Charles Buckley, CPA

There are many changes to your personal taxes due to the H.R. 1, P.L. 119-21. I’m not going to use the funny acronym for it, sorry. This act has made your federal taxes more complicated in some respects. Overall the standard deduction is still pretty high so most folks will continue to benefit from the simplicity of not itemizing.

A couple changes that I have found interesting:

• State and Local Tax Deductions – This has been increased to $40k maximum, which will benefit most people in Duxbury who work and own a property.
• Tip income deduction – the act created a deduction of up to $25k for qualified tips received by a person in an occupation that customarily and regularly receives tips. As with most deductions, there are income level phase outs.
• Overtime income deduction – similar to tips but $12,500 for single and 25k for a joint return.
• Auto loan interest deduction – up to 10k for individuals with Modified Adjusted Gross Income less than $100k or $200k for MFJ.
• The assault on anything “Green” continues with the elimination of the electric vehicle credit and solar credit – those have expired and 2025 will be the last year to claim them.

More numbers and LEtters

STANDARD DEDUCTION

• Single: $15,750
• Married filing jointly and surviving spouses: $31,500
• Married filing separately: $15,750

ITEMIZED DEDUCTIONS

• Miscellaneous itemized deductions are disallowed.

STANDARD MILEAGE RATE

• Business: 70 cents per mile.
• Medical and moving: 21 cents per mile.
• Charitable services: 14 cents per mile.

TAX CREDITS

• Earned income: Maximum credit depends on number of qualifying children: $649 (none); $4,328 (one); $7,152 (two); and $8,046 (three or more), subject to phaseouts. The ceiling for disqualifying investment income is $11,950.
• Child: Maximum credit per child $2,200, with maximum refundable portion $1,700. Phases out at AGI above $200,000 (single) and $400,000 (married filing jointly). Social Security numbers required for taxpayers (or, on a joint return, at least one spouse) and qualifying children.
• Adoption expense: $17,280 maximum; phases out with MAGI between $259,190 and $299,190. Up to $5,000 refundable.
• American opportunity: $2,500 per year, per student maximum (100% of the first $2,000 of qualifying expenses and 25% of the next $2,000 paid by the taxpayer), with 40% of the credit refundable unless the taxpayer is a child subject to the kiddie tax. Phases out for single taxpayers with MAGI between $80,000 and $90,000 ($160,000–$180,000 for married taxpayers filing jointly).
• Lifetime learning: 20% of up to $10,000 of qualified tuition and related expenses paid by the taxpayer. Phases out between $80,000 and $90,000 of MAGI for single filers and $160,000–$180,000 for married taxpayers filing jointly.
• Sec. 25D residential clean energy: 30% of amount paid for qualifying property (for qualified fuel cell property, maximum credit of $500 for each 0.5 kilowatt of capacity).
• Small business health insurance: 50% of amount of nonelective contributions an eligible small employer makes on behalf of its employees for premiums for certain health insurance coverage (35% credit against payroll tax for a tax-exempt small employer). Available for two consecutive tax years. Phases out for employers with 10–25 full-time-equivalent employees and average annual wages between $33,300 and $66,600.

RETIREMENT PLAN LIMITS

• Maximum 401(k) plan elective deferral: $23,500 (plus $7,500 catch-up for individuals age 50+ and $11,250 for individuals who attain age 60–63 in 2025).
• Defined benefit plan maximum benefit: $280,000.
• Defined contribution plan contribution limit: $70,000 or 100% of compensation, whichever is less.
• IRA deductible contribution limit: $7,000 (plus $1,000 catch-up for age 50+).
• IRA deduction phaseout for active participant in a workplace retirement plan: MAGI from $126,000–$146,000 (married filing jointly); $79,000–$89,000 (single taxpayers and heads of household); $0–$10,000 (married filing separately); $236,000–$246,000 (individual who is not an active participant in a workplace retirement plan but whose spouse is).
• Roth IRA contribution limit: $7,000 (plus $1,000 catch-up for age 50+).
• Roth IRA contribution limit phaseout (MAGI): $236,000–$246,000 (married filing jointly); $150,000–$165,000 (single and heads of household); $0–$10,000 (married filing separately).