ONE BIG BEAUTIFUL BILL

This bill is an extension of the Tax Cuts & Jobs Act of 2017.   This bill increased some of the credits and/or made some of the provisions permanent.   It also established new temporary deductions for qualified tips, qualified overtime, and some interest paid on a passenger vehicle.   It also established a new type of tax-advantages account referred to as a Trump Account.

The bill makes permanent the individual tax rates of 10%, 12%, 22%, 24%, 32%, 35% & 37% -

the estate and trust rates of 10%, 24%, 35% & 37%.

The standard deductions were permanently increased (adjusted annually for inflation).

• Single - $15,750
• Head of Household (Single taxpayers with dependents) - $23,625
• Married Filing Jointly - $31,500

CTC is permanently increased from $2000 to $2200 for qualifying children ages 0 - 16.

Credit for Other Dependents is still $500 for children 17+ and qualifying relatives.

Phase out for individual with a Modified Adjusted Gross Income is $200,000 for Single and $400,000 for Married Filing Jointly.

The QBiD is made permanent allowing a business deduction from your taxable income.  Phase out has increased from $50,000 to $75,000 for non-joint filers and $100,000 to $150,000 for joint filers.

For 2025 - 2028, Seniors can take an additional $6,000 deduction off of their taxable income.   Married seniors can take an additional $12,000.   

Social Security payments will continue to be taxed as before based on other income with no more than 85% of the Social Security payments subjected to income tax.

We have been hearing this, but this isn't exactly true.   Employers will probably continue to withhold taxes at the normal rate on your tips and overtime.   However, you will be able to reduce your taxable income with an above the line deduction.  

For tips: You will be able to have a maximum deduction of $25,000; this will phase out for incomes $150,000 and above (single taxpayers); $300,000 and above (MFJ taxpayers). 

Your tips should be listed on your W2.

For overtime: You will be able to have a maximum deduction of $12,500 single; $25,00 for MFJ; this will phase out for incomes $150,000 and above (single taxpayers); $300,000 and above (MFJ taxpayers).

Your deduction won’t include all of your overtime pay, just the half or double time paid. Your tax preparer will need to see your final paystub with your YTD wages. Let’s look at an example:

You work 40 hours a week for 52 weeks of the year earning $20/hr = Regular pay $41,600.

You work 400 hours of overtime for the year earning time & a half at $30/hr = Overtime pay $12,000.

You would include $52,600 in line 1 on your 1040 for wages. Then you could deduct $4,000 of overtime pay from your taxable income if you are paid at time and a half for overtime. Your half time pay was $10/hr for 400 hours equaling $4000 deduction.  

A Trump Account is an IRA account you can open for your children under age 18.