Preparing for Tax Season: Key Changes and Tips

As tax season approaches, it's essential to prepare thoroughly to navigate the complexities of filing your taxes effectively. Whether you've been meticulous with record-keeping or could use some organization, knowing what's new and staying informed will allow you to utilize every possible advantage during tax preparation. This upcoming tax year, particularly due to changes from the One Big Beautiful Bill Act (OBBBA), brings several updates you should be aware of:

  • No Tax on Tips: There's a new deduction for tip-receiving professionals, allowing up to $25,000 in tax-free cash tips. However, this phases out for AGIs over certain thresholds. Ensure any qualifying tips are accurately reported by employers to benefit from this.
  • No Tax on Qualified Overtime: An opportunity exists to deduct overtime earnings above regular pay rates, up to substantial limits. Knowing if you qualify and carefully documenting hours can maximize this deduction's utility.
  • Vehicle Loan Interest Deduction: Interest on loans for personal-use vehicles can now be deductible. Ensure your vehicle meets the specified criteria and watch for new reporting forms.
  • SALT Deduction Limit: The limit for state and local tax deductions has increased, but varies with income. Be sure to understand how these limits could apply to you.
  • Retirement Catch-Up: For those aged 60-63, contribution limits have enhanced significantly. Utilize this to boost your retirement savings strategically.
  • Child and Adoption Credits: Increases to these credits mean more potential returns. Ensure eligible children and adoption expenses meet all requirements for claiming.
  • Section 179 Expensing: Business asset expensing limits see significant increases, providing small and medium businesses immediate tax benefits for qualifying investments and equipment.
  • Bonus Depreciation and Research Expenditures: New permanent measures and immediate deductions can provide strong incentives for business investment.

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To be well-prepared for tax season, starting early is key. Establish a system for organizing your documents, whether in physical or digital form. Segregate receipts and records by category, such as medical expenses or charitable contributions, and ensure all entries are complete and accurate.

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Moreover, special attention should be paid to unique financial transactions that require detailed reporting, such as sales of property, cryptographic assets, or substantial charitable donations. Organized, distinct record-keeping will simplify the filing process and maximize potential deductions.

Additionally, new compliance measures require diligence:

  • Cryptocurrency Transactions: With increased IRS scrutiny, ensure meticulous records of gains and losses for all digital currency transactions.
  • Healthcare Marketplace: If your insurance is through a government marketplace, ensure you have Form 1095-A for premium tax credits.
  • Foreign Financial Assets: Be aware of any foreign accounts or inheritances that necessitate special reporting.

Start assembling necessary documentation in January, and consistently update your record as documents arrive. Remember, addressing these requirements early and asking questions when uncertain can avoid unnecessary issues at filing time.

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