Income Tax Preparation & Small Business Accounting

NEW OBBBA PROVISIONS:

• Increased Child Tax Credit & Child Care Credit
• 2025 – 2028 Temporary Personal Deduction for Seniors of $6000.00 (reduced by 6% of MAGI exceeding $75,000 single / $150,000 MFJ)

• QUALIFIED TIPS DEDUCTION 2025 – 2028:
  (See List of IRS recognized Tip Workers under “Client Resources” Tab)
  The maximum annual deduction is $25,000; is phased out
  When AGI is over $150,000 single/$300,000 MFJ.
  • Tips reported on W-2, 1099, or Form 4137.
  • Form 4137 bring Tip Journal.
  • 2025 Exception:  Bring Final Paystubs from each Employer, Bring Log of Tips,& other Proof, if information not on W-2
  • Also a Credit Allowed for portion of Employee Social
    Security & Medicare Tax paid by Tips received prior to Law
    Passage for Employees of food & beverage establishments
  • Also Credit Expanded to include Tips of employees in the following Service Industries:
    *Barbering & Hair Care
    *Nail Care
    *Esthetics
    *Body & Spa Treatments
    
    

• NO TAX ON OVERTIME DEDUCTION 2025 – 2028:
  Deduct pay that Exceeds regular Pay; the “half” of “time-and-a-half”.
  The maximum annual deduction is $12,500 single / $25,000 MFJ Phased out when AGI over $150,000 single/$300,000 MFJ.
  • Should be reported on W-2.
  • 2025 Exception:  Bring Final Paystubs from each Employer! Payroll records, employer summaries.
    
    
• VEHICLE LOAN INTEREST DEDUCTION 2025 – 2028:
  Watch for Form 1098-VLI
  • Need Statement for 2025 Loan Interest Received
  • Deduct up to $10,000 for Loan origination after 12/31/24
  • Gross weight under 14,000 pounds & assembled in U.S.
  • Phase out MAGI above $100,000 single/$200,000 MFJ.
  • Bring VIN each year claimed.

SOME OF THE PROVISIONS FROM TRUMPS 2018 TAX CUTS & JOB ACT (H.R.1) were made permanent (Like the lower Tax Brackets)

NEW Modifications to these provisions include:

• Mortgage Insurance Premiums (MIPS) are now deducted as Qualified Residence Mortgage Interest.
• Unreimbursed Educator Expenses can be deducted as Miscellaneous itemized Deduction to use with the other Form 1040 deduction.
• Standard Deduction increased to $15,750 Single; $31,500 MFJ; $23625 HOH.
• SALT (State And Local Taxes) Deduction Increased Cap Starting 2025 is up to $40,000.  In 2030 it reverts back to $10,000.

Charitable Contributions:

• Beginning after 2025 Taxpayers can DEDUCT up to $1000 Single/ $2000 MFJ without itemizing on Sch A.
• If itemizer a .5% floor applies; deduction allowed to amount of contribution that exceed .5% of AGI.

What Counts as Qualified Overtime Compensation:

• (See “Overtime FS-2026-01 in “Client Resources”)
• Overtime Deduction limited to portion of overtime pay required under Fair Labor Standards Act FLSA.
• Example: employee ears $20 an hour is paid $30 an hour for 10 overtime hours; only the $10 per hour premium qualifies for deduction; even if employer voluntarily pays double time, ONLY the amount needed to reach time-and-a half qualifies.

New on 2026 W-2 Form:

• New Box 12 codes:
  • TA for employer contributions to a Trump Account
  • TP for total Qualified tips
  • TT for total qualified overtime compensation
  • Employees will use the TP and TT amounts when claim deductions on new Schedule1-A, Additional Deductions
• New Box 14 Changes:
  • 14a, Other
  • 14b, Treasury Tipped Occupation Code (if an employer reports code 000 and no other occupation code in Box 14; tips are not treated as qualified tips for deduction.

MORE OBBBA INFORMATION

• TRUMP ACCOUNTS: Includes a Pilot Program for child born 2025 -2028 allows IRS to make a $1000.00 contribution to an IRA on behalf of the child (beneficiary).
• PERMANENT EXTENSION OF THE 100% BONUS Depreciation.
• Section 179 Deduction Limit is $2.5 Million + inflation adjustments
• ADOPTION CREDIT INCREASE
• EDUCATION:  Employer paid Education Expenses up to $5250 excluded from Employee Income. This can also be used for Student Loan payments.

Educator Expense Deduction

An eligible educator can take an above the line deduction for out-of-pocket classroomrelated expenses. Deduction may not exceed $300 ($350 for 2026).

MFJ - each eligible spouse may claim up to $700 total in 2026 if both qualify, then itemize any excess.

After Dec. 31 2025 the OBBBA added a miscellaneous itemized deduction for unreimbursed educator expenses and expressly ensures it remains deductible in 2026 and beyond.

Educator expenses are defined by cross-reference to §62(a)(2)(D) but there is no dollar cap. Nonathletic supplies for health and physical education are allowed, "In the classroom" is broadened to "as part of instructional activity," and eligibility is expanded to include an interscholastic sports administrator or coach.

Taxpayers may claim both on the same return; the above-the-line amount first (up to the indexed cap), then claim additional unreimbursed amounts as an itemized deduction under §162 as modified by OBBA.

OBBA adds interscholastic sports administrators or coaches to the list of eligible educators.

ILLINOIS Changes Enacted:

• Extending Personal & Corporation Income Tax Credits provided to FILM, VIDEO, or TELEVISION PRODUCTIONS in state until January 1, 2039.
• See list -- Go to Film Production Credit Illinois (under “Client Resources”)