by Stephen Reed | Accounting News, News, Newsletter, Tax, Tax Planning, Tax Planning - Individual, Tax Preparation - Individual
President Trump’s One Big Beautiful Bill (OBBB) could change your tax return in real ways. The bill offers potential relief for parents raising kids, workers earning tips or overtime, and seniors on fixed incomes. There are a few key areas to pay attention to. Here’s what to know.
No Taxes on Tips
When tips are counted as taxable income, it decreases take-home pay, and there’s a chance you could get pushed into a higher tax bracket. The OBBB created a temporary deduction for tips up to $25,000 through tax year 2028, whether you itemize or claim the standard deduction on your return. If your modified adjusted gross income (MAGI) is greater than $150,000 ($300,000 for married couples filing jointly), the tip deduction gradually phases out. Keep in mind that tips are still subject to payroll taxes and may also be taxed at the state or local level.
No Taxes on Overtime
When Trump was campaigning, he pitched “no taxes on overtime” as a win for blue-collar workers, and it is. Workers can deduct up to $12,500 in overtime ($25,000 for joint filers). For a worker making $25 an hour who logs 10 overtime hours, that’s an extra $375 before taxes. Over time, those overtime hours can make a big difference in take-home pay. As with “no taxes on tips,” the deduction phases out with MAGIs greater than $150,000. And workers should remember that the exemption applies only to true overtime, not bonuses.
Bigger Tax Breaks for Seniors
Under the OBBB, if you’re 65 or older as of December 31, 2025, and making less than $75,000 a year, you get an extra $6,000 standard deduction (up to $12,000 for married couples filing jointly). That’s on top of the usual standard deduction. The deduction is gradually reduced if your MAGI exceeds $75,000 ($150,000 for married couples filing jointly) and is completely phased out at $175,000 ($250,00 for married couples filing jointly). Again, this is active from tax years 2025-2028.
Car Loan Interest Deductible
In a nod to middle-class families who rely on cars for work and everyday life, the OBBB allows individuals to deduct interest on auto loans. Effective from 2025-2028, it applies to new and used cars for personal use. For those financing a car, especially in today’s high-interest rate environment, this can provide real savings.
Expanded Child Tax Credit
The OBBB also increases the child tax credit from $2,000 to $2,200, and it will be adjusted annually for inflation beginning in 2026. Phaseout thresholds are $200,000 for single filers and $400,000 for married couples filing jointly.
Critics of the OBBB say the measures discussed above will add to the deficit, but for the average taxpayer, these deductions could mean a bigger refund or a smaller tax payment.
by Stephen Reed | Accounting News, Construction, Industry - Construction, News, Newsletter
The construction industry enters 2026 facing both persistent headwinds and emerging opportunities. Rising material costs, ongoing labor shortages, and policy uncertainty continue to challenge business owners. But at the same time, there’s an undercurrent of guarded optimism as the industry enters 2026. Here’s what construction companies need to know to plan for success in the year ahead.
Labor Shortages and Wage Pressure Continue
The labor shortage in construction is unlikely to go away in 2026. With many experienced workers retiring and fewer younger, skilled workers entering the industry, the competition remains strong for skilled talent. This is driving upward wage pressure.
Contractors should focus on workforce training programs to foster internal talent, employee retention efforts that go beyond pay, and productivity improvements through better scheduling and technology.
Material Costs and Tariff Uncertainty
Trade policy is a wild card. Tariffs on key materials like copper, steel, and plastics are still in play and could increase costs even more. Given the current uncertain roadmap for trade deals, pricing volatility could persist throughout the year.
That said, federal tax incentives could boost domestic production and help ease pressure on supply chains. In the short term, though, business owners should expect price swings.
Smart moves include:
- Strengthening relationships with suppliers and securing long-term supply agreements
- Focusing on long-term financial planning, including building in contingency budgets
- Improving your forecasting and cash flow planning
Economic Signals: Mixed but Stabilizing
Construction activity slowed in 2025, largely due to high interest rates and uncertainty surrounding federal policy. Commercial construction was especially uneven. But 2026 may bring some recovery, driven by:
- Better financing conditions if interest rates continue to ease
- Clarity on federal policies that could revive delayed projects
- New tax credits that spark demand for specific projects
Still, recovery will likely be uneven. Public infrastructure has remained a bright spot thanks to the Infrastructure and Jobs Act of 2021, but that funding is set to expire in October 2026. Without additional supportive legislation, public-sector activity could slow significantly after 2026.
How to Prepare for 2026
To stay competitive, construction businesses should:
- Invest in workforce training and prioritize employee retention. Focus on your current team with on-the-job training, mentorship, and safety certifications. Investing in your crew reduces project delays and helps retain your best workers.
- Tighten cost estimation and build in price flexibility. Update your cost estimation strategies to account for fluctuating material costs and wage increases. Include contingencies in your bids to protect margins.
- Monitor trade and tax policy. Keep an eye on tariffs and federal tax incentives that may impact project pipelines.
- Improve cybersecurity. If needed, upgrade your systems to protect sensitive project data and employee records. Use multi-factor authentication and encrypted file storage.
For construction business owners, 2026 is likely to be a balancing act between opportunity and caution. But when you focus on resiliency and efficiency, you’ll be able to handle the swings in demand and capitalize on opportunities.
by Stephen Reed | Accounting News, News, Newsletter, Retirement Savings
More Americans are turning to a 401(k) hardship withdrawal to cover urgent and unexpected expenses. By the end of 2024, about 5% of employees had taken a hardship withdrawal from their 401(k) accounts. That’s more than double the 2% who did so in 2018. With inflation, housing, and healthcare costs rising, Americans are having difficulty saving for emergencies, so they’re finding alternative ways to afford unexpected expenses, including hardship withdrawals from retirement funds. Is this a smart move? Here’s when a hardship withdrawal does and doesn’t make sense.
What Is a 401(k) Hardship Withdrawal?
A hardship withdrawal is money taken out of a 401(k) or traditional IRA for what the IRS deems an “immediate and heavy financial need.” You can pull funds early without incurring the usual 10% early withdrawal penalty as long as the withdrawal meets certain criteria. However, these withdrawals are still subject to standard income taxes. And unlike a 401(k) loan, it can’t be paid back.
Common hardship reasons include:
- Medical expenses
- Funeral costs
- Preventing foreclosure or eviction
- Tuition and educational fees
- Repairing damage to your home from a natural disaster
When a Hardship Withdrawal Might Be the Right Move
A hardship withdrawal can make sense if:
- You’ve exhausted all other options, such as tapping emergency savings or inquiring about payment plans for your hardship
- The expense is time-sensitive and unavoidable
- You’re facing a medical emergency, a foreclosure, or an eviction
- You won’t need to withdraw from your 401(k) again in the foreseeable future
Just be aware that a hardship withdrawal means you’re shrinking your future nest egg, possibly by tens of thousands, depending on the amount you withdraw, your age, and market returns.
When a 401(k) Hardship Withdrawal Is Probably Not Worth It
It’s best to avoid taking a hardship withdrawal for credit card debt, vacations, monthly expense catch-ups, and home upgrades (unless for disaster repairs).
Retirement savings should not be used as a financial band-aid. If you find yourself in the position of contemplating a hardship withdrawal to cover routine expenses and self-incurred debt, it’s time for a budget overhaul.
Also consider that you’re still taxed on the withdrawal, so taking out $10,000 would only mean $7,000 or $8,000 after taxes.
Alternatives to Consider
Before tapping your 401(k), here are some other options to explore:
- A personal loan or home equity loan (as long as the interest rate is reasonable)
- A 401(k) loan. This is not the same as a withdrawal. You repay the loan over time with interest.
- Contact your creditors to set up a payment plan
- Seek help from nonprofit financial counseling services
These options may provide short-term relief without resorting to something as drastic as a 401(k) hardship withdrawal.
by Stephen Reed | Accounting News, Healthcare, Industry - Healthcare, News, Newsletter
A recent deal between the Trump administration and Pfizer is signaling hope to the pharmaceutical industry. Under Trump’s Pfizer deal, Pfizer gets an exemption from pharmaceutical-specific tariffs if the company invests in domestic manufacturing. This key deal is expected to pave the way for other drug companies to negotiate similar agreements. Here’s what this deal means for the healthcare industry and American drug consumers.
A Deal to Dodge Tariffs
The Trump administration has been threatening tariffs under Section 232, a trade law that allows the president to add import taxes if a product is deemed important to national security. Historically, tariffs have been imposed on materials such as steel, aluminum, lumber, and certain copper products.
Trump’s agreement with Pfizer gives the company a three-year grace period without new import taxes, provided it follows through on its commitment to invest more money in U.S. manufacturing.
Key Terms
Here are the main points that drugmakers should keep in mind:
- Domestic manufacturing requirement: During the three-year grace period, Pfizer will invest $70 billion in research and development and domestic manufacturing.
- Most-Favored Nation (MFN) Pricing: Pfizer will offer prescription medication at MFN pricing: the lowest price offered to any comparably developed foreign country that pays for the same drugs.
- Direct-to-Consumer website: Slated to begin next year, the government-run website TrumpRx will allow patients to purchase Pfizer drugs at a discount (50% on average) by eliminating insurance middlemen.
- Industry-wide deals: The Trump administration is open to negotiating similar agreements with other drugmakers before imposing tariffs.
What This Means for Healthcare Businesses
The Pfizer agreement signals a shift in how government policy might affect drug pricing and supply chains in the years ahead. If other drug makers negotiate similar deals, the U.S. could see more stability in drug pricing, which would help private practices and pharmacies better manage inventory costs and insurance reimbursements.
Domestic manufacturing, which is stipulated in the agreement, could reduce supply-chain delays and shortages that often hit hospitals, clinics, and local pharmacies first. More U.S. production means less dependence on foreign suppliers.
On the other hand, if drug manufacturers raise their prices to cover the cost of meeting government requirements, such as new factory investments, pharmacies and smaller suppliers like independent wholesalers could see tighter profit margins.
Pfizer’s deal with the Trump administration points to a changing environment for the healthcare industry, where domestic production, pricing transparency, and a proactive approach to negotiating with lawmakers can shape costs and competitiveness.
by Stephen Reed | Accounting News, News, Newsletter, Tax, Tax Planning, Tax Planning - Individual
The One Big Beautiful Bill (OBBB) signed by President Trump includes a federal cap on the state and local tax (SALT). Until 2024, SALT was capped at $10,000 under the 2017 Tax Cuts and Jobs Act (TCJA), but the OBBB increased it to $40,000. The cap will rise by 1% each year through 2029, and barring any moves by Congress, it will revert to $10,000 in 2030. That means high-earning taxpayers and taxpayers in high-tax states have a short window to make the most of the extra $30,000 deduction.
What Is the SALT Deduction?
SALT stands for state and local taxes. The SALT deduction allows taxpayers who itemize their taxes to claim a deduction for some state and local taxes from their federal taxable income, including:
- State and local income taxes
- Property taxes
For many households, just property taxes alone can exceed $10,000, so the old cap blocked them from deducting the full amount. The new $40,000 cap opens the door for a much larger write-off.
MAGI Matters
Whether or not you can claim the SALT deduction depends on your modified adjusted gross income (MAGI). If your income is on the higher side, you might not qualify for the full SALT deduction. Once your MAGI exceeds certain limits, the deduction starts to reduce. So, if you’re in a higher tax bracket, it makes sense to do the math ahead of time.
How This Affects Estimated Taxes
If you typically owe quarterly estimated taxes, you might want to adjust the timing. Making your fourth-quarter state income tax payment before December 31 ensures those amounts are included in your 2025 SALT deduction. For some people, that could mean paying more of their state taxes before the end of the year or increasing withholding at work. The $40,000 cap makes these strategies more worthwhile than they’ve been since 2018.
Ways to Capitalize on the $40,000 SALT Deduction
Here are a few smart ways to make the most of the new deduction:
- Prepay property taxes: If your local government allows it, think about paying part of your 2026 property tax bill before the end of 2025. Doing so lets you take the deduction right away instead of waiting. Just be sure to check that your county allows prepayments.
- Review State Tax Withholding: If you usually owe a hefty state tax bill when you file, you could increase your withholding at work or send in extra estimated payments during the year. With the new SALT cap, these payments are now more likely to make a difference on your return.
- To Itemize or Not to Itemize: The SALT deduction only helps if you itemize instead of taking the standard deduction, so do the math to see if itemizing is the right move for you. Add up your SALT, mortgage interest, charitable giving, and medical expenses. If the total beats the standard deduction, itemizing will save you more.
- Time Other Deductions: Some deductions, like medical costs, are unpredictable. But others, such as charitable donations, can be timed. If you’re on the border where itemizing makes sense, shifting more of those expenses into 2025 can push your total high enough to take full advantage of the new SALT cap.
If you’re unsure about whether or not you should itemize your taxes, or if you could benefit from the new SALT cap, consult a tax professional who can help you make sense of it all.
