The BIG BEAUTIFUL BILL is over 1,000 pages….
Here is some info on a couple provisions in the Big Beautiful Bill
No Tax on Tips:
Effective Tax Years 2025 – 2028
The first $25,000 of tips are tax deductible. Taxes are still taken out of employees pay so it doesn’t affect paychecks. The tax benefit comes into play during tax time. When the employee does their taxes they can deduct up to $25,000 of their tips from their total income which will lower their taxable income.
Individuals with income under $150, 000 or $300,000 married filing jointly qualify for the tax deduction
$25,000 is exempt only from FEDERAL income tax…..it is not exempt from FICA or State Income Tax
This is an “Above The Line” deduction (like student loan interest, IRA Contributions, Self-Employed Health Insurance, etc) so the tax savings varies based on taxpayers tax rate.
Not Tax on Overtime:
Effective Tax Years 2025-2028
Up to $12,500 overtime pay is tax deductible. Taxes are still taken out of employees pay so it doesn’t affect paychecks. The tax benefit comes into play during tax time. When the employee does their taxes, they can deduct up to $12,500 of overtime pay from their total income which will lower their taxable income. For MFJ, if both spouses have overtime pay, then a maximum of $25,000 can be deducted from income.
Individuals with income under $150, 000 or $300,000 married filing jointly qualify for the tax deduction
$12,500 is exempt only from FEDERAL income tax…..it is not exempt from FICA or State Income Tax
This is an “Above The Line” deduction (like student loan interest, IRA Contributions, Self-Employed Health Insurance, etc) so the tax savings varies based on taxpayers tax rate.
No Tax on Social Security:
Effective Tax Years 2025 – 2028
This isn’t so much a “no tax”, but more of an extra “standard deduction”. Individuals over age 65 get $6000 deduction. For Married Filing Joint, if both spouses are over 65, then the deduction is $12,000. Seniors get this extra deduction regardless of whether they take standard deduction or itemize their deductions. Basically for seniors it is standard deduction (or itemized deductions) PLUS $6,000 (or $12,000 for mfj).The tax benefit comes into play as it lowers federal taxable income
Phases out for income over $75,000 or $150,000 Married Filing Joint
This deduction only applies to FEDERAL income tax, state income taxes still apply based on each state’s tax laws
SALT (State & Local Tax – Itemized Deduction)
Effective Tax Years 2025 – 2028
Increases from $10,000 to $40,000. After 2025, a 1% increase for inflation
In 2029 it reverts to $10,000
Estate Tax
Tax Year 2026
Exemption increases to $15 million for single and $30million for married filing joint
Child Tax Credit
Effective Tax Year 2025
Increases to $2,200
Charitable Donations
Effective Tax Year 2026+
Cash Donations up to $1,000 for single filers $2,000 married filing jointly can be deducted without itemizing deductions
Savings Accounts for kids
Effective Tax Years 2025+
Also called Trump Accounts
kids born between 2025 -2028 receive $1,000 credit into savings account
Can contribute up to $5,000 per year tax free until child turns 18
These accounts are custodial IRA’s and grow tax free
After age 18 funds can be withdrawn