OHIO — With the passage of President Trump’s tax bill last July, tax filing season will look different for many Americans.
The act is more than 800 pages long, so there’s a lot to unpack. But John Patriarca, the chief operating officer of P3 Financial Group, said there are three main takeaways most taxpayers should know.
- No tax on tips. Workers who earn tips may no longer have to pay federal taxes on that income. That’s a significant change for people in the service industry who rely on tips to make ends meet
- Overtime pay is also getting a tax break. If you work extra hours, that overtime money could now be tax free, depending on income and eligibility requirements
- Seniors aged 65 and older are seeing changes too. New tax relief measures could lower how much retirees owe, especially those living on fixed incomes like Social Security or pensions
“There’s not a ton of controversy and overall, it’s you know, it is a good thing,” Patriarca said. “It will benefit the bulk of the taxpayers. They do project this year to be the largest amount in terms of volume and sheer number of tax refunds that are going to be going out.”
Patriarca said the new laws are designed to benefit low-to-middle-income earners the most.
“These income limitations obviously are designed to make sure that these policy changes affect and target lower to middle-income earners, which really are the people that deserve and need the tax breaks,” Patriarca said.
He added the law is retroactive to January of last year, meaning the taxes taxpayers will prepare in 2026 are for the 2025 tax year.
No Tax on Tips
The new law allows qualified workers to deduct tip income if they meet certain requirements. Single filers can deduct up to $12,500, while married couples filing jointly can deduct up to $25,000, with income limits that phase out at higher earnings.
No Tax on Overtime
The overtime deduction follows a similar structure, including the same dollar limits and income phase-outs. Single filers have a maximum deduction of $12,500, while married filers can deduct up to $25,000.
Patriarca said both of these deductions directly reduce taxable income, meaning there’s no need to itemize deductions whether a filer itemizes or takes the standard deduction.
Senior Standard Deduction Increase
Under the senior tax relief provisions, there’s an additional $6,000 deduction for taxpayers 65 and older who file single, and $12,000 for married couples filing jointly if both spouses qualify. There is an income limitation, however — $75,000 for single filers and $150,000 for married couples filing jointly, before the deduction begins to phase out.
Patriarca said all the stipulations make professional guidance especially helpful to ensure everything is reported correctly and taxpayers get the most out of their money.
While there’s a lot of advice online and on social media, he recommends not creating a tax plan based on information from an unqualified source.
“2025 was a little bit goofy because these tax laws were put into place mid-year,” Patriarca said. “So, you just want to make sure you check with your employer to make sure they’re reported properly and then when you do file your tax return that you’re reporting those properly with whichever service you use.”
Other notable changes
Another change, Patriarca said, allows taxpayers to deduct the interest they pay on car loans, though there are limitations and eligibility requirements.
For small businesses and self-employed individuals, the law also includes expanded bonus depreciation for certain assets placed into service.
How often do tax changes happen?
Patriarca said changes to tax law aren’t uncommon.
“We do see tax law change generally whenever we see policy change within Congress,” Patriarca said. “And so, when we see a shift in power at that level, generally we will see potentially some new tax bills from new tax law, as we have in 2025.”
The changes impact not only taxpayers but also employers responsible for filing W-2s and 1099s.
“We just want to make sure that we’re doing our due diligence, making sure that we’re submitting all of our wage reporting, W-2, 1099 accurately so that our employees are in a favorable position and they’re able to file their taxes accurately and take advantage of the new tax code,” Patriarca said.
These tax changes are currently set to run through the end of 2028, unless extended by future leadership.
The IRS has not yet announced when it will begin accepting tax returns, though the agency typically starts processing returns in the last week of January. The deadline for filing taxes without requesting an extension is April 15.
Patriarca also reminded taxpayers that filing an extension does not mean they can delay payment. Even with an extension, any balance owed must still be paid by April 15.
Taylor Bruck
Source link