- (800) 664-8297
- Contact Us
To claim the Child Tax Credit for each qualifying child who has a Social Security number that is valid for employment in the United States, under OBBBA.
To be a qualifying child for the 2024 tax year, your dependent generally must:
The age requirement has not changed for 2025 and future years.
The law made the Child Tax Credit permanent and added some modifications as follows:
Beginning in 2025, the increased amount of the child tax credit applies.
The higher value of the Child Tax Credit (CTC) set by the TCJA is now permanent and slightly increased to $2,200 per child. Additionally, the amount of the CTC and related refundable credit of S1,400 will be adjusted for inflation annually.
We had several questions concerning tips.
Q: On the tips. Sch C -- would we report tips as income (for SE calculation) and then take the deduction or just not list on Sch C?
A: Additional guidance will be needed, but I assume they will appear somewhere on the Schedule C.
Q: Will tips be a deduction to income or credit on tax?
A: Appears to be a deduction. Guidance on where we will take the deduction needs to be provided.
Q: Are the tip changes available to schedule C taxpayers? If so, how will those work?
A: See below. Guidance will be needed on how this will work on the tax return.
Q: Some states auto add 20% for tip- does this apply?
A: We need to wait for guidance on this issue, as the law states “voluntary” tips.
Q: If this 20% is tacked on, will it be considered a “service charge” not a tip?
A: Unknown at this time.
Q: I'd heard it was only cash tips.
A: See below.
Q: You mentioned the $25K limit on tips is for MFJ limiting it to $12,500 per person but allowing it for both taxpayers if married?
A: On this issue, we are expecting additional guidance, but I would think if married each would get $12,500 but only if both earned tips. They would only be able to deduct the lesser of the tip income up to $12,500 earned as tips. If one spouse does not have tips they would not get the deduction.
Q: Where can we find the list of industries that qualify for the tip deduction?
A: See below - guidance to be issued.
Note: We did receive some guidance on Tips from IRS in the last week. Based on that we can address some but not all the questions. We are expecting future guidance.
New deduction: Effective for 2025 through 2028, employees and self-employed individuals may deduct qualified tips received in occupations that are listed by the IRS as customarily and regularly receiving tips on or before December 31, 2024, and that are reported on a Form W-2, Form 1099, or other specified statement furnished to the individual or reported directly by the individual on Form 4137.
Reporting: Employers and other payors must file information returns with the IRS (or SSA) and furnish statements to taxpayers showing certain cash tips received and the occupation of the tip recipient.
Guidance: By October 2, 2025, the IRS must publish a list of occupations that “customarily and regularly” received tips on or before December 31, 2024.
The IRS will provide transition relief for tax year 2025 for taxpayers claiming deduction and for employers and payors subject to the new reporting requirements.
Two questions concerning overtime were asked. We did receive some additional guidance after the webinar. We will need to wait for additional guidance on how it will appear on the IRS forms.
New deduction: Effective for 2025 through 2028, individuals who receive qualified overtime compensation may deduct the pay that exceeds their regular rate of pay – such as the “half” portion of “time-and-a-half” compensation -- that is required by the Fair Labor Standards Act (FLSA) and that is reported on a
Taxpayer eligibility: Deduction is available for both itemizing and non-itemizing taxpayers.
Taxpayers must:
Reporting: Employers and other payors are required to file information returns with the IRS (or SSA) and furnish statements to taxpayers showing the total amount of qualified overtime compensation paid during the year.
Guidance: The IRS will provide transition relief for tax year 2025 for taxpayers claiming the deduction and for employers and other payors subject to the new reporting requirements.
Q: Where will the $1,000 come from for the Trump Accounts?
A: Until we have additional guidance, unknown?
Beginning January 1, 2026, OBBBA creates a new tax-preferred savings account for children under age 18 called the “Trump account.” These accounts will operate like individual retirement accounts, allowing earnings to grow on a tax-free basis. Parents, relatives and other entities may contribute up to $5,000 annually after-tax (indexed for inflation) up to age 18, with certain exceptions.
Children born between 2025 and 2028 will be automatically enrolled and receive a $1,000 one-time federal contribution to jumpstart their account. The accounts must be held by a financial institution and invested in a qualified index fund. Distributions from the accounts are prohibited until the child reaches age 18.
Notably, OBBBA allows employers to contribute to an employee’s child’s Trump account on a tax-free basis. The law requires the employer to have a separate written plan document to make such contributions, and the plan is subject to nondiscrimination rules under IRC Section 129. Employers may contribute up to $2,500 for each employee, and that amount is indexed beginning in 2027.
Further regulatory guidance on the Trump accounts program is expected from the Department of the Treasury.
We had several questions concerning the Senior Deduction – which I erroneously stated applied to Social Security benefits. See corrections below.
**Correction and Clarification Concerning the Senior Deduction**
Webinar July 10, 2025
§ 70103
This section permanently repeals the personal exemption tax deduction for most taxpayers and establishes a temporary (for 2025-2028) personal exemption tax deduction of up to $6,000 for individuals who are 65 years or older (subject to income limitations and identification requirements).
As will any new law, I will continue to decipher the technical aspects in an effort to assist with the transition of learning law that will impact clients in the future.
Therefore, individuals 65 or older regardless of the type of income will qualify for this deduction if they are within the threshold amounts and phase out calculation and have a social security number.
There is much confusion surrounding this area of law. As IRS seeks to implement the new law, they will look at the text that was passed (below) but they will also review the “intent” of Congress. The issue began with the current presidential campaign noted to provide relief from the taxation of Social Security benefits. When support was not sufficient the law enacted, modified the original “non-taxation of Social Security benefits” and the Senior Deduction was born.
Regardless this will be a boon for Seniors and provide tax relief.
NOTE: As with any new law there is a possibility for “technical correction” down the road. For now, those 65 or older can reap the benefits.
Q: How do you calculate the dependent care credit and is the max still $600?
The new law provides more relief to taxpayers utilizing the child and dependent care tax credit. Enhanced credit begins at a 50% rate but is phased out based on income. For taxpayers with an adjusted gross income (AGI) over $15,000, the credit is reduced by 1 percentage point for every $2,000 above that amount, but not below 35%. If taxpayers’ AGI exceeds $75,000 (or $150,000 for joint filers), the credit is further reduced by 1 percentage point for every $2,000 over that threshold, with a minimum credit rate of 20%. Enhanced credit applies to taxable years after December 31, 2025.
Increase to Dependent Care Assistance Program Limit
OBBBA increases the limit for the dependent care assistance program, which allows employers to provide dependent care assistance funds to employees on a tax-free basis. The new limit is increased from $5,000 per year to $7,500 per year or $3,750 for married couples filing separately, and it will apply for tax years beginning after December 31, 2025.
This is all we currently have for guidance. The credit was increased and remains on Form 2441 and will be calculated based on the new law, but will not apply until after December 31, 2025. This gives IRS time to provide corrected forms and additional guidance.
Effective: 2026 and beyond
The maximum percentage of expenses that you can claim for this credit has increased to 50%, but the threshold of expenses remains the same at 50% of $3,000 (1 person) or $6,000 (2+ persons).
Additionally, the phase down ranges are at much higher income levels (Adjusted Gross Income) than prior rules.
The new law allows taxpayers to elect to pay tax on the gain from the sale of qualified farmland property to a qualified farmer on an installment basis over four taxable years, beginning with the tax year in which the sale occurs.
For farmers that sell farmland to eligible farmers, the bill allows capital gains to be paid over four annual installments. Qualified farmland is defined as real property that has either:
A) been used by the taxpayer as a farm, or
B) leased by the taxpayer to a qualified farmer, during substantially all of the 10-year period ending on the date of the sale and is subject to a covenant which prohibits the use of the property as anything other than a farm for a 10-year period.
For farmland that has been used for farming or leased to a qualified farmer, this provides an additional incentive for taxpayers to structure sales to qualified farmers looking to acquire land instead of delaying the sale for tax purposes.
A “qualified farmer” is an individual who is actively engaged in farming.
This provision is effective for sales or exchanges occurring in tax years beginning after July 4, 2025.
Will the above the line teacher deduction remain?
The adjustment to income for teachers’ $300.00/$600.00 (joint) will remain the same.
In summary, the OBBBA offers teachers the option of a permanent above-the-line deduction for eligible educator expenses, limited to $300 for single filers and $600 for joint filers, or potentially a higher itemized deduction on Schedule A if they choose to itemize and meet the qualifications.
New itemized deduction (beginning in 2026)
Will there be any changes to amortization?
Beginning in 2022, the TCJA required businesses to amortize § 174 research and experimentation (R&E) costs over five years if incurred in the United States or 15 years if incurred outside the country.
With the mandatory mid-year convention, deductions were spread out over six years.
The OBBBA permanently allows the deduction of domestic R&E expenses in the year incurred, starting with the 2025 tax year.
The OBBBA also allows “small businesses” (those with average annual gross receipts of $31 million or less) to claim the deduction retroactively to 2022.
Any business that incurred domestic R&E expenses in 2022 through 2024 can elect to accelerate the remaining deductions for those expenditures over a one- or two-year period.
Other than the above change, I did not see further changes to amortization.
Additional Senior Deduction: A new temporary deduction for individuals aged 65 and older is introduced for tax years 2025 through 2028.
This additional deduction is $6,000 per qualifying individual.
For married couples where both spouses are 65 or older, the deduction can be up to $12,000.
The deduction begins to phase out for taxpayers with a Modified Adjusted Gross Income (MAGI) over $75,000 (single) or $150,000 (joint).
OBBBA solidified the larger standard deduction amounts implemented under the TCJA and introduced a temporary deduction specifically for seniors.
The temporary age 65+ Senior deduction is on top of the additional standard deduction given to individuals who are either age 65+ or blind, which adds an extra $2,000 to the standard deduction for single filers or $1,600 for each eligible married filer.
Which means that between the 'normal' standard deduction, the current age 65+ or blind deduction, and the new temporary age 65+ deduction, households with members age 65+ are eligible for up to $23,750 in deductions for single filers, $39,100 for joint filers with one spouse age 65+, and $46,700 for joint filers where both spouses are age 65+.
New deduction: Effective for 2025 through 2028, individuals may deduct interest paid on a loan used to purchase a qualified vehicle, provided the vehicle is purchased for personal use and meets other eligibility criteria. (Lease payments do not qualify.)
Maximum annual deduction is $10,000.
Deduction phases out for taxpayers with modified adjusted gross income over $100,000 ($200,000 for joint filers).
Qualified interest: To qualify for the deduction, the interest must be paid on a loan that is:
If a qualifying vehicle loan is later refinanced, interest paid on the refinanced amount is generally eligible for the deduction.
The taxpayer must include the Vehicle Identification Number (VIN) of the qualified vehicle on the tax return for any year in which the deduction is claimed.
Note: Paid attendees can request a replay link for any previously recorded webinar by asking JoJo or emailing [email protected].
