What Changed in the Tax Code and Why It Matters to You

For Families: Credits & Savings

Deeper Dive into New Family Tax Benefits

• Permanent Child Tax Credit (CTC): The credit is now $2,200 per child. The refundable portion (the amount you get back if you owe no tax) is $1,700 for 2025. You must provide a valid Social Security Number (SSN) for the child and the parents to claim this.

• Trump Accounts for Children: Beginning in 2026, a new tax-deferred savings account will be available for children under age 18.

• $1,000 Kickstart: A pilot program will provide a $1,000 government contribution (free money) for U.S. citizens born between 2025 and 2028.

• Growth: These accounts function like traditional IRAs but have a $5,000 annual contribution limit (indexed for inflation).

• How to open an account: Form 4547 must be filed with the IRS to open an account and receive the $1,000 pilot payment. If ready, the form may be submitted with your 2025 tax return.

• Childcare Support (Effective 2026): The tax-free limit for Dependent Care Assistance programs increases to $7,500 (up from $5,000).

• The Child and Dependent Care Credit rate increases to 50% (up from 35%) for families with AGIs under $15,000, phasing down to 20% for higher earners.

For Workers: Tips & Overtime

How to Claim the New Tips and Overtime Deductions

• Qualified Tips Deduction: You can deduct up to $25,000 in cash or credit card tips received in a qualifying occupation.

• Exclusions: This does not include mandatory service charges or automatic gratuities added to a bill. Tip must be voluntary.

• Income Limitation: Deduction is reduced by $100 for each $1,000 your income exceeds $150,000 ($300,000 on a joint return)

• Married Individuals: You must file a joint tax return if you are married. You could be considered unmerited if you qualify for the Head of Household filing status.

• Self-employed individuals: The deduction is limited to the net profit from your business that received tips and must be reported on Form 1099NEC or Form 1099-K.

• Qualified Overtime Deduction: You can deduct the "premium" portion (the extra 0.5 in "time-and-a-half") of your overtime pay, up to $12,500 ($25,000 if filing jointly).

• Eligibility: This applies to employees who are "non-exempt" under the Fair Labor Standards Act (FLSA).

• Qualified overtime pay: This is the amount of money you were paid in excess of 40 hours/week.

• Phase-out: The deduction begins to decrease if your income (MAGI) exceeds $150,000 ($300,000 for joint returns).

• Married Individuals: You must file a joint tax return if you are married. You could be considered unmarried if you qualify for the Head of Household filing status.

• Reporting Requirement: Overtime pay is not required to be reported as a separate line item on your 2025 W-2; therefore, we strongly recommend that you submit your final pay stub with the rest of your tax documents to us.

For Seniors (Age 65+)

Understanding the New Senior Deduction

• Maximum Benefit: Taxpayers age 65 or older can deduct up to $6,000 each ($12,000 on a joint return if both qualify)

• Married Individuals: You must file a joint tax return if you are married. You could be considered unmarried if you qualify for the Head of Household filing status.

• Phase-out Rules: The deduction is reduced by 6% for every dollar your income (MAGI) exceeds $75,000 ($150,000 for joint filers)

• Social Security Clarification: Despite rumors, the OB3 Act did not change how Social Security benefits are taxed; this is a separate, additional deduction

For Homeowners & Car Buyers

Higher SALT Limits & Car Loan Interest Deductions

• New SALT Deduction Limits: The $10,000 cap on State and Local Taxes has been replaced with a temporary, higher limit

• 2025: $40,000

• 2026: $40,400

• Deduction is reduced by 30% of income over $500,000

• Note: These higher limits drop back to $10,000 in 2030.

• Car Loan Interest Deduction: You can deduct up to $10,000 in interest paid on a personal vehicle loan without itemizing.

• Vehicle Requirements:

• The vehicle must have undergone "final assembly" in the U.S. This includes cars, SUVs, pickup trucks, and motorcycles under 14,000 lbs.

• It must be e new vehicle. You must be a first owner.

• Loan Requirements:

• Interest must be paid on the Loan incurred after December 31st, 2024

• Refinance loan qualify

• Documentation:

• You must include the vehicle's VIN on your tax return to claim this deduction.

• Must have a statement available showing the total amount of interest paid

• Married Individuals: You do not need to file a joint return to claim these deductions; therefore, you can deduct up to $20,000 using the Married Filing Separately status.