“In this world, nothing is certain but death and taxes” – Benjamin Franklin
Uncertainty describes tax filing season and this year’s tax prep includes big changes because of the so-called “Big Beautiful Bill” passed by Congress. “I’ve noticed the refunds jumping quite a bit,” said Nate Reiter from Integrated Tax and Accounting Solutions. He has seen client refund increase from $300 last year to $2,000 this year.
One example is that taxpayers 65 and older have a new deduction. “You’ll get an additional $6,000 deduction on your tax return,” added Reiter. “It’s up to $12,000 for a couple. It does have the phase out depending on the amount of income you receive, but it’s straight $12,0000. So, most married filing jointly couples, if they are both over the age of 65, are going to essentially be able to immediately write off about $45,000 in income once you throw in their standard deduction.”
Seniors aren’t the only beneficiaries of changes to the tax code. Adjustments were added for workers receiving tips and overtime. The rules now provide a top line deduction up to $25,000. “What that means is you don’t have to be itemizing on your return in order to take this deduction. You just have to have your tips separated.” The deduction for overtime pay applies to the difference between the regular payrate and the overtime rate. Reiter used the example that if an overtime rate is $20 an hour and the overtime rate is $30 per hour, the deduction applies to the $10 difference on the overtime rate. The deduction is $12,500 for a single filer and it “goes right off as a deduction against your ordinary income for the year.”
The cap for the amount deducted paid to state and local taxes increased to $40,000. Reiter believes more people will be itemizing this year because of the increased cap on state and local taxes. “The SALT (state and local taxes) include anything, especially for folks here in Ohio, that you would pay to one of your local municipalities like city or township. It also includes real estate taxes.”
Parents who purchased a ‘Trump Account” similar to an IRA for children should check to see if they qualify for a deduction, depending upon when the child was born.
With all the changes and many clients looking at bigger refunds, Reiter reminds people that “every good tax preparer would say it’s always going to depend on your situation.”
The deadline for filing tax returns this year is Wednesday, April 15.
