storm has passed.
Build an Emergency Budget
An emergency savings account is your safety net. When you regularly set money aside for slower periods, you’ll be able to cover payroll and expenses when income dips. A general guideline is to save three to six months of operating costs. Start small if you need to. Even a little buffer can cushion the impact of an unexpected financial emergency or buy a little time to adjust when the economy starts to turn.
Diversify Your Income
Relying on one product or one big client is risky. If that income slows down, you’re stuck. Study your customers and think about ways to create new revenue streams. Could you add a service that complements what you already sell? Could you package smaller offerings for cost-conscious buyers? Even small side streams make your business more resilient.
Keep Leads Coming In
When times get tough, marketing is often the first cut. That’s a mistake. You need to attract new customers to keep money flowing. Think of low-cost ways to stay visible: update your website, keep your social media active, and reach out to past customers through an email campaign. Consistent marketing efforts are more important than a big ad spend and will almost always pay off in the future.
Focus on Customer Relationships
Your customers are your best allies in a downturn. Keep communication open. Everyone hurts when the economy is down, so ask your customers how you can help. Even if they cut back on spending, customers are more likely to remain loyal to a business when they feel they’re valued. Good service often beats price.
There are also useful ways to show your customers you care. Add smaller rewards to your loyalty program, like a free coffee or a discounted add-on. Send thank-you notes, coupons, or small gifts with orders. Anything you do to keep your connection with your customers can lay the groundwork for recurring business.
Protect Your Profitability
Sales are always going to ebb and flow, so planning for turbulent times is key. Watch your costs closely. Look for waste and trim it early. Negotiate better deals with suppliers. Automate small tasks to save time. But profitability is more than just slashing spending. It’s also about making sure the money you bring in isn’t just covering expenses but contributing to your business’s long-term health and strengthening your bottom line.
Economic downturns are tough, but with the right strategies and enough planning, they don’t have to sink your business. No amount of preparation is going to remove all risks, but it gives you options. And options bring peace of mind when the economy is unpredictable.
by Amanda O'Brien | Accounting News, Credit Card Debt, Debt, Financial goals, News, Newsletter, Retirement Savings
Recent surveys reveal that Americans spend hours each week thinking about their finances. Rising prices, mounting debt, and uncertainty about the future all contribute to financial stress. Add in steep housing costs, concerns over tariffs raising the price of goods, and lingering worries about retirement savings, and it’s no surprise that, according to a Bankrate survey conducted earlier this year, more than 43% of Americans say money negatively affects their mental health. In this article, we discuss what’s driving financial worries and offer strategies to boost financial security.
The Pressure of Rising Costs
Inflation continues to affect nearly every aspect of daily life. Food prices have increased more than 20% over the past three years, straining household budgets. And home prices and mortgage rates remain high. This puts a big question mark on home ownership for the younger generations. In fact, according to NAR (National Association of REALTORS) data, the number of first-time home buyers—typically led by younger Americans—dropped to 1.14 million in 2024. That’s the lowest level on record since the NAR started tracking first-time buyers in 1989. Renters face struggles as well, with average rents increasing more than 25% since 2019.
Tariffs also play a role in pushing prices higher, which trickles down to consumers. For small businesses and households alike, higher costs on goods and materials add to financial pressure.
Debt and Retirement Worries
Credit card debt has been on an upward trend since 2021. The rising costs of necessities like housing, groceries, and gas have pushed many Americans to reach for credit cards just to make ends meet.
At the same time, Americans are concerned about their financial futures in retirement due to a lack of savings, market volatility, and uncertainty surrounding Social Security. A 2024 Bankrate survey discovered that 57% of Americans worry they are falling behind on building an adequate nest egg.
What Helps Ease Financial Stress
Three main factors that contribute to easing concerns about money are: higher income, reduced debt, and broader economic improvements. For example, when inflation cools and wages go up, people are better prepared to plan and save.
Younger Americans, in particular, worry about job security, with layoffs and limited career opportunities top concerns. A strong labor market creates stability and more spending power. When jobs are steady and paychecks grow, people feel more secure about their money. That confidence shows up in how they spend, save, and invest, and it gives the economy an extra boost.
Practical Solutions
While we can’t control factors like inflation, tariffs, or the broader economy, there are steps to take to get back on the right path. Here are some ways to improve financial stress:
- Build a budget. Tracking income and expenses provides a clear picture of where money is going and helps pinpoint areas to cut back.
- Start an emergency fund. Even starting with a small cushion of $500–$1,000 can ease stress and help prevent the need to rely on high-interest credit cards when financial emergencies happen.
- Focus on paying down high-interest debt. Prioritize credit cards and personal loans first. Knocking out those high-interest balances frees up money in your budget and helps create financial security.
- Increase retirement contributions gradually. Setting up automatic transfers into a 401(k) or IRA, even starting with 1–2% of income, helps build long-term savings.
- Seek advice and guidance. It’s no secret that many Americans are facing financial insecurity right now, but the good news is that there are plenty of trusted voices and perspectives to lean on. Seek out free tools and workshops that can help with decisions and planning, which you can find through many employers, banks, and community organizations. And don’t discount reading articles and newsletters, listening to podcasts, and following social media accounts of reliable sources. These can all improve financial literacy and help you make informed moves with your money.
Inflation, housing affordability, and rising debt continue to weigh on Americans’ minds, but the information and strategies above can help ease worries and create a path to financial stability.
by Amanda O'Brien | Accounting News, News, Newsletter, Retirement, Social Security
President Trump’s “Big Beautiful Bill” has been making headlines, particularly for what it could mean for older Americans collecting Social Security. While many headlines have suggested that the bill would eliminate taxes on Social Security benefits, that’s not entirely accurate. Instead, the legislation includes a targeted tax deduction for seniors that could lower or eliminate federal taxes on their benefits, depending on their income. Here’s what to know about this $6,000 “senior bonus.”
What Is the $6,000 Senior Bonus?
This so-called senior bonus is technically a $6,000 additional standard deduction available to taxpayers who are 65 years and older. Rather than eliminating taxes on Social Security benefits across the board, the bill increases the standard deduction for older Americans, which could result in significantly lower taxable income, especially for middle-income seniors.
For a married couple where both spouses are 65 or older, the deduction could be doubled, potentially reducing taxable income by up to $12,000.
How the Deduction Affects Social Security Taxes
A portion of Social Security benefits becomes taxable if an individual’s combined income exceeds $25,000, or $32,000 for couples. This could potentially result in federal taxation of up to 85% of their benefits. The $6,000 senior deduction doesn’t directly eliminate those taxes, but it reduces the taxable income portion of a retiree’s income. This could potentially push them below the thresholds that trigger Social Security taxation.
By lowering taxable income, the deduction could:
- Reduce or eliminate federal tax on Social Security benefits for some filers.
- Keep more of retirees’ benefits in their bank accounts, particularly if they fall into the middle-income tax bracket—a group that tax experts predict will benefit most from this bill.
Who Qualifies for the Deduction?
Taxpayers must meet the following criteria to be eligible for the $6,000 deduction:
- Be age 65 or older by the end of the tax year
- File as single, head of household, or married filing jointly
- Have taxable income that would otherwise make their Social Security benefits partially or fully taxable.
The deduction applies only to federal income taxes. It doesn’t change how Social Security benefits are taxed at the state level—some states still tax benefits independently, though Indiana does not.
How Long Will the Deduction Be Available?
As of right now, the deduction is scheduled to be effective for tax year 2025 through 2028. Keep in mind that future legislative changes could alter this timeframe.
Who Stands to Benefit Most?
The deduction is expected to provide the greatest relief to middle-income seniors—those earning just above the current taxation thresholds. Taxpayers with up to $75,000 in modified adjusted gross income — or up to $150,000 if married and filing jointly — may receive the full deduction. For wealthier retirees with higher investment income, the deduction gradually phases out.
For example, a retired couple with a combined income of $40,000-$60,000, much of which comes from Social Security, pensions, or part-time work, could see a significant reduction in their tax liability.
While the One Big Beautiful Bill doesn’t eliminate taxes on Social Security benefits, the $6,000 deduction offers a step toward protecting more benefits from federal taxation.
by Amanda O'Brien | Accounting News, News, Newsletter, Retirement, Retirement Savings
A 401(k) is often thought of as a set-it-and-forget-it kind of account—set a contribution amount, bank on a company match, and let the market do its thing. But if you haven’t checked in on your plan lately, you might be missing out on some significant new features.
Thanks in part to the SECURE Act 2.0, a handful of updates are giving retirement savers more flexibility, more control, and more ways to grow their money. Whether you’re just starting out or racing toward retirement, here are some under-the-radar 401(k) features worth knowing about.
Super Catch-Up Contributions
Starting this year, if you’re between the ages of 60 and 63, you can contribute an extra $11,250 to your 401(k) beyond the standard catch-up amount ($7,500 for workers over 50). This is due to a provision in the SECURE Act 2.0, and it gives late-career workers a valuable second wind to boost their savings.
Easier Access to Hardship Withdrawals
Hardship withdrawals have always been part of the 401(k) landscape, but the SECURE Act 2.0 made the process simpler. The updated rules remove some of the documentation hurdles, and many plans now allow participants to self-certify the hardship, thereby bypassing the need for an employer to sign off on the paperwork. While no one wants to dip into their retirement funds early, if life throws you a curveball with a hefty price tag, you’ll have an easier time taking a penalty-free withdrawal.
Access to Financial Advisors
Not every 401(k) offers the same cookie-cutter investment options anymore. Some plans now include a self-directed brokerage account (SDBA), which opens the door to a broader range of investment options that you can manage on your own or with the assistance of a personal financial adviser.
For seasoned investors (or those who simply want more choice and guidance), this is a major step forward. You don’t have to go it alone, and you’re not limited to just a handful of mutual funds. However, be aware that a financial advisor’s guidance will come with a fee.
Automatic Enrollment for New Hires
One issue the SECURE Act 2.0 aims to address is boosting employees’ retirement savings. Starting this year, new 401(k) plans are required to enroll eligible employees automatically. That means if you’re starting a new job with a qualifying employer, you’ll likely be opted into the plan by default. Automatic enrollment typically begins at 3% of your salary and increases by 1% each year, up to a maximum of 10%. It will be up to the employee to opt out if they wish to do so.
This move could make a big difference for younger workers who might otherwise delay saving. Even a modest contribution early on can grow significantly over time, thanks to the power of compound interest.
Smarter Digital Tools
Gone are the days of randomly selecting investment funds. Most 401(k) providers now offer access to online dashboards and planning tools. Although the specific digital tools may vary across providers, they can help you calculate how much to save, project your retirement income, and compare investment choices. These tools are typically free, and they’ve quietly become one of the most useful (yet overlooked) features of a modern retirement plan. Much like a GPS, these digital tools can’t drive the car for you, but they’ll guide you on the most efficient route.
Annuities
In an effort to give savers a way to turn part of their retirement savings into guaranteed lifetime income, the SECURE Act includes a provision that allows 401(k) plans to offer annuities as investment options. Despite the potential benefits, annuities are still relatively uncommon in 401(k) plans. However, interest is on the rise, so watch for them to become a more common part of 401(k) retirement planning.
Take Action
401(k) plans have evolved from an add-on feature of retirement to flexible tools that can adapt to your changing financial goals. If it’s been a while since you reviewed your plan, take a few minutes to log in and see what’s available. That small step could end up making a big difference in your retirement.
