The One, Big, Beautiful Bill Act (OBBBA) was passed earlier this year, and it was properly referred to as ‘big’. There was a lot to this bill. The good news for you is we have distilled the big bill down to its most salient points as it’s time. It’s time to get tax information organized.
With the end of year rapidly approaching, our thoughts go to the holiday season with most of us (yes, even us) not wanting to think much about preparing 2025 tax returns.
However, with the recent tax law changes, there is work for you to do before we can do our part to prepare and finalize your 2025 taxes. The reality is that many of the tax benefits offered via the Big, Beautiful Bill will not flow automatically to us, your CPA. You will need to calculate the data and submit it to us as you upload your tax-related documents for the year.
Five Important Tax Changes to Prepare for:
- Income – Tips
Determine how much of your income reported on your W2 was Tips. We will need that number reported to us as your W2 will not provide the detail needed to account for the opportunity to reduce your tax burden by excluding up to $25,000 per person of tip income. - Income – Overtime
Similar to tips, we will need you to report to us the amount of total income earned in the year that was overtime income. Individuals can exclude up to $12,500 of overtime income and those filing jointly can exclude up to $25,000 of overtime income from being taxed. - Expenses – Depreciation
The tax bill increased the depreciation limit to $2.5 million for assets placed in service in 2025. We advise you to make purchases by year end to take advantage of this increased threshold or contact us for advice. - Deductions: State and local tax deductions
The allowable deduction was increased significantly from $10,000 to up to $40,000 annually. This has the effect of having many tax filers moving from taking the standard deduction to itemizing deductions to take advantage of this increased allowance. To do so, you need to track charitable donations so gather your receipts to have the supporting documentation so we can help you benefit from this tax change. - A New Deduction
Deducting interest paid on a qualifying new vehicle purchased for personal use effective January 1,2025.- Up to $10,000 in qualifying interest paid on the car loan can be deducted per year. The interest must be from a secured auto loan originated after December 31, 2024.
- Filing Method: This is an “above-the-line” deduction, meaning you can claim it even if you take the standard deduction (itemizing is not required).
- Eligibility Requirements: To qualify, both the buyer and the vehicle must meet specific criteria:
- Vehicle: Must be a new car, minivan, van, SUV, pickup truck, or motorcycle weighing less than 14,000 pounds. Used vehicles and leases do not qualify.
- Assembly: The vehicle’s final assembly must have occurred in the United States. You can verify this using the VIN (vehicles with VINs starting with 1, 4, or 5 are typically U.S.-assembled) or the vehicle’s window sticker.
- Use: The vehicle must be for personal use, not commercial or fleet use.
We know it is more interesting to talk about stuffing or dressing or your favorite pie, but at LCW CPAs, we want you to be informed and aware of the tax benefits that may apply to you as a result of the passage of the One Big Beautiful Bill Act. It could put more money in your pocket which, at the end of the day, is what we were hired to do for you: Protect your hard-earned money.
Start chipping away at organizing your data. You will be happy you did…really.