Federal Changes

Due to the One Big Beautiful Bill Act of July, 2025, most forms and many publications will change in 2025 and in 2026. The following is a brief list of the forms affecting most individuals.

• Changes Affecting 2025 Returns
• Redesigned Form 1040 and supporting forms
• New Form 1040 Schedule 1-A to determine the new tax provsions (tip income, overtime, car interest and senior deduction)
• Changes Affecting Your 2026 (Filed in 2027) Tax Return  
  • W-2: Wage and Tax Statement
  • 1099-NEC & MISC
  • W-9: Request for Taxpayer Identification Number and Certification

Pennsylvania Changes (not yet updated for 2025)

In August, 2023 the Commonwealth of Pennsylvania expanded the Property Tax/Rent Rebate Program, effective January 1, 2024. Eligible individuals include: those aged 65 and older, widows and widowers aged 50 years and older, and those over age 18 with disabilities:

• The maximum rebate has increased from $650 to $1000. In addition, all of the rebates at the various income levels have increased:
• The income cap for both renters and homeowners has increased to $45,000, (up from $15,000-renters/$35,000-homeowners).
• Going forward, the income caps will be tied to the cost of living, so increases in Social Security will not cause otherwise eligible individuals to lose their rebate.

We recommend going to your State Senator or Reprersentative's office to have your PROPERTY/RENT REBATE Forms completed.

On July 4, 2025, Congress passed the "One Big Beautiful Bill (OBBBA)". It includes many personal and business tax code changes affecting 2025 and future years. The following is a brief summary of those provisions that will impact your 2025 tax return.

• A new income tax deduction for qualified tips—available to itemizing and non-itemizing taxpayers;
• A new income tax deduction for qualified overtime compensation—available to itemizing and non-itemizing taxpayers;
• A new income tax deduction for qualified passenger vehicle loan interest paid on a loan that you took out in 2025 for the purchase of an applicable passenger vehicle—available to itemizing and non-itemizing taxpayers;
• An enhanced income tax deduction for seniors—available to itemizing and non-itemizing taxpayers;
• An increase in the standard deduction;
• An increase in the limitation on the itemized deduction for state and local taxes paid; and
• Changes to the child tax credit.
• Elimination of the federal tax credit for electric vehicles as of September 30, 2025.
• You may elect to enroll your dependents under the age of 18 with a valid social security number in a new IRA-type investment called "Trump Accounts".

No tax on tips.

• Employees (and the self-employed) may deduct up to $25,000 of qualified tips received in occupations that are listed by the IRS as customarily and regularly receiving tips on or before Dec. 31, 2024, and that are reported to the employer (on Form 4070) or the IRS (in Box 7, 8 or 14 of the W-2).
• “Qualified tips” are voluntary cash or charged tips received from customers or, in the case of employees, through tip sharing arrangements.
• If a self-employed individual receives qualified tips, they can deduct up to their net profits, but they must provide written documentation of the amount of the tips. Tips are subject to Self-Employment Tax.
• The deduction is available for both itemizing and non-itemizing taxpayers.
• The deduction phases out for taxpayers with modified adjusted gross income over $150,000 ($300,000 for joint filers).
• Tips are subject to income and payroll taxes.

No tax on overtime.

• Individuals (employees and other workers) may deduct up to $12,500 ($25,000 if married filing jointly) of qualified overtime ( time-and-a-half) compensation and that is reported to the IRS. The deduction is available for both itemizing and non-itemizing taxpayers. Example: You earn $10/hr and work a 40 hour week. You are paid time-and-half for overtime ($15/hr). Only the $5 qualified overtime compensation can be deducted. You must provide a statement from your employer showing the amount of qualified overtime compensation (the amount for time-and-a-half over 40 hours/week) received.
• The deduction phases out for taxpayers with modified adjusted gross income over $150,000 ($300,000 for joint filers).
• Overtime compensation is subject to income and payroll taxes.

No tax on car loan interest.

• Individuals may deduct interest paid on a new personal use 2025 passenger vehicle car loan (lease payments do not qualify). The maximum annual deduction is $10,000.
• An applicable passenger vehicle is a car, minivan, van, SUV, pick-up truck or motorcycle, that has undergone final assembly in the United States.
• The taxpayer provide a statement from lender showing amount of interest ad  must include the vehicle identification number (VIN) of the applicable passenger vehicle on the tax return. The first digit of the VIN must be "1", "4" or "5".

Enhanced deduction for seniors.

• Individuals who are age 65 and older may claim an additional deduction of $6,000 ($12,000 for married couples if both spouses qualify). This new deduction is a personal exemption that is separate from the current additional standard deduction for seniors under existing law.
• The deduction phases out for taxpayers with modified adjusted gross income over $75,000 ($150,000 for joint filers).
• If the taxpayer is married, the taxpayer and the taxpayer’s spouse must file jointly.

An increase in the standard deduction.

• The standard deduction has increased to the following amounts:
  • $31,500 (up from $30,000) for married filing jointly or a qualifying surviving spouse;
  • $23,625 (up from $22,500) for head of household; and
  • $15,750 (up from $15,000) for single or married filing separately.

An increase to the limitation on the itemized deduction for state and local taxes.

• Individuals who itemize their deductions can claim up to $40,000 ($20,000 if married filing separately) for state and local taxes paid.
• The maximum deduction is reduced for taxpayers with modified adjusted gross income over $500,000 ($250,000 if married filing separately).

Changes to the child tax credit.

• The maximum child tax credit has increased to $2,200 (up from $2,000) per eligible child.
• The individual claiming the child tax credit must have a social security number valid for employment. If married filing jointly, at least one spouse must have a social security number valid for employment. The qualifying child must also have a social security number valid for employment.

Trump Accounts

• A Trump Account is a new type of individual retirement account that can be established for eligible individuals under the age of 18 with a valid Social Security number.
• Contributions to Trump accounts can start being made on July 4, 2026 and may come from many sources, includign the Government.
• The election must be made on Form 4547 before January 1 of any year before the account beneficiary turns 18.

The Electric Vehicle Tax Credit to expire in 2025

• The federal tax credits for electric vehicles (EVs) are scheduled to expire on September 30, 2025.
• The affected credits include the incentive for new and used EVs, as well as the commercial and leased clean vehicle credits.
• A customer just needs to have a binding contract in place and at least one payment made before September 30, 2025 to obtain the tax credit.