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 Amanda O'Brien | Accounting News, News, Newsletter
Health savings accounts (HSAs) are one of the best tools for saving on healthcare costs. And beginning this year, more Americans than ever will qualify for HSAs, thanks to the One Big Beautiful Bill (OBBB), which was passed last July. Read on to learn what’s changing, who qualifies, and how these updates could offer savings on healthcare costs.
What Is an HSA?
An HSA is a special type of savings account Americans can use to pay for qualified medical expenses. Contributions are tax-deductible, the money grows tax-free, and withdrawals are tax-free for qualified medical expenses. Unlike flexible spending accounts (FSAs), HSAs don’t have a “use it or lose it” rule, so your funds roll over each year. And you keep the account even if you change jobs or retire. Until now, HSAs have been available only to people enrolled in high-deductible health plans (HDHPs), but the OBBB changed that.
Bronze and Catastrophic ACA Health Plans Now Qualify
As of January 1, 2026, anyone enrolled in a bronze or catastrophic health plan sold through the Affordable Care Act (ACA) marketplace now qualifies for an HSA plan. Before, these plans didn’t meet the IRS’s strict HDHP requirements. This update opens the door for millions more people, especially younger adults and people who choose lower-premium coverage, to start saving for healthcare expenses.
Direct Primary Care Now Covered
Under the OBBB, people using Direct Primary Care (DPC) can now pair it with an HSA. DPC is a subscription model where patients pay a monthly fee to a doctor or practice for unlimited primary care visits. Now, as long as the fee stays under $150 per month for individuals (under $300 for families), HSA funds can be used to pay for those services. This gives patients more flexibility and control over their healthcare budgets.
Telehealth Services No Longer Disqualify Patients for HSA Eligibility
In the past, if a patient’s HDHP covered telehealth visits before they met the deductible, it could wipe out their HSA eligibility for the year. However, the OBBB allows HDHPs to cover telehealth visits before the deductible is met. That means a patient’s health plan can cover virtual doctor visits upfront (or with a small copay), and they can still contribute to their HSA. Patients are no longer forced to choose between the convenience of telehealth and their savings goals.
These updates make HSAs more accessible, especially at a time when healthcare costs are on the rise, and more patients are using telemedicine. An HSA can build a cushion for future costs, making it an often overlooked retirement savings vehicle.
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.
