Happy Thanksgiving!
As we enter the holiday season, the crew here at Pearson and Co. wanted to express our sincere thanks and gratitude to you for trusting us with your tax preparation needs.
We look forward to helping you again in this upcoming tax season.
There are many tax changes to be aware of due to the passage of the One Big Beautiful Bill Act earlier this year. Here are a few of them that may impact you.
SALT (State & Local Tax) Deductions
The cap for this deduction increases from $10,000 to $40,000 (with annual 1% inflation adjustments through 2029) for taxpayers with adjusted gross income (AGI) of $500,000 or less, phasing down to $10,000 for higher earners. This affects anyone who itemizes deductions and pays state/local income, property, or sales taxes exceeding the prior cap, regardless of their state of residence.
Overtime and Tips
Under the 2025–2028 tax rules, workers can deduct qualified overtime premium pay (the “half” in time-and-a-half) up to $12,500 single/$25,000 joint, and tipped income up to $25,000, both as above-the-line deductions that reduce taxable income even if you take the standard deduction. These deductions begin to phase out starting at $150,000 MAGI single / $300,000 joint.
$6,000 Senior Deduction
For tax years 2025–2028, taxpayers age 65 or older receive an additional $6,000 deduction ($12,000 if both spouses are 65+). This is on top of the regular standard deduction and the existing small extra amount for seniors, and it’s available whether you itemize or not. It begins phasing out at $75,000 (single) MAGI (Modified Adjusted Gross Income) or $150,000 (joint).
Car Loan Interest
You may deduct up to $10,000 per year of interest paid on new auto loans for U.S.-assembled passenger vehicles (under 14,000 lbs. Gross Vehicle Weight) that are used for personal purposes. This new deduction is available even if you take the standard deduction. This is available for the tax years of 2025-2028. The deduction phases out based on your MAGI and applies only to loans originated after December 31, 2024.