The IRS has released new guidance to help taxpayers who eligible to claim the deduction for tips and for overtime compensation for tax year 2025. https://t.co/OhhnEiPwPB ...

The IRS has released new guidance to help taxpayers who eligible to claim the deduction for tips and for overtime compensation for tax year 2025. https://t.co/OhhnEiPwPB ...

Core Insights - The article discusses IRS-approved tax shelters that can legally reduce tax liabilities for individuals, emphasizing the importance of compliance with tax laws [1][2] Tax Shelters Overview - Retirement accounts such as 401(k) and IRAs allow taxpayers to defer taxes until retirement, potentially lowering their tax burden when they withdraw funds [3][6] - The projected contribution limits for IRAs in 2026 are $7,500 for individuals under 50 and $8,600 for those 50 and older, reflecting an increase from 2025 limits [4] - Real estate investments provide tax advantages through various deductions, including mortgage interest and property taxes, although itemizing deductions is necessary [4][5]

It's open enrollment and if you get your health insurance through an Affordable Care Act plan, next year's premiums may shock you. I'm Sharon Eper, senior personal finance correspondent at CNBC and the author of the Money 101 newsletter. Imagine paying 26% more for health insurance next year.That's how much insurers premiums are expected to increase for ACA plans. But you could pay a lot more if enhanced tax subsidies are not extended beyond December 31st. your cost for coverage could double.So, here are th ...

Core Insights - The article discusses the benefits of Qualified Charitable Distributions (QCDs) for retirees, highlighting it as a tax-efficient way to donate to charity while reducing taxable income [2][5]. Group 1: Qualified Charitable Distributions (QCDs) - A QCD is a direct transfer from a pretax IRA to a qualified charity, allowing retirees to avoid taxable income that would otherwise affect their adjusted gross income (AGI) [2][3]. - Retirees aged 70½ or older can donate up to $108,000 through QCDs in 2023, with married couples able to each contribute this amount if both qualify [3]. - QCDs are particularly beneficial for retirees who do not itemize deductions, as 91% of filers opt for the standard deduction, meaning regular charitable donations do not lower their taxable income [4]. Group 2: Tax Implications and Requirements - QCDs provide a tax advantage as the donated amount is excluded from income, which is considered "better than a deduction" [5]. - Retirees aged 73 or older are required to take minimum distributions (RMDs) from their pretax retirement accounts, and failing to do so incurs penalties from the IRS [5].

Core Insights - Understanding the difference between tax deductions and tax credits is crucial for effective tax planning, as it can significantly impact financial outcomes [2][3]. Tax Deductions vs. Tax Credits - A tax deduction reduces taxable income, while a tax credit reduces tax liability dollar for dollar, making credits generally more powerful [3]. - For example, a $10,000 deduction in a 37% tax bracket saves $3,700, whereas a $10,000 tax credit reduces the tax owed by the full $10,000 [3]. Practical Applications - Knowledge of tax terms enables better financial planning and tax preparation, allowing individuals to maximize their benefits [4]. - Common deductions include mortgage interest, charitable contributions, and state and local taxes, which lower the income subject to tax [5]. - Identifying applicable tax credits, such as those for energy efficiency improvements, can further enhance tax savings [6].

Tax Deductions Overview - The One Big Beautiful Bill Act introduces four new tax deductions, including an enhanced deduction for seniors aged 65 and older, which allows an additional deduction of $6,000 starting with 2025 returns [1][15] - The new deductions are classified as "below-the-line deductions," meaning they do not reduce adjusted gross income (AGI) but are available to all eligible taxpayers, regardless of whether they itemize deductions or take the standard deduction [3][10][11] Specific Deductions - A new deduction for car loans will be available for loans taken out in 2025 to purchase new cars assembled in the U.S. This deduction does not apply to used cars or vehicles assembled outside the U.S. [2][5] - The maximum annual deduction for tip income is set at $25,000 per return, which can significantly reduce taxable income for eligible taxpayers [23] Eligibility and Limitations - Higher-income seniors may receive a reduced or no tax break, as the enhanced deduction phases out for modified AGI over $75,000 for singles and $150,000 for joint filers [1][28] - The "no tax on tips" deduction is not available for taxpayers who file as married filing separately, and tips must be reported to qualify for the deduction [29][22] Reporting and Compliance - Taxpayers must report qualified tips on specific forms (W-2, 1099, or Form 4137) to claim the deduction, and tips must be received as part of legal transactions [22][21] - Automatic service charges or mandatory gratuities do not qualify as "qualified tips" for the deduction, emphasizing the need for voluntary customer tips [31][30]

Core Points - The Federal Trade Commission (FTC) has reached a historic $2.5 billion settlement with Amazon over allegations of deceptive Prime subscription practices, including enrolling consumers without consent and complicating the cancellation process [2][3] Financial Implications - Amazon is required to pay a $1 billion civil penalty, the largest ever for an FTC rule violation, and provide $1.5 billion in refunds to approximately 35 million affected consumers [3] - The $1 billion penalty must be paid in two installments: $500 million within 14 days and the remaining $500 million due in 18 months [9] - The $1.5 billion in refunds is expected to be deductible as business expenses, potentially reducing Amazon's after-tax cost [7][9] Compliance Changes - The settlement mandates Amazon to implement significant changes to its Prime enrollment and cancellation processes, including a clear option for customers to decline Prime [3] - Amazon can no longer use misleading buttons that complicate the cancellation process, ensuring easier access for consumers wishing to cancel their Prime membership [3]

Core Points - The One Big Beautiful Bill Act (OBBBA) increased the state and local tax (SALT) cap deduction to $40,000 from $10,000, benefiting homeowners in high property tax states [1] - The Tax Cuts and Jobs Act (TCJA) of 2017 made many itemized deductions permanent, but there are still opportunities for middle-class Americans to reduce tax bills starting with their 2025 returns [3] Mortgage Interest - Homeowners can deduct mortgage interest paid on up to $750,000 of mortgage debt starting in 2025, as per IRS guidelines [4] - Taxpayers should obtain their 1098 form from lending institutions to report mortgage interest [4][5] Medical Expenses - Medical expenses can be deducted if combined with SALT payments exceed the standard deduction, but only expenses exceeding 7.5% of adjusted gross income (AGI) are eligible [6] - Qualified medical expenses include co-pays, medical bills, insurance premiums, and transportation costs to medical appointments [7]

Core Insights - The One Big Beautiful Bill Act (OBBBA) introduces new tax benefits for car buyers, including a temporary tax deduction on car loan interest, which may influence purchasing decisions [3][4] - Personal finance expert Suze Orman warns against using these tax benefits as justification for unplanned car purchases, emphasizing the importance of financial prudence [2][7] Tax Changes Summary - The OBBBA allows a temporary tax deduction of up to $10,000 on car loan interest until 2028, with income phase-out thresholds set at $100,000 for individuals and $200,000 for joint filers [3] - The act also ends the federal tax credit of $7,500 for new electric vehicle purchases and the $1,000 credit for home EV charging station installations, with expiration dates of September 30, 2025, and June 30, 2026, respectively [4] Market Implications - The average cost of a new car exceeds $49,000, and potential tariffs may further increase prices, which could lead to a rush in purchases due to perceived tax benefits [6] - Orman cautions that tax breaks should not be the primary reason for making significant investments in new cars, advocating for a more measured approach to car buying [7][8]