2025 Changes
Big Beautiful Bill...What does it mean for me?
Tax on Tips
First things first, do you qualify for a tip deduction on your taxes? Here is a comprehensive list of who qualifies: https://home.treasury.gov/system/files/136/Tipped-Occupations-Detailed-8-27-2025.pdf
**W-2 Employees - in order to take this exclusion you MUST have either: a specified 3 digit code entered on your W-2 in Box 12, Code TP or an attachment to your W-2 from your employer stating how much of your tips are Qualified Tips.
PLEASE BE SURE TO BRING ALL ATTACHMENTS TO YOUR W-2 AT DROP OFF!!! Failure to have the proper documentation will result in you not receiving the deduction!
A few key points:
- Mandatory tips do not count. Tips must be voluntary (it is the employers responsibility to properly report this. If you received cash tips and did not report them to your employer, they do not count)
- Deduction ceiling is $25,000. Your deduction will be the lesser of: qualified tips received or the $25,000 ceiling. (i.e. you received $8,000 in tips, your deduction is $8,000. If you received $30,000 in tips, your deduction is capped at $25,000.)
- Schedule C Filers - it is your responsibility to keep up with how many tips you receive in a given year. Your tip deduction is limited to your Net Income (income after expenses). (i.e. you receive $15,000 in tips in year X but your net income is $8,000. You still pay SE tax on the $8,000 and the tip deduction is limited to $8,000)
- Tip deduction is per return, not per person!
-Deduction phase out starts at $150,000 of income for Single Taxpayers, and $300,000 for MFJ Taxpayers
- Deduction is for tax years 2025-2028 under current law
*Legal disclaimer - we cannot make this election based on taxpayers word. Our hands are tied to rely on information only reported straight from the employers - No exceptions!*
Tax on Overtime
This deduction is only for overtime hours worked. This is defined as hours worked over 40 hours weekly or as stated in your employee handbook from your employer. Holiday pay and double time for holiday/weekends does not qualify as overtime pay.
The deduction is only for the half portion of the time and a half of overtime pay.
2025
You much obtain an attachment from your employers that has the calculation of the amount to be claimed. A paystub does not count per the IRS. Employers or payroll service providers are required to supply all employees who meet the criteria with an IRS approved attachment stating how much pay is subject to the deduction.
2026
Starting in 2026 the employer will supply this amount on your W-2 in Box 12, Code TT.
A few key points:
-Deduction is $12,500 for Single Taxpayers, $25,000 for MFJ Taxpayers
- Deduction is not allowed for Married Filing Separate Taxpayers
- Deduction is per return, not per taxpayer
- Deduction starts to phase out at $150,000 in income for Single Taxpayers, and $300,000 for MFJ Taxpayers
- Not everyone qualifies. Google your profession to see if you are eligible for this deduction
- Deduction is for 2025-2028 under current law
PLEASE BE SURE TO BRING ALL ATTACHMENTS TO YOUR W-2 AT DROP OFF!!! Failure to have the proper documentation will result in you not receiving the deduction!
*Legal disclaimer - we cannot make this election based on taxpayers word, our hands are tied to rely on information only reported straight from the employers - No exceptions!*
Auto Loan Interest Deduction
New auto loans as of 1/1/2025 may qualify for the new Auto Loan Interest Deduction.
A few key points:
- car must be new (no used cars qualify)
- Must be a secured loan (no credit card or Home Equity borrowing allowed)
- Deduction is for the lesser of: actual interest paid and $10,000
- Deduction phase out begins at $100,000 in income for Single Taxpayers, and $200,000 for MFJ Taxpayers
- Vehicle must have final assembly in US and be under 14,000GVW
- RV's, Boats and Campers do not qualify
- Credit is VIN based so information has to be supplied with the return to give us this information
Extra Changes
65 years or older as of 12/31/25?
Good news, you get a new Senior Deduction.
- Deduction is not pro-rated
- Up to $6,000 per taxpayer
- Married Filing Separate does not qualify
- Deduction phases out at $75,000 of income for Single Taxpayers, and $150,000 for MFJ Taxpayers
Charitable Contributions
- Consider bunching all into 2025 as 2026 brings back a front of the return deduction. What is bunching? Consider making your 2026 deductions in December of 2025 so you can take extra advantage of the Schedule A write off.
Energy Credits
- Thinking about upgrades? 2025 is the last year of energy credits.
Child Tax Credit
- For 2025 the child tax credit will increase $200/kid under the age of 17
Teachers!
- Good news! Your educator expenses are now fully able to be itemized starting in 2026. 2025 you will still receive a $300 credit but in 2026 you can add all of your education expenses to your Schedule A to help you itemize and take advantage of more expenses.
Gambling Losses
- All gambling losses are now limited to 90% starting 1/1/2026.
Do you Itemize?
- The taxes section of the Schedule A will no longer limited to $10,000 for 2025-2028. The new limit will be $40,000 as long as you make under $500,000. This section includes: State Withholding, State Estimated Taxes, State Tax Balance Due from Prior Year, Real Estate Taxes, and Personal Property Taxes.