A Brief Summary of Tax Law Changes

By Guest

By John F. Dobbyn, EA

We’ve all heard and read a lot about the One Big Beautiful Bill Act, but I thought it might be helpful to summarize the five most important provisions that will affect the 2025 tax returns of most Canton Citizen readers. Readers should find these helpful to know before meeting with their professional tax preparers (ideally, a local Canton CPA or Enrolled Agent instead of a national chain) over the next three months.

Senior Citizens

All senior citizens (age 65+) will get a special “extra” deduction of $6,000 ($12,000 for Married Filing Jointly) if their Adjusted Gross Income is under $75,000 ($150,000 MFJ). If your income is above those numbers, the benefit gets phased out gradually to the point where you get nothing if your AGI is $175,000 (Single) or $250,000 (MFJ). The majority of our own clients are in the 22 percent tax bracket, so they will save about $1,300 ($2,600 for a married couple).

Itemized Deductions

Because the IRS is allowing a lot more state and local taxes (SALT) to be deducted, many taxpayers who have been taking a Standard Deduction in recent years will now be itemizing. If you have mortgage interest (including home equity), be sure to have Form 1098 that you receive from your lender. Your accountant will also need your real estate and auto excise taxes, charitable deductions and medical expenses (but only if they are more than 7.5 percent of your income).

This is a pretty big deal for taxpayers who have really high property tax bills and/or very high-paying jobs on which they pay a lot of state income taxes. We have a number of clients who will now have $30,000 more in itemized deductions and save between $7,000 and $10,000 in federal taxes because of the SALT change alone.

No Tax on Overtime and Tips

What gets lost in the headlines is the fact that the “no tax” benefit only applies to the premium portion of overtime. In other words, if you get time-and-a-half for working overtime, only the extra “half” pay rate is tax-free. The problem is that the IRS did not change the W2 forms for 2025, so it’s up to the taxpayer to compute the deduction. Your tax preparer will need you to give them a copy of your last pay stub, which we can only hope will break out the total overtime pay. If not, your preparer will have to figure it out some other way.

Regarding tips, it will be shown on Line 7 of your W2, so you don’t have to do anything special if you are an “employee.” However, if you are self-employed and include tips in your business revenue (e.g. hair stylist, Uber driver), those tips will be included to calculate your business profit (and Self Employment Tax) on Schedule C, but then they will be deducted (up to $25,000) to reduce your taxable income.

Car Loan Interest

You can deduct up to $10,000 of interest on loans for brand-new cars made (final assembly) in the United States and bought in 2025. The form requires the Vehicle Identification Number, so make sure you have that available. Note: cars with VIN’s beginning with 1, 4 and 5 were assembled in the U.S.

“Trump” Accounts

If you had a new baby in 2025, you will file new Form 4547 with your tax return to make your child eligible to get $1,000 deposited to a special account by the federal government sometime beginning in July.

You can also submit Form 4547 for any other child for whom you expect to make your own contributions to a “Trump” Account beginning in July. They won’t get the $1,000, but you might decide that such contributions make sense for you. If interested, your preparer can explain the details when you meet.

In summary, if you’ve been preparing your own tax returns in the past, this might be the right year to work with a local professional preparer to make certain you get every deduction to which you are legally entitled.

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