What's new this year?
Updated January 20th, 2026
The "One Big Beautiful Bill Act" OBBBA
The "One Big Beautiful Bill Act" (OBBBA), signed into law on July 4, 2025, has introduced some of the most significant changes to the tax code in years.
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Enhanced Senior Tax Deduction
Taxpayers aged 65 and older are eligible for a new, additional tax break. On top of the existing standard deduction, seniors can now claim an extra $6,000 deduction ($12,000 for married couples if both qualify). This new personal exemption is available to both itemizers and non-itemizers, though it does begin to phase out for those with a modified adjusted gross income (MAGI) above $75,000 ($150,000 for joint filers). Please note that Social Security income remains taxable.
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Marketplace Subsidies: The 2025 Cliff and 2026 Shift
The 2025 tax year is the final year for "enhanced" health insurance subsidies, which allowed many families to qualify for lower premiums regardless of how high their income was. As we file your 2025 return, we will use Form 1095-A to reconcile the financial assistance you received during the year; notably, 2025 still includes "repayment caps" that limit the amount you must pay back if your actual income ended up being higher than you estimated. However, you should be aware that these protections vanish on January 1, 2026. Starting with the 2026 tax year, the "subsidy cliff" returns—meaning if your income exceeds 400% of the federal poverty level, you lose all eligibility for credits, and the IRS will require you to repay 100% of any excess subsidy you received, regardless of your income level.
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Solar and Battery Storage Installations
Claim 30% of eligible solar costs as a tax credit. This credit cannot reduce your income tax liability below zero; however, the unused credit amount will roll forward to future tax years.
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Increase to the State and Local Tax (SALT) Deduction Cap
For years, taxpayers in high-tax states were limited by the $10,000 SALT cap on state and local tax deductions. Starting in 2025, this cap has been quadrupled to $40,000 for most filers. This is a major win for homeowners and those with high state income tax bills, as it allows significantly more people to benefit from itemizing their deductions rather than taking the standard deduction.
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The so-called "No Tax on Tips" Deduction
In a landmark move for service industry workers, a new deduction for "qualified tips" is now available. Taxpayers in eligible occupations can deduct up to $25,000 of their tip income from their federal taxes. This deduction is "above-the-line," meaning you can claim it even if you do not itemize, providing substantial relief for servers, bartenders, and other tipped professionals. The tax break applies only to income tax; tips are still subject to Social Security and Medicare tax, so the coined term "No Tax on Tips" is not strictly true.
To ensure we claim the maximum deduction for you, please provide the following documentation:
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Form W-2: For 2025, your employer may not have a specific box for "qualified tips" yet. Please bring your W-2 so we can review Box 7 (Social Security tips), which will serve as a primary record.
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Daily Tip Logs: If your W-2 does not reflect all your tips (or if you are self-employed), bring your personal records or daily tip logs. These should show the date, amount, and source of tips (cash, credit card, or apps like Venmo).
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Monthly Tip Reports (Form 4070): If you provided monthly written reports to your employer, copies of these statements are excellent substantiation.
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Form 1099-K or 1099-NEC: If you are a gig worker or freelancer, bring these forms along with any records that distinguish tip income from base service fees.
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Employer Statements: Some employers may provide a separate written statement or an online portal printout detailing your 2025 tips to help bridge the gap before the 2026 forms are updated.
Overtime Pay
Hourly workers who put in extra hours will see more of that money stay in their pockets this year. The 2025 tax law introduces a new deduction for "qualified overtime compensation," allowing workers to deduct up to $12,500 ($25,000 for married couples) of their overtime earnings. This provision is designed to reduce the tax burden on those who exceed the standard 40-hour work week. Important Note: This deduction applies only to overtime pay required by federal law (FLSA)—typically hours worked over 40 in a single week. It does not apply to "daily overtime" required only by certain state laws (like California's 8-hour rule), holiday double-time, or premium pay offered voluntarily by your company's policy.
Since the IRS is giving employers a "transition year" to update their payroll systems, the overtime amount might not be in a standard box on your W-2. Please provide the following:
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Form W-2: Check Box 14. Many employers are using this space to list "FLSA OT Prem" or "Qual OT" for 2025.
Year-End Pay Stub: Your final pay stub for 2025 is the most important document if your W-2 is missing the overtime breakdown. It typically shows the total "Overtime" or "1.5x" earnings for the entire year.
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Employer Statements: If your company provided a separate letter or online portal printout detailing your "FLSA-qualified" hours, please bring it.
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Timesheets or Logs: If you are a gig worker or your pay stubs are unclear, bring records of the specific weeks you worked more than 40 hours so we can calculate the deductible portion.​
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Car Loan Interest
For the first time in decades, interest on personal car loans is once again deductible—with a few specific conditions. Under the 2025 tax law, taxpayers can deduct up to $10,000 in interest paid on loans for vehicles purchased in 2025. This is an "above-the-line" deduction, meaning you can benefit from it even if you do not itemize your deductions. This deduction is strictly for personal-use vehicles. If a vehicle is used for business or commercial purposes (such as a delivery van or a fleet vehicle), it does not qualify for this specific deduction, though it may still be eligible for traditional business expense write-offs. To qualify, the vehicle must also be purchased new, have a gross weight under 14,000 lbs, and have undergone final assembly in the United States.
To claim this deduction, we are required to report specific details about the vehicle and the loan to the IRS. Please provide the following information:
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The Vehicle Identification Number (VIN): This is required on your tax return. You can find it on your dashboard, the driver's side door jamb, or your insurance card.
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Lender Interest Statement: For 2025, lenders are required to provide you with a statement (via mail or their online portal) showing the total interest you paid during the year.
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Sales Contract or Window Sticker: To prove the vehicle was "Assembled in the USA," please bring the original purchase agreement or the "Monroney" window sticker if you still have it.
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Loan Origination Date: We must verify that the loan originated after December 31, 2024.
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Digital Assets and the New Form 1099-DA
The IRS has officially launched Form 1099-DA, a new mandatory information return specifically for digital assets. If you sold or exchanged cryptocurrency, NFTs, or other digital assets through a U.S.-based custodial exchange (like Coinbase or Kraken) in 2025, the broker is legally required to report those transactions to both you and the IRS. Brokers must furnish your 2025 Form 1099-DA by February 17, 2026. For 2025, brokers are only required to report the gross proceeds (the total amount you received from the sale). Reporting your "cost basis" (what you originally paid) is optional for brokers for the 2025 tax year. This means the form you receive might show how much you sold your crypto for, but it may leave the "cost" box blank. Because the cost basis might be missing from the 1099-DA, you are still responsible for providing records of your original purchase price to ensure you don't pay tax on the full sales amount.
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Restored 100% Bonus Depreciation
Small business owners can once again deduct the full cost of equipment and machinery in the first year. The new law restored 100% bonus depreciation for assets placed in service after January 19, 2025—a significant increase from the 40% rate that was previously scheduled. For any equipment purchased early in the year (Jan 1–19), the 40% rate still applies. Please bring your invoices and records showing exactly when your equipment was purchased and put into use.
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Clean Vehicle Tax Credits (New & Used)
The federal tax credits for electric vehicles (EVs) have a new, early expiration date. Under the 2025 tax law, the $7,500 new EV credit and the $4,000 used EV credit are only available for vehicles acquired on or before September 30, 2025. Any vehicle purchased after this date is no longer eligible for these federal tax credits. If you chose the "Point of Sale" rebate—where the dealer applied the $7,500 or $4,000 credit directly to your purchase price, you are still legally required to report this on your 2025 tax return. Receiving the money at the dealership is considered an advance payment of the credit. We must file Form 8936 to reconcile that payment with your actual eligibility. If your income exceeds the IRS thresholds ($300k for joint filers / $150k for single), the IRS may require you to pay back the credit you received at the dealership.
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Energy Efficient Home & Clean Energy Credits
​The credits for home improvements (like windows and HVAC) and clean energy (like solar) are scheduled to end; to qualify, all projects must be fully installed and placed in service by December 31, 2025. To enable us to process your credits, we will need you to complete the relevant sections of our Energy Efficient Home Improvement Credits (EEHIC) Checklist, including signing the declaration of compliance.​
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Business Use of Vehicle - Increased Mileage Rates
​The standard mileage rate for business use of personal vehicles increased to $0.70 per mile for tax year 2025 and $0.725 for 2026. Detailed mileage logs are not required for filing your return, but they may be needed in case of audit. We have a checklist to help you collate your vehicle expenses. Don't forget to take your mileage reading at the start of the year! There are various apps that can help you track your mileage during the year.
