MANCHESTER, NH — Recent findings from Consumer Reports indicate that significant tax changes, such as tax-free tips and an enhanced child tax credit, may affect your federal tax return this year. The legislation known as the “One Big Beautiful Bill” has introduced various new deductions. For instance, tips are now tax-free, and taxpayers can possibly deduct as much as $25,000 of reported tip income.
“A lot of taxpayers, particularly those working in the service industry, might qualify for this credit,” explained Kelly Tassin, an accounting professor at Missouri State University. “However, once your earnings hit a certain threshold, that deduction starts to decline until it’s completely eliminated.”
Additionally, the new “overtime tax-free” deduction allows individuals to deduct up to $12,500. Seniors aged 65 and above may also qualify for an extra $6,000 deduction, but it phases out for incomes over $75,000. To adjust for inflation, the child tax credit has risen to $2,200 per child.
If you financed a new car for personal use last year, you might be able to claim up to $10,000 in interest deductions, as long as the car was assembled in the United States. “This deduction is intended to promote the purchase of American-made vehicles,” Tassin noted, adding that taxpayers need to provide the vehicle’s identification number and that the loan must be originated by them.
If you find yourself owing money to the IRS and are short on funds, it’s crucial to file by April 15, pay what you can, and select a payment option, such as a credit card or an IRS installment agreement. “There is a fee for using this option, but keep in mind that interest will still accrue,” Tassin cautioned.
Consumer Reports highlighted the necessity of being aware of which changes affect you, reviewing your tax withholding, keeping accurate records, and filing any debts on time. Moreover, new transparency requirements mandate that the IRS clearly detail basic mathematical mistakes on returns, giving you 60 days to appeal if necessary.
