What the New Tax Bill Means for Parents
Deductions, credits and more The One Big Beautiful Bill Act of 2025 (OBBBA) contains a number of tax breaks for parents. Here’s a summary of what’s in the bill for families, including planning tips to make the most of each tax break. Parents get a permanent increase to the child tax credit. The child tax credit increases to $2,200 (up from $2,000) and is now permanent. The refundable portion stays at $1,700, with future adjustments tied to inflation. Planning Tip: If your adjusted gross income will approach $200,000 (single) or $400,000 (married), look for ways to reduce your income to avoid phasing out the credit. Strategies like contributing more to retirement accounts, health savings accounts, or flexible spending accounts can help keep you below the limit and maintain your eligibility for the full credit. Student loan cancellation is tax-free. Forgiveness of student loans due to death or permanent disability is now permanently excluded from taxable income. Planning Tip: Review disability paperwork for accuracy and ensure it is completed and submitted through the appropriate loan service office or the Department of Education’s Total and Permanent Disability discharge process. If you’re a parent borrower (such as with a PLUS loan), consider including this tax benefit in your estate or disability planning discussions. Adoption tax credit. $5,000 of the $17,280 adoption tax credit in 2025 is now refundable, even for families with little or no income tax liability. Planning Tip: To take full advantage of the non-refundable portion of the credit (up to $12,280), you’ll need to have a tax liability. Consider delaying certain deductions or, if possible, shifting taxable income into the year you claim the credit so you can take advantage of the non-refundable portion of the credit. But remember that the credit starts to phase out at $259,190 of income. Trump accounts. Each child born between January 1, 2025, and December 31, 2028, will receive a $1,000 tax-advantaged investment account at birth. Parents, grandparents, and qualified organizations can contribute up to $5,000 per year, until the year before the child turns 18. Funds can be withdrawn starting the year the child turns 18. Planning Tip: There are still many unanswered questions about this new account and its related tax break. There are also other, and potentially better, options to save for your child, including Roth IRAs. So while we wait for more clarification, consider using alternative tax-free or tax-advantaged accounts for your child. 529 Education Plans. The annual limit for K–12 tuition withdrawals doubles to $20,000 per student beginning in 2026. These funds can now also cover books, tutoring, online materials, home school costs, and educational therapies for children with disabilities. 529s can also be used for post-secondary teaching certifications and trade programs. Planning Tip: While contributions to a 529 plan aren’t deductible on your federal tax return, you can front-load up to five years’ worth of the annual gift tax exclusion into a single year. The 2025 exclusion is $19,000, so you can contribute up to $95,000 (5 x $19,000) to a 529 plan per beneficiary (up to $190,000 if married).
Tip and Overtime Tax Breaks Require Your Attention
Best advice? Be prepared NOW! Two new major tax changes, No Tax on Tips & No Tax on Overtime, are introduced in the One Big Beautiful Bill Act (OBBBA) passed on July 4, 2025. Here’s what you need to know about these two tax breaks, along with questions that still need answered before filing your 2025 tax return. How much you can deduct No Tax on Tips. You can deduct up to $25,000 in qualified tips from your federal taxable income. The deduction phases out above $150,000 ($300,000 for joint filers). No Tax on Overtime. Up to $12,500 in qualified overtime pay can be deducted from your taxable income ($25,000 for those filing jointly). The deduction also phases out over $150,000 ($300,000 for joint filers). Who qualifies Obvious jobs such as servers and bartenders will likely qualify to deduct their tips. But there are plenty of other occupations who frequently or occasionally receives tips. The IRS is mandated to provide a more detailed list of what tips will qualify. Until this is done, there will be some uncertainty. Regarding overtime, the tax bill uses the Department of Labor’s definition of working beyond 40 hours in a single workweek for non-exempt employees. The deduction only applies to the overtime portion of the pay (the one-half of time-and-a-half). But there’s still some gray areas. For example, what happens if a worker is compensated via a bonus or comp time instead of an hourly wage? Reporting is key Employers are required to separately report qualified tips and qualified overtime on an employee’s Form W-2 or a contractor’s Form 1099. The problem is that 1099s do not currently have a spot to report tips (the W-2 currently has a box for allocated tips), while both W-2s and 1099s don’t have a spot to report overtime. There’s also withholding questions. While there’s a tax break for tips and overtime up to a certain dollar amount, this only applies to federal income taxes. Tips and overtime are still subject to other taxes, including Social Security, Medicare, and state income taxes. Employers will have to distinguish between income that’s fully taxable, and income that’s only subject to Social Security, Medicare, and other taxes. 2025 is a transition year The OBBBA addresses some of this uncertainty by allowing 2025 to be a transition year before the tax-free income must be reported on reformatted W-2s and 1099s. And it’s a good thing because the 2025 format is already approved and been provided to printers and software companies. More details to come The IRS is mandated within the OBBBA to come up with what it will accept as proof of your 2025 earnings. Until that guidance is published you should: Immediately compile your overtime and tip income from the beginning of the year. Retain any documentation that can prove the amount you are going to claim. Review your pay stubs to see if tip and overtime income is tracked separately from your normal earnings. If so, you may have what you need. If not, contact your employer immediately and ask what they are planning to do to provide proper documentation. The IRS says it will publish more guidance by mid- to late October. So stay tuned as these and other questions will hopefully be answered long before you must file your 2025 tax return.
Becoming What We See and Hear: The Quiet Power of Influence
We like to think we’re in control of our decisions. But the truth is, much of what we do is shaped by influence – often subtly, sometimes blatantly – through what we see, hear, and experience every day. Here’s a deeper look at the power of influence. Visual cues shape perception Visuals are powerful. Marketers know this instinctively. That’s why packaging is designed down to the last pixel and influencers carefully curate their posts to appear natural yet highly appealing. But it goes beyond consumer behavior. Seeing certain body types in media over and over influences how we perceive attractiveness. Constant exposure to violence in TV shows and games can desensitize us. Even the layout of a grocery store is designed to steer us subtly: essentials in the back, impulse buys in the checkout lane. It’s not mind control—it’s a form of subtle influence built into our surroundings. Sound sends the signals Sound is another strong current of influence. Music shifts moods. A song can trigger nostalgia, change the tone of a scene, or set the stage for what’s to come. Ever wonder why restaurants play slow music at dinner time? It encourages patrons to relax, stay longer, and order more. Beyond music, there’s voice and language. The way someone says something can matter more than what they’re saying. Politicians, public speakers, even YouTubers train their tone and pacing to gain trust. The rhythm of speech, the warmth in a voice, or a confident pause—these details shape how we respond emotionally and psychologically. Social proof: The herd instinct One of the strongest influences on human behavior is other humans. Social proof is the phenomenon where people copy the actions of others to reflect correct behavior. If a product has 5,000 five-star reviews, we trust it more. If everyone’s sharing the same viral video, we click on it, too. It’s not weakness – it’s wiring. Humans are social animals. Belonging matters. Fitting in helped our ancestors survive. That instinct still plays out in modern settings, from what we wear to what causes we support. Algorithms know how we tick Technology has supercharged influence. Algorithms don’t just guess what we want, they shape what we see next. Personalized feeds filter our reality. You see more of what you engage with, which reinforces your views, biases, and habits. It’s not just about giving us what we like…it’s designed to keep us watching, clicking, and buying. Awareness is the first defense The solution isn’t to avoid influence, but rather to recognize it. Influence is part of being human. It helps us learn, adapt, and connect. But unchecked, influence can steer us in directions we never actively chose. We can’t control every input, but we can control our filters. Ask: Why do I believe this? Who benefits if I act on this? Does this feel true, or is it just familiar? Media literacy, critical thinking, and mindfulness are tools we all need. Influence isn’t going away. But with awareness, we can take back some of the control we lose when we let everything around us decide for us. As always, should you have any questions or concerns regarding your tax situation please feel free to call.
Creative Ideas to Cut Your Food Bill (No Ramen Required)
You don’t need to survive on sodium-packed ramen or become a full-time coupon clipper to shrink your grocery bill. In the age of rising food prices and shrinking portions, here are several ways that smart shoppers are turning grocery shopping into a game – and winning. Start with a reverse meal plan. Instead of planning meals and then shopping for ingredients, try the opposite: start with what’s already in your pantry, refrigerator, and freezer. Build your meals around these forgotten food items. Create a Use-It-Up week. Dedicate one week each month to eating through your fridge and pantry without buying anything new except for essentials like mil or eggs. Challenge yourself to get creative – stir-fry leftover vegetables, toss beans into soups, and reinvent last night’s dinner into today’s lunch. Shop with a theme. Theme your weekly shopping trip around one protein or main ingredient that’s on sale. For example, if ground turkey is discounted, plan meals like chili, tacos, and lettuce wraps that all use it in different ways. This tactic keeps meals fresh without requiring a long, expensive list of ingredients. Think bulk, but strategically. Buying in bulk doesn’t always save money—especially if food goes to waste. But there are staples where bulk pays off: oats, rice, dried beans, pasta, nuts, and spices. If you’re short on storage or cash, consider splitting bulk purchases with a friend or family member. This lets you access better prices without overcommitting. Switch from brands to ingredients. Instead of buying pre-packaged items like pancake mix, salad kits, or frozen dinners, shift toward base ingredients. A 5-pound bag of flour costs about the same as one box of mix—and it makes dozens of batches. Salad kits are convenient, but chopping your own greens and mixing a quick vinaigrette costs half as much and takes just a few minutes. Prepped ingredients save time but often cost double. Use the freezer as your budget ally. Your freezer is more than a storage space—it’s a money-saving tool. Freeze leftovers before they spoil, store bread and meats bought on sale, and portion out soups and stews for future meals. You can also freeze perishable items like herbs (in olive oil), overripe bananas (for baking), or grated cheese. Eat what’s in season (locally). Seasonal produce is cheaper and tastier, as out-of-season items are often imported and marked up. Shopping at local farmers markets or joining a community-supported agriculture group can connect you to fresh food at a better price. Set a weekly grocery challenge. Turn saving into a sport. Set a dollar limit for your weekly trip, challenge yourself to make five dinners from under 10 ingredients, or cook a zero-waste week where you throw nothing out. You don’t need extreme measures to cut your grocery bill. With the right mix of planning, creativity, and smart habits, you can keep your kitchen stocked and your wallet happy.
Custodial Accounts for Kids: Understanding the Trade-offs of This Great Teaching Tool
Many parents rely on piggy banks and birthday cash to teach kids about money. But more are now turning to custodial accounts – a hands-on way for children to learn about saving and investing. While these accounts offer great learning opportunities, they also come with several trade-offs worth planning for. What you gain by using custodial accounts Custodial accounts are managed by a parent or grandparent until a child turns 18 or 21 (depending on the state). There are two primary types of accounts: UGMA (Uniform Gifts to Minors Act) – only basic assets are allowed, such as cash, stocks, bonds, mutual funds and ETFs UTMA (Uniform Transfers to Minors Act) – also allows other types of assets, such as real estate, art, and intellectual property In addition to providing children a way to learn the basics of saving and investing, here are several other advantages of using custodial accounts: Simple and accessible. Easy to set up at most banks and brokerages. Potential tax benefits. A portion of your kids unearned income is taxed at the child’s lower tax rate. No contribution limits. Custodial accounts don’t cap how much you or your child can contribute to the account. Flexibility. The account’s money can be used for anything that benefits your child, not just education. While custodial accounts can be great for teaching kids about money, they do come with several trade-offs you’ll need to consider. Trade-off #1 : The Kiddie Tax Custodial accounts can trigger something called the kiddie tax. Here’s how it works. In 2025, the first $1,350 of your child’s unearned income is tax-free. The next $1,350 is taxed at your child’s tax rate (usually no more than 12%). Any unearned income above $2,700 ($1,350+ $1,350) is taxed at the parents’ rate, which can be as high as 37%! What to do instead: If your child has earned income, a Roth IRA for minors offers tax-free growth and avoids the kiddie tax entirely. Trade-off #2: Impact on Financial Aid Custodial accounts are counted as a child’s asset on the Free Application for Federal Student Aid (FAFSA). Student assets are assessed at a much higher rate (20%) than parent assets (5.64%). This means that $10,000 in a custodial account can reduce financial aid eligibility by $2,000 or more. What to do instead: If you’re saving for college, consider a 529 plan. The account owner retains control, the funds grow tax-free, and qualified withdrawals are tax-free as well. Plus, 529 plans are treated more favorably in financial aid calculations. Trade-off #3: Loss of Control Once the child comes of age, they can spend the money however they want. If your goal was to fund education but your 18-year-old wants to buy a motorcycle instead, you’re out of luck. What to do instead: Spread your child’s earned income around multiple types of accounts. Put some in a 529 plan or other education account. Contribute another amount to a traditional or Roth IRA in the child’s name. And make a deposit into a custodial account that your child can (eventually) do whatever they want with. Bottom Line Custodial accounts still have their place, especially for general-purpose savings or teaching financial responsibility. But it’s important to understand the trade-offs and long-term implications.
Common Questions About Taxes
What everyone is wondering Here are several of the most common tax questions and their answers. But like most things, there can be exceptions, so if in doubt always ask for help. What happens to a loan if it’s forgiven? The IRS generally considers the canceled amount as taxable income, unless an exception applies. This means you may have to report the forgiven debt on your tax return and pay income taxes on it. Lenders typically issue a Form 1099-C for canceled debts, which you must include on your tax return. Does my child need to report cash earned from a lemonade stand? Yes, the cash your child earned for helping a neighbor is taxable. The IRS doesn’t care if it came from mowing lawns, babysitting, or lemonade stands, earned income is earned income. Your child may not end up owing any income taxes, though, thanks to the single taxpayer standard deduction of $15,000 in 2025. But they’ll still be on the hook for Social Security and Medicare taxes if their net profit is more than $400. Are my rewards earned on a credit card taxable? Taxation of any extras you earn with a credit card – including miles, discounts, even cash back – are not taxable if you had to pay to get them. Other rewards that you receive, for example a reward for signing up for a card or for referring a new cardholder, are considered taxable income per the IRS. Does my employer contribution count towards the 401(k) limit? Your employer’s matching contributions do not count toward your maximum contribution limit, which for this year is $23,500. If you’re 50 or older, you can sock away an additional $7,500 (for a total of $31,000) this year. What happens to loans from my retirement account if I change jobs? When you switch jobs, you must pay back any loans borrowed from your employer-sponsored retirement account within a short amount of time. If the loan isn’t paid back, the outstanding balance is considered a distribution that is subject to income taxes and an early withdrawal penalty. Do I really need to report gifts given to people? Yes, but only if you give more than $19,000 ($38,000 if married) in 2025 to any one person. It must be reported to the IRS on a gift tax return. That’s because the IRS keeps track of gifts you’re allowed to make over the course of your lifetime, which in 2025 is $13,990,000 ($27,980,000 if married). Only after reaching this lifetime dollar amount will you need to actually make a gift tax payment. Do I have to report a loss? You may think the IRS isn’t interested in losses you incur, such as when you sell a stock at a loss or if your business loses money. The reality is that you should always report losses on your tax return because you can use them to offset income under certain conditions. In addition, most losses can be carried forward to future years to offset income.
The One Big Beautiful Bill Act
The One Big Beautiful Bill Act What you need to know With the passage of the One Big Beautiful Bill Act or OBBBA, many of the temporary tax laws set to expire at the end of 2025 have been made permanent. This week’s tip summarizes the changes to several of the more popular deductions and credits, while the tax tips over the next few weeks will cover individual topics to help you understand how the major changes may impact you and your situation. For individuals Many temporary tax provisions are made permanent This includes: Tax rates: the higher tax rates expected next year will not occur. Higher standard deduction: There is a slight increase in these levels for 2025. They are: $31,500 Joint $23,625 Head of Household $15,750 all others Elimination of personal exemptions: This is now permanent Elimination of most miscellaneous itemized deductions: The main impact is not being able to deduct unreimbursed business expenses. Higher child tax credit: The $2,000 per person is now $2,200 per person in 2025 with the same $200,000 single and $400,000 joint phaseouts. Higher estate & gift exemption levels: Permanently raises exemptions to $15 million in 2026 with inflation adjustments thereafter. Other Changes Above the line charitable contributions: Starting in 2026, you can deduct $1,000 of charitable contributions if single or $2,000 if filing jointly. This is available to you whether you use the standard deduction or itemize your deductions. There is also the introduction of a .5% floor for itemizing charitable contributions. SALT limit moves up: The itemized deduction limit for taxes (commonly known as SALT) increases from $10,000 to $40,000 through 2029 with an income phaseout of $500,000. The AMT stays high…but: The Alternative Minimum Tax retains the higher exemption amounts, but the phaseouts revert to 2018 levels starting in 2026. This will not impact many, but if it does you need to be prepared. Itemized deduction phaseout returns in 2026 for some taxpayers: The Pease limit that previously reduced up to 80% of your itemized deductions is not in play for 2025, but a revised version for top income earners will impact 2026 and beyond. Elimination of many energy credits: This includes the credit for purchasing electric vehicles after September, 30, 2025 and elimination of many residential energy efficient purchase credits at the end of 2025. So plan accordingly. And several items completely new for 2025 thru 2028! Tax-free tips: Up to $25,000 of tips may be deducted for those working in traditionally tipped industries. Tax-free overtime pay: Up to $12,500 for single and $25,000 for joint filers of the premium portion of compensation is now tax-free. Both the tip income and overtime benefits phase out when Adjusted Gross Income exceeds $150,000 or $300,000 for joint filers. New senior $6,000 deduction: This benefit is for both itemizers and non-itemizers and phases out when modified AGI exceeds $75,000. New Trump accounts: An account for each child born from the beginning of 2025 through the end of 2028 will be pre-funded with $1,000. There are IRA-style accounts available for those born outside these years, but they are not funded For Businesses The Qualified Business Income deduction, commonly, known as QBI or Section 199A, is now permanent. Further, there is also a minimum $400 deduction benefit for taxpayers who have at least $1,000 of qualified business income. Higher SALT: Good new for flow through entities is the increase of the ceiling for taxes as an itemized deduction from $10,000 to $40,000 through 2029, making it less important to pay your business taxes on state tax returns. But if you do, the popular technique called PTET is still available. Fewer 1099s: There will be fewer 1099s in the future since the minimum reporting threshold is moved from $600 to $2,000 for the Form 1099-NEC and many other 1099s. Plus the back and forth confusion on who needs to issue and receive Form 1099-Ks for third-party billing purposes moves up from $600 to $20,000 and 200 transactions, making this filing headache for most taxpayers go away. Capital purchase benefits. The ability to expense capital purchases retains its options with 100% bonus deprecation through 2029 and expansive Section 179 deductions of up to $2.5 million of qualified property. Expense R&D. Research and Development expenditures can now be written off versus amortizing the costs over five years. There is even the ability to apply these new rules retroactively to 2022, so it makes sense to review your situation. C corporation tax unchanged. Equally important is what was not in the bill. The C corporation tax rate did not increase as many had feared, nor was the rate lowered. This is a lot to cover in a single tax tip. So the tips over the next several weeks will focus on individual topics to help you navigate how these changes may impact your situation.
Common Tax Questions
Taxes can be complicated, and the rules often come with exceptions. While it’s always wise to consult a professional, here are answers to some of the most frequently asked tax questions. What Happens If a Loan Is Forgiven?If a lender cancels your debt, the IRS generally treats the forgiven amount as taxable income. That means you may need to report it on your tax return and pay taxes on it. You’ll typically receive Form 1099-C, which shows the canceled amount. There are exceptions, so check with a tax advisor to see if you qualify for relief. Is My Child’s Lemonade Stand Money Taxable?Yes. Any money your child earns—from mowing lawns, babysitting, or a lemonade stand—is considered taxable earned income. Even if they owe no income tax (thanks to the $15,000 standard deduction in 2025), they may still owe Social Security and Medicare taxes if they’re considered self-employed. Are Credit Card Rewards Taxable?It depends. Not taxable: Cash back or travel points earned by spending money. Taxable: Bonuses or referral rewards received without spending (such as a sign-up bonus just for opening a card). The IRS considers non-purchase-based rewards as taxable income. Do Employer Contributions Count Toward My 401(k) Limit?No. Your employer’s contributions do not count toward your annual 401(k) contribution limit. In 2025, you can contribute up to $23,500 yourself, and if you’re age 50 or older, you can make an additional $7,500 catch-up contribution, for a total of $31,000. What Happens to Retirement Account Loans When I Change Jobs?If you took a loan from your employer-sponsored retirement plan, you usually must repay it quickly when you leave the job. If not repaid, the loan becomes a distribution, which is taxed as income and may be subject to a 10% early withdrawal penalty. Do I Need to Report Gifts I Give?Yes—but only if you give more than $19,000 to any one person in 2025 (or $38,000 as a married couple). If you exceed that, you’ll need to file a gift tax return. You won’t owe taxes unless your total lifetime gifts exceed $13,990,000 (or $27,980,000 if married). Should I Report a Loss?Absolutely. Whether it’s a stock loss or a business loss, report it. Why? Because you may be able to offset other income with the loss, and even carry it forward to future tax years. Losses can provide valuable tax relief when used strategically. Have more questions? A quick planning session with a tax professional can help you avoid surprises and make the most of your situation.
Review and Correct Your 1099s NOW!
Review and Correct Your 1099s NOW! What to do to fix this thorny problem It’s sometime in February and you realize the Form 1099 you received is in error. In fact, it overstates your income by several thousand dollars. What should you do? Gather your facts. Put yourself in the shoes of the vendor, bank or investment company representative. Gather evidence they will need to support your claim to correct the tax form. This includes receipts, e-mails, and statements. Have your account number handy as well. Contact the vendor. Contact the vendor as soon as you discover the error and ask them to re-issue the statement or provide you with a corrected form. Start with a phone call, then put your evidence in writing and send it to them via certified mail. Give the vendor a reasonable, yet concrete, time frame to correct the error. You do not want to wonder when a correction is coming, so keep control of the timing for a correction if at all possible. Written confirmation. If the vendor agrees with your change, ask for a letter from them that outlines the correction. File this letter with your tax return to help you defend against a potential audit. Tell the IRS. After a reasonable attempt to correct the error with no progress, contact the IRS to inform them of the failure to correct your information. File an extension? If you believe a correction is on the way, you may wish to file a tax extension. Remember, you will still need to pay any tax owed by the original due date. If you do not have assurance of a correction, file your tax return with correct information and provide documentation that outlines the reporting error.
Summer Tax Tips for Everyone
Summer is usually the time for relaxing, but it can also be a time for tax savings, especially if you’re still reeling from an unexpectedly large tax bill in April. Here are four timely tips: Rent your home. If you rent out your main home or a vacation home part of the time, you may be entitled to deductions like other landlords. This includes the rental-related portion of mortgage interest, property taxes, repairs, utilities, and insurance. Keep in mind, if your personal use exceeds certain limits, you can’t deduct a loss. And if you rent for less than 14 days, the rental income is tax free! Send young kids to camp. Depending on your situation, you may be able to claim a Child and Dependent Care Tax Credit for the cost of sending children under age 13 to summer day camp. However, the cost of overnight camp doesn’t qualify for the credit. Hire your child. If you have an older child looking for employment this summer, hire them to work for your business. Reasonable wages are deductible by the business and your child will likely owe little tax, if any, on the earnings. Plus, they may be eligible for other employee benefits. Take a business trip. Spend some time seeing a different city this summer while you’re on a business trip. When you travel for business, you can generally deduct expenses — including airfare, lodging and 50 percent of the cost of meals — attributable to the business portion of the trip. But you must spend more time on business matters while you’re away than you do on sightseeing or other personal activities. Leverage a child’s earned income. If you have a young worker who earns money from mowing lawns or babysitting, be sure to keep track of their earnings. While they will probably earn too little to pay tax, this earned income allows the young worker to open a Roth IRA. You could even decide to gift money into the account as long as it’s less than the earned income amount. Finally, summer is a great time to create a full-year tax projection. Use this information to determine if the steps you’re taking now will help you avoid a large tax bill at the end of the year. Call today to schedule a review of your situation to help manage your full-year tax bill.