President Trump responds to his spending bill passing
“It was very easy to get Jesus,” President Donald Trump responded to his passing of tax and spending bills.
The tax season is not yet nearing its start, but it’s time to start planning to take advantage of the new provisions of the massive tax and expenditure bill that became law at the beginning of July, experts say.
There are no tips or taxes on overtime, and the $6,000 bonus deduction for seniors is well-published, but there are many more tax changes available. Other highlights include charitable contribution deductions, interest deductions for certain new vehicles on car loans, and family deductions and credit increases.
Brian Gray, Certified Public Accountant and Tax Partner at Gursey Schneide, said: There are a lot right now.
Charitable contributions are no longer just for items
OBBB will forever bring back the charitable contribution deduction to those who receive the standard deduction from 2026.
During the 2020 pandemic, the CARES Act allowed a temporary deduction of up to $300 for cash contributions for individuals receiving the standard deduction. The temporary deduction was extended to $600 for married couples co-submitted in 2021, and has since expired.
Under the OBBB, “A year-end charity deduction plan could be beneficial,” Gray said. “If you can’t itemize, you can deduct $1,000 per person or $2,000 per couple.”
The above deductions can be taken without itemizing them. It’s worth it as it could lower your adjusted gross income, lower your tax liability and help you qualify for other deductions or tax credits.
Personal car loan interest deduction
Brian Schultz, a certified public accountant for Plante Moran Wealth Management’s tax practices, said OBBB can deduct interest on new individual car loans for first timers.
Interest on personal car loans was previously deductible, but was only an itemized deduction until the 1986 Tax Reform Act ruled out.
Under the OBBB, Americans can deduct interest rates up to $10,000 on taxes, starting in 2025-2028.
Some warnings have specific requirements to qualify for the deduction, which can make it difficult to take advantage of. For example, the purchase must be a new US assembled vehicle for personal use, with income restrictions applied.
However, if you can find a qualified vehicle and are eligible for a deduction, the calculations can change when deciding whether to purchase or lease the vehicle or lease each cost, Schultz said.
More benefits for families
Schultz said that even if a family receives the standard deduction, there are two benefits that families should know.
- If your employer offers a flexible spending account (DCFSA) for higher dependency care. Before taxes are deducted, the funds will be withdrawn from your salary and can be used to care for children and adults who are generally unable to take care of themselves.
OBBB permanently increases the annual maximum contribution from $5,000 to $7,500 (or $3,750 for married couples). The increase will begin next year, but registration for these plans will soon begin in 2025, Schultz said.
The temporary increase during Covid was packed with contribution levels at $5,000 for 40 years, with the exception of $10,500 in 2021 from the US Rescue Plan Act in 2021 (or $5,250 for married people).
- Schultz said Child and Addiction Care Credit (CDCC) will receive a double boost starting in 2026.
First, credit rates increased from 35% to 50% of qualifying costs, up to $3,000 for one child, up to $6,000 for two or more children, and up to $6,000 for families with the lowest incomes. There is no upper limit on income, but the percentage gradually decreases as income rises.
Second, the income threshold for taxpayers receiving a minimum 20% credit jumped to $206,000 for couples who submitted jointly, for individuals from their pre-OBBB income levels of $86,000 and $43,000, respectively, for jointly submitted couples.
According to the fund for the first five years, these changes have led to an increase in tax credits for nearly 4 million families. It is a nonprofit focused on ensuring families have affordable access to quality childcare and early learning programs.
“Under current law, families with two young children who have two young children usually receive around $1,200,” Sara Litling, the organization’s executive director, said in a statement after Congress passed the OBBB. “With the enhancement, the benefits will be seen as a $900 boost that can make a meaningful difference for parents who manage tight budgets.”
With one plan, Americans could earn more credits, Schultz said. For example, increasing your contribution of 401(k) will reduce your taxable income sufficiently to win a large CDCC in 2026.
“A lot of new changes due to gradual out-of-revenue,” he said. “Beware of your income level.”
(Reissue to fix typos.)
Medora Lee is a money, market and personal finance reporter for USA Today. mjlee@usatoday.com and Subscribe to our free daily money newsletter Personal finance tips and business news every Monday to Friday.
