This bill covers a lot of items that we can't begin to tell taxpayers about. Here are some items that will effect some of our taxpayers.
“No Tax on Tips”
- New deduction: Effective for 2025 through 2028, employees and self-employed individuals may deduct qualified tips received in occupations that are listed by the IRS as customarily and regularly receiving tips on or before December 31, 2024, and that are reported on a Form W-2, Form 1099, or other specified statement furnished to the individual or reported directly by the individual on Form 4137.
- “Qualified tips” are voluntary cash or charged tips received from customers or through tip sharing.
- Maximum annual deduction is $25,000; for self-employed, deduction may not exceed individual’s net income (without regard to this deduction) from the trade or business in which the tips were earned.
- Deduction phases out for taxpayers with modified adjusted gross income over $150,000 ($300,000 for joint filers).
- Taxpayer eligibility: Deduction is available for both itemizing and non-itemizing taxpayers.
- Self-employed individuals in a Specified Service Trade or Business (SSTB) under section 199A are not eligible. Employees whose employer is in an SSTB also are not eligible.
- Taxpayers must:
- include their Social Security Number on the return and
- file jointly if married, to claim the deduction.
- Reporting: Employers and other payors must file information returns with the IRS (or SSA) and furnish statements to taxpayers showing certain cash tips received and the occupation of the tip recipient.
- Guidance: By October 2, 2025, the IRS must publish a list of occupations that “customarily and regularly” received tips on or before December 31, 2024.
- The IRS will provide transition relief for tax year 2025 for taxpayers claiming the deduction and for employers and payors subject to the new reporting requirements.
“No Tax on Overtime”
- New deduction: Effective for 2025 through 2028, individuals who receive qualified overtime compensation may deduct the pay that exceeds their regular rate of pay – such as the “half” portion of “time-and-a-half” compensation -- that is required by the Fair Labor Standards Act (FLSA) and that is reported on a Form W-2, Form 1099, or other specified statement furnished to the individual.
- Maximum annual deduction is $12,500 ($25,000 for joint filers).
- Deduction phases out for taxpayers with modified adjusted gross income over $150,000 ($300,000 for joint filers).
- Taxpayer eligibility: Deduction is available for both itemizing and non-itemizing taxpayers.
- Taxpayers must:
- include their Social Security Number on the return and
- file jointly if married, to claim the deduction.
- Taxpayers must:
- Reporting: Employers and other payors are required to file information returns with the IRS (or SSA) and furnish statements to taxpayers showing the total amount of qualified overtime compensation paid during the year.
- Guidance: The IRS will provide transition relief for tax year 2025 for taxpayers claiming the deduction and for employers and other payors subject to the new reporting requirements.
“No Tax on Car Loan Interest”
- New deduction: Effective for 2025 through 2028, individuals may deduct interest paid on a loan used to purchase a qualified vehicle, provided the vehicle is purchased for personal use and meets other eligibility criteria. (Lease payments do not qualify.)
- Maximum annual deduction is $10,000.
- Deduction phases out for taxpayers with modified adjusted gross income over $100,000 ($200,000 for joint filers).
- Qualified interest: To qualify for the deduction, the interest must be paid on a loan that is:
- originated after December 31, 2024,
- used to purchase a vehicle, the original use of which starts with the taxpayer (used vehicles do not qualify),
- for a personal use vehicle (not for business or commercial use) and
- secured by a lien on the vehicle.
If a qualifying vehicle loan is later refinanced, interest paid on the refinanced amount is generally eligible for the deduction.
- Qualified vehicle: A qualified vehicle is a car, minivan, van, SUV, pick-up truck or motorcycle, with a gross vehicle weight rating of less than 14,000 pounds, and that has undergone final assembly in the United States.
- Final assembly in the United States: The location of final assembly will be listed on the vehicle information label attached to each vehicle on a dealer's premises. Alternatively, taxpayers may rely on the vehicle’s plant of manufacture as reported in the vehicle identification number (VIN) to determine whether a vehicle has undergone final assembly in the United States.
- The VIN Decoder website for the National Highway Traffic Safety Administration (NHTSA) provides plant of manufacture information. Taxpayers can follow the instructions on that website to determine if the vehicle’s plant of manufacture was located in the United States.
- Taxpayer eligibility: Deduction is available for both itemizing and non-itemizing taxpayers.
- The taxpayer must include the Vehicle Identification Number (VIN) of the qualified vehicle on the tax return for any year in which the deduction is claimed.
- Reporting: Lenders or other recipients of qualified interest must file information returns with the IRS and furnish statements to taxpayers showing the total amount of interest received during the taxable year.
- Guidance: The IRS will provide transition relief for tax year 2025 for interest recipients subject to the new reporting requirements.
Deduction for Seniors
- New deduction: Effective for 2025 through 2028, individuals who are age 65 and older may claim an additional deduction of $6,000. This new deduction is in addition to the current additional standard deduction for seniors under existing law.
- The $6,000 senior deduction is per eligible individual (i.e., $12,000 total for a married couple where both spouses qualify).
- Deduction phases out for taxpayers with modified adjusted gross income over $75,000 ($150,000 for joint filers).
- Qualifying taxpayers: To qualify for the additional deduction, a taxpayer must attain age 65 on or before the last day of the taxable year.
- Taxpayer eligibility: Deduction is available for both itemizing and non-itemizing taxpayers.
- Taxpayers must:
- include the Social Security Number of the qualifying individual(s) on the return, and
- file jointly if married, to claim the deduction.
- Taxpayers must:
Educator Expense
In 2026, educators can still claim the above-the-line deduction for educator expenses, which is set at $300. But starting in 2026 any expenses paid for for education above the $300 can be put on your itemized deduction Schedule A, if you itemize. There is no limit.
Key Details:
- Eligibility: This deduction is available to teachers, instructors, counselors, principals, or aides for kindergarten through grade 12.
- Qualified Expenses: Eligible expenses include classroom supplies, materials, and other necessary items purchased for use in the classroom.
- Filing: The deduction reduces your taxable income directly, making it beneficial for educator
SALT Deduction Cap
Current Law:
- $10,000 cap on state and local tax (SALT) deduction through 2025 when itemizing
New Law:
- $40,000 cap for 2025–2029 (indexed 1%/year)
- For married filing separately, the cap is $20,000.
- Reverts to $10,000 in 2030
- Phases out above $500,000 AGI for both single and married filers (example calculation below)
- The SALT cap is reduced by 30% of the amount by which your MAGI exceeds the threshold.
- The deduction cannot be reduced below the old $10,000 cap (or $5,000 for married filing separately).
Example of Phaseout calculation (2025, Married Filing Jointly)
- MAGI: $550,000
- Threshold: $500,000
- Excess: $550,000 – $500,000 = $50,000
- Phase-Out Amount: $50,000 × 30% = $15,000
- Adjusted Cap: $40,000 – $15,000 = $25,000
- So, this couple could deduct up to $25,000 in state and local taxes.
What It Means:
Taxpayers in high-tax states get significant, though temporary, relief. However, high-income filers see limited benefit due to the phaseout. After 2029, the cap returns to $10,000, so planning for future years is essential.
Temporary SALT Cap Increase You can pay your taxes in one year for 2 years as long as it has been billed.
The SALT cap goes from $10,000 to $40,000 in 2025 (one-half for married filing separately). The cap will further increase by 1% a year until 2029. Then it returns to $10,000 in 2030.
| Year | SALT Cap |
|---|---|
| 2025 | $40,000 |
| 2026 | $40,400 |
| 2027 | $40,804 |
| 2028 | $41,212 |
| 2029 | $41,624 |
| 2030 | $10,000 |
Charitable Deduction Provisions This is effective after Dec 31 2025 so starting in 2026
The bill contains three separate charitable deduction changes, not just one:
#15A: Above-the-Line Charitable Deduction (Section 70424)
Current Law:
- $300 ($600 joint) above-the-line deduction (expired after 2021)
New Law:
- $1,000 ($2,000 joint) above-the-line deduction for individuals who do not itemize
- Made permanent
Start Date: Taxable years beginning after December 31, 2025
#15B: 0.5% Floor on Individual Charitable Deductions (Section 70425)
Current Law:
- No floor on charitable deductions for individuals
New Law:
- 0.5% floor on charitable contributions for individuals
- Aggregate charitable contributions must exceed 0.5% of taxpayer’s contribution base to be deductible
Start Date: Taxable years beginning after December 31, 2025
Green Energy Tax Credits ends Sept 30, 2025
Current Law:
- EV and residential energy credits scheduled through 2032-2034
- Clean electricity credits through 2032
- Various manufacturing and production credits with extended timelines
New Law:
- Most credits repealed or phased out by 2025-2028
- Dramatic acceleration of termination dates
- Limited grandfathering for vehicles under binding contracts
Start Date/Period: Various dates from September 30, 2025 through December 31, 2028
End Date: Most credits terminate by December 31, 2025; some by 2027-2028
Phaseouts/Calculations/Notes:
IMMEDIATE ACTION REQUIRED (September 30, 2025):
- New EV Credit (Section 30D): $7,500 credit ENDS September 30, 2025
- Used EV Credit (Section 25E): $4,000 credit ENDS September 30, 2025
- Commercial Clean Vehicle Credit (Section 45W): $7,500 credit ENDS September 30, 2025
YEAR-END DEADLINE (December 31, 2025):
- Residential Clean Energy Credit (Section 25D): 30% credit for solar panels, battery storage ENDS December 31, 2025
- Energy Efficient Home Improvement Credit (Section 25C): Credit for HVAC, water heaters, windows ENDS December 31, 2025
MID-2026 DEADLINES:
- Alternative Fuel Vehicle Refueling Property Credit (Section 30C): EV charging stations END June 30, 2026
- New Energy Efficient Home Credit (Section 45L): For builders ENDS June 30, 2026
- Energy-Efficient Commercial Buildings Deduction (Section 179D): ENDS June 30, 2026
LATER TERMINATIONS (2027-2028):
- Clean Electricity Production Credit (Section 45Y): Solar and wind facilities must be placed in service by December 31, 2027 (with 12-month construction grace period)
- Clean Electricity Investment Credit (Section 48E): Solar and wind facilities must be placed in service by December 31, 2027 (with 12-month construction grace period)
- Clean Hydrogen Production Tax Credit (Section 45V): ENDS January 1, 2028
- Advanced Manufacturing Production Credit (Section 45X): Wind components END December 31, 2027
Who is Affected:
EV buyers, homeowners, renewable energy businesses, manufacturers
What It Means:
This represents a massive rollback of green energy incentives with extremely aggressive timelines. EV buyers have only until September 30, 2025 (only weeks from today) to take delivery of vehicles to qualify for the $7,500 credit. Homeowners considering solar have until December 31, 2025 to complete installations for the 30% credit. The dramatic acceleration means clients must act immediately to secure these significant tax benefits before they expire. Industry experts predict a surge in EV sales over the next three months followed by a sharp decline, while the solar industry faces massive disruption with only months to complete projects. The early termination of these credits, originally scheduled through 2032, represents one of the most aggressive reversals of clean energy policy in U.S. history, potentially slowing the transition to renewable energy and electric transportation.
Critical Client Advisory: Those considering EV purchases must finalize deals and ensure delivery by September 30, 2025. Solar customers should accelerate installation timelines to complete by year-end 2025. Business charging station installations must be completed by June 30, 2026.
Gambling Loss Limitation effective after Dec 31, 2024
Current Law:
- Gambling losses deductible up to full amount of winnings
New Law:
- Gambling losses limited to 90% of winnings
Start Date: Taxable years beginning after December 31, 2024
Who is Affected: Gamblers who itemize deductions
What It Means:
Even if gambling losses equal or exceed winnings, taxpayers must pay tax on at least 10% of their winnings. This increases tax revenue from gambling activities and reduces the ability to completely offset winnings with losses.
Trump Accounts (Children’s Savings)
Current Law:
- No federal seed accounts exist
New Law:
- $1,000 federal deposit for children born 2025-2028
- $5,000 annual contribution limit
- Tax-favored growth until age 18
- Established as an individual retirement account (IRA, not a Roth)
- Qualified uses: education, first home, small business startup
Start Date: Children born between January 1, 2025, and January 1, 2029
Who is Affected: Families with children born during eligible period
What It Means:
Creates a new federally-funded savings program encouraging long-term investment for children’s future. The accounts combine government seed money with private contributions to build wealth over time for education, homeownership, or entrepreneurship.
Estate & Gift Tax Exemption
Current Law:
- $13.61 million per person (2024), indexed for inflation
- Set to revert to lower levels in 2026
New Law:
- Exemption increased to $15 million per person, indexed
- $30 million for married couples
- Made permanent
Start Date: Estates and gifts after enactment
Who is Affected: High-net-worth individuals and family businesses
What It Means:
Wealthy families can transfer more assets tax-free, making estate planning more generous and flexible. This particularly benefits family-owned businesses and multi-generational wealth transfer strategies.
Home Mortgage Interest Deduction
Current Law:
- $750,000 cap on deductible mortgage debt
- Mortgage insurance premiums separately treated
New Law:
- $750,000 cap maintained permanently
- Mortgage insurance premiums now included within the cap
- HELOC interest remains non-deductible
Start Date: Taxable years beginning after December 31, 2025
Who is Affected: Homeowners with mortgages
What It Means:
The mortgage interest deduction rules are clarified and made permanent. Including mortgage insurance premiums in the calculation provides a slight benefit for some homeowners, but the cap prevents the deduction from returning to $1 million.