Investing in a home brings tax benefits

Purchasing a home is the most significant investment most people will make. Owning your home comes with valuable tax advantages that can reduce your annual tax bill. One of the primary benefits is the mortgage interest deduction, which allows homeowners to deduct the interest paid on mortgage loans, up to certain limits. This can be particularly beneficial in the early years of a mortgage when interest payments are highest. In addition, property taxes paid on your primary residence are generally deductible, up to the IRS limit for state and local taxes (currently $10,000 for individuals or married couples filing jointly). Contact us to learn about other tax-related benefits of owning a home.

New limits for Health Savings Accounts in 2026

If you’re covered by a high-deductible health plan (HDHP), you can contribute pretax income to a Health Savings Account (HSA) up to certain limits. Funds can be withdrawn tax-free to pay qualified medical expenses. The IRS annually adjusts HSA and HDHP contribution limits for inflation. For 2026, the maximum HSA contribution amount for individuals will be $4,400 ($4,300 for 2025) and $8,750 ($8,550 for 2025) for family coverage.

The minimum HDHP deductible for individuals will be $1,700 ($1,650 for 2025) and $3,400 for family coverage ($3,300 for 2025). The maximum HDHP out-of-pocket cost will be $8,500 for self-coverage ($8,300 for 2025) and $17,000 for family coverage ($16,600 for 2025).

Is day camp deductible as child care?

Most kids will be out of school soon for the summer, if they aren’t already. And many will head to summer camp. Sending your child to a summer day camp while you work may count as an expense toward the federal Child and Dependent Care Credit. Under current law, this credit ranges in value from 20% to 35% of the day camp cost, depending on the working parents’ income. For one qualifying child under age 13, you may use up to $3,000 of unreimbursed expenses to claim the credit or $6,000 for two or more children. Note, overnight camp costs don’t qualify for the credit and aren’t deductible. Contact us with your questions, or check out IRS Publication 503, Child and Dependent Care Expenses here.

What to do when you can’t pay your tax debt

If taxpayers can’t pay the tax they owe in full, one option is to seek an offer in compromise (OIC) from the IRS. That’s a way to potentially settle the debt for less than you owe. The IRS states it will generally accept a reasonable offer. Be aware, the tax agency will first do a thorough review of your financial situation to assess your ability to pay. Suppose your OIC is rejected. What then? You can appeal within 30 days of the rejection letter date by submitting Form 13711 (Request for Appeal of OIC), or by sending a letter to the IRS with certain details. Be prepared to support the facts and explain why you’re seeking an appeal. Contact us with questions or click here for more information.

Taxability of gig income and “other income”

Summer is a time when many students and others earn money through the gig economy. This means they use online platforms to find and perform on-demand work and provide services. Regardless of how this money is received, it’s subject to self-employment tax and may trigger a Form 1099-K if earnings exceed $600.

Selling items online also generates taxable income, subject to self-employment tax. One seller learned this the hard way. After selling $41,972 in movie memorabilia online, he reported the amount as “other income” exempt from self-employment tax. The U.S. Tax Court ruled the income wasn’t exempt and added penalties due to the tax deficiency. (TC Memo 2025-13)

On July 4, President Trump signed into law the far-reaching legislation known as the One, Big, Beautiful Bill Act (OBBBA). As promised, the tax portion of the 870-page bill extends many of the provisions of the Tax Cuts and Jobs Act (TCJA), the sweeping tax legislation enacted during the first Trump administration. It also incorporates several of President Trump’s campaign pledges, although many on a temporary basis, and pulls back many clean-energy-related tax breaks.

While the OBBBA makes permanent numerous tax breaks, it also eliminates several others, including some that had been scheduled to resume after 2025. Here’s a rundown of some of the key changes affecting individual and business taxpayers. Except where noted, these changes are effective for tax years beginning in 2025.

Key changes affecting individuals

• Makes permanent the TCJA’s individual tax rates of 10%, 12%, 22%, 24%, 32%, 35% and 37%
• Makes permanent the near doubling of the standard deduction. For 2025, the standard deduction increases to $15,750 for single filers, $23,625 for heads of households and $31,500 for joint filers, with annual inflation adjustments going forward
• Makes permanent the elimination of personal exemptions
• Permanently increases the child tax credit to $2,200, with annual inflation adjustments going forward
• Temporarily increases the limit on the deduction for state and local taxes (the SALT cap) to $40,000, with a 1% increase each year through 2029, after which the $10,000 limit will return
• Permanently reduces the mortgage debt limit for the home mortgage interest deduction to $750,000 ($375,000 for separate filers) but includes mortgage insurance premiums as deductible interest
• Permanently eliminates the deduction for interest on home equity debt
• Permanently limits the personal casualty deduction for losses resulting from federally declared disasters and certain state declared disasters
• Permanently eliminates miscellaneous itemized deductions except for unreimbursed educator expenses
• Permanently eliminates the moving expense deduction (with an exception for members of the military and their families in certain circumstances)
• Expands the allowable expenses that can be paid with tax-free Section 529 plan distributions
• Makes permanent the TCJA’s increased individual alternative minimum tax (AMT) exemption amounts
• Permanently increases the federal gift and estate tax exemption amount to $15 million for individuals and $30 million for married couples beginning in 2026, with annual inflation adjustments going forward
• For 2025–2028, creates an above-the-line deduction (meaning it’s available regardless of whether a taxpayer itemizes deductions) of up to $25,000 for tip income in certain industries, with income-based phaseouts (payroll taxes still apply)
• For 2025–2028, creates an above-the-line deduction of up to $12,500 for single filers or $25,000 for joint filers for qualified overtime pay, with income-based phaseouts (payroll taxes still apply)
• For 2025–2028, creates an above-the-line deduction of up to $10,000 for qualified passenger vehicle loan interest on the purchase of certain American-made vehicles, with income-based phaseouts
• For 2025–2028, creates a bonus deduction of up to $6,000 for taxpayers age 65 or older, with income-based phaseouts
• Limits itemized deductions for taxpayers in the top 37% income bracket, beginning in 2026
• Establishes tax-favored “Trump Accounts,” which will provide eligible newborns with $1,000 in seed money, beginning in 2026
• Makes the adoption tax credit partially refundable up to $5,000, with annual inflation adjustments (no carryforwards allowed)
• Eliminates several clean energy tax credits, generally after 2025, including the clean vehicle, energy-efficient home improvement and residential clean energy credits
• Permanently eliminates the qualified bicycle commuting reimbursement exclusion
• Restricts eligibility for the Affordable Care Act’s premium tax credits
• Creates a permanent charitable contribution deduction for non-itemizers of up to $1,000 for single filers and $2,000 for joint filers, beginning in 2026
• Imposes a 0.5% floor on charitable contributions for itemizers, beginning in 2026

Key changes affecting businesses

• Makes permanent and expands the 20% qualified business income (QBI) deduction for owners of pass-through entities (such as partnerships, limited liability companies and S corporations) and sole proprietorships
• Makes permanent 100% bonus depreciation for the cost of qualified new and used assets, for property acquired after January 19, 2025
• Creates a 100% deduction for the cost of “qualified production property” for qualified property placed into service after July 4, 2025, and before 2031
• Increases the Sec. 179 expensing limit to $2.5 million and the expensing phaseout threshold to $4 million for 2025, with annual inflation adjustments going forward
• Increases the cap on the business interest deduction by excluding depreciation, amortization and depletion from the calculation of “adjusted taxable income”
• Permanently allows the immediate deduction of domestic research and experimentation expenses (retroactive to 2022 for eligible small businesses)
• Makes permanent the excess business loss limit
• Prohibits the IRS from issuing refunds for certain Employee Retention Tax Credit claims that were filed after January 31, 2024
• Eliminates clean energy tax incentives, including the qualified commercial clean vehicle credit, the alternative fuel vehicle refueling property credit and the Sec. 179D deduction for energy-efficient commercial buildings
• Permanently renews and enhances the Qualified Opportunity Zone program
• Permanently extends the New Markets Tax Credit
• Permanently increases the maximum employer-provided child care credit to $500,000 ($600,000 for small businesses), with annual inflation adjustments
• Makes permanent and modifies the employer credit for paid family and medical leave
• Makes permanent the exclusion for employer payments of student loans, with annual inflation adjustments to the maximum exclusion beginning in 2027
• Makes permanent the foreign-derived intangible income (FDII) and global intangible low-taxed income (GILTI) deductions and the minimum base erosion and anti-abuse tax (BEAT)
• Expands the qualified small business stock gain exclusion for stock issued after the date of enactment

Buckle up

We’ve only briefly covered some of the most significant OBBBA provisions here. There are additional rules and limits that apply. Note, too, that the OBBBA will require a multitude of new implementing regulations. Turn to us for help navigating the new law and its far-reaching implications to minimize your tax liability.

At Beers Hamerman Cohen & Burger PC we are proud to sponsor the Orange Little League each year. Supporting young athletes as they build confidence teamwork and friendships is something we value deeply as part of our commitment to the community.

This season was extra special with our partner Jennifer Schempp serving as coach for the team which also includes her son. Through the dedication of all the players coaches and families the team worked hard and made it all the way to the playoffs. We are proud to support such an incredible group and celebrate their hard work and success.

Managing payroll can be a major challenge for small business owners, especially as state and federal payroll tax regulations continue to evolve. Missteps in this area aren’t just minor hiccups — they can lead to significant financial penalties and operational disruptions. Below are some common payroll compliance pitfalls and ways to avoid them.

Misclassifying Workers

Businesses often prefer to treat workers as independent contractors (rather than employees) to lower costs and administrative burdens. However, the IRS, the U.S. Department of Labor, various state agencies and even workers themselves may challenge worker classifications.

Properly classifying a worker as an independent contractor is beneficial because the business doesn’t have to worry about employment tax issues or provide expensive fringe benefits. However, when a business mistakenly treats an employee as an independent contractor, the employer could owe unpaid employment taxes, penalties and interest. The employer also may be liable for employee benefits, such as health insurance and retirement plan contributions, that should have been provided but weren’t. So, it’s important to get worker classification right.

Beware: IRS and DOL rules can differ from state and local rules. That said, worker classification is generally based on the degree of control the employer has over the person and their work product.

Another misclassification error happens when an employer misinterprets an exemption from overtime pay. Most salaried executives and many other employers are exempt from overtime pay requirements under the Fair Labor Standards Act (FLSA). However, the FLSA includes several key exceptions reflecting earnings thresholds.

Miscalculating Pay

Inaccurate earnings calculations can cause headaches for employers and hardship for workers. For instance, shorted employees may have to scramble to pay their bills. Examples of mistakes involving employee compensation include:

• Overpayment or underpayment,
• Errors relating to new hires and employees on disability or leave,
• Inaccurate retroactive payments, and
• Incorrect deductions for fringe benefits.

If you make a mistake when compensating an employee, resolve the issue immediately and take steps to prevent it from happening again. Being transparent and responsive helps retain valued workers and maintain morale and productivity.  

Tracking Time Improperly

Accurately tracking time for hourly employees can be challenging. Employers may unintentionally overlook compensable time, such as meal or rest breaks, travel to off-site assignments, or participation in company-sponsored events.

Under the FLSA, nonexempt employees — typically paid hourly — must receive overtime pay at 1.5 times their regular rate for any hours worked beyond 40 in a workweek. Improper time tracking can lead to two unfavorable outcomes: 1) underpayment, where employees aren’t properly compensated for overtime, or 2) overpayment, which may require repayment or adjustments to future wages. Either scenario can cause frustration, damage morale, and potentially expose the employer to legal risk.

Failing to Report All Sources of Income

Compensation includes more than just salaries and hourly pay. Examples of alternative pay sources are:

• Overtime,
• Bonuses, and
• Commissions.

Some lesser-known income items may also come into play. For instance, some employers may offer incentive stock options (ISOs) or other rights, gift cards, employee awards, and other fringe benefits, such as the use of company-owned vehicles.

Payroll and income taxes must be paid on these items, too. Failing to include the value of awards, bonuses and fringe benefits (when required) in employees’ taxable incomes can lead to substantial underreporting penalties for employers.

Missing Deadlines

The IRS and state tax agencies expect your business to deposit federal payroll taxes on time. That means your organization must deposit amounts withheld for income tax, Social Security and Medicare taxes (FICA) and Federal Unemployment Tax Act taxes (FUTA) throughout the year. It’s critical to follow the IRS schedule for depositing payroll payments. Deposit frequency depends on your total tax liability. Most small businesses must deposit payroll taxes by the 15^th of the following month. However, some may be required to make semiweekly deposits.

In addition, small businesses must generally report wages and tax withholding quarterly. The due dates for calendar-year businesses’ quarterly reports are as follows:

Note: If a due date falls on a weekend or legal holiday, the deadline moves to the next business day.

When cash is tight, business owners may be tempted to borrow money from withheld payroll taxes. This is never a good idea. Missed deadlines or underpaying the IRS could cost more taxes (plus penalties and interest). Additionally, an officer, business owner and/or other employee responsible for meeting payroll tax obligations on behalf of your organization could be held personally liable for the full amount of the unpaid taxes under Section 6672 of the Internal Revenue Code.

Issuing Inaccurate W-2s

Form W-2, “Wage and Tax Statement,” is the only payroll tax form that goes directly from an employer to its employees. It provides the following tax information:

• Gross income,
• Taxable income, and
• Payroll withholding for fringe benefits and retirement account contributions.

Reporting these items correctly is critical. Mistakes on an employee’s W-2 can have a domino effect throughout the company. It can lead to penalties for errors, extra paperwork and disgruntled employees.

Relying on Manual Recordkeeping

It might be relatively easy for a small business owner to handle payroll matters for a handful of employees. But as your business grows, payroll tasks become more complicated. Reliance on paper processes, manual data entries and spreadsheets to track employees’ hours can lead to miscalculations in pay. For example, manual processes can lead to misplaced worksheets and missed payments.

Furthermore, when the person in charge of processing payroll is out of the office, his or her designated replacement may not be fully prepared for the responsibilities. This situation can cause payroll entries to fall through the cracks or be misrepresented.

Consider investing in an automated payroll system integrates with your accounting system and other digital tools, such as customer relationship management platforms, project management tools, cloud storage and communication apps. Potential benefits include simplified payroll processing, improved oversight and fewer payroll errors. 

Get It Right

Payroll-related laws and regulations aren’t written in stone. Payroll practices should take into account any changes applicable to your business and government requirements. For example, some procedures were paused or postponed during the pandemic, and new laws and rulings may require updates to your payroll management system. This requires continuous vigilance.

If you feel overwhelmed by payroll tasks, it may be time to shift payroll management responsibilities to an external payroll provider. Professionals who specialize in payroll processing can help you avoid costly mistakes. Contact your professional advisors for more information.

We are pleased to announce that Ryan Parent, CPA, has been named Managing Partner of Beers, Hamerman, Cohen & Burger, P.C.

Ryan joined BHCB in 2012 after earning his bachelor’s degree in accounting from Quinnipiac University. Since then, he has built a reputation for thoughtful leadership and technical expertise, specializing in accounting and auditing services for multi-employer union benefit plans, senior living communities, and a variety of for-profit organizations, as well as providing tax services to high-net worth individuals.

He earned his master’s degree in accounting and taxation from the University of Hartford and became a licensed CPA in 2017. Ryan is an active member of the Connecticut Society of Certified Public Accountants (CTCPA) and is committed to serving the broader community. He currently serves as a board member and Supervisory Committee member for the New Haven County Credit Union, on the Board of Governors for New Haven Country Club, and is a director of Goodwill of Southern New England.

Outside of work, Ryan enjoys golfing, supporting community initiatives and spending time with his family. We look forward to his continued leadership as he takes on this new role.

We’re excited to welcome Antonio Ferraro to our team as an Audit Intern this summer. Antonio will be working closely with our Audit Department, gaining hands-on experience in audits of employee benefit plans and non-profit organizations. Under the guidance of Supervisor Haley Kaercher, he will also assist across various areas of our practice. We’re thrilled to have him on board and look forward to a productive and educational internship experience!

Graduating from college comes with exciting new beginnings—and some adult responsibilities, too. Among them? Navigating taxes. Whether you’re filing your first return or coordinating with your parents for optimal tax results, here are answers to the most common tax questions new grads face.

Can My Parents Still Claim Me as a Dependent?

Your parents can claim you as a “qualifying child” for 2025 if all of the following apply:

• You’re under age 24 at the end of the year.
• You were a full-time student for at least five months of the year.
• You didn’t provide more than half of your own financial support.
• You lived with your parents for more than half the year (excluding time away at school).

If you don’t meet all those criteria, your parents might still be able to claim you as a “qualifying relative” if:

• Your gross income is less than $5,200, and
• Your parents provided more than half of your support during the year.

If My Parents Claim Me, Do I Still Have to File a Tax Return?

Most dependents still need to file a federal income tax return to report their earnings—even if they owe little or nothing. That’s because:

For 2025, an unmarried dependent can claim a standard deduction equal to the greater of:

• $1,350, or
• Earned income + $450, up to a maximum of $15,000.

For example, if you earn $25,000 and your standard deduction is $15,000, you’d have $10,000 in taxable income. With a 10% tax rate on the first $11,925 of taxable income, your federal tax would be $1,000.

Important: Earned income includes wages, tips, freelance work, and any taxable scholarships or fellowship grants.

Can I Deduct Student Loan Interest?

Yes, if you meet the income limits, you can deduct up to $2,500 of student loan interest paid in the year.

• Single filers: Deduction phases out between $85,000–$100,000 MAGI.
• Married filing jointly: Phaseout range is $170,000–$200,000.

Who Should Claim the Education Tax Credits—Me or My Parents?

There are two main federal tax credits for education:

1. American Opportunity Credit

• Worth up to $2,500 per year, for up to four years of undergraduate study.
• Covers 100% of the first $2,000 of qualified expenses and 25% of the next $2,000.

Qualified expenses include:

• Tuition
• Mandatory enrollment fees
• Course materials

To qualify, you must be enrolled at least half-time in a program leading to a degree. The credit can offset your entire federal tax bill. If any of the credit remains, up to 40% (max $1,000) is refundable.

2. Lifetime Learning Credit

• Worth up to $2,000 per year (20% of up to $10,000 in qualified expenses).
• No limit on the number of years you can claim it.
• No requirement to be enrolled half-time or in a degree program.

Ideal for part-time students, graduate students, or those taking longer to complete undergraduate studies. Room and board and optional fees don’t qualify.

Income Phaseouts for Both Credits in 2025:

• Single filers: $80,000 – $90,000
• Married filing jointly: $160,000 – $180,000

Who Should Claim the Credit?

If your parents’ income is below the threshold, it usually makes sense for them to claim the credit (especially if they’re in a higher tax bracket). If their income is too high and you’re eligible, you should claim the credit yourself.

Example: Percy, age 22, graduates in May 2025 and earns $25,000 that year. His parents provide more than half his support, so he qualifies as their dependent. Percy qualifies for the $2,500 American Opportunity Credit, which eliminates his $1,000 tax bill. He also receives a $600 refundable credit (40% of the remaining $1,500). Alternatively, if his parents qualify for the full credit, it may make more sense for them to claim it instead.

Welcome to Adulthood—And Taxes

From determining dependency status to maximizing education tax benefits, taxes can be tricky for new grads. The good news? There are smart ways to save—if you know where to look. For personalized advice tailored to your situation, consider working with a tax professional. It’s one of the best moves you can make as you step into this next chapter of life.

If you own a small business and have children in high school, technical school or college, you might consider asking them to work for you part-time or full-time over the summer. Or you might want to hire your spouse or another relative for an open position. Hiring relatives allows them to earn some extra money and learn about the family business. Plus, there may be tax advantages and savings opportunities that could sweeten the deal. Here’s what you should know.

Payroll Tax Breaks

Owners of certain unincorporated businesses who hire their kids may be eligible for payroll tax breaks. If your children are under age 18, you can hire them for full- or part-time work, and their wages will be exempt from Social Security and Medicare (FICA) taxes and federal unemployment (FUTA) tax. But there’s an important catch — to be exempt, your business must be structured as one of the following entities:

• A sole proprietorship,
• A single-member limited liability company (LLC) that’s treated as a sole proprietorship for tax purposes,
• A spousal partnership, or
• A spousal LLC that’s treated as a partnership for tax purposes.

The FICA tax exemption applies to both:

• The employee’s share of FICA tax that’s withheld from the employee’s paychecks, and
• The employer’s share of FICA tax that your business must pay to Uncle Sam.

Important: The FUTA tax exemption lasts until an employee-child reaches age 21. If your child is 18 or older, his or her wages will be subject to FICA tax, like any other employee.

If you operate your business as an S or C corporation, your child’s wages from the business are subject to FICA and FUTA tax, like any other employee, regardless of the child’s age.

Potential Federal Income Tax Savings

When you hire your child, your business can deduct his or her wages for federal income tax purposes. Deductible wages may also lower your state income tax obligation and self-employment tax, if applicable. Of course, the wages must be reasonable for the work performed to be deductible.   

In addition, thanks to today’s generous standard deduction, child employees — regardless of their ages — won’t owe any federal income tax on wages from your business below the following thresholds for 2025:

• $15,000 if the child files as a single taxpayer,
• $22,500 if the child files as a head of household, and
• $30,000 if the child is married and files jointly.

Important: These thresholds are based on the assumption that the child has no taxable income from other sources. As earned income, your child’s wages also won’t be subject to the so-called “kiddie tax.”

These income tax benefits may also be available if you hire extended family members, such as grandchildren, nieces and nephews, and even your parents. 

Roth Saving Opportunities

Working for the family business teaches kids fiscal responsibility and provides them with extra spending money. However, you might also want to encourage your child to use some or all of the wages for long-term goals, such as saving for college or retirement.

For example, your child’s (or grandchild’s) wages count as earned income that can be contributed to an IRA, with the potential for impressive compounding over time. The only tax-law requirement for your child to make annual IRA contributions is having earned income that at least equals what’s contributed for that year. Age is completely irrelevant. So, if your child earns some cash from a summer job or part-time work after school, he or she can contribute to an IRA for that year.

For the 2025 tax year, people under age 50 can contribute the lesser of:

• His or her earned income, or
• $7,000.

While the same contribution limit applies equally to Roth IRAs and traditional deductible IRAs, the Roth option usually makes more sense for young people. Why? First, kids are usually in a lower tax bracket now than in retirement. Second, your child can withdraw all or part of the annual Roth contributions — without any federal income tax or penalty — to pay for college or for any other reason. However, Roth earnings generally can’t be withdrawn tax-free before age 59½.

In contrast, if your child makes deductible contributions to a traditional IRA, any subsequent withdrawals must be included in gross income. Even worse, traditional IRA withdrawals taken before age 59½ may be hit with a 10% early withdrawal penalty tax unless an exception applies. (Several exceptions exist, including to pay for qualified higher-education expenses and up to $10,000 in qualified first-time homebuyer costs.)

Important note: Even though a child can withdraw Roth contributions without any adverse federal income tax consequences, the best strategy is to leave as much of the Roth account balance as possible untouched until retirement (or later) to accumulate a larger federal-income-tax-free sum.

By making Roth contributions for just a few teenage years, your child can potentially accumulate a significant nest egg by retirement age. Realistically, however, most kids might not be willing to contribute the $7,000 annual maximum even when they earn enough to do so. However, as long as they have earned income, you can give them the money to fund an IRA (up to the amount of their earnings).

Small Business, Big Tax Breaks

Hiring relatives can be a tax-smart idea for small business owners. Remember that their wages must be reasonable for the work performed. So, this strategy works best with teenage children or adult family members to whom you can assign meaningful tasks. Keep the same records as you would for any other employee to substantiate hours worked and duties performed (such as timesheets and job descriptions). And, of course, issue your relative a Form W-2, as you would for any other employee.

Encouraging your child or grandchild to make Roth IRA contributions is a great way to introduce the idea of saving money and investing for the future. It’s also never too soon for children to learn about taxes and how to legally minimize or avoid them. Contact your tax advisor for more information.

The U.S. House of Representatives recently passed a sweeping tax and spending measure, dubbed “The One, Big, Beautiful Bill.” It includes significant tax implications for electric vehicle (EV) buyers and homeowners. Specifically, the bill eliminates federal tax credits after December 31, 2025, for clean vehicles and certain energy-efficient home improvements.

If you’ve been considering purchasing an EV or upgrading your home’s energy efficiency, you may want to act soon to take advantage of the current incentives before they potentially disappear. Here are the details of what could change under the proposed legislation, now being considered by the Senate.

Clean Vehicle Tax Credits

The House bill would eliminate the following new and used clean vehicle tax credits after 2025, with a limited exception:

Credits for new clean vehicles (Section 30D). Under the Inflation Reduction Act, buyers of new qualifying clean vehicles can receive up to $7,500 in nonrefundable tax credits, based on specific mineral sourcing and battery component requirements. Vehicles that meet only one of these criteria still qualify for a $3,750 credit. Clean vehicles include EVs, hydrogen fuel cell cars and plug-in hybrids. Under current law, this credit is available through 2032.

Additional eligibility rules include:

• The vehicle must be for personal use (not resale), 
• It must be used primarily in the United States, and
• Final assembly of the vehicle must occur in North America.

The manufacturer suggested retail price (MSRP) can’t exceed $80,000 for vans, sport utility vehicles and pickup trucks, or $55,000 for other vehicles. The MSRP for this purpose isn’t necessarily the price you pay. It includes manufacturer-installed options, accessories and trim but excludes destination fees.

In addition, a taxpayer must meet modified adjusted gross income (MAGI) caps of $300,000 for joint filers, $225,000 for heads of households and $150,000 for all other filers.

Credits for used clean vehicles (Section 25E). Buyers of used clean vehicles may qualify for a credit of 30% of the sale price, up to $4,000. To be eligible for the credit:

• The sale price must be under $25,000, and
• The vehicle must be at least two model years old and meet battery requirements.

There’s also an income limit for used clean vehicles, but it’s lower than the limits for new vehicles. For used vehicles, the MAGI cap is $150,000 for married joint filers, $112,500 for heads of households and $75,000 for others.

Both credits are nonrefundable and can’t be carried forward unless claimed as a general business credit. Taxpayers can transfer the credit to a dealer to reduce the purchase price or claim it when filing their tax returns. Only two dealer transfer elections are allowed per year. IRS Form 8936 is required when either claiming the EV credit or transferring it to a dealer.

Important: The House bill provides an exception for small-volume manufacturers, allowingvehicles from manufacturers that have sold fewer than 200,000 qualifying clean vehicles to retain eligibility for the current credits through 2026.

The Energy Efficient Home Improvement Credit

In addition, the House bill would eliminate energy-efficient home improvement credits for upgrades such as qualified windows and exterior doors after 2025.If these provisions are enacted, 2025 may be your final chance to offset some of the cost of high-efficiency home improvements through tax savings.

Under current law, homeowners can claim the Section 25C Energy Efficient Home Improvement Credit for up to 30% of the cost of eligible improvements each year through 2032. The annual limits are:

• Up to $600 for exterior windows and skylights, and
• Up to $500 total for exterior doors (limited to $250 per door).

These upgrades must meet Energy Star certification requirements.

Key Takeaways

With these credits potentially on the chopping block, it may be a good time to purchase an EV or make energy-efficient home upgrades — especially if you were already planning to make these investments. Be sure to retain purchase receipts and certifications for eligible upgrades.Potential legislative changes add to the complexity of navigating tax credits. Although the House bill retains these green tax credits through year end, the Senate could make changes in its bill (which would then have to pass in the House before being signed into law). Contact your tax advisor to help you understand the eligibility requirements for these credits and claim them while they’re still available. Also visit the IRS website for more information about clean vehicle tax credits and the Energy Efficient Home Improvement Credit.

Many people graduate college with significant amounts of student loan debt. The average amount borrowed by 2022-23 bachelor’s degree recipients who took out loans to pay for college is approximately $29,300, according to the College Board’s “Trends in Student Aid 2024 report.”

The burden of student loan repayment can force young adults to delay major life milestones, such as purchasing a home, starting a family and saving for retirement. In addition, defaulting on student loans can harm a borrower’s credit rating and result in garnishment of wages.

Moreover, the implications of student loan debt often extend to family members. While students may independently qualify for federal student loans without a co-signer, most private loans require a creditworthy co-signer — typically a parent — who becomes equally responsible for repayment. Some lenders offer a co-signer release option after a certain number of on-time payments. However, this isn’t guaranteed. It depends on the lender’s policies and the borrower’s income level and credit score at the time of release.

If your family is struggling to afford higher education costs, you’re not alone. Here are eight tips to help you get a handle on student loans and set your student on the path toward financial independence.

1. Do Your Homework

Decisions made before and during college can significantly affect your final debt tally. When choosing a school, consider it an investment decision, not an emotional one. Compare the total costs of each school on your list, including:

• Tuition and fees,
• Room and board, and
• Books, supplies and equipment.

Many parents experience sticker shock when they add up the full cost of attending college. Fortunately, you probably won’t have to pay sticker price if you work with the college’s financial aid department. After you’re accepted into a school and complete the requisite forms, you should receive a financial assistance package that states the amount and type of financial aid offered. 

Also evaluate each school’s job placement rates and average starting salaries for graduates in the majors you’re mulling. Consider whether the career that corresponds with your preferred major will provide you with enough funds to cover the loan payments that will begin soon after you graduate.

To avoid borrowing more than you need, it’s important to reassess your expenses each semester. Cover as much as possible with federal direct loans before applying for private loans. Also take a fresh look at scholarship and work-study opportunities every semester.

2. Create a Detailed List

It’s important to prepare a spreadsheet that lists all your loans so you can compute the total amount of debt. This schedule should break out the details for each loan, identifying the type (federal or private, subsidized or unsubsidized) and the terms, including:

• Interest rate,
• Monthly payment,
• Current and principal balances,
• Repayment rules, and
• Grace periods.

Compiling this information while your student is still in school helps keep track of loans taken out each semester (or draws on open-ended private loans that allow borrowers to withdraw funds as needed up to a pre-approved credit limit). After graduation, the schedule can be used to formulate a repayment plan and prepare monthly budgets.

3. Explore Repayment Options

Several options are available for repaying your federal direct loans. The Federal Student Aid Loan Simulator  provides a helpful tool for comparing monthly payment alternatives.

If you have federal student loans, you might consider combining some or all of them into a Federal Direct Consolidation Loan. A consolidation loan has a fixed interest rate that’s the weighted average of the interest rates of the loans being consolidated, rounded up to the nearest eighth of a percent. While consolidating your loans may slightly increase your interest rate, it will lock you into a fixed rate. You also may be able to consolidate some private loans into a single private loan at a lower interest rate.

Bear in mind that consolidation has potential downsides. For example, you could end up with a longer repayment period, which translates to paying more interest over the loan term. And you might forfeit certain borrower benefits — such as discounts or rebates — associated with your current loans.

4. Inquire about Loan-Related Employee Benefits

Your employer may provide various types of student loan assistance — which could be significant enough to influence your job choice. For example, through 2025, employers can offer up to $5,250 in student loan repayment benefits per employee per year tax-free under current law.

Additionally, under a provision of SECURE 2.0, employers can make matching retirement plan contributions to cover the qualified student loan payments (QSLPs) made by plan participants during the year. The change went into effect for plan years beginning in 2024. Employees participating in the following plans may be eligible:

• 401(k) plans,
• 403(b) plans,
• SIMPLE-IRAs, and
• Governmental 457(b) plans.

Note that special rules apply to SIMPLE-IRA plans.

In effect, this provision allows employers to make matching contributions to the retirement accounts of employees who aren’t actually contributing to their accounts but who are making student loan payments. This provision helps participants reduce student debt while simultaneously building retirement savings.

5. Take Advantage of the Student Loan Interest Deduction

You may be eligible to write off up to $2,500 of student loan interest as an above-the-line adjustment on your personal return whether you itemize or not. This deduction is available only to the person legally obligated to repay the loan.

However, the deduction is phased out based on modified adjusted gross income (MAGI), and the amounts aren’t that high. For 2024, the phaseout begins at $80,000 for single filers ($165,000 for married couples who file jointly). For 2025, the phaseout begins at $85,000 for single filers ($170,000 for married couples who file jointly). You also may be eligible for state tax deductions.

6. Make Extra Payments to Reduce Your Principal

Paying down the principal on your loans reduces your total interest payments. It can also allow you to pay off your debt faster.

For instance, if you switch from monthly to biweekly payments, you’ll make an extra payment every year. Over 10 years, you could trim a year off your repayment schedule. Alternatively, if you receive a year-end bonus or tax refund, you might consider putting the extra cash toward paying down your student loans.    

Another strategy — known as the “debt avalanche” approach — calls for making an extra monthly payment on your highest interest rate loan. When that loan is paid off, apply the amount you were paying each month for the retired debt toward the loan with the next highest interest rate and so on. This strategy prevents excessive interest accumulation and allows you to tackle principal payments efficiently.

Important: When using the debt avalanche approach, continue making minimum payments on all loans to avoid penalties and keep accounts in good standing. You should also notify the lender that you want to apply the extra payments to the principal balance, not a prepayment of the loan’s next installment.

7. Enroll in Automatic Payment

Federal student loan programs grant a 0.25% discount on the interest rate to borrowers who set up automatic withdrawals from their checking accounts. Many private lenders offer similar discounts for automatic payments.

Aside from the discount, autopayments also ensure that you won’t miss any payments. This may be especially handy for young people who are adjusting to living independently and busy pursuing full-time careers.

8. Take Ownership

Effectively managing student loan debt requires a proactive approach, careful planning and financial discipline. One of the worst mistakes borrowers make is missing loan payments, assuming they’ll catch up later. If you’re having trouble making ends meet, you don’t have to struggle alone. Talk to your lender or another trusted financial advisor to assess your options and devise a realistic debt service plan that works for your situation.