The One Big Beautiful Bill

Workers in occupations that customarily and regularly receive tips may deduct their qualified tip income from federal taxable income. Tips must still be reported on the return first — the deduction then reduces taxable income. The net result for many tipped workers: little or no income tax on tip earnings.

Qualifying occupations include food service workers, bartenders, salon and barber workers, hotel and hospitality staff, and similar service roles. The IRS maintains the qualifying occupation list — check IRS.gov before filing.

Note: This provision expires after tax year 2028 unless extended by Congress. It applies to employees, not self-employed individuals. Tips must still be fully reported — the deduction is applied on Form 1040 after reporting.

Eligible employees may deduct the qualified overtime premium — specifically, the portion of overtime pay that exceeds the employee’s regular rate of pay. This is the “time-and-a-half” premium above the base hourly rate, not the full overtime paycheck. Overtime pay must still be reported as income on the W-2; the deduction is applied separately to reduce taxable income.

Practical example: If a client earns $20/hr and receives $30/hr for overtime, the deductible premium is the extra $10/hr — not the full $30/hr. You need the client’s pay stubs or a letter from their employer to identify the premium amount. The W-2 does not separate this.

Income limits apply — higher earners phase out of this deduction. Check IRS guidance for current thresholds before filing.

Note: Expires after tax year 2028 unless extended by Congress. Applies to employees receiving overtime under the Fair Labor Standards Act. Does not apply to self-employed individuals.

The Child Tax Credit increased from $2,000 to $2,200 per qualifying child under age 17 for tax years 2025 and 2026. The Additional Child Tax Credit (refundable portion) remains available and is indexed for inflation. Verify your software reflects the updated amount before filing any return with a child credit.

Taxpayers who are 65 years of age or older receive an additional $6,000 deduction on top of their regular standard deduction. For married couples where both spouses are 65 or older, the combined additional deduction is $12,000. This stacks on top of the existing age-related standard deduction add-on already in the tax code.

Income phase-outs apply for higher-income seniors. For most retirees on Social Security or pension income in your market, the full deduction is available. Ask every client their age before completing the return.

Note: Expires after tax year 2028 unless extended. Check IRS guidance for the exact phase-out thresholds.

The State and Local Tax (SALT) deduction cap increased from $10,000 to $40,000 for taxpayers with income under $500,000. This only matters for clients who itemize deductions. Most of your South Shore clients take the standard deduction and are unaffected. If a client has significant property taxes and was previously itemizing, recalculate to see if itemizing now makes sense.

Note: This cap reverts to $10,000 in 2030 unless Congress acts again.

Taxpayers may deduct up to $10,000 of qualified interest paid on a loan for a new, U.S.-assembled vehicle. The vehicle must be purchased new — used vehicles do not qualify. The deduction is taken on the federal return and reduces taxable income.

Income limits (MAGI phase-out):

• Single filers: phase-out begins at $100,000 MAGI
• Married filing jointly: phase-out begins at $200,000 MAGI

For most working-class clients in South Shore — warehouse workers, gig drivers, tradespeople — income levels are typically within the qualifying range. Ask about any new vehicle purchases and whether the client is paying loan interest on it.

Note: Expires after tax year 2028 unless extended. Applies to new vehicles assembled in the United States. Check IRS guidance for the definition of “U.S.-assembled” and any additional qualifying criteria before filing.

Several clean energy tax credits created by the 2022 Inflation Reduction Act have been eliminated or significantly curtailed, with different credits expiring on different dates:

• Clean vehicle credits (new and used EVs) — end after September 30, 2025
• Residential clean energy credit (solar panels, battery storage) — ends after December 31, 2025
• Energy efficient home improvement credit (heat pumps, windows, doors) — ends after December 31, 2025
• Alternative fuel vehicle refueling property credit — ends after June 30, 2026
• Commercial clean vehicle credit — ends after June 30, 2026

Transition rules may apply for purchases that were in progress or contracted before the cutoff dates. Do not assume a credit is unavailable without checking the specific date and whether a transition exception applies.

Before filing any return with an energy credit: verify the purchase date against the applicable credit’s expiration date using IRS.gov guidance. Rules are still being finalized.