The Internal Revenue Code has long had much to offer taxpayers who are 50 or older, nearing retirement, or already in their golden years. And the One Big Beautiful Bill Act (OBBBA), enacted last July, expanded several tax breaks and added new opportunities for older taxpayers. Whether you’re in this age group and preparing your 2025 federal income tax return or looking to optimize future tax outcomes (or both), here are seven tax breaks to consider.

1. Additional Standard Deduction

Regardless of age, taxpayers who choose not to itemize deductions are entitled to the standard deduction for their filing status. The Tax Cuts and Jobs Act (TCJA) of 2017 approximately doubled the standard deduction amounts, and the OBBBA made those increases permanent and further increased the amounts for 2025 to:

• $15,750 for single filers (up from $15,000 before the OBBBA),
• $23,625 for heads of households (up from $22,500), and
• $31,500 for married couples filing jointly (up from $30,000).

These amounts will be inflation adjusted for 2026 and beyond.

Additional standard deduction amounts are allowed for individuals age 65 or older or blind. For 2025, these amounts are $2,000 for an unmarried individual age 65 or older or blind, or $1,600 for a married person age 65 or older or blind. (These amounts are doubled if the individual is both over age 65 and blind.)

So, for instance, if you’re a joint filer claiming the standard deduction and you and your spouse are both in your late sixties (and not blind), your additional deduction is $3,200.

2. Senior Deduction

The OBBBA provides a new tax break for many taxpayers age 65 or older. For 2025 through 2028, taxpayers in this age group may be able to claim a deduction of up to $6,000. If both spouses of a married couple filing jointly are age 65 or older, each spouse may be eligible for a separate senior deduction of up to $6,000 — for a combined total of up to $12,000. This deduction is available whether you itemize or not.

But there’s a catch. The senior deduction is phased out based on modified adjusted gross income (MAGI). The phaseout begins at $75,000 of MAGI for single filers or $150,000 for joint filers. It phases out completely when MAGI exceeds $175,000 or $250,000, respectively.

3. Catch-Up Contributions

Taxpayers who max out their annual contribution limits for employer-sponsored retirement plans, such as 401(k)s, as well as for IRAs, can up the ante after reaching age 50 with catch-up contributions. These are amounts you can contribute in addition to your regularly allowed contributions and any employer matches you might receive. For instance, in 2026, taxpayers age 50 or older can add:

• $8,000 to the maximum 401(k) deferral of $24,500 for a total contribution of $32,500, or
• $1,100 to the maximum traditional or Roth IRA contribution of $7,500 for a total contribution of $8,600.

Catch-up contributions are annually indexed for inflation.

Important: Beginning in 2026, the SECURE 2.0 Act requires the 401(k) catch-up contributions of higher-income taxpayers to be treated as post-tax Roth contributions. In 2026, the requirement generally applies to taxpayers who earned more than $150,000 in 2025. This threshold will be annually indexed for inflation.

4. Super Catch-Up Contributions

Under SECURE 2.0, starting in 2025, a slightly older age group of employees — those who are age 60 to 63 at the end of the tax year — can boost their catch-up contributions to most employer-sponsored plans to 150% of the amount allowed for those age 50 and over. (Once you reach age 64, the regular catch-up contribution limit is reinstated.)

The limit for these “super” catch-up contributions in 2026 is $11,250 (the same as in 2025). So, if you’ll be 60, 61, 62 or 63 on December 31, 2026, you can potentially contribute up to $35,750 to a 401(k) this year — the maximum deferral of $24,500 plus a super catch-up contribution of $11,250.

Important: The aforementioned Roth requirement for higher-income taxpayers, including the annually indexed income threshold, applies to super catch-up contributions, too.

5. Spousal IRAs

Married couples can take advantage of a retirement-savings tax break if only one spouse works. That is, the couple may set up an IRA in the nonworking spouse’s name — often called a “spousal IRA” — based on the working spouse’s earned income. This can be particularly helpful when one spouse has retired and the other is still working.

For instance, let’s say 55-year-old Irma earns $100,000 a year while her 65-year-old spouse, Irving, has already retired. The couple can contribute up to $17,200 to IRAs in 2026 — $8,600 to Irma’s IRA and another $8,600 to Irving’s spousal IRA. Depending on income levels and participation in workplace retirement plans, these contributions may be fully or partially deductible under the usual IRA rules.

6. Penalty-Free Retirement Plan Distributions

Reaching age 59½ is a key milestone when it comes to taking distributions from IRAs, 401(k)s and other qualified retirement plans. Normally, a 10% tax penalty — on top of your regular income tax liability — is assessed on retirement plan withdrawals before that age unless a special exception applies.

If you’re retiring before age 59½ and need to make retirement plan withdrawals, consider this penalty exception: You can take substantially equal periodic payments (SEPPs) under one of three IRS-approved methods. SEPPs are based on your life expectancy or the joint life expectancy of you and a designated beneficiary. Complying with the SEPP rules can be complicated. You may want to involve your tax pro if you’re considering this option.

7. Qualified Charitable Distributions

Generally, distributions from traditional IRAs are taxed at ordinary income rates — even if you subsequently donate the funds to charity. Charitable contributions may be deductible if you itemize, and a more limited deduction will be available to nonitemizers for the 2026 tax year.

However, if you’re older than 70½, you can transfer IRA funds directly to a qualified charity with no federal income tax consequences. Although you can’t claim itemized deductions for these qualified charitable distributions (QCDs), their tax-free treatment equates to a 100% deduction because you’ll never be taxed on those amounts. QCDs also count toward required minimum distributions. (See “A Note on Required Minimum Distributions” below.)

There is an annual limit for QCDs, but it’s indexed for inflation every year. In 2026, the QCD limit is $111,000 (up from $108,000 in 2025). If you and your spouse both qualify, you can transfer twice that amount tax-free.

Moreover, QCDs aren’t included in your adjusted gross income (AGI) or MAGI. Among other benefits, this lowers the odds that you’ll be affected by income-based phaseouts and reductions of various tax breaks, such as the AGI ceiling on charitable contributions or the MAGI limit on the new senior deduction. Also, lowering AGI can potentially limit Medicare premium surcharges, exposure to the net investment income tax and the taxation of Social Security benefits.

In addition, SECURE 2.0 authorized eligible taxpayers to make a one-time QCD transfer to a charitable remainder trust or charitable gift annuity. Annually indexed for inflation, the limit on such tax-free transfers is $55,000 in 2026 (up from $54,000 in 2025).

Identify and Leverage

Tax rules affecting older taxpayers continue to evolve and, as you can see, recent legislation has added several new opportunities for tax savings. Of course, eligibility requirements, income limits and phaseouts can affect how much you’ll benefit. Ask your tax advisor for help identifying which tax breaks are available to you and how to leverage their positive impact.

The IRS typically updates Form 1040 every year — sometimes a little, sometimes a lot. Given the many tax law changes under the One Big Beautiful Bill Act (OBBBA), there’s plenty to talk about this filing season. Here are some highlights.

Basic Changes

The OBBBA permanently extends the individual federal income tax rates established under the Tax Cuts and Jobs Act. The thresholds for these rates are annually adjusted for inflation. (See “2025 Federal Tax Rates and Brackets for Individuals” below.)

The law also increased the basic standard deduction for 2025 to:

• $15,750 for single filers (up from $15,000 before the OBBBA),
• $23,625 for heads of households (up from $22,500), and
• $31,500 for married couples filing jointly (up from $30,000).

These amounts will be inflation adjusted for 2026 and beyond.

Additional standard amounts are allowed for individuals age 65 or older or blind. For 2025, the additional amounts are $2,000 for an unmarried individual age 65 or older or blind, or $1,600 for a married person filing jointly age 65 or older or blind. (These amounts are doubled if the individual is both over age 65 and blind.)

New Deduction for Seniors

For 2025, the OBBBA allows individuals age 65 and older to claim a new “senior” deduction of up to $6,000, subject to an income-based phaseout. This deduction is available whether you itemize or not. For joint filers, if both spouses are age 65 or older, each one is potentially eligible for a bonus deduction of up to $6,000 — for a combined total of up to $12,000.

The senior deduction begins to phase out when modified adjusted gross income (MAGI) exceeds $75,000 for single filers ($150,000 for joint filers). The phaseout is complete when MAGI exceeds $175,000 ($250,000 for joint filers).

New Deduction for Tips

For 2025, the OBBBA allows a new deduction that can offset up to $25,000 of qualified tip income received during the year. The tax break is available if you work in an occupation where tips are customarily received, and it can be claimed whether you itemize or not.

For self-employed individuals, the deduction can’t exceed the amount of your net income — before the deduction — from the trade or business in which you earned the tips. If you’re married, you must file a joint return to claim the tip deduction. And the tax break is available only if you include your Social Security number on your Form 1040.

The tip deduction that would otherwise be allowed (subject to the $25,000 limit) starts to phase out when MAGI exceeds $150,000 for single filers ($300,000 for joint filers). The deduction phases out by $100 for each $1,000 (or fraction thereof) of MAGI above the applicable threshold.

Important: You can’t claim the tip deduction for work in a specified service trade or business (SSTB). Ask your tax advisor whether you work in an SSTB.

New Deduction for Overtime Pay

For 2025, eligible taxpayers can deduct up to $12,500 ($25,000 for joint filers) of qualified overtime pay. This deduction can be claimed whether you itemize or not. However, if you’re married, you must file jointly to claim it. And you can’t claim the tax break unless you include your Social Security number on your Form 1040.

Qualified overtime pay means extra overtime compensation (the so-called “overtime premium”) that was paid to you as mandated under the Fair Labor Standards Act (FLSA). This law requires time-and-a-half overtime pay except for certain exempt workers. Qualified overtime pay doesn’t include overtime premiums that aren’t required by the FLSA but are mandated by state law or under certain contracts (for example, union-negotiated collective bargaining agreements). In other words, the overtime deduction is unavailable to employees who aren’t subject to the FLSA’s overtime pay requirements.

For example, suppose you worked 500 hours of overtime last year. In compliance with the FLSA, you were paid $37.50 per overtime hour rather than your regular rate of $25 per hour. In this situation, your qualified overtime pay for 2025 is $6,250 (500 times a $12.50 overtime premium).

The overtime deduction that would otherwise be allowed (after applying the $12,500/$25,000 limit) starts to phase out when your MAGI exceeds $150,000 for single filers ($300,000 for joint filers). The deduction is phased out by $100 for each $1,000 of MAGI (or fraction thereof) above the applicable threshold.

New Deduction for Auto Loan Interest

For 2025, the OBBBA grants eligible individuals — including those who don’t itemize — a new deduction of up to $10,000 for interest paid on loans taken out to buy a qualifying personal-use passenger vehicle. The loan must be taken out after 2024 and secured by a “first lien” for a vehicle used for personal purposes. Leased vehicles don’t qualify.

To qualify for the new deduction, the vehicle must be a car, minivan, van, sport utility vehicle, pickup truck or motorcycle with a gross vehicle weight rating under 14,000 pounds. It must be manufactured primarily for use on public streets, roads and highways. In addition, the vehicle needs to be new (meaning the original use begins with you), and its final assembly must have occurred in the United States. You’re required to report the vehicle identification number (VIN) on your tax return. Vehicles assembled in the United States have a special number in the VIN that confirms eligibility.

The deduction begins to phase out when MAGI exceeds $100,000 for single filers ($200,000 for joint filers). If your MAGI is above the applicable threshold, the amount that you can deduct (subject to the $10,000 limit) is reduced by $200 for each $1,000 (or fraction thereof) of excess MAGI.

Bigger SALT Deduction

Before the OBBBA, the itemized deduction for state and local taxes (SALT) was limited to $10,000 per return ($5,000 for married individuals who file separately). For 2025, the OBBBA increased the SALT deduction limit to $40,000 per return ($20,000 for married filing separately).

As before, you can choose to deduct general state and local sales taxes instead of income-related SALT. This is a helpful option if you owe little or nothing for income-related SALT. If you choose it, your SALT deduction will be based on the amount of general state and local sales taxes you paid, plus your state and local property taxes, if applicable.

For 2025, the higher SALT deduction limit begins to phase out at $500,000 per return ($250,000 for married filing separately). The phaseout reduces the otherwise allowable SALT deduction limitation by 30% of MAGI above the applicable threshold, but not below $10,000 per return ($5,000 for married filing separately).

Important Changes for People with Children and Other Dependents

The dependents section of the 2025 Form 1040 also requests more information about you and your dependents than in previous tax years. The IRS uses this information to determine eligibility for certain tax benefits, such as the Child Tax Credit, the Credit for Other Dependents and the Earned Income Credit.

For 2025, the OBBBA increases the Child Tax Credit to $2,200 per qualifying child under age 17. The refundable portion of the credit is $1,700 for 2025. You can collect the refundable credit amount even if you don’t owe any federal income tax. Beginning in 2025, a valid Social Security number is required to claim the Child Tax Credit.

Additionally, starting in 2025, up to $5,000 of the adoption credit amount is refundable. This amount will be inflation adjusted after 2025. You can collect a refundable credit amount even if you don’t owe any federal income tax.

Liberalized Rules for Section 529 Account Withdrawals

Section 529 accounts are a tax-favored way to save for and pay qualified education expenses. In 2025, account owners could take tax-free withdrawals of up to $10,000 to pay tuition for a public, private or religious K-12 school. Starting in 2026, the annual limit increases to $20,000.

For withdrawals taken after July 4, 2025, the OBBBA expanded the definition of qualified K-12 expenses to include curriculum materials; fees for nationally standardized tests, books and other instructional materials; dual-enrollment fees for college courses taken in high school; online educational materials; tutoring or educational classes taken outside the home; and specialized strategies to support students with disabilities.

For withdrawals taken after July 4, 2025, tax-free treatment is allowed for withdrawals to cover qualified postsecondary credentialing expenses. Such expenses include:

• Tuition, fees, books, supplies and equipment required for the enrollment or attendance of the 529 account beneficiary in a recognized postsecondary credential program,
• Fees for required testing for the beneficiary to obtain or maintain a recognized postsecondary credential, and
• Fees for required continuing education for the beneficiary to maintain a recognized postsecondary credential.

You can also use tax-free 529 account withdrawals to cover 1) expenses for the beneficiary to attend a registered apprenticeship program, and 2) principal or interest payments on qualified education loans owed by the account beneficiary or a sibling of the account beneficiary, subject to a lifetime limit of $10,000.

New Trump Accounts

The OBBBA allows parents, guardians and other authorized individuals to elect to establish new Trump Accounts (TAs), which are similar to traditional IRAs set up for under-age-18 account beneficiaries. For children who are U.S. citizens born in 2025, an authorized individual can elect to have a tax-free $1,000 pilot program contribution made to the TA in question. Elections to establish a TA and receive the $1,000 contribution can be made on the new Form 4547, “Trump Account Election(s),” which may be filed with your tax return.

Important: After July 4, 2026, authorized individuals can start making annual nondeductible TA contributions of up to $5,000 until the year the account beneficiary turns age 18.

Reporting Requirement for Digital Asset Transactions

Did you use a broker in 2025 to sell a digital asset, such as Bitcoin? If so, the broker should send you a Form 1099-DA, “Digital Asset Proceeds From Broker Transactions,” to report the transaction. On that form, your broker may report your tax basis in the digital asset you sold — but isn’t required to do so.

If your broker doesn’t report your basis on Form 1099-DA, you must use your own records to determine the basis. And regardless of whether you receive a Form 1099-DA, you’re required to answer the digital assets question on your return and report any gains or losses from digital asset transactions during the year.

More Than a Few

As you can see, there are more than a few changes to consider when filing your 2025 return. Your tax advisor can provide further specifics and help you take full advantage of any tax-saving opportunities available to you.

If you’re a parent of minor children or of one or more college students, you’re likely thinking about them as you prepare to file your 2025 federal tax return or begin tax planning for 2026. Do they make you eligible for the Child Tax Credit? For the Credit for Other Dependents? For education-related tax breaks?

What you might not be thinking about is the “kiddie tax,” which could increase taxes on your children’s unearned income. Knowing when the kiddie tax applies and how it works can help prevent unpleasant surprises and allow for smarter tax planning.

A Higher Tax on Unearned Income

The kiddie tax is designed to minimize parents’ ability to significantly reduce income taxes by transferring income-producing assets to their children in lower tax brackets. When it applies, some or most income on investments held by the child is taxed at the parents’ higher marginal federal income tax rate rather than at the child’s rate.

The rule applies only to unearned income. This typically includes interest, dividends, capital gains and similar investment income, often from custodial accounts or investments held in a child’s name. Earned income, such as wages from a part-time job or self-employment, isn’t subject to the kiddie tax and is taxed at the child’s own rate.

Applicability After Age 18

The kiddie tax isn’t strictly a tax on minors. It often applies for several years after a child turns 18. Specifically, the kiddie tax may apply if your child is under age 18 at year end or is age 18 at year end and didn’t provide more than half of his or her own support through earned income. It can also apply to full-time students from ages 19 through 23 who didn’t provide more than half of their own support through earned income.

Beginning the year your child turns 24, the kiddie tax no longer applies. This is true even if he or she is still a student relying on parental support.

Unearned Income Thresholds

If your child is subject to the kiddie tax, it won’t apply to all of his or her unearned income. For both 2025 and 2026, the first $1,350 of your child’s unearned income will generally be tax-free. The next $1,350 will be taxed at your child’s own federal income tax rate. Any unearned income above $2,700 generally will be subject to the kiddie tax and taxed at your marginal federal income tax rate.

As a result, relatively modest investment income can trigger the kiddie tax. For example, custodial accounts holding investments that generate dividends or capital gains distributions can trigger the kiddie tax even when no trading occurs.

Planning Considerations

Before transferring any investment assets to your children or grandchildren, consider the potential kiddie tax consequences. You may want to avoid giving them assets that generate substantial dividends or that are highly appreciated and will generate substantial capital gains when sold — unless they can be held until the child is no longer subject to the kiddie tax.

You may also want to consider alternatives to transferring assets directly to the child or to a taxable custodial account. For example, you could make contributions to a suitable tax-advantaged account, such as a Section 529 savings plan, Coverdell Education Savings Account or a newly available Trump Account.

If your child already holds investments that could generate income subject to the kiddie tax, you may want to consider traditional tax planning strategies for his or her investments. For instance, you could minimize trading activity or offset realized capital gains by selling other investments in your child’s portfolio at a loss.

Things Can Get Complicated

Calculating the kiddie tax involves several steps, including filing a tax return for the child. Plus, because the child’s return relies on information from the parents’ tax return, the kiddie tax ties the two together. Suffice it to say, things can get complicated quickly. If your child has unearned income, contact your tax advisor for help determining whether he or she is subject to the kiddie tax, calculating the tax if needed, and aligning tax planning strategies with your overall goals.

Not all married couples earn dual incomes. For example, during the course of a marriage, one spouse may leave the workforce to care for a family member or tend to his or her own health issues. Regardless of why you left and whether it’s temporary or long-term, you might still want to save for retirement while your spouse continues working. 

The good news is you can do just that with a “spousal” IRA — which, among other requirements, must be set up in the nonworking spouse’s name. Even better, you generally have until April 15, 2026, to make eligible IRA contributions for 2025. In some situations, these contributions can reduce taxable income when filing your 2025 joint return. Let’s dive into what you and your working spouse need to know.

Rules for Nonworking Spouses

For the 2025 tax year, a nonworking spouse can potentially make a deductible traditional IRA contribution of up to $7,000 ($8,000 for individuals who were age 50 or older as of December 31, 2025). However, to make a spousal IRA contribution, you must meet two requirements:

1. You and your spouse must file a joint return.
2. Your combined earned income must at least equal the sum of your and your spouse’s combined contributions.

But here’s where it gets a bit tricky. If your working spouse participates in a qualified retirement plan through a job or self-employment, the deductibility of your spousal IRA contribution is phased out for the 2025 tax year between joint modified adjusted gross income (MAGI) of $236,000 to $246,000. Contact your tax advisor for help calculating MAGI for this purpose.

If your working spouse is not covered by a qualified retirement plan through a job or self-employment, you — as the nonworking spouse — can make a deductible traditional IRA contribution. In this situation, there are no limitations on your joint MAGI.

For instance, say you’re a stay-at-home parent who’s 40 years old. You and your spouse file jointly, and your joint MAGI is $230,000 for 2025. All income comes from your spouse’s employer, which sponsors a qualified retirement plan that your spouse participates in, but you don’t. In this scenario, for the 2025 tax year, you can make a deductible contribution of up to $7,000 to a traditional spousal IRA because your joint MAGI is below the $236,000 deduction phaseout threshold, and your spouse supplies the requisite earned income.

Alternatively, under the same circumstances, let’s say your joint 2025 MAGI is $250,000. In this case, you can’t make a deductible contribution to a traditional spousal IRA because your joint MAGI exceeds the $246,000 deduction phaseout ceiling. However, you can make a nondeductible contribution regardless of how high your joint MAGI might be.

Rules for Working Spouses

Now let’s look at things from your working spouse’s perspective. If neither you nor your partner participates in a qualified retirement plan through a job or self-employment, your working spouse can make a deductible contribution of up to $7,000 for the 2025 tax year to a traditional IRA set up in his or her name. The limit increases to $8,000 if your spouse was age 50 or older as of December 31, 2025. The only limitation is that you must together have enough earned income to at least match the combined amount of your contributions. All the requisite earned income can come from the working spouse.

On the other hand, say your working spouse does participate in a qualified retirement plan. In this case, his or her ability to make a deductible traditional IRA contribution for the 2025 tax year is phased out between joint MAGI of $126,000 and $146,000.

Hypothetical Examples

Timothy and Tamara are joint filers who turned 40 in 2025. The couple has a joint MAGI of $175,000 for 2025. All the couple’s income comes from Tamara’s employer, which sponsors a qualified retirement plan that she participates in, but Timothy doesn’t participate in a plan. For the 2025 tax year, Tamara, the working spouse, can’t make a deductible traditional IRA contribution because the couple’s joint MAGI exceeds the applicable deduction phaseout ceiling ($146,000). However, she can make a nondeductible contribution to a traditional IRA.

As the nonworking spouse, Timothy can make a deductible contribution of up to $7,000 to an eligible traditional spousal IRA. Why? Because the couple’s joint MAGI is below the deduction phaseout threshold for nonworking spouses ($236,000).

Here’s a different example: Addie, a 35-year-old nonworking spouse, and Adam, her 40-year-old working spouse, have a joint MAGI of $800,000 for 2025. Neither Addie nor Adam participates in a qualified retirement plan. Despite the couple’s high joint MAGI, they can each make a deductible traditional IRA contribution of up to $7,000 for the 2025 tax year.

Roth IRA Contributions

Tax deductibility isn’t an issue with Roth IRA contributions. You make those contributions with after-tax dollars, and you’re subject to the same annual contribution limits as those for traditional IRAs. The Roth IRA tax advantage is at the back end. You can withdraw all your Roth account earnings — along with the sum of your annual contributions — tax-free after age 59½ as long as you’ve had at least one Roth IRA open for more than five years. Withdrawals that pass these tests are called “qualified Roth distributions.”

However, eligibility to contribute to a Roth IRA for the 2025 tax year is phased out between MAGI of $236,000 to $246,000 for joint filers. Also, you must have enough earned income to at least match the combined amount of Roth contributions made by you and your spouse. Again, all the earned income can come from one working spouse. Roth IRA contribution eligibility doesn’t depend on whether you or your spouse participates in a qualified retirement plan.

Important: Be aware that the $7,000 contribution limit ($8,000 if you were age 50 or older as of December 31, 2025) is the combined limit for traditional IRA contributions (whether deductible or not) and Roth IRA contributions for the 2025 tax year. So, if you contribute the maximum to a Roth IRA, you can’t contribute anything to a traditional IRA. If you contribute the maximum to a traditional IRA, you can’t contribute anything to a Roth IRA.

If your joint MAGI is too high to make a deductible traditional IRA contribution, but low enough to make a Roth contribution, it’s often better to make a Roth contribution rather than a nondeductible traditional IRA contribution. The reason: You can withdraw accumulated Roth account earnings as tax-free qualified distributions — assuming you pass the qualified distribution tests. In contrast, earnings that accumulate in a traditional IRA, including one funded solely with nondeductible contributions, are fully taxable when withdrawn.

Even if your joint MAGI permits making deductible traditional IRA contributions, you may still want to consider making Roth IRA contributions, depending on your current and expected future tax bracket. After all, a Roth IRA features future tax-free withdrawals while a traditional IRA only sets you up for future taxable withdrawals.

Beneficial Decisions

Leaving the workforce doesn’t mean you have to stop saving for retirement. However, as you can see, the rules for contributing to traditional and Roth IRAs can be complex depending on your situation. For best results, work closely with your tax advisor to make decisions that achieve your retirement goals and optimize your tax outcomes.

Traditional IRA Contributions When Both Spouses Work

What are the limits on traditional IRA contributions if both you and your spouse work? If both spouses participate in qualified retirement plans, the $126,000 to $146,000 joint modified adjusted gross income (MAGI) deduction phaseout range applies to both spouses for the 2025 tax year.

For example, suppose you and your spouse both work and participate in qualified retirement plans. If your joint MAGI was $150,000 for 2025, neither you nor your spouse can make a deductible traditional IRA contribution for the 2025 tax year, because your joint MAGI exceeds the ceiling of the deduction phaseout range ($146,000).

However, if your joint MAGI was $126,000 or below, you can make a deductible contribution of up to $7,000 for the 2025 tax year ($8,000 if you were age 50 or older as of December 31, 2025). The same is true for your spouse.

What if you and your spouse work, but only one of you participates in a qualified retirement plan? In that case, the participating spouse’s ability to make a deductible traditional IRA contribution for the 2025 tax year is subject to the $126,000 to $146,000 joint MAGI deduction phaseout range. Meanwhile, the nonparticipating spouse falls within the $236,000 to $246,000 deduction phaseout range.

Let’s say you and your spouse both work, but only your spouse participates in a qualified retirement plan. Your joint MAGI is $230,000 for 2025. Here, your spouse can’t make a deductible traditional IRA contribution for the 2025 tax year because your joint MAGI exceeds the applicable $146,000 deduction phaseout ceiling. However, your spouse can make a nondeductible contribution of up to $7,000 ($8,000 if he or she was age 50 or older as of December 31, 2025).

Meanwhile, you can make a deductible contribution because your joint MAGI is below the $236,000 floor for the deductible contribution phaseout range that applies to a working spouse who doesn’t participate in a tax-favored retirement plan. In fact, you can contribute and deduct up to $7,000 ($8,000 if you were age 50 or older as of December 31, 2025).

Proper preparation can make your 2025 tax filing process faster, more accurate, and significantly less stressful. Gathering and organizing the right information before contacting your accountant helps ensure nothing is overlooked and can often reduce preparation time and costs. Below is a practical guide to the key documents and details you should have ready as tax season approaches.

Essential Documents to Gather

Personal Information

Make sure you have accurate identification and payment details for everyone included on your return:

• Social Security numbers or Tax Identification Numbers for you, your spouse, and dependents
• Dates of birth for all individuals listed on the return
• Documentation of estimated federal and state tax payments, including, for each:
  • Amount paid
  • Date paid

Income Records

Compile documentation for all sources of income received during the year, including:

• W-2 forms for wages and salaries
• 1099 forms such as:
  • 1099-NEC or 1099-MISC for self-employment or contract work
  • 1099-INT and 1099-DIV for interest and dividends
  • 1099-R for retirement distributions
  • 1099-G for unemployment income
  • 1099-K for third-party payment platforms
• Records for other income, including stock or cryptocurrency sales, rental income, gambling winnings, and alimony received

Deduction and Credit Information

Having proper documentation helps ensure you receive every deduction and credit you are entitled to:

• 1098 forms, including:
  • Mortgage interest statements
  • Student loan interest statements
  • Tuition statements
• Itemized deduction information, including:
  • Medical and dental expenses
  • Real estate and motor vehicle property taxes, showing amounts actually paid and the dates paid.
• Childcare expenses, including amounts paid and the provider’s tax identification number

Business and Self-Employed Records

If you are self-employed or own a business, additional preparation is essential:

• Year-end profit and loss statements and balance sheets
• Records supporting business expenses such as rent, utilities, supplies, and travel
• Detailed mileage logs for business vehicles

Prior-Year Tax Returns

Keep copies of your most recent filings available, including your 2023 and 2024 federal and state tax returns. These provide valuable reference points and help ensure consistency year over year.

Final Checklist Before Submitting Your Information

Before sending documents to your accountant, take a few final steps:

• Verify personal details, including your current address, phone number, and banking information for direct deposit
• Include copies of any IRS or state notices received during the year
• Use a secure client portal whenever possible to protect sensitive information
• Be ready to discuss major life events such as marriage, divorce, birth of a child, home purchases, or other significant changes that occurred during 2025

Stay Organized and Save Time

Keeping documents organized, clearly labeled, and stored securely can streamline the tax preparation process and reduce follow-up questions. A little preparation now can lead to faster filing, improved accuracy, and greater peace of mind throughout tax season.

If you have questions or would like professional assistance with your tax preparation, planning, or audit needs, contact Beers, Hamerman, Cohen & Burger, PC. Our experienced team is committed to providing personalized, reliable service to help individuals and businesses navigate an ever-changing tax landscape with confidence.

Do you regularly donate to charity? In the past, you may have derived generous tax benefits for your contributions without much forethought. Or perhaps you didn’t bother to consider potential write-offs before donating because you assumed you wouldn’t be eligible. In either case, you should know that some of the charitable deduction rules have changed for 2026.

Under the One Big Beautiful Bill Act (OBBBA), enacted last year, there are new obstacles for some donors and new tax-saving opportunities for others. Much depends on whether you itemize deductions or claim the standard deduction on your individual federal income tax return.

Basic Guidelines

Within certain limits, you can potentially deduct contributions made to qualified charitable organizations if you adhere to IRS recordkeeping requirements. You must, for example, substantiate cash contributions with a receipt, bank record, payroll record or similar documentation. And you must substantiate those of $250 or more with a written acknowledgement from the charity. Also, you need to obtain such documents by the earlier of the date you file the return or the due date (including extensions).

Generally, your deduction for cash contributions to public charities can’t exceed 60% of your adjusted gross income (AGI). You may carry forward any remainder for up to five years. The Tax Cuts and Jobs Act (TCJA), enacted in 2017, raised the limit from 50% of AGI to 60% for 2018 through 2025. And the OBBBA permanently extends this higher ceiling. (We’ll discuss the new law’s impact in further detail below.)

Other special rules apply to gifts of property, and the percentage-of-AGI limits are often lower than for cash gifts — such as 30% for certain appreciated property gifts to public charities. Generally, any excess may be carried forward up to five years. If you claim a deduction for donations of noncash property over $5,000, you usually must obtain a qualified appraisal and attach IRS Form 8283 to your return. You can’t simply value the donated property yourself.

But here’s the kicker: For 2025 and most previous tax years, charitable donations are deductible only if you itemize deductions on your tax return. Itemizing saves taxes when your total allowable itemized deductions — including charitable contributions — exceed the applicable standard deduction. However, because of the TCJA’s changes, including a significant increase in the various standard deduction amounts, fewer individuals itemize today.

New Law’s Impact

This is where the OBBBA adds a few twists and turns that go into effect beginning with 2026 returns that will be filed in 2027. For starters, it installs a new floor on charitable deductions for itemizers, effectively reducing their annual write-offs. But the OBBBA also provides new tax incentives for nonitemizers. These developments may significantly impact your 2026 donation strategies. Here’s how it breaks down for both groups:

Itemizers face stricter limits. First, charitable donations are deductible only to the extent that, in total, they exceed 0.5% of your AGI. This operates like the 7.5%-of-AGI floor for medical expense deductions. So, if your AGI is $100,000, and you donate $5,000 during the year, your deduction is reduced to $4,500. You may be able to carry forward disallowed amounts, but the rules are complex, and the floor can continue to limit what’s deductible in later years.

In addition, the OBBBA reduces the benefit of itemized deductions — including charitable deductions — for high-income taxpayers. Beginning in 2026, the benefit for those in the top 37% tax bracket will generally be as if they were in the 35% bracket. For example, if you’re in the 37% bracket and have $10,000 in charitable deductions after exceeding the AGI floor, the deductions will save you $3,500 in taxes rather than $3,700 in taxes.

For 2026, this applies only to 1) single filers and heads of household with taxable income above $640,600, 2) married couples filing jointly with taxable income above $768,700 and 3) married individuals filing separately with taxable income above $384,350.

Nonitemizers get a permanent deduction. Beginning in 2026, taxpayers can deduct up to $1,000 in cash contributions to qualified public charities, or $2,000 for joint filers. The definition of “cash contribution” may be broader than you think. It includes gifts made by debit or credit card, check, electronic bank transfer, online payment platform, and payroll deduction.

Unlike the charitable deduction for itemizers, these write-offs have no floor. However, gifts to donor-advised funds or private foundations aren’t eligible. Also, donations exceeding the $1,000/$2,000 limit can’t be carried forward.

Practical Approach

So, how can you lay the groundwork for a viable charitable giving tax strategy this year? Begin by discussing with your tax advisor whether it will likely make sense for you to itemize on your 2026 or 2027 returns. Absent extenuating circumstances, plan to make donations in the year in which you’ll receive the maximum tax benefit.

For instance, if you don’t expect to itemize for 2026 but do expect to for 2027, you might “bunch” cash donations into 2026 up to the $1,000/$2,000 limit (whichever applies to you) because your 2026 standard deduction won’t be reduced by 0.5% of your AGI. However, if you’re planning a large property gift, you might defer that donation to 2027, when you can potentially claim an itemized deduction for it.

Helping Hand

Be aware that other rules affecting charitable donation deductions may apply. For example, if you donate property to an eligible charity, how the charity uses the property may impact the amount of your deduction. Work closely with your tax advisor to ensure compliance with all applicable rules. With a helping hand, you can develop a strategy under current law that maximizes the tax benefits for your situation.

New Boundaries for C Corporation Donations

If you’re a shareholder in a C corporation that intends to donate to charity this year, be sure to catch up on the latest tax law developments. The One Big Beautiful Bill Act (OBBBA) creates new boundaries.

Under previous law, deductions for C corporations were limited to 10% of the company’s taxable income. Any excess could generally be carried forward for up to five years. So, if a small C corporation earned $1 million in 2025 and donated $120,000, the deduction would be limited to $100,000, and $20,000 could be carried forward to 2026.

However, things become slightly more complicated under the OBBBA. For tax years beginning in 2026 or later, the new law imposes — for the first time ever — a 1% of taxable income floor on charitable deductions for C corporations. Donations are deductible only to the extent that, in total, they exceed the 1% floor. Note that the 10% deduction ceiling isn’t going away; the two thresholds work in tandem.

If a C corporation’s contributions exceed the 10% ceiling, it may generally carry forward the excess. What’s more, under the OBBBA rules, the amount disallowed by the 1% floor may also be carried forward. But if the corporation’s contributions don’t exceed the 10% ceiling, carryovers generally aren’t allowed.

Additionally, C corporations may be eligible for other charitable tax breaks for certain donations. For example, they may claim an enhanced deduction for donations of inventory to a public charity if the items are specifically used for the care of the “ill, needy, or infants,” according to the IRS. Consult your tax advisor for more information and assistance.

Yesterday, we were proud to celebrate Partner, Shari Elias, at the 2025 CTCPA Women’s Awards Luncheon, an event that honors female CPAs and accounting professionals who are making meaningful contributions to their organizations, communities, and the accounting profession as a whole.

The CTCPA Women’s Awards recognize leaders who exemplify excellence, dedication, and impact. Shari’s recognition reflects her ongoing commitment to her clients, her colleagues, and the profession, as well as her leadership and influence within the accounting community. Her work continues to inspire those around her and reinforces the importance of mentorship, integrity, and professional growth.

As part of the award ceremony, a video highlighting Shari’s career, achievements, and professional journey was shared with attendees. We invite you to learn more about Shari and view the video featured during the luncheon by clicking the link below:

https://www.ctcpas.org/ctcpawomen2026sharielias

Please join us in congratulating Shari on this well-deserved recognition. We are honored to celebrate her accomplishments and proud to have her as a leader within our firm.

The One Big Beautiful Bill Act (OBBBA) establishes new individual federal income tax deductions for qualified income from tips and overtime. Although the OBBBA wasn’t signed into law until July 4, 2025, these new deductions were effectively made retroactive to January 1, 2025.

The IRS has announced it won’t issue revised information reporting forms for tax year 2025. That means workers and their tax advisors will have to determine the amount of eligible tips or overtime pay they received last year. On the bright side, the IRS did issue guidance in November on how to do so. If you’re someone who gets tips or works overtime, read on for some helpful background about claiming the new deductions on your 2025 return.

Tip Deduction Basics

Let’s start with tips. For tax years 2025 through 2028, the OBBBA established a new deduction that can potentially offset up to $25,000 of qualified tip income annually. And you don’t need to itemize to claim it.

Customers can pay eligible tips in cash, by credit card or through a tip-sharing arrangement. However, the deduction is available only if you receive tips in an occupation that the IRS has designated as customarily receiving such income. In September 2025, the IRS released proposed regulations that list dozens of occupations that qualify for the deduction, grouped into eight categories:

1. Beverage and food services,
2. Entertainment and events,
3. Hospitality and guest services,
4. Home services,
5. Personal services,
6. Personal appearance and wellness,
7. Recreation and instruction, and
8. Transportation and delivery.

For self-employed individuals, the deduction can’t exceed your net income — calculated before the deduction — from the same trade or business in which you earn the tips. If you’re married, you must file jointly with your spouse to claim the write-off.

Remember, you must first report your tip income to the IRS on your individual return. Then you can claim the deduction if you qualify. It’s important to understand that this tax break isn’t an income exclusion. Medicare tax will apply to your tip income, and Social Security tax usually will, too. Also, such income may still be fully taxable for state and local income tax purposes.

Tip Deduction Phaseout

The tip deduction that would otherwise be allowed up to the $25,000 limit begins to phase out when your modified adjusted gross income (MAGI) exceeds $150,000, or $300,000 if you’re married and file jointly. The deduction phases out in $100 increments for each $1,000 of MAGI, or a portion thereof, exceeding the applicable threshold. In this context, MAGI consists of your regular AGI plus certain tax-free offshore income that you probably don’t have.

Reporting Tip Income

You must also report tip income to your employer. IRS Publication 531, “Reporting Tip Income,” explains how to track and report your tips. But consult your tax advisor for help setting up a tailored, comprehensive employer-reporting approach. Your employer should withhold Social Security and Medicare taxes from the reported amount and include the reported amount on your Form W-2.

Important: If you received tips in 2025 that you didn’t report to your employer, or if your W-2 shows allocated tips that exceed what you reported, you must report the additional tip income on your tax return. You’ll also need to use Form 4137 to calculate and pay the employee share of Social Security and Medicare taxes. Consult your tax advisor for assistance.

Calculating Tip Deductions

Bear in mind that, for 2025, employers aren’t required to report qualified tip income amounts to workers. So, you may have to work with your tax advisor to do so. The IRS guidance includes examples of how to determine the amount of qualified tip income you received last year. Here are some adapted versions:

Server with accurately reported tips. Ann is a restaurant server whose W-2 shows she received $18,000 in tips, from which her employer withheld Social Security tax. The withholding was accurate, and Ann received no additional tips, so she didn’t need to complete Form 4137. The $18,000 counts as qualified tip income for purposes of calculating her deduction.

Bartender with additional tips. Bob, a bartender, reported $20,000 in tips to his employer. However, he also received $4,000 in unreported tips. So, he worked with his tax advisor to complete Form 4137, which was filed with his 2025 return. The $24,000 ($20,000 + $4,000) counts as qualified tip income for purposes of calculating Bob’s deduction.

Self-employed travel guide with complications. Dex is a self-employed travel guide who operates his business as a sole proprietorship. In 2025, he received $7,000 in tips from customers, paid through a third-party settlement organization (TPSO).

The TPSO sent Dex a Form 1099-K, showing $55,000 of total payments for 2025. His 1099-K doesn’t itemize his tips, but Dex kept a log showing the dates, customer names and tip amounts. Because of this thorough documentation, he can count the $7,000 as qualified tip income for purposes of calculating his deduction.

Overtime Deduction Basics

Now let’s move on to the new overtime deduction. Before the OBBBA, overtime income was fully taxable for federal income tax purposes. For the 2025 through 2028 tax years, the OBBBA established a new deduction that can offset up to $12,500 of qualified overtime income annually ($25,000 for joint filers). You can claim the deduction whether or not you itemize, but if you’re married, you must file a joint return with your spouse to claim the write-off.

All the points we mentioned above about tip income apply to overtime income. You’re required to report it and can claim the new deduction only if you qualify. The deduction isn’t an income exclusion; Social Security tax may apply, and Medicare tax will for sure. Also, overtime income may be fully taxable for state or local tax purposes.

Defining Qualified Overtime

Qualified overtime income is defined as extra compensation paid in compliance with the Fair Labor Standards Act (FLSA). The law generally requires time-and-a-half pay for worktime exceeding 40 hours in a workweek. We’ll call extra hourly amounts “overtime premiums.”

Qualified overtime income doesn’t include overtime premiums paid to FLSA-exempt employees, such as executives. It also excludes overtime premiums not required by the FLSA but mandated by state law or under certain contracts (for example, union-negotiated collective bargaining agreements). In other words, the overtime deduction is unavailable to employees who aren’t subject to the FLSA’s overtime pay requirements.

For instance, let’s say you worked 20 hours of overtime in the most recent pay period. Under the FLSA, you were paid $37.50 per hour for overtime compared to your regular hourly rate of $25. In this scenario, your overtime premium is $12.50 per overtime hour ($37.50 – $25), and your qualified overtime income for the period is $250 (20 × $12.50).

Overtime Phaseout

The overtime deduction that would otherwise be allowed up to the $12,500/$25,000 limit begins to phase out when MAGI exceeds $150,000 ($300,000 for joint filers). Like the tip deduction, the overtime deduction phases out in $100 increments for each $1,000 of MAGI, or a portion thereof, exceeding the applicable threshold.

For example, say you’re a single filer for 2025 with $20,000 in qualified overtime income from your regular job as a cable technician. But your MAGI is $175,000 thanks to a profitable side gig, which is $25,000 above the applicable threshold ($175,000 – $150,000). Under the phaseout, your overtime deduction can’t exceed $10,000 [$12,500 – (25 × $100)].

Or let’s say you’re a joint filer for 2025 with $30,000 of qualified overtime income from your tech support job. However, your MAGI is $400,000, which is $100,000 above the applicable threshold ($400,000 – $300,000). Under the phaseout, your overtime deduction can’t exceed $15,000 [$25,000 – (100 × $100)].

Calculating Overtime Deductions

Although your employer must include overtime pay as taxable income on your W-2, it’s not required to separately report your qualified overtime income for 2025. However, some employers may voluntarily notify employees of their total amounts of overtime income. If you’d like to pursue the deduction but your employer doesn’t provide the necessary information, consider requesting it. Or you can ask your tax advisor for help with the number-crunching.

In the event you don’t receive a separate accounting of your 2025 qualified overtime income, you must make a reasonable effort to determine whether you’re an FLSA-covered employee. Generally, this simply entails asking the appropriate person in your organization, such as an HR staff member. As mentioned, if you’re exempt from the FLSA’s requirements, you can’t claim the overtime deduction.

The recently issued IRS guidance includes examples for determining the amount of qualified overtime income received in 2025. Here are two adapted versions:

1. Abe’s two alternate realities. In a perfect world, Abe receives a statement from his employer showing that he was paid $5,000 in “FLSA overtime premium” during the year. He and his tax advisor can simply apply the $5,000 when calculating his 2025 overtime deduction.

In a less-perfect world, Abe’s employer issues a year-end statement showing total overtime pay of $15,000 in 2025, which includes his overtime premium plus his regular hourly wage for overtime hours. In this case, the overtime amount reported to Abe represents all the time-and-a-half pay for his overtime hours. To determine his qualified overtime income, Abe must divide $15,000 by three, yielding $5,000.

2. Bella’s generous employer. Bella works for an organization that pays overtime at twice the regular hourly rate, so her overtime premium equals 100% of regular pay. In 2025, Bella’s year-end pay stub shows she received $20,000 of overtime pay at the double pay rate. Because half of that amount represents the allowable overtime premium for deduction purposes, Bella’s qualified overtime income is $10,000 ($20,000 ÷ 2).

Valuable Opportunities One slight downside to the new tip and overtime deductions is that they’re not “above the line,” so they won’t reduce your AGI. The lower your AGI, the better, because it increases your odds of qualifying for various income-sensitive tax breaks. Nonetheless, the deductions are valuable tax-saving opportunities well worth pursuing under the right circumstances. If you believe you’re eligible for either or both, discuss the matter with your tax advisor.

Workers’ compensation is designed to help people who have been hurt on the job get back on their feet. However, it’s also an area that is ripe for potential abuse.

No matter what form it takes, workers’ comp fraud hurts everyone. Insurers pay billions of dollars a year in fake claims. Businesses also pay an higher insurance premiums and incur other costs such as:

• Production delays,
• Extra pay for employees working longer hours,
• Retraining, and
• Replacing equipment.

Employees suffer if they must put in longer hours or if companies reduce annual raises because of higher insurance premiums. Even consumers pay because higher costs are likely to translate into higher prices.

For all these reasons, it’s important to be on the lookout for workers’ comp fraud at your company.

The most common scheme is the phony workplace injury that’s later discovered when the employee is caught doing heavy lifting at home or seen working for another employer while collecting benefits.

While it is important to be alert to possible fraudulent claims, it is far more important to prevent them from happening in the first place. Let employees know that in most states, workers’ compensation claim fraud is a crime. Punishment varies from state to state but can include prison time and fines. According to the Coalition Against Insurance Fraud, there are several other ways to help combat workers’ comp fraud at your company:

• Verify carefully the references and background information of potential hires.
• Publicize your company’s workers’ compensation policy to all your employees, and provide them with updates at least once a year.
• Educate supervisors on how injuries decrease productivity and how workers’ comp costs affect the bottom line.
• Display fraud awareness posters and the National Insurance Crime Bureau’s hotline number, along with any hotline mechanisms from your state.
• Work with your insurer to set up a safety-management program that can help eliminate safety problems.
• Contact your insurer’s special investigation crimes unit immediately if you suspect a fraudulent claim and you have evidence or witnesses to back up your suspicion.
• Pay attention to employee complaints and concerns about their working conditions. The strongest predictor of fraud is a chronically disgruntled work force.

In the first episode of their new podcast, Senior Tax Manager, Christopher Ficocelli and Tax Manager Daniel Horvath discuss key year-end tax planning considerations for clients as the calendar year comes to a close.

Many tax strategies must be implemented before year-end to be effective. This episode highlights timely ideas that may help individuals and business owners plan proactively and avoid last-minute surprises.

🎧 We invite you to listen and contact our team to discuss how these strategies may apply to your specific situation.

https://open.spotify.com/episode/0oqWMBe8YBgglAhlXP527h?si=qonNPeqQTyy7m73fL1nqFQ