Also, the phase-in amounts are increased from $50,000 to $75,000 for single filers and from $100,000 to $150,000 for joint filers.

Bonus depreciation: The Act makes additional first year (bonus) depreciation for certain qualified property permanent at 100% (under prior law, it was to phase out to zero). This provision is effective for property acquired after Jan. 19, 2025. There is also a new 100% bonus depreciation provision for “qualified production property” (QPP, which is certain non-residential real property used in the manufacturing, production or refining of certain tangible personal property). This QPP provision is effective for property placed in service after July 4, 2025.

179 Expensing limits:

For property placed in service after 2024, the Code Sec. 179 expensing limits are increased to $2,500,000 and the phaseout threshold is increased to $4,000,000.

Both limits are subject to inflation adjustments.

Business interest:

For post-2025 tax years, the Act modifies the definition of adjusted taxable income for purposes of the Code Sec. 163(j) limitation on business interest.

The new rule makes the limitation less restrictive by allowing depreciation and amortization to be added back, resulting in a higher adjusted taxable income, and potentially a larger allowable interest deduction.

The small business exemption remains for businesses (other than tax shelters) with average annual gross receipts below the inflation-adjusted threshold (e.g., $31 million for 2025).

Real property trades or businesses and farming businesses can elect out of the limitation if they use the alternative depreciation system (ADS) for applicable property

Deduction limitation for compensation of publicly held corporation executives:

For post-2025 tax years, all members of a publicly held corporation’s controlled group and affiliated service group are subject to the $1 million per year compensation deduction limits of certain top executives.

Foreign tax credit (FTC) Allocation of deductions to foreign source net CFC tested income (formerly known as GILTI):

The Act, which renames GILTI to net CFC tested income, limits the deductions that may be allocated to income in the net CFC tested income category to (i) the deduction for net CFC tested income itself as well as for taxes imposed on that income and (ii) any other deductions directly allocable to net CFC tested income. Also, no amount of interest expense or R&E expense may be allocated to this category. Deductions which would have been allocated to the net CFC tested income category but for this provision must instead be allocated to U.S. source taxable income for purposes of the FTC limitation. This provision is effective for tax years beginning after 2025.

Exclusion of gain on the sale or exchange of qualified small business stock (QSBS):

The Act provides that gain on the “applicable percentage” (50% for stock held for 3 years, 75% for stock held for 4 years, 100% for stock held for 5 years) is eliminated for QSBS acquired after July 4, 2025.

Also, the gain exclusion threshold is increased from $10 million to $15 million, and the $50 million aggregate gross asset limit is increased to $75 million.

All thresholds will be adjusted for inflation.

Enhanced manufacturing investment credit:

The advanced manufacturing investment credit (also known as the semiconductor credit or the CHIPS credit) on qualified investments in an advanced manufacturing facility built before Jan. 1, 2027 is increased  to 35% (up from 25%) for property placed in service after 2025.

Information reporting, Form 1099-K:

The Act retroactively reverts the Form 1099-K reporting threshold back to the pre-ARPA $20,000 and 200 transactions threshold.

Information reporting, Forms 1099-NEC, 1099-MISC:

For payments made after 2025, the reporting thresholds for Forms 1099-NEC and 1099-MISC are increased from $600 to $2,000 (adjusted for inflation after 2026).

Gain on the sale of certain farmland property:

For sales or exchanges occurring after July 4, 2025, sellers of qualified farmland property may elect to pay capital gains tax on the sale in four equal annual installments.

The first payment is due with the return for the year in which the sale occurs, with the remaining payments being due with the successive years’ returns. 

If any payment is missed, the balance is due immediately.

Corporate charitable contributions:

• The annual charitable contribution deduction is generally limited to 10% of taxable income, but  the deduction is reduced by 1% of taxable income for tax years after 2025.
• There is a new 1% floor: only the aggregate amount of contributions exceeding 1% of taxable income is deductible.

Excess business losses: The Act makes the Code Sec. 461(l) limit on excess business losses permanent for noncorporate taxpayers.

• Threshold Amounts: For 2025, the threshold is $313,000 for single filers and $626,000 for joint filers. For tax years after 2025, these amounts are adjusted for inflation using 2024 as the base year.
• Definition: An “excess business loss” is the excess of aggregate trade or business deductions over the sum of aggregate gross income or gain from those trades or businesses plus the threshold amount.
• Treatment of Disallowed Losses: Any excess business loss disallowed under Code Sec. 461(l) is treated as a net operating loss (NOL) carryforward to subsequent tax years.
• The Act also permanently suspends the separate excess farm loss limitation so all business losses (including farming) are subject to the excess business loss limitation.
  • The limitation applies at the partner or shareholder level for partnerships and S corporations.

Energy efficient commercial buildings deduction:

Under the Act, the energy efficient commercial building deduction terminates for any cost of energy efficient commercial building property whose construction begins after June 30, 2026.

Cost recovery for energy property:

The Act eliminates 5-year MACRS classification for energy property effective for property for which construction begins after 2024.

Advanced energy project credit:

Effective July 4, 2025, “add backs” in the event of the revocation of a project certification are discontinued.

Advanced manufacturing production credit:

The Act terminates the credit for wind energy components produced and sold after Dec. 31, 2027. It also subjects pre-Act applicable critical minerals to a new phaseout schedule and tightens the rules regarding foreign entities.

Energy efficient home improvement and new energy efficient home credits:

The energy efficient home improvement credit under Code Sec. 25C is terminated for property placed in service after 2025.

The new energy efficient home credit under Code Sec. 45L terminates for any qualified new energy efficient home acquired after June 30, 2026.

Residential clean energy credit:

The residential clean energy expenditures credit is terminated for any expenditures made after 2025.

Clean vehicle credits:

The credits for new and previously owned clean vehicles terminate for vehicles acquired after Sept. 30, 2025.

The credit for qualified commercial clean vehicles also terminates for vehicles acquired after Sept. 30, 2025.

Alternative fuel vehicle refueling property credits:

The credit for “alternative fuel vehicle refueling property” (such as an EV charger) terminates for property placed in service after June 30, 2026.

No Income Tax on Tips – For Employers:

• The provision does NOT exempt employers from payroll tax (FICA) obligations on tips. Employers must continue to withhold and pay Social Security and Medicare taxes on all reported tips, as before.
• Starting in 2025, employers must separately report the amount of qualified tips and the employee’s occupation on Forms W-2 (for employees) and 1099 (for independent contractors).
• For tips received before January 1, 2026, employers may use any reasonable method to approximate designated tip amounts due to the retroactive effective date.
• Only cash and credit card tips in customary tipping occupations qualify, and service charges are excluded.
• Employers must ensure payroll systems can track and report qualified tips and occupations for W-2 reporting, including for the retroactive portion of 2025.

No Tax on Overtime: 

For the 2025 tax year, employers are required to report the total amount of qualified overtime compensation on employees’ Forms W-2 and, for non-employees, on applicable 1099 forms.

Because most payroll systems do not currently separate out qualified overtime, the law provides transition relief for 2025: employers may use any reasonable method to estimate and report qualifying overtime amounts for this year.

There are no changes to the W-2, 1099, or federal income tax withholding tables for 2025; employers should continue using current reporting procedures. Updates to forms and withholding procedures reflecting the new law will take effect for tax year 2026 and beyond.

The Act makes the lower individual income tax rates and wider tax brackets introduced by the Tax Cuts and Jobs Act permanent, preventing a scheduled tax rate increase after 2025.

For example, the top individual rate will remain at 37% (instead of reverting to 39.6%), and the marriage penalty relief for most brackets continues. This means married couples filing jointly will typically not face higher taxes compared to filing as singles.

Increased Standard Deduction: The standard deduction has been permanently increased for 2025 and beyond:

For 2025: $30,000 for joint filers, $22,500 for heads of household, and $15,000 for singles

For 2026: $31,500, $23,625, and $15,750.

Reduced Itemized Deductions for High Earners:

Starting in 2026, high-income taxpayers’ itemized deductions will be reduced by 2/37 (about 5.4%) of the lesser of

• the amount of itemized deductions or (b) their taxable income that exceeds the threshold for the 37% tax bracket.

The Pease limitation which previously reduced itemized deductions for high-income taxpayers was permanently repealed.  With this change, bunching itemized deductions into a single year and taking the standard deduction in alternate years can be effective.

Child Tax Credit:

This credit was increased to $2,200 per child* (indexed for inflation after 2025), with the refundable portion set at $1,700 for 2025 (also indexed for inflation).

The $500 credit is retained for other dependents, and phaseout thresholds at $400,000 for joint filers and $200,000 for others remain the same. 

*The CTC is available for children under age 17 at the close of the tax year who are U.S. citizens, can be claimed as dependents, and have a valid SSN.

Estate & Gift Exclusion Amount:

The exclusion amount for federal estate and gift tax will increase to $15 million (indexed for inflation) for estates of decedents dying and gifts made after Dec. 31, 2025.

Individual Alternative Minimum Tax Exemption (AMT) Amounts:

The Act made increased AMT exemption amounts and phaseout thresholds permanent. 

• 2025 exemption amounts are $137,000 for joint filers, $88,100 for single filers, $68,500 for married filing separately, with phaseout thresholds of $1,252,700 for joint filers and $626,350 for others. These amounts are indexed for inflation annually.
• For tax years beginning after 2025, the phaseout rate for the AMT exemption increases from 25% to 50%. This means the exemption phases out twice as quickly for higher-income taxpayers starting in 2026. The standard deduction and, after 2025, personal and dependency exemptions are not allowed for AMT purposes, meaning they must be added back to alternative minimum taxable income (AMTI). 
• AMT continues to be calculated at 26% on the first $239,100 ($119,550 for married filing separately) of AMTI above the exemption and 28% on the excess.

Deduction for Taxpayers Age 65 or Older:

For tax years 2025–2028, individuals age 65 or older (and their spouses, if filing jointly) can claim a new $6,000 deduction per qualified person.

To maximize this benefit, seniors should aim to keep their adjusted gross income (AGI) below $75,000 (single) or $150,000 (joint), as the deduction is reduced by 6% of any excess.  A Social Security Number is required for each qualifying individual to avoid disallowance of the deduction.

Car Loan Interest:

For tax years 2025–2028, individuals can deduct up to $10,000 per year in interest paid on loans for new personal-use vehicles even if they don’t itemize deductions.

The deduction phases out for single filers with MAGI over $100,000 and joint filers over $200,000.

To qualify, the loan must be for a new, U.S.-assembled car, SUV, van, pickup, or motorcycle (under 14,000 pounds), secured by a first lien.

The taxpayer must be the original owner, and the vehicle’s VIN must be reported on the tax return.

Child and Dependent Care Credit:

Starting in 2026, the Child and Dependent Care Credit will be more valuable for many families. The maximum credit rate increases to 50% of eligible expenses, up to $3,000 for one qualifying individual or $6,000 for two or more.

The full 50% rate applies to families with AGI up to $15,000 and gradually phases down to 35% for AGI up to $75,000 ($150,000 for joint filers).

As always, thorough records of all qualifying expenses and coordination with any employer-provided dependent care benefits will help maximize the full credit potential.

Contributions to Scholarship-Granting Organizations:

New for tax years ending after Dec. 31, 2026, individual taxpayers can claim a federal income tax credit of up to $1,700 per year for cash contributions to qualifying scholarship-granting organizations (SGOs) in participating states.

To maximize this benefit, confirm relevant state participation and ensure the SGO is on the IRS-approved list before contributing.

Disaster-Related Personal Casualty Losses:

Individuals can now claim a personal casualty loss deduction for a federally declared disaster, even if they don’t itemize.

The standard deduction is increased by the amount of the net disaster loss. Documentation of losses and insurance claims are required. 

The rules for filing an amended return to claim a disaster-related casualty loss remain unchanged from prior law.

Taxpayers may elect to deduct a qualified disaster loss in the tax year immediately preceding the year in which the disaster occurred.

This election can be made on an original or amended return for the prior year.

An amended return must be filed no later than six months after the due date (without extensions) for filing the return for the disaster year.

American Opportunity and Lifetime Learning Credits:

Starting in 2026, to claim the American Opportunity Tax Credit (AOTC) the correct Social Security Number (SSN) of the student (or taxpayer or spouse, if applicable) must be included along with the Employer Identification Number (EIN) of each college or university. 

The Act did not change the credit amount, phaseout thresholds, or general eligibility for the Lifetime Learning Credit.

The only change is that, for tax years beginning after 2025, a valid Social Security Number (SSN) will be required for the taxpayer and student to claim the credit, rather than just a Taxpayer Identification Number (TIN).

For tax years beginning after 2025, the requirement for a valid Social Security Number (SSN) means that both the taxpayer and the student (if the credit is claimed for someone other than the taxpayer or spouse) must have a valid SSN issued on or before the due date of the tax return for that year to be eligible for the Lifetime Learning Credit.

ITINs (Individual Taxpayer Identification Numbers) will no longer be sufficient, and if the SSN is issued after the return due date, the credit cannot be claimed for that year.

If the required SSN is missing or incorrect, the IRS will deny the credit for that year. This change tightens eligibility and may exclude certain noncitizens and others who previously qualified using an ITIN.

Eligibility to Enroll in Qualified Health Plan:

For tax years after 2027, the premium tax credit (PTC) can only be claimed for months the health insurance Exchange has verified an individual’s eligibility to enroll in a qualified health plan (QHP) and to receive advance PTC payments. Federal tax returns should be timely file to avoid losing the credit.

Any changes in income, family size, or other circumstances should be promptly reported to the Marketplace within 30 days and quickly respond to any requests for information.

Deduction for Qualified Residence Interest:

The deduction for mortgage interest on home acquisition debt is permanently capped at $750,000 ($375,000 if married filing separately), rather than increasing to$1 million in 2026 as previously scheduled. 

Any interest for a new mortgage or refinancing on debt above $750,000 will not be deductible.

The Act made the disallowance of a deduction for interest on home equity lines of credit (HELOCs) permanent.

In addition, mortgage insurance premiums are now deductible as qualified residence interest for tax years beginning after 2025.

The deduction applies to qualified mortgage insurance on acquisition indebtedness.

The deduction is phased out by 10% for each $1,000 ($500 if married filing separately) of AGI above $100,000 ($50,000 if married filing separately), and is completely phased out for AGI above $109,000 ($54,500 if married filing separately).

If premiums are prepaid, the deduction must be amortized over the shorter of the loan term or 84 months, with only the allocable portion deductible each year.

Miscellaneous Itemized Deductions: The Act permanently eliminates miscellaneous itemized deductions for individual taxpayers.

Educator Expense Deduction:

The Act adds a new educator expense itemized deduction effective starting in 2026.

It allows eligible K–12 teachers, counselors, coaches, and aides who work at least 900 hours per year to deduct unreimbursed classroom expenses. Qualifying expenses include books, supplies, and equipment used for instructional activities.

This new deduction provides a permanent, standalone benefit for educators’ out-of-pocket classroom expenses, but you must itemize deductions to take this deduction.

New Tax-Deferred Investment Accounts for Children:

Taxpayers can open a new type of tax-deferred investment account for eligible, called a “Trump account,”

• Eligibility: Can be opened for U.S. citizens under 18 with a valid Social Security number.
• Contributions: Up to $5,000 per year (indexed for inflation after 2027) in after-tax dollars can be contributed for each eligible child until the year the child turns 18.
  • For children born between January 1, 2025, and December 31, 2028, the federal government will contribute an initial $1,000 to each account.
  • Employers may also contribute up to $2,500 per year, and these employer contributions are excluded from the employee’s taxable income.
• Investments: Until age 18, funds must be invested in low-fee mutual funds or ETFs tracking a qualified U.S. equity index.
• Tax Treatment: Contributions are not tax-deductible, but earnings grow tax deferred.
  • Withdrawals are generally not allowed before age 18, at which point the account transitions to a traditional IRA and the beneficiary gains full control.
• Special Rules: If the beneficiary dies or becomes disabled before age 18, special rollover rules apply, including the ability to roll over the account to an ABLE account for disabled individuals.
• Gift Tax: Contributions count toward the annual gift tax exclusion.
• Employer Deduction: Employers can deduct the cost of contributions, which are treated as a fringe benefit and subject to nondiscrimination requirements.

Adoption Credit:

Starting in 2025, the adoption credit is enhanced to include a refundable portion of up to $5,000 per child (indexed for inflation). This means eligible taxpayers can receive up to $5,000 as a refund even if they owe no tax.  Form 8839 must be filed in the year the adoption is finalized, which requires a taxpayer identification number for each adopted child.

Qualified Higher Education Expenses:

Changes to 529 savings plans allow families to use tax-free distributions for a much broader range of K-12 education expenses including not just tuition, but also curriculum, books, online materials, tutoring, standardized test fees, dual enrollment, and educational therapies for students with disabilities.

Starting in 2026, the annual limit for K-12 distributions doubles from $10,000 to $20,000 per beneficiary.

To maximize tax savings, consider timing 529 withdrawals to match qualified expenses within the same tax year, and coordinate with other education tax credits to avoid overlap.

Higher Education Expenses for 529 Accounts:

529 plan distributions can now be used tax-free for a wider range of education expenses, including not only college costs but also “qualified postsecondary credentialing expenses.”

This means 529 funds can be used for tuition, fees, books, supplies, and equipment required for enrollment in recognized certificate, licensing, or apprenticeship programs even if they are not traditional degree programs.

Individuals’ Charitable Deductions:

Charitable contribution deduction rules were significantly revised for tax years beginning after December 31, 2025

For individuals:

• The 60% AGI limit for cash contributions to public charities is now permanent.
• Non-itemizers can take an above-the-line deduction for cash gifts to public charities: up to $1,000 for single filers and $2,000 for joint filers.
• A new 0.5% AGI floor applies to itemized charitable deductions, so only contributions exceeding 0.5% of AGI are deductible as an itemized deduction.
• The overall limitation on itemized deductions is reinstated for high-income taxpayers, potentially reducing allowable deductions.

Limitation on Casualty Loss Deduction:

Starting in 2026, personal casualty loss deductions are permanently limited to losses from federally declared disasters (and certain state-declared disasters).

Remittance Transfers: Starting in 2026, a new 1% excise tax will apply to remittance transfers from U.S. senders to recipients in foreign countries.

Transfers funded with cash, money orders, cashier’s checks, or similar physical instruments such as non-U.S. payment apps are subject to the tax.

• Transfers that are excluded from the 1% excise tax under Title 31, Chapter 53 are those withdrawn directly from financial institutions governed by the Bank Secrecy Act. These institutions include banks, credit unions, savings associations, trust companies, money services businesses (such as money transmitters, check cashers, and issuers of traveler’s checks or money orders), broker-dealers in securities, casinos and card clubs, Insurance companies, and mutual funds.

If a remittance transfer is withdrawn directly from an account at one of these regulated financial institutions, it is not subject to the excise tax.

Additionally, transfers funded with a U.S.-issued debit or credit card are also excluded.

Wagering Losses:

Starting in 2026, only 90% of wagering losses can be deducted against winnings, even if losses equal or exceed winnings.

Deduction and Exclusion for Moving Expenses:

Moving expenses are now permanently nondeductible for most taxpayers, and any employer reimbursement for moving costs is fully taxable as income.

Only active-duty military members moving under orders and, starting in 2026, certain intelligence community employees remain eligible to deduct or exclude qualified moving expenses.

ABLE Accounts: The rules for ABLE (Achieving a Better Life Experience) accounts were permanently enhanced as follows:

• Contribution Limits: The annual contribution limit is now set at the annual gift tax exclusion amount ($19,000 for 2025), plus an additional amount for certain employed beneficiaries.
  • If the beneficiary is employed and not covered by an employer retirement plan, they can contribute the lesser of the federal poverty line for a one-person household,
  • or their compensation for the year, in addition to the standard limit.
• Eligibility: Starting in 2026, individuals who became disabled before age 46 (up from age 26) can qualify for an ABLE account.
• Rollover Provisions: Tax-free rollovers from Section 529 qualified tuition programs to ABLE accounts are now permanent, subject to the annual contribution limit.
  • Rollovers from new “Trump accounts” to ABLE accounts are also allowed, provided the entire balance is rolled over in a direct trustee-to-trustee transfer in the year the beneficiary turns 17.
• Saver’s Credit: The ability for designated beneficiaries to claim the saver’s credit for contributions to their own ABLE accounts is now permanent.
  • After 2026, only ABLE account contributions (not IRA or employer plan contributions) will be eligible for the saver’s credit.
  • The maximum annual amount eligible for the credit will increase from $2,000 to $2,100, indexed for inflation.
• Other Rules: The ability to change the designated beneficiary to another eligible family member remains.
  • The rules for excess contributions and excise taxes (6% on excess) remain, but corrective distributions can avoid the penalty if made within the tax year.

Individual SALT Limitation:

The SALT (state and local tax) deduction cap is temporarily increased to $40,000 for 2025 ($40,400 in 2026, with 1% annual increases through 2029), before reverting to $10,000 in 2030.

For those with modified adjusted gross income (MAGI) above $500,000 in 2025, the deduction phases out by 30% of the excess over the threshold but will not drop below $10,000.

Managing income and deductions to stay below the phaseout threshold, or timing large transactions to occur in years with a higher cap, can help maximize this tax benefit.

Energy Efficient Home Improvement Credit (IRC Sec. 25C):

This credit, which provides a 30% tax credit for qualifying energy-efficient improvements to your home (such as windows, doors, insulation, and HVAC systems), will expire for property placed in service after December 31, 2025. There is no phaseout or transition period; the credit simply ends after this date. Unused credits cannot be carried forward to future years].

Residential Clean Energy Credit (IRC Sec. 25D):

This credit, which covers 30% of the cost of qualified solar, wind, geothermal, fuel cell, and battery storage installations, will also expire for expenditures made after December 31, 2025.

There is no transition rule or phaseout. However, if you incur qualifying expenses before the deadline, any unused credit can be carried forward to offset future tax liability

Clean Vehicle Credits (IRC Sec. 30D, 25E, 45W):

Federal tax credits for the purchase of new, previously-owned, and commercial clean vehicles will expire for vehicles placed in service after September 30, 2025. There are no transition rules or phaseouts for these credits

Alternative Fuel Vehicle Refueling Property Credit (IRC Sec. 30C):

The credit for installing alternative fuel vehicle refueling property (such as electric vehicle charging stations) will end for property placed in service after June 30, 2026. For personal property, there is no carryforward of unused credits. For business property, unused credits may be carried forward as part of the general business credit.

No Income Tax on Tips – For Employees:

• Employees in occupations that customarily received tips as of December 31, 2024, can deduct up to $25,000 of qualified tips per year from their taxable income for tax years 2025 through 2028.
• “Qualified tips” include cash tips, credit card tips, and tips received through tip pooling, but not service charges or tips in specified service trades or businesses.
• The deduction phases out by $100 for every $1,000 of modified adjusted gross income (MAGI) above $150,000 for single filers or $300,000 for joint filers.
• Only tips properly reported on IRS-approved forms (e.g., Form W-2) are eligible, and married taxpayers must file jointly to claim the deduction.
• The IRS will publish a list of qualifying occupations, and the deduction is available to both itemizers and non-itemizers.
• The deduction requires a valid Social Security Number.

No Tax on Overtime:

The “no tax on overtime” rule is a temporary deduction for the FLSA overtime premium, subject to income limits and reporting requirements, and does not exempt overtime pay from payroll tax withholding or reporting at the employer level.

The deduction is claimed by employees (or non-employees) on their individual tax returns for the 2025–2028 tax years.

The deduction applies to “qualified overtime compensation,” which is the overtime premium required under the Fair Labor Standards Act (FLSA)—that is, pay for hours worked over 40 in a week, at a rate above the regular rate.

• The maximum deduction is $12,500 per year for single filers and $25,000 for joint filers.
• The deduction phases out by $100 for every $1,000 of modified adjusted gross income (MAGI) above $150,000 (single) or $300,000 (joint).
• Only the overtime premium portion (not regular wages or tips) is eligible.
• The deduction is available to both employees and non-employees (such as independent contractors) who receive qualified overtime compensation.
• Married individuals must file jointly to claim the $25,000 limit.
• A valid Social Security Number must be included on the return.
• The deduction is available to non-itemizers and can be claimed in addition to the standard deduction.
• Employers must report the total amount of qualified overtime compensation on employees’ W-2 forms (or 1099s for non-employees).
• The IRS will update withholding procedures beginning in 2026 to reflect the new deduction.
• The deduction is not available for regular wages, non-FLSA overtime, or amounts already deducted as tips.

The current above-the-line deduction

Eligible educators can deduct some of their unreimbursed out-of-pocket classroom costs under the educator expense deduction. This is an “above-the-line” deduction, which means you don’t have to itemize and it reduces your adjusted gross income (AGI), which has an added benefit: Because AGI-based limits affect a variety of tax breaks, lowering your AGI might help you maximize your tax breaks overall.

To be eligible, taxpayers must be kindergarten through grade 12 teachers, instructors, counselors, principals or aides. Also, they must work at least 900 hours a school year in a school that provides elementary or secondary education as determined under state law.

For 2025, up to $300 of qualified expenses paid during the year that weren’t reimbursed can be deducted. (The deduction limit is $600 if both taxpayers are eligible educators who file a joint tax return, but these taxpayers can’t deduct more than $300 each.) The limit is annually indexed for inflation but typically doesn’t go up every year.

Examples of qualified expenses include books, classroom supplies, computer equipment (including software), other materials used in the classroom, and professional development courses. For courses in health and physical education, the costs for supplies are qualified expenses only if related to athletics.

A new miscellaneous itemized deduction

The OBBBA makes permanent the Tax Cut and Jobs Act’s (TCJA’s) suspension of miscellaneous itemized deductions subject to the 2% of AGI floor. This had included unreimbursed employee business expenses such as teachers’ out-of-pocket classroom expenses. The suspension had been in place since 2018.

But the OBBBA creates a new miscellaneous itemized deduction for educator expenses. This is in addition to the $300 above-the-line deduction. And this deduction isn’t subject to the 2% of AGI floor or a specific dollar limit. The new deduction is available for eligible expenses incurred after Dec. 31, 2025.

Both who’s eligible and what expenses qualify are a little broader for the itemized deduction than for the above-the-line deduction. For example, interscholastic sports administrators and coaches are also eligible. And, for courses in health and physical education, the supplies don’t have to be related to athletics.

Keep in mind that you’ll have to itemize deductions to claim this new deduction next year. Taxpayers can choose to itemize this and certain other deductions or to take the standard deduction based on their filing status. Itemizing deductions saves tax only when the total is greater than the standard deduction. The OBBBA has made permanent the nearly doubled standard deductions under the TCJA, so fewer taxpayers are benefiting from itemizing.

Carefully track expenses

If you’re a teacher or other educator, keep receipts when you pay for eligible expenses and note the date, amount and purpose of each purchase. Have questions about educator deductions or other tax-saving strategies? Please contact us.

Clean vehicle tax credits

If you’re planning to buy a clean vehicle, consider acting soon to take advantage of expiring tax benefits:

New clean vehicle credit. This credit offers up to $7,500 for qualifying new electric and fuel cell vehicles, depending on how the battery components and critical minerals are sourced. Vehicles that meet only one of the sourcing criteria may be eligible for a reduced $3,750 credit. Originally set to expire in 2032, this credit now ends on September 30, 2025.

The maximum manufacturer’s suggested retail price is $55,000 for cars and $80,000 for SUVs, trucks and vans. To qualify, your adjusted gross income (AGI) must not exceed $150,000 ($300,000 for married couples filing jointly and $225,000 for heads of households).

Used clean vehicle credit. Buyers of eligible used EVs or fuel cell vehicles may claim up to $4,000, or 30% of the purchase price — whichever is lower — if bought from a dealer. This credit also expires on September 30, 2025.

The maximum price of the vehicle is $25,000. To be eligible for the credit, your AGI must not exceed $75,000 for single taxpayers ($150,000 for married joint filers and $112,500 for heads of households).

Alternative fuel refueling property credit

Homeowners who install equipment to recharge EVs or dispense clean fuel may qualify for the alternative fuel vehicle refueling property credit. The IRA had extended and expanded this benefit.

For property placed in service at a primary residence after 2023, the credit equals 30% of the installation cost, up to $1,000 per item (charging port, fuel dispenser, or storage property). Equipment must be placed in service by June 30, 2026, instead of the previous end-of-2032 deadline.

Home energy tax credits

The OBBBA shortens the lifespan of several tax credits available to individual homeowners. Those planning home upgrades may want to act swiftly to make the most of these two opportunities.

Energy efficient home improvement credit. This tax break provides a 30% nonrefundable credit for qualified expenses such as energy-efficient doors, windows, skylights, insulation, heat pumps and home energy audits. The maximum credit you can claim this year is $1,200.

There are no income restrictions, but credit caps vary by item. In 2025, credit limits include:

• $250 per exterior door ($500 total),
• $600 for windows, central A/C, panels, and select equipment,
• $150 for energy audits, and
• $2,000 for heat pumps, water heaters, and biomass systems (superseding the usual $1,200 limit).

This credit was previously scheduled to end after 2032. The expiration has been moved up to December 31, 2025.

Residential clean energy credit. This tax break provides a 30% nonrefundable credit for renewable energy systems like solar, wind, geothermal, and biomass installations. There are no income limits. Under prior law, this credit was set to expire after 2034. The OBBBA makes the new expiration date December 31, 2025.

Secure savings now

Given the shortened timelines and reduced availability of green tax benefits under the OBBBA, proactive planning is key. If you’re interested, you should make the most of these incentives while they last. Contact us with any questions about your situation.

Tax law changes

The Tax Cuts and Jobs Act (TCJA) made the individual alternative minimum tax (AMT) rules more taxpayer-friendly for 2018-2025 and significantly reduced the odds that you’ll owe the AMT for those years. But the new One Big Beautiful Bill Act (OBBBA) contains mixed news about your AMT exposure.

AMT rates

The maximum AMT rate is “only” 28% versus the 37% maximum regular federal income tax rate. At first glance, it may seem counterintuitive that anyone would worry about paying AMT. However, while the top AMT rate is lower, it applies to a much larger taxable base with fewer deductions and credits. That’s why people in certain situations still need to worry about it.

For 2025, the maximum 28% AMT rate kicks in when your taxable income, calculated under the AMT rules, exceeds an inflation-adjusted threshold of $239,100 for married joint-filing couples or $119,550 for other taxpayers. Below these thresholds, the AMT rate is 26%.

AMT exemptions

Under the AMT rules, you’re allowed an inflation-adjusted AMT exemption — effectively a deduction — in calculating your alternative minimum taxable income. The TCJA significantly increased the exemption amounts for 2018-2025. The OBBBA made the TCJA increased exemption amounts permanent, with annual inflation adjustments.

For 2025, the exemption amounts are $88,100 for unmarried individuals, $137,000 married joint-filing couples, and $68,500 for married individuals who file separate returns.

Exemption phase-out rule

At high levels of alternative minimum taxable income, your AMT exemption is phased out, which increases the odds that you’ll owe the tax. The TCJA dramatically increased the phase-out thresholds to levels where most taxpayers are unaffected by the phase-out rule. For 2025, the exemption begins to be phased out when alternative minimum taxable income exceeds $626,350 or $1,252,700 for a married joint-filing couple. For 2018-2025, the applicable exemption is reduced by 25% of the excess of your alternative minimum taxable income over the applicable phase-out threshold.

Mixed news in the OBBBA

Starting in 2026, the OBBBA makes the $500,000 and $1 million exemption phase-out threshold permanent. That’s the good news.

The bad news: Starting in 2026, the new law resets the exemption phase-out thresholds to $500,000 and $1 million with annual inflation adjustments for 2026 and beyond. So for 2026, these phase-out thresholds will be lower than the higher thresholds that apply for 2025. More bad news: Starting in 2026, the OBBBA increases the exemption phase-out percentage from 25% to 50%.

Bottom line: For 2026 and beyond, AMT exemptions for higher-income taxpayers can be phased out faster. That means more taxpayers may owe the AMT for 2026 and beyond.

AMT risk factors

Various interacting factors make it difficult to pinpoint exactly who’ll be hit by the AMT and who’ll dodge it. Here are five implications and risk factors.

1. Substantial income from capital gains or other sources. When you have high income, from whatever sources, it can cause your AMT exemption to be partially or completely phased out. That increases the odds that you’ll owe the AMT.
2. Itemized state and local tax (SALT) deductions. You can’t deduct SALT expenses under the AMT rules. This can hurt those living in high-tax states.
3. Exercise of incentive stock options (ISOs). When you exercise an ISO, the bargain element (the difference between the market value of the shares on the exercise date and your ISO exercise price) doesn’t count as income under the regular tax rules, but it counts as income under the AMT rules.
4. Standard deductions. Standard deductions are disallowed under the AMT rules.
5. Private activity bond interest income. This category of interest income is tax-free for regular tax purposes but taxable under the AMT rules.

Determine your status

The TCJA significantly reduced the odds that you’ll owe the AMT. But the OBBBA increases the odds for some taxpayers, thanks to unfavorable changes to the AMT exemption rules that will take effect in 2026. Don’t assume you’re exempt from AMT — especially if you have some of the risk factors outlined above. Contact us to determine your current status after the OBBBA changes take effect.

The One, Big, Beautiful Bill Act, recently signed into law, provides a great deal of certainty for affluent families. Beginning in 2026, it permanently increases the federal gift and estate tax exemption amount to $15 million ($30 million for married couples). The amount will continue to be adjusted annually for inflation. If your estate exceeds, or is expected to exceed, the exemption amount, consider implementing planning techniques today that can help you reduce or avoid gift and estate taxes down the road.

What if you’re not currently ready to give significant amounts of wealth to the next generation? Perhaps you want to hold on to your assets in case your circumstances change in the future.

Fortunately, there are techniques you can use to take advantage of the higher exemption amount while retaining some flexibility to access your wealth should a need arise. Here are two ways to build flexibility into your estate plan.

1. SLATs

If you’re married, a spousal lifetime access trust (SLAT) can be an effective tool for removing wealth from your estate while retaining access to it. A SLAT is an irrevocable trust, established for the benefit of your children or other heirs, which permits the trustee to make distributions to your spouse if needed, indirectly benefiting you as well.

So long as you don’t serve as trustee, the assets will be excluded from your estate and, if the trust is designed properly, from your spouse’s estate as well. For this technique to work, you must fund the trust with your separate property, not marital or community property.

Keep in mind that if your spouse dies, you’ll lose the safety net provided by a SLAT. To reduce that risk, many couples create two SLATs and name each other as beneficiaries. If you employ this strategy, be sure to plan the arrangement carefully to avoid running afoul of the “reciprocal trust doctrine.”

Under the doctrine, the IRS may argue that the two trusts are interrelated and leave the spouses in essentially the same economic position they would’ve been in had they named themselves as life beneficiaries of their own trusts. If that’s the case, the arrangement may be unwound and the tax benefits erased.

2. SPATs

A special power of appointment trust (SPAT) is an irrevocable trust in which you grant a special power of appointment to a spouse or trusted friend. This person has the power to direct the trustee to make distributions to you.

Not only are the trust assets removed from your estate (and shielded from gift taxes by the current exemption), but so long as you are neither a trustee nor a beneficiary, the assets will enjoy protection against creditors’ claims.

Hold on to your assets

These strategies are just two that you can include in your estate plan to take advantage of the newly permanent exemption amount while maintaining control of your assets. Contact us for more details.