Author: Slattery & Holman, P.C.

 

The U.S. House of Representatives passed its sweeping tax and spending bill, dubbed The One, Big, Beautiful Bill Act (OBBBA), by a vote of 215 to 214. The bill includes extensions of many provisions of the Tax Cuts and Jobs Act (TCJA) that are set to expire on December 31. It also includes some new and enhanced tax breaks. For example, it contains President Trump’s pledge to exempt tips and overtime from income tax.

The bill has now moved to the U.S. Senate for debate, revisions and a vote. Several senators say they can’t support the bill as written and vow to make changes.

Here’s an overview of the major tax proposals included in the House OBBBA.

Business tax provisions

The bill includes several changes that could affect businesses’ tax bills. Among the most notable:

Bonus depreciation. Under the TCJA, first-year bonus depreciation has been phasing down 20 percentage points annually since 2023 and is set to drop to 0% in 2027. (It’s 40% for 2025.) Under the OBBBA, the depreciation deduction would reset to 100% for eligible property acquired and placed in service after January 19, 2025, and before January 1, 2030.

Section 199A qualified business income (QBI) deduction. Created by the TCJA, the QBI deduction is currently available through 2025 to owners of pass-through entities — such as S corporations, partnerships and limited liability companies (LLCs) — as well as to sole proprietors and self-employed individuals. QBI is defined as the net amount of qualified items of income, gain, deduction and loss that are effectively connected with the conduct of a U.S. business. The deduction generally equals 20% of QBI, not to exceed 20% of taxable income. But it’s subject to additional rules and limits that can reduce or eliminate the tax benefit. Under the OBBBA, the deduction would be made permanent. Additionally, the deduction amount would increase to 23% for tax years beginning after 2025.

Domestic research and experimental expenditures. The OBBBA would reinstate a deduction available to businesses that conduct research and experimentation. Specifically, the deduction would apply to research and development costs incurred after 2024 and before 2030. Providing added flexibility, the bill would allow taxpayers to elect whether to deduct or amortize the expenditures. (The requirement under current law to amortize such expenses would be suspended while the deduction is available.)

Section 179 expensing election. This tax break allows businesses to currently deduct (rather than depreciate over a number of years) the cost of purchasing eligible new or used assets, such as equipment, furniture, off-the-shelf computer software and qualified improvement property. An annual expensing limit applies, which begins to phase out dollar-for-dollar when asset acquisitions for the year exceed the Sec. 179 phaseout threshold. (Both amounts are adjusted annually for inflation.) The OBBBA would increase the expensing limit to $2.5 million and the phaseout threshold to $4 million for property placed into service after 2024. The amounts would continue to be adjusted annually for inflation. (Under current law, for 2025, the expensing limit is $1.25 million and the phaseout threshold is $3.13 million.)

Pass-through entity “excess” business losses. The Inflation Reduction Act, through 2028, limits deductions for current-year business losses incurred by noncorporate taxpayers. Such losses generally can offset a taxpayer’s income from other sources, such as salary, interest, dividends and capital gains, only up to an annual limit. “Excess” losses are carried forward to later tax years and can then be deducted under net operating loss rules. The OBBBA would make the excess business loss limitation permanent.

Individual tax provisions

The OBBBA would extend or make permanent many individual tax provisions of the TCJA. Among other things, the new bill would affect:

Individual income tax rates. The OBBBA would make permanent the TCJA income tax rates, including the 37% top individual income tax rate. If a new law isn’t enacted, the top rate would return to 39.6%.

Itemized deduction limitation. The bill would make permanent the repeal of the Pease limitation on itemized deductions. But it would impose a new limitation on itemized deductions for taxpayers in the 37% income tax bracket that would go into effect after 2025.

Standard deduction. The new bill would temporarily boost standard deduction amounts. For tax years 2025 through 2028, the amounts would increase $2,000 for married couples filing jointly, $1,500 for heads of households and $1,000 for single filers. For seniors age 65 or older who meet certain income limits, an additional standard deduction of $4,000 would be available for those years. (Currently, the inflation-adjusted standard deduction amounts for 2025 are $30,000 for joint filers, $22,500 for heads of households and $15,000 for singles.)

Child Tax Credit (CTC). Under current law, the $2,000 per child CTC is set to drop to $1,000 after 2025. The income phaseout thresholds will also be significantly lower. And the requirement to provide the child’s Social Security number (SSN) will be eliminated. The OBBBA would make the CTC permanent, raise it to $2,500 per child for tax years 2025 through 2028 and retain the higher income phaseout thresholds. It would also preserve the requirement to provide a child’s SSN and expand it to require an SSN for the taxpayer (generally the parent) claiming the credit. After 2028, the CTC would return to $2,000 and be adjusted annually for inflation.

State and local tax (SALT) deduction. The OBBBA would increase the TCJA’s SALT deduction cap (which is currently set to expire after 2025) from $10,000 to $40,000 for 2025. The limitation would phase out for taxpayers with incomes over $500,000. After 2025, the cap would increase by 1% annually through 2033.

Miscellaneous itemized deductions. Through 2025, the TCJA suspended deductions subject to the 2% of adjusted gross income (AGI) floor, such as certain professional fees and unreimbursed employee business expenses. This means, for example, that employees can’t deduct their home office expenses. The OBBBA would make the suspension permanent.

Federal gift and estate tax exemption. Beginning in 2026, the bill would increase the federal gift and estate tax exemption to $15 million. This amount would be permanent but annually adjusted for inflation. (For 2025, the exemption amount is $13.99 million.)

New tax provisions

On the campaign trail, President Trump proposed several tax-related ideas. The OBBBA would introduce a few of them into the U.S. tax code:

No tax on tips. The OBBBA would offer a deduction from income for amounts a taxpayer receives from tips. Tipped workers wouldn’t be required to itemize deductions to claim the deduction. However, they’d need a valid SSN to claim it. The deduction would expire after 2028. (Note: The Senate recently passed a separate no-income-tax-on-tips bill that has different rules. To be enacted, the bill would have to pass the House and be signed by President Trump.)

No tax on overtime. The OBBBA would allow workers to claim a deduction for overtime pay they receive. Like the deduction for tip income, taxpayers wouldn’t have to itemize deductions to claim the write-off but would be required to provide an SSN. Also, the deduction would expire after 2028.

Car loan interest deduction. The bill would allow taxpayers to deduct interest payments (up to $10,000) on car loans for 2025 through 2028. Final assembly of the vehicles must take place in the United States, and there would be income limits to claim the deduction. Both itemizers and nonitemizers would be able to benefit.

Charitable deduction for nonitemizers. Currently, taxpayers can claim a deduction for charitable contributions only if they itemize on their tax returns. The bill would create a charitable deduction of $150 for single filers and $300 for joint filers for nonitemizers.

What’s next?

These are only some of the provisions in the massive House bill. The proposed legislation is likely to change (perhaps significantly) as it moves through the Senate and possibly back to the House. In addition to disagreements about the tax provisions, there are Senators who don’t agree with some of the spending cuts. Regardless, tax changes are expected this year. Turn to us for the latest developments.

Stay Informed

As the legislative process unfolds, we’ll continue to monitor the latest developments. Subscribe to our newsletter or contact us directly to see how potential changes may impact your personal or business tax situation.

 

© 2025

 

The U.S. House of Representatives has passed its budget reconciliation bill, dubbed The One, Big, Beautiful Bill. Among other things, the sweeping bill would eliminate clean vehicle credits by the end of 2025 in most cases.

If you’re planning to take advantage of the federal electric vehicle tax credit, the new House GOP bill may impact your decision. Here’s what you need to know.

The Current Credit

The Inflation Reduction Act (IRA) significantly expanded the Section 30D credit for qualifying clean vehicles placed in service after April 17, 2023. For eligible taxpayers, it extended the credit to any “clean vehicle,” including EVs, hydrogen fuel cell cars and plug-in hybrids, through 2032. It also created a new credit, Sec. 25E, for eligible taxpayers who buy used clean vehicles from dealers. That credit equals the lesser of $4,000 or 30% of the sale price.

The maximum credit for new vehicles is $7,500, based on meeting certain sourcing requirements for 1) critical minerals and 2) battery components. Clean vehicles that satisfy only one of the two requirements qualify for a $3,750 credit.

The Sec. 30D and Sec. 25E credits aren’t refundable, meaning you can’t receive a refund if you don’t have any tax liability. In addition, any excess credit can’t be carried forward if it’s claimed as an individual credit. A credit can be carried forward only if it’s claimed as a general business credit.

If you’re eligible for either credit (see below), you have two options for applying it. First, you can transfer the credit to the dealer to reduce the amount you pay for the vehicle (assuming you’re purchasing the vehicle for personal use). You’re limited to making two transfer elections in a tax year. Alternatively, you can claim the credit when you file your tax return for the year you take possession of the vehicle.

Buyer Requirements

To qualify for the Sec. 30D credit, you must purchase the vehicle for your own use (not resale) and use it primarily in the United States. The credit is also subject to an income limitation. Your modified adjusted gross income (MAGI) can’t exceed:

• $300,000 for married couples filing jointly or a surviving spouse,
• $225,000 for heads of household, or
• $150,000 for all other filers.

If your MAGI was less in the preceding tax year than in the year you take delivery of the vehicle, you can apply that amount for purposes of the income limit.

Note: As initially drafted, the GOP proposal would retain the Sec. 30D credit through 2026 for vehicles from manufacturers that have sold fewer than 200,000 clean vehicles.

For used vehicles, you similarly must buy the vehicle for your own use, primarily in the United States. You also must not:

• Be the vehicle’s original owner,
• Be claimed as a dependent on another person’s tax return, and
• Have claimed another used clean vehicle credit in the preceding three years.

A MAGI limit applies for the Sec. 25E credit, but with different amounts than those for the Sec. 30D credit:

• $150,000 for married couples filing jointly or a surviving spouse,
• $112,500 for heads of household, or
• $75,000 for all other filers.

You can choose to apply your MAGI from the previous tax year if it’s lower.

Vehicle Requirements

You can take advantage of the Sec. 30D credit only if the vehicle you purchase:

• Has a battery capacity of at least seven kilowatt hours,
• Has a gross vehicle weight rating of less than 14,000 pounds,
• Was made by a qualified manufacturer,
• Underwent final assembly in North America, and
• Meets critical mineral and battery component requirements.

In addition, 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 paid. It includes manufacturer-installed options, accessories and trim but excludes destination fees.

To qualify for the 25E used car credit, the vehicle must:

• Have a sale price of $25,000 or less, including all dealer-imposed costs or fees not required by law (legally required costs and fees, such as taxes, title or registration fees, don’t count toward the sale price),
• Be a model year at least two years before the year of purchase,
• Not have already been transferred after August 16, 2022, to a qualified buyer,
• Have a gross vehicle weight rating of less than 14,000 pounds, and
• Have a battery capacity of at least seven kilowatt hours.

The sale price for a used vehicle is determined after the application of any incentives — but before the application of any trade-in value.

Don’t Forget the Paperwork

Form 8936, “Clean Vehicle Credits,” must be filed with your tax return for the year you take delivery. The form is required regardless of whether you transferred the credit or chose to claim it on your tax return. Contact us if you have questions regarding the clean vehicle tax credits and their availability.

 

Need help claiming the EV tax credit? Contact us today to ensure you don’t miss out.

 

© 2025

 

The Tax Cuts and Jobs Act (TCJA) significantly limited the types of theft losses that are deductible on federal income taxes. But a recent “advice memo” (CCA 202511015) from the IRS’s Office of Chief Counsel suggests more victims of fraudulent scams may be able to claim a theft loss deduction than previously understood.

Casualty loss deduction basics

The federal tax code generally allows individuals to deduct the following types of losses, if they weren’t compensated for them by insurance or otherwise:

• Losses incurred in a business,
• Losses incurred in a transaction entered into for profit (but not connected to a business), or
• Losses not connected to a business or a transaction entered into for profit, which arise from a casualty or theft loss (known as personal casualty or theft losses).

A variety of fraud schemes may fall under the third category.

To deduct a theft loss, the taxpayer/victim generally must establish that:

• The loss resulted from conduct that’s deemed theft under applicable state law, and
• The taxpayer has no reasonable prospect of recovery of the loss.

From 2018 through 2025, though, the TCJA allows the deduction of personal casualty or theft losses only to the extent of personal casualty gains (for example, an insurance payout for stolen property or a destroyed home) except for losses attributable to a federally declared disaster. As a result, taxpayers who are fraud victims generally qualify for the deduction only if the loss was incurred in a transaction entered into for profit. That would exclude the victims of scams where no profit motive exists. The loss of the deduction can compound the cost of scams for such victims.

The IRS analysis

The IRS Chief Counsel Advice memo considers several types of actual scams and whether the requisite profit motive was involved to entitle the victims to a deduction. In each scenario listed below, the scam was illegal theft with little or no prospect of recovery:

Compromised account scam. The scammer contacted the victim, claiming to be a fraud specialist at the victim’s financial institution. The victim was induced to authorize distributions from IRA and non-IRA accounts that were allegedly compromised and transfer all the funds to new investment accounts. The scammer immediately transferred the money to an overseas account.

The IRS Chief Counsel found that the distributions and transfers were made to safeguard and reinvest all the funds in new accounts in the same manner as before the distributions. The losses, therefore, were incurred in a transaction entered into for profit and were deductible.

“Pig butchering” investment scam. This crime is so named because it’s intended to get every last dollar by “fattening up” the victim with fake returns, thereby encouraging larger investments. The victim here was induced to invest in cryptocurrencies through a website. After some successful investments, the victim withdrew funds from IRA and non-IRA accounts and transferred them to the website. After the balance grew significantly, the victim decided to liquidate the investment but couldn’t withdraw funds from the website.

The Chief Counsel determined that the victim transferred the funds for investment purposes. So the transaction was entered into for profit and the losses were deductible.

Phishing scam. The victim received an email from the scammer claiming that his accounts had been compromised. The email, which contained an official-looking letterhead and was signed by a “fraud protection analyst,” directed the victim to call the analyst at a provided number.

When the victim called, the scammer directed the victim to click a link in the email, giving the scammer access to the victim’s computer. Then, the victim was instructed to log in to IRA and non-IRA accounts, which allowed the scammer to grab the username and password. The scammer used this information to distribute all the account funds to an overseas account.

Because the victim didn’t authorize the distributions, the IRS weighed whether the stolen property (securities held in investment accounts) was connected to the victim’s business, invested in for profit or held as general personal property. The Chief Counsel found that the theft of property while invested established that the victim’s loss was incurred in a transaction entered into for profit and was deductible.

Romance scam. The scammer developed a virtual romantic relationship with the victim. Shortly afterwards, the scammer persuaded the victim to send money to help with supposed medical bills. The victim authorized distributions from IRA and non-IRA accounts to a personal bank account and then transferred the money to the scammer’s overseas account. The scammer stopped responding to the victim’s messages.

The Chief Counsel concluded this loss wasn’t deductible. The victim didn’t intend to invest or reinvest any of the distributed funds so there was no profit motive. In this case, the losses were nondeductible.

Note: If the scammer had directed the victim to a fraudulent investment scheme, the results likely would’ve been different. The analysis, in that situation, would mirror that of the pig butchering scheme.

Kidnapping scam. The victim was convinced that his grandson had been kidnapped. He authorized distributions from IRA and non-IRA accounts and directed the funds to an overseas account provided by the scammer.

The victim’s motive wasn’t to invest the distributed funds but to transfer them to a kidnapper. Unfortunately, these losses were also nondeductible.

What’s next?

It’s uncertain whether the TCJA’s theft loss limit will be extended beyond 2025. In the meantime, though, some scam victims may qualify to amend their tax returns and claim the loss deduction. Contact us if you need assistance or have questions about your situation.

 

© 2025

 

Victims of presidentially declared disasters in recent years who couldn’t previously claim a casualty loss deduction may now be able to claim a refund. Additional tax relief also might be available. Read on to learn more about the potential opportunities for victims of certain disasters.

Loosened restrictions for casualty losses

The tax relief comes via the Federal Disaster Tax Relief Act (FDTRA), which was signed into law by former President Biden in December 2024. Among other things, the law makes it easier to claim a deduction for qualified disaster-related personal casualty losses during a specific time period.

Previously, you could claim such a deduction only if you itemized your deductions. It was further limited by a $100 reduction per loss, and you were allowed to deduct only the amount of the loss that exceeded 10% of your adjusted gross income. The so-called 10% rule was applied after the $100 reduction.

Under the FDTRA, those restrictions no longer apply if you suffered a casualty loss attributable to a presidentially declared disaster (referred to as a “qualified disaster loss”) that began on or after December 28, 2019, and on or before December 12, 2024, and ended no later than January 11, 2025. (Note that this relief doesn’t apply to the 2025 California wildfires. See “Wildfire relief” below for information on other relief available to the victims of those and other more recent fires.)

In addition, the president must have made the disaster declaration between January 1, 2020, and February 10, 2025. The limit for such losses is that each separate casualty loss is deductible only after it exceeds $500.

Be aware that casualty losses are generally deductible in the year the loss is incurred. For example, if a qualified disaster occurred in 2022, but your insurance company didn’t deny your related claim until 2024, you’d deduct the loss for 2024. But you now have the option to deduct any loss attributable to a presidentially declared disaster in the tax year prior to the occurrence.

Wildfire relief

The FDTRA provides that “qualified wildfire relief payments” — including those made to Los Angeles County taxpayers affected by the 2025 California wildfires — can be excluded from gross income for tax purposes. It’s been estimated that this provision will return $512 million in taxes to wildfire victims. And it’ll protect payment recipients from losing certain income-based benefits, such as health insurance premium subsidies, Veterans Administration co-pay assistance and federal student aid.

The exclusion applies to any amount received by, or on behalf of, an individual as compensation for losses, expenses or damages, including for:

• Additional living expenses,
• Lost wages, other than compensation for lost wages paid by the employer which otherwise would have paid those wages,
• Personal injury,
• Death, and
• Emotional distress.

The compensation must have been granted for a federally declared disaster that was declared after December 31, 2014, as the result of a forest or range fire. The payments must be received during tax years beginning after December 31, 2019, and before January 1, 2026. Compensation from insurance and other reimbursements doesn’t qualify for the exclusion.

The law prohibits double-dipping. You can’t claim a deduction or credit for any expense excluded from income under the provision. And, if you use excluded qualified payments to purchase or improve property, you may not increase your basis or adjusted basis in the property by the excluded amount.

The IRS is also providing some relief related to filing deadlines for individuals and households that reside or have a business in Los Angeles County and were affected by wildfires and straight-line winds that began on January 7, 2025. These taxpayers have until October 15, 2025, to file various federal individual and business tax returns and make tax payments.

The new deadline applies to individual income tax returns and payments normally due on April 15, 2025. This relief also applies to the 2024 estimated tax payment that was due on January 15, 2025, and estimated tax payments normally due on April 15, June 16, and September 15, 2025.

It also applies to:

• Quarterly payroll and excise tax returns normally due on January 31, April 30, and July 31, 2025,
• Calendar-year partnership and S corporation returns normally due on March 17, 2025,
• Calendar-year corporation and fiduciary returns and payments normally due on April 15, 2025, and
• Calendar-year tax-exempt organization returns normally due on May 15, 2025.

East Palestine train derailment relief

The FDTRA also extends relief to victims of the train derailment on February 3, 2023, in East Palestine, Ohio. “East Palestine Train Derailment Payments” can be excluded from gross income.

The payments include any amount received by, or on behalf of, an individual as derailment-related compensation for:

• Loss,
• Damages,
• Expenses,
• Loss in real property value,
• Closing costs related to real property (including realtor commissions), and
• Inconvenience (including access to real property).

The compensation must have come from a federal, state or local government agency, Norfolk Southern Railway, or any subsidiary, insurer or agent of Norfolk Southern Railway.

Next steps for taxpayers

If you’re claiming any of the benefits under the FDTRA for a tax year for which you’ve already filed a tax return without claiming the benefits, you’ll need to file an amended return. We can file your amended return electronically if you’re amending a return for the current or prior two tax periods.

You must file Form 1040-X, Amended U.S. Individual Income Tax Return, on paper to amend your return if 1) the amended return is for earlier years, or 2) your prior year return was originally filed on paper during the current processing year. If you file your amended return electronically, you can elect to have any refund directly deposited into a U.S. financial institution account. Contact us with any questions and to prepare an amended return for you.

 

© 2025

 

President Trump and the Republican Congress plan to act swiftly to make broad changes to the United States — including its federal tax system. Congress is already working on legislation that would extend and expand provisions of the sweeping Tax Cuts and Jobs Act (TCJA), as well as incorporate some of Trump’s tax-related campaign promises.

To that end, GOP lawmakers in the U.S. House of Representatives have compiled a 50-page document that identifies potential avenues they may take, as well as how much these tax and other fiscal changes would cost or save. Here’s a preview of potential changes that might be on the horizon.

Big Plans

The TCJA is the signature tax legislation from Trump’s first term in office, and it cut income tax rates for many taxpayers. Some provisions — including the majority affecting individuals — are slated to expire at the end of 2025. The nonpartisan Congressional Budget Office estimates that extending the temporary TCJA provisions would cost $4.6 trillion over 10 years. For context, the federal debt currently rings in at more than $35 trillion, and the budget deficit is $711 billion.

In addition to supporting the continuation of the TCJA, the president has pushed to reduce the 21% corporate tax rate to 20% or 15%, with the goal of generating growth. He also supports eliminating the 15% corporate alternative minimum tax imposed by the Inflation Reduction Act (IRA), signed into law during the previous administration. It applies only to the largest C corporations.

Regarding tax cuts for individuals beyond TCJA extensions, Trump has expressed that he’s in favor of:

• Eliminating the estate tax (which currently applies only to estates worth more than $13.99 million),
• Repealing or raising the $10,000 cap on the deduction for state and local taxes,
• Creating a deduction for auto loan interest, and
• Eliminating income taxes on tips, overtime and Social Security benefits.

Finally, he wants to cut IRS funding, which would reduce expenditures but also reduce revenues. Without offsets, these plans would drive up the deficit significantly.

Possible Offsets

The House GOP document outlines numerous possibilities beyond just spending reductions to pay for these tax cuts. For example, tariffs — a major plank in Trump’s campaign platform — may play a role.

The GOP document suggests a 10% across-the-board import tariff. Trump, however, has discussed and imposed various tariff amounts, depending on the exporting country. The 25% tariffs on Canadian and Mexican products, which were imposed earlier, have been paused until March 4. An additional 10% tariff on Chinese imports took effect on February 4.

In addition, Trump said tariffs on goods from other countries, including the 27-member European Union, could happen soon. While he maintains that those countries will pay the tariffs, it’s generally the U.S. importer of record that’s responsible for paying tariffs. Economists generally agree that at least part of the cost would then be passed on to consumers.

The House GOP document also examines generating savings through changes to various tax breaks. Here are some of the options:

The mortgage interest deduction. Suggestions include eliminating the deduction or lowering the current $750,000 limit to $500,000.

Head of household status. The document looks at eliminating this status, which provides a higher standard deduction and certain other tax benefits to unmarried taxpayers with children compared to single filers.

The child and dependent care tax credit. The document considers eliminating the credit for qualified child and dependent care expenses.

Renewable energy tax credits. The IRA created or expanded various tax credits encouraging renewable energy use, including tax credits for electric vehicles and residential clean energy improvements, such as solar panels and heat pumps. The GOP has proposed changes ranging from a full repeal of the IRA to more limited deductions.

Employer-provided benefits. Revenue could be raised by eliminating taxable income exclusions for transportation benefits and on-site gyms.

Health insurance subsidies. Premium tax credits are currently available for households with income above 400% of the federal poverty line (the amounts phase out as income increases). Revenue could be raised by limiting such subsidies to the “most needy Americans.”

Education-related breaks are also being assessed. The House GOP document looks at how much revenue could be generated by eliminating credits for qualified education expenses, the deduction for student loan interest and federal income-driven repayment plans. The GOP is also weighing the elimination of interest subsidies for federal loans while borrowers are still in school and imposing taxes on scholarships and fellowships, which currently are exempt.

The Hurdles

Republican lawmakers plan on passing tax legislation using the reconciliation process, which requires only a simple majority in both houses of Congress. However, the GOP holds the majority in the House by only three votes.

That gives potential holdouts within their own caucus a lot of leverage. For example, deficit hawks might oppose certain proposals, while centrist members may prove reluctant to eliminate popular tax breaks and programs.

Republican representatives of all stripes are likely to oppose moves that would hurt industries in their districts, such as the reduction or elimination of certain clean energy incentives. And, of course, lobbyists will make their voices heard.

Stay Tuned

The GOP hopes to enact tax legislation within President Trump’s first 100 days in office, but that may be challenging. We’ll keep you apprised of important developments.

© 2025

A federal district court judge has struck down the Biden administration’s new rule regarding the salary threshold for determining whether certain employees are exempt from federal overtime pay requirements. The first phase of the rule took effect for most employers in July 2024 and affects executive, administrative and professional (EAP) employees.

With a Republican administration poised to take control of the U.S. Department of Labor (DOL), the court’s ruling may sound the death knell for the rule. Here’s what the ruling means for employers.

The rejected rule

Under the Fair Labor Standards Act (FLSA), nonexempt workers are entitled to overtime pay at 1.5 times their regular pay rate for hours worked per week that exceed 40. EAP employees are exempt from the overtime requirement if they satisfy three tests:

Salary basis test. An employee is paid a predetermined and fixed salary that isn’t subject to reduction due to variations in the quality or quantity of his or her work.

Salary level test. The salary isn’t less than a specific amount or threshold.

Duties test. An employee primarily performs executive, administrative or professional duties.

The new rule focused on the salary level test and increased the threshold in two steps. The first step occurred on July 1, 2024, when most salaried workers earning less than $844 per week or $43,888 per year became eligible for overtime (up from $684 per week or $35,568 per year). The second step was scheduled to kick in on January 1, 2025, when the salary threshold would have increased to $1,128 per week or $58,656 per year.

In addition, the rule raised the total compensation requirement for highly compensated employees (HCEs), who are subject to a more relaxed duties test than employees earning less. HCEs need only “customarily and regularly” perform at least one of the duties of an exempt EAP employee instead of primarily performing such duties.

As of July 1, 2024, this less restrictive test applied to HCEs who perform office or nonmanual work and earn total compensation (including bonuses, commissions and certain benefits) of at least $132,964 per year (up from $107,432). It would have risen to $151,164 on January 1, 2025.

The rule also established a mechanism to update the salary thresholds every three years, based on current earnings data from the most recent available four quarters of data from the U.S. Bureau of Labor Statistics. However, the DOL could temporarily delay a scheduled update when warranted by unforeseen economic or other conditions.

The court’s ruling

In June 2024, the U.S. District Court for the Eastern District of Texas temporarily blocked the rule as far as its application to the State of Texas as an employer — so on an extremely limited basis — while it considered the state’s underlying legal challenge to the rules (State of Texas v. U.S. Dep’t of Labor). Multiple business groups joined Texas and asked the court to vacate the rule entirely.

On November 15, 2024, the court did just that. It found that the new rule exceeded the DOL’s authority to define terms because the EAP exemption requires that an employee’s status turn on duties, not salary — and the new rule impermissibly made salary predominate over duties. The court also found the automatic updating mechanism exceeded the DOL’s authority.

Notably, the court cited the U.S. Supreme Court’s recent decision overturning the doctrine known as “Chevron deference.” Under the doctrine, which had been in effect for decades, courts deferred to “permissible” agency interpretations of the laws they administer. The high court’s ruling empowers courts to reject agency rules more easily.

Employer response

As a result of the court’s ruling, the salary thresholds for EAP employees and HCEs return to their earlier levels: $684 per week or $35,568 per year for the former and $107,432 for the latter. On its face, that’s good news for employers. However, many businesses have started making moves in response to the new rule. For example, employers may have reclassified some employees as nonexempt, increased salaries to retain exempt status for others or reduced salaries to offset new overtime pay. Now what?

Of course, the DOL could appeal the ruling, which could make employers reluctant to institute any immediate changes. An appeal would be heard by the conservative Fifth Circuit Court of Appeals, which has repeatedly ruled against the Biden administration.

The best predictor of what’s to come may be the treatment of a similar DOL rule issued by President Obama’s administration. A court invalidated the rule in November 2016 in a ruling that was appealed while Obama was still in office. The DOL under President Trump’s first administration withdrew the appeal and issued the revised and less expansive rule that took effect in 2019.

Regardless, bear in mind that exempt employees also must satisfy the applicable duties test, whatever the salary threshold. An employee whose salary exceeds the threshold but doesn’t primarily engage in the applicable duties isn’t exempt from the overtime requirements.

Proceed with caution

Employers that roll back changes in status or salary increases that were implemented in anticipation of the new rule may find that employees — or their attorneys — begin to question whether their duties warrant an exemption. Even if they don’t pursue litigation, rollbacks must be weighed against the impact on employee morale in a competitive job market. The best course will vary by employer, and legal advice is strongly encouraged. We’ll keep you updated on the latest news regarding the ruling.

© 2025

The IRS has issued its 2025 inflation-adjusted contribution amounts for retirement plans in Notice 2024-80. Many retirement-plan-related limits will increase for 2025 — but less than in prior years. Thus, depending on the type of plan you have, you may have limited opportunities to increase your retirement savings.

Type of limitation	2024 limit	2025 limit
Elective deferrals to 401(k), 403(b), 457(b)(2) and 457(c)(1) plans	$23,000	$23,500
Annual benefit limit for defined benefit plans	$275,000	$280,000
Contributions to defined contribution plans	$69,000	$70,000
Contributions to SIMPLEs	$16,000	$16,500
Contributions to traditional and Roth IRAs	$7,000	$7,000
Catch-up contributions to 401(k), 403(b) and 457 plans for those age 50 or older	$7,500	$7,500
Catch-up contributions to 401(k), 403(b) and 457 plans for those age 60, 61, 62 or 63*	N/A	$11,250
Catch-up contributions to SIMPLE plans for those age 50 or older	$3,500	$3,500
Catch-up contributions to SIMPLE plans for those age 60, 61, 62 or 63*	N/A	$5,250
Catch-up contributions to IRAs for those age 50 or older	$1,000	$1,000
Compensation for benefit purposes for qualified plans and SEPs	$345,000	$350,000
Minimum compensation for SEP coverage	$750	$750
Highly compensated employee threshold	$155,000	$160,000

* A change that takes effect in 2025 under SECURE 2.0

Your MAGI may reduce or even eliminate your ability to take advantage of IRAs. Fortunately, IRA-related MAGI phaseout range limits all will increase for 2025:

Traditional IRAs

MAGI phaseout ranges apply to the deductibility of contributions if a taxpayer (or his or her spouse) participates in an employer-sponsored retirement plan:

• For married taxpayers filing jointly, the phaseout range is specific to each spouse based on whether he or she is a participant in an employer-sponsored plan:
  • For a spouse who participates, the 2025 phaseout range limits will increase by $3,000, to $126,000–$146,000.
  • For a spouse who doesn’t participate, the 2025 phaseout range limits will increase by $6,000, to $236,000–$246,000.
• For single and head-of-household taxpayers participating in an employer-sponsored plan, the 2025 phaseout range limits will increase by $2,000, to $79,000–$89,000.

Taxpayers with MAGIs in the applicable range can deduct a partial contribution; those with MAGIs exceeding the applicable range can’t deduct any IRA contribution.

But a taxpayer whose deduction is reduced or eliminated can make nondeductible traditional IRA contributions. The $7,000 contribution limit for 2025 (plus $1,000 catch-up, if applicable, and reduced by any Roth IRA contributions) still applies. Nondeductible traditional IRA contributions may also be beneficial if your MAGI is too high for you to contribute (or fully contribute) to a Roth IRA.

Roth IRAs

Whether you participate in an employer-sponsored plan doesn’t affect your ability to contribute to a Roth IRA, but MAGI limits may reduce or eliminate your ability to contribute:

• For married taxpayers filing jointly, the 2025 phaseout range limits will increase by $6,000, to $236,000–$246,000.
• For single and head-of-household taxpayers, the 2025 phaseout range limits will increase by $4,000, to $150,000–$165,000.

You can make a partial contribution if your MAGI falls within the applicable range, but no contribution if it exceeds the top of the range.

(Note: Married taxpayers filing separately are subject to much lower phaseout ranges for traditional and Roth IRAs.)

Revisit your retirement plan

To better ensure that your retirement plans remain on track, consider these 2025 inflation-adjusted contribution limits. We can help you review your plans and make any necessary modifications.

 

© 2025

The outcome of the November 5 election is likely to significantly impact taxes. Many provisions in President-elect Donald Trump’s signature tax legislation from his first time in the White House, the Tax Cuts and Jobs Act (TCJA), are scheduled to expire at the end of 2025. Now, there’s a better chance that most provisions will be extended.

This is especially true as Republicans have won back a majority in the U.S. Senate. As of this writing, Republicans have 52 seats, with a few seats yet to be called, so their majority could grow. The balance of power in the U.S. House of Representatives remains up in the air, with quite a few seats yet to be called.

In addition to the TCJA, the former and future president has suggested many other tax law changes during his campaign. Here’s a brief overview of some potential tax law changes:

Expiring provisions of the TCJA

Examples of expiring provisions include lower individual tax rates, an increased standard deduction, and a higher gift and estate tax exemption. The president-elect would like to make the TCJA’s individual and estate tax cuts permanent. He’s also indicated that he’s open to revisiting the TCJA’s $10,000 limit on the state and local tax deduction.

Business taxation

President-elect Trump has proposed decreasing the corporate tax rate from its current 21% to 20% (or even lower for companies making products in America). He’d also like to expand the Section 174 deduction for research and development expenditures.

Individual taxable income

The president-elect has proposed eliminating income and payroll taxes on tips for restaurant and hospitality workers, and excluding overtime pay and Social Security benefits from taxation.

Housing incentives

President-elect Trump has alluded to possible tax incentives for first-time homebuyers but without specifics. The Republican platform calls for reducing mortgage rates by slashing inflation, cutting regulations and opening parts of federal lands to new home construction.

Tariffs

The president-elect has called for higher tariffs on imports, suggesting a baseline tariff of 10%, with a 60% tariff on imports from China. (In speeches, he’s proposed a 100% tariff on certain imported cars.)

Final Thoughts

Which extensions and proposals will actually come to fruition will depend on a variety of factors. For example, Congress has to pass tax bills before the president can sign them into law. If you have questions on how these potential changes may affect your overall tax liability, please contact us.

 

© 2025

2025 ordinary-income tax brackets
Tax rate	Single	Head of household	Married filing jointly or surviving spouse	Married filing separately
10%	$0 –   $11,925	$0 –   $17,000	$0 –   $23,850	$0 –   $11,925
12%	$11,926 –   $48,475	$17,001 –   $64,850	$23,851 –   $96,950	$11,926 –   $48,475
22%	$48,476 – $103,350	$64,851 – $103,350	$96,951 – $206,700	$48,476 – $103,350
24%	$103,351 – $197,300	$103,351 – $197,300	$206,701 – $394,600	$103,351 – $197,300
32%	$197,301 – $250,525	$197,301 – $250,500	$394,601 – $501,050	$197,301 – $250,525
35%	$250,526 – $626,350	$250,501 – $626,350	$501,051 – $751,600	$250,526 – $375,800
37%	Over $626,350	Over $626,350	Over $751,600	Over $375,800

Note that under the TCJA, the rates and brackets are scheduled to return to their pre-TCJA levels (adjusted for inflation) in 2026 if Congress doesn’t extend the current levels or make other changes.

Standard deduction

The TCJA nearly doubled the standard deduction, indexed annually for inflation, through 2025. In 2025, the standard deduction will be $30,000 for married couples filing jointly, $22,500 for heads of households, and $15,000 for singles and married couples filing separately.

After 2025, the standard deduction amounts are scheduled to drop back to the amounts under pre-TCJA law unless Congress extends the current rules or revises them. Also worth noting is that the personal exemption that was suspended by the TCJA is scheduled to return in 2026. Of course, Congress could extend the suspension.

Long-term capital gains rate

The long-term gains rate applies to realized gains on investments held for more than 12 months. For most types of assets, the rate is 0%, 15% or 20%, depending on your income. While the 0% rate applies to most income that would be taxed at 12% or less based on the taxpayer’s ordinary-income rate, the top long-term gains rate of 20% kicks in before the top ordinary-income rate does.

2025 long-term capital gains brackets*
Tax rate	Single	Head of household	Married filing jointly or surviving spouse	Married filing separately
0%	$0 –   $48,350	$0 –   $64,750	$0 –   $96,700	$0 –   $48,350
15%	$48,351 – $533,400	$64,751 – $566,700	$96,701 – $600,050	$48,351 – $300,000
20%	Over $533,400	Over $566,700	Over $600,050	Over $300,000
* Higher rates apply to certain types of assets.

As with ordinary income tax rates and brackets, those for long-term capital gains are scheduled to return to their pre-TCJA levels (adjusted for inflation) in 2026 if Congress doesn’t extend the current levels or make other changes.

AMT

The alternative minimum tax (AMT) is a separate tax system that limits some deductions, doesn’t permit others and treats certain income items differently. If your AMT liability exceeds your regular tax liability, you must pay the AMT.

Like the regular tax brackets, the AMT brackets are annually indexed for inflation. In 2025, the threshold for the 28% bracket will increase by $6,500 for all filing statuses except married filing separately, which will increase by half that amount.

2025 AMT brackets
Tax rate	Single	Head of household	Married filing jointly or surviving spouse	Married filing separately
26%	$0 – $239,100	$0 – $239,100	$0 – $239,100	$0 – $119,550
28%	Over $239,100	Over $239,100	Over $239,100	Over $119,550

The AMT exemptions and exemption phaseouts are also indexed. The exemption amounts in 2025 will be $88,100 for singles and $137,000 for joint filers, increasing by $2,400 and $3,700, respectively, over 2024 amounts. The inflation-adjusted phaseout ranges in 2025 will be $626,350–$978,750 for singles and $1,252,700–$1,800,700 for joint filers. Phaseout ranges for married couples filing separately are half of those for joint filers.

The exemptions and phaseouts were significantly increased under the TJCA. Without Congressional action, they’ll drop to their pre-TCJA levels (adjusted for inflation) in 2026.

Education and child-related breaks

The maximum benefits of certain education and child-related breaks will generally remain the same in 2025. But most of these breaks are limited based on a taxpayer’s modified adjusted gross income (MAGI). Taxpayers whose MAGIs are within an applicable phaseout range are eligible for a partial break — and breaks are eliminated for those whose MAGIs exceed the top of the range.

The MAGI phaseout ranges will generally remain the same or increase modestly in 2025, depending on the break. For example:

The American Opportunity credit. For tax years beginning after December 31, 2020, the MAGI amount used by joint filers to determine the reduction in the American Opportunity credit isn’t adjusted for inflation. The credit is phased out for taxpayers with MAGIs in excess of $80,000 ($160,000 for joint returns). The maximum credit per eligible student is $2,500.

The Lifetime Learning credit. For tax years beginning after December 31, 2020, the MAGI amount used by joint filers to determine the reduction in the Lifetime Learning credit isn’t adjusted for inflation. The credit is phased out for taxpayers with MAGIs in excess of $80,000 ($160,000 for joint returns). The maximum credit is $2,000 per tax return.

The adoption credit. The MAGI phaseout range for eligible taxpayers adopting a child will increase in 2025 — by $7,040. It will be $259,190–$299,190 for joint, head-of-household and single filers. The maximum credit will increase by $470, to $17,280 in 2025.

Note: Married couples filing separately generally aren’t eligible for these credits.

These are only some of the education and child-related tax breaks that may benefit you. Keep in mind that, if your MAGI is too high for you to qualify for a break for your child’s education, your child might be eligible to claim one on his or her tax return.

Gift and estate taxes

The unified gift and estate tax exemption and the generation-skipping transfer (GST) tax exemption are both adjusted annually for inflation. In 2025, the amount will be $13.99 million (up from $13.61 million in 2024). Beware that the TJCA approximately doubled these exemptions starting in 2018. Both exemptions are scheduled to drop significantly in 2026 if lawmakers don’t extend the higher amount or make other changes.

The annual gift tax exclusion will increase by $1,000, to $19,000 in 2025. (It isn’t part of a TCJA provision that’s scheduled to expire.)

Crunching the numbers

With the 2025 inflation adjustment amounts trending slightly higher than 2024 amounts, it’s important to understand how they might affect your tax and financial situation. Also keep in mind that many amounts could change substantially in 2026 because of expiring TCJA provisions — or new tax legislation, which could even go into effect sooner. We’d be happy to help crunch the numbers and explain the tax-saving strategies that may make the most sense for you in the current environment of tax law uncertainty.

 

© 2025

Hurricane Milton has caused catastrophic damage to many parts of Florida. Less than two weeks earlier, Hurricane Helene victimized millions of people in multiple states across the southeastern portion of the country. The two devastating storms are among the many weather-related disasters this year. Indeed, natural disasters have led to significant losses for many taxpayers, from hurricanes, tornadoes and other severe storms to the wildfires again raging in the West.

If your family or business has been affected by a natural disaster, you may qualify for a casualty loss deduction and federal tax relief.

Understanding the casualty loss deduction

A casualty loss can result from the damage, destruction or loss of property due to any sudden, unexpected or unusual event. Examples include floods, hurricanes, tornadoes, fires, earthquakes and volcanic eruptions. Normal wear and tear or progressive deterioration of property doesn’t constitute a deductible casualty loss. For example, drought generally doesn’t qualify.

The availability of the tax deduction for casualty losses varies depending on whether the losses relate to personal- or business-use items. Generally, you can deduct casualty losses related to your home, household items and personal vehicles if they’re caused by a federally declared disaster. Under current law, that’s defined as a disaster in an area that the U.S. president declares eligible for federal assistance. Casualty losses related to business or income-producing property (for example, rental property) can be deducted regardless of whether they occur in a federally declared disaster area.

Casualty losses are deductible in the year of the loss, usually the year of the casualty event. If your loss stems from a federally declared disaster, you can opt to treat it as having occurred in the previous year. You may receive your refund more quickly if you amend the previous year’s return than if you wait until you file your return for the casualty year.

Factoring in reimbursements

If your casualty loss is covered by insurance, you must reduce the loss by the amount of any reimbursement or expected reimbursement. (You also must reduce the loss by any salvage value.)

Reimbursement also could lead to capital gains tax liability. When the amount you receive from insurance or other reimbursements (less any expense you incurred to obtain reimbursement, such as the cost of an appraisal) exceeds the cost or adjusted basis of the property, you have a capital gain. You’ll need to include that gain as income unless you’re eligible to postpone reporting the gain.

You may be able to postpone the reporting obligation if you purchase property that’s similar in service or use to the destroyed property within the specified replacement period. You can also postpone if you buy a controlling interest (at least 80%) in a corporation owning similar property or if you spend the reimbursement to restore the property.

Alternatively, you can offset casualty gains with casualty losses not attributable to a federally declared disaster. This is the only way you can deduct personal-use property casualty losses incurred in locations not declared disaster areas.

Calculating casualty loss

For personal-use property, or business-use or income-producing property that isn’t completely destroyed, your casualty loss is the lesser of:

• The adjusted basis of the property immediately before the loss (generally, your original cost, plus improvements and less depreciation), or
• The drop in fair market value (FMV) of the property as a result of the casualty (that is, the difference between the FMV immediately before and immediately after the casualty).

For business-use or income-producing property that’s completely destroyed, the amount of the loss is the adjusted basis less any salvage value and reimbursements.

If a single casualty involves more than one piece of property, you must figure each loss separately. You then combine these losses to determine the casualty loss.

An exception applies to personal-use real property, such as a home. The entire property (including improvements such as landscaping) is treated as one item. The loss is the smaller of the decline in FMV of the whole property and the entire property’s adjusted basis.

Other limits may apply to the amount of the loss you can deduct, too. For personal-use property, you must reduce each casualty loss by $100 (after you’ve subtracted any salvage value and reimbursement).

If you suffer more than one casualty loss during the tax year, you must reduce each loss by $100 and report each on a separate IRS form. If two or more taxpayers have losses from the same casualty, the $100 rule applies separately to each taxpayer.

But that’s not all. For personal-use property, you also must reduce your total casualty losses by 10% of your adjusted gross income after you’ve applied the $100 rule. As a result, smaller personal-use casualty losses often provide little or no tax benefit.

Keeping necessary records

Documentation is critical to claim a casualty loss deduction. You’ll need to show:

• That you were the owner of the property or, if you leased it, that you were contractually liable to the owner for the damage,
• The type of casualty and when it occurred,
• That the loss was a direct result of the casualty, and
• Whether a claim for reimbursement with a reasonable expectation of recovery exists.

You also must be able to establish your adjusted basis, reimbursements and, for personal-use property, pre- and post-casualty FMVs.

Qualifying for IRS relief

This year, the IRS has granted tax relief to taxpayers affected by numerous natural disasters. For example, Hurricane Helene relief was recently granted to the entire states of Alabama, Georgia, North Carolina and South Carolina and parts of Florida, Tennessee and Virginia. The relief typically extends filing and other deadlines. The IRS may provide additional relief to Hurricane Milton victims. (For detailed information about your area, visit: https://bit.ly/3nzF2ui.)

Be aware that you can be an affected taxpayer even if you don’t live in a federally declared disaster area. You’re considered affected if records you need to meet a filing or payment deadline postponed during the applicable relief period are located in a covered disaster area. For example, if you don’t live in a disaster area but your tax preparer does and is unable to pay or file on your behalf, you likely qualify for filing and payment relief.

Turning to us for help

If you’ve had the misfortune of incurring casualty losses due to a natural disaster, contact us. We’d be pleased to help you take advantage of all available tax benefits and relief.

 

© 2025