As tax season approaches, taxpayers are urged to familiarize themselves with the significant changes brought about by last year’s “Big Beautiful Bill.” Awareness of these updates is crucial, especially for those filing state and local taxes, as there are new caps based on adjusted gross income.
One of the most notable alterations affects servers, following President Donald Trump’s commitment to eliminate taxes on tips. However, this initiative comes with a crucial limitation: the exemption is capped at $25,000 per return. Jon Karp, a tax partner at Whitley Penn, clarified that this cap applies to married couples filing jointly, meaning they collectively receive only $25,000, rather than $25,000 for each individual.
Additionally, parents of qualifying children should note that the child tax credit has seen an increase of $200 this year. This modification aims to provide further financial support to families.
Another significant introduction is for children born after 2024, referred to as “Trump Accounts.” These accounts are designed to offer financial benefits to newborns, and parents can effortlessly access the $1,000 available in the account by filing Form 4547 with their tax returns.
The IRS plans to begin accepting tax filings on January 26, making it essential for taxpayers to prepare ahead of time to take full advantage of the new provisions.
