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, News, Newsletter, Tax, Tax Planning
After Donald Trump’s win in November, taxpayers are wondering how a second Trump term could reshape U.S. tax policy. Trump’s first term saw sweeping changes under the Tax Cuts and Jobs Act (TCJA) of 2017. With key provisions of that legislation set to expire in 2025, Trump’s proposals offer a glimpse of his tax priorities. From significant individual tax cuts to business-friendly policies, here’s what you need to know.
The Expiration of the 2017 Tax Cuts
The TCJA lowered tax rates across the board, nearly doubling the standard deduction—which eliminated the need for itemized deductions—and capping the state and local tax (SALT) deduction at $10,000. These changes contributed to lower tax bills for many Americans. However, the individual tax cuts were temporary and are set to expire at the end of 2025 unless Congress acts to extend them.
If re-elected, Trump has indicated that extending or making these provisions permanent would be a top priority. Without an extension, taxpayers could see higher marginal tax rates, a reduced standard deduction, and the return of personal exemptions.
Removing the $10,000 SALT Deduction Cap
The SALT deduction, which allows taxpayers to deduct state and local taxes on their federal tax returns, became a testy issue after the TCJA imposed a $10,000 cap. This change particularly affected residents in high-tax states like New York, California, and New Jersey.
Trump has proposed removing the cap, a move that would benefit taxpayers in those states while potentially increasing the federal deficit. Critics argue that eliminating the cap would disproportionately benefit higher-income households, but supporters see it as a necessary adjustment to provide relief to middle- and upper-income earners in high-tax areas. Steven Moore, a senior economic advisor to Trump, recently floated the idea of doubling the cap to $20,000 as a potential compromise.
Eliminating Taxes on Social Security and Tip Income
Currently, up to 85% of Social Security benefits can be taxable, depending on your income level. Trump’s tax plan consists of eliminating these taxes, which would provide retirees with additional financial security. Trump has also floated the idea of eliminating taxes on tips, which would increase take-home pay and simplify tax compliance for hospitality and service industry workers. However, this proposal has sparked discussion over the potential impact on tax revenue and fairness in the tax code.
Reducing the Corporate Tax Rate
The TCJA decreased the corporate tax rate from 35% to 21%, which rendered the U.S. more competitive globally. Trump has suggested lowering the rate even more, potentially to 15%. Those in favor of this plan say that it could spur economic growth and encourage domestic investment, while critics are concerned about increasing the federal deficit.
Trump’s Tariffs
Trump has been clear on his stance on tariffs. During his first term, Trump imposed tariffs on various goods, particularly from China. Tariffs are not taxes in the traditional sense, but they can indirectly affect taxpayers by increasing the cost of goods and services. Businesses often pass these costs onto consumers, so households, particularly those in middle- and lower-income brackets, could feel the strain of tariffs.
