Tax Peace

Happy New Year! May 2026 be a year of PEACE within us all.

Today is the S Corporation and Partnership tax filing deadline!

If your business is structured as an S Corp (Form 1120-S) or a Partnership (Form 1065) and you requested a 6-month extension back in March, today is the final day to file your return with the IRS.

✅ File on time to avoid late filing penalties
✅ Ensure your K-1s are issued to partners/shareholders
✅ Stay compliant and keep your business in good standing

Staying ahead of deadlines = staying ahead in business.

❓Do self-employed individuals qualify for the overtime deduction?

-> No. Self-employed individuals are not eligible for this deduction.

Here’s why:

• The overtime deduction only applies to employees covered by the Fair Labor Standards Act (FLSA) who must be paid overtime.

• Business owners with a 20% or greater ownership interest are exempt from the FLSA, which means they cannot claim the deduction.

-> In short, this deduction is for qualifying employees, not self-employed business owners.

Can self-employed individuals claim the new tip deduction?

-> Yes — as long as all other requirements are met.

Important details:

• The deduction for tips cannot exceed your share of gross income from the business.

• Tips earned in a Specified Service Trade or Business (SSTB) (such as law, accounting, consulting, financial services, etc.) are not eligible under Section 199A.

If you’re self-employed in industries like food service, hospitality, beauty, or transportation, this deduction may apply to you.

Important Tax Deadline Reminder for Business Owners:

If you filed an extension for your 2024 business taxes, here’s what you need to know:

• S Corporations (Form 1120-S) and Partnerships (Form 1065) that filed extensions earlier this year must submit their completed tax returns no later than September 15, 2025.

What this means for you:

• If your business operates as an S Corp or a Partnership, your tax return is due on this date, even if you filed for an extension back in March.

• Filing late may result in penalties and interest, even if you don’t owe taxes.

• Partnerships and S Corps generally don’t pay income tax at the entity level, but timely filing is still required to issue K-1 forms to partners or shareholders.

✅ Staying on top of this deadline keeps your business compliant and ensures your partners/shareholders can file their own personal returns accurately.

Several Clean Energy Credits are set to Expire or be repealed:

• New & Used Electric Vehicle Credits - ending after September 30, 2025
• Residential Energy Credits (e.g., solar, efficiency upgrades) - ending after 2025
• Alternative Fuel Refueling Credit - ending after June 30, 2026

If you’re planning to buy a qualifying EV or make energy-saving home improvements, you may want to move quickly to lock in your credit before these deadlines.

NO TAX ON TIPS & OVERTIME (BBB)

1. No Federal Income Tax on Tips
- Tipped workers can deduct up to $25,000/year in reported tips from their federal taxable income.
- Deduction phases out at $150,000 AGI (or $300,000 for joint filers)
- Employers still report tips on Form W‑2 (or Form 1099), and F**A taxes (Social Security and Medicare) still apply.

2. No Federal Income Tax on Overtime
- The premium portion of overtime pay (e.g. the “half‑time” above regular pay) qualifies for deduction.
- Deduction capped at $12,500 for individuals, $25,000 for joint filers, also phases out at the same AGI thresholds.
- Valid for tax years 2025 through 2028.

Example:
Scenario:
- Hourly rate: $20/hour
- Regular hours: 40 hrs → $800
- Overtime hours: 8 hrs at 1.5× → $20 × 1.5 × 8 = $240
- Tips reported: $300
= Total weekly gross pay:
= $800 (regular) + $240 (overtime) + $300 (tips) = $1,340

Big Beautiful Bill (New Rules):
- Overtime ($240) and Tips ($300) exempt from federal income tax.
- Only regular wages ($800) taxed for federal income tax purposes.

Withholding estimates:
- Federal Income Tax: ~$50 (on $800)
- Social Security: Still on full $1,340 → $83.08
- Medicare: Still on full $1,340 → $19.43

Total deductions:
$50 + $83.08 + $19.43 = $152.51

Take-home pay:
$1,340 – $152.51 = $1,187.49

SUMMARY: The One Big Beautiful Bill: 2025 Tax Changes You Need to Know

WHAT'S NEW FOR 2025 TAXES?
🔹Standard Deduction (2025 amounts)
- Single / MFS: $15,750
- Head of Household: $23,625
- Married Filing Jointly: $31,500
🔹Extra $6,000 Deduction for Seniors (2025–2028)
- For taxpayers 65+
- Phases out at MAGI: $75K (single) / $150K (joint)
- Not available if filing Married Filing Separately
🔹State & Local Tax (SALT) Deduction Boost (2025–2029)
- Cap raised to $40,000 (under $500K income)
- Phases out for high earners; adjusts 1% yearly
🔹Deductions for Workers
✔ No Tax on Overtime Pay (2025–2028)
- Deduct up to $12,500 (single) / $25,000 (joint)
✔ No Tax on Tips (2025–2028)
- Deduct up to $25,000
- Both phase out at MAGI $150K/$300K

🔹Other 2025 Updates
- Form 1099-K only if >$20K + 200+ transactions
- Car Loan Interest Deduction: Up to $10,000 (2025–2028), U.S.-assembled vehicles only
- Clean Energy Credits: End after Sept 30, 2025
🔹 Family-Friendly Tax Benefits
✔ Child Tax Credit: $2,200 per child (permanent)
✔ Other Dependent Credit: $500 (permanent)
✔ Adoption Credit: Up to $17,280, with $5,000 refundable
✔ 529 Plan Expansion:
- Up to $20K for K-12
- Includes books, tutoring, and test fees

COMING IN 2026 AND BEYOND
🏦 Trump Child Savings Accounts (2026–2028)
- $1,000 starter from government for kids born 2025–2028
- Parents can add $5,000/year (tax-deferred)
- Employers can add $2,500/year
🏡 Mortgage Interest Deduction
- Cap stays at $750K debt (or $375K MFS)
- PMI now deductible
💝 Charitable Deduction for Non-Itemizers
- Up to $1,000 single / $2,000 joint
🎓 Education Perks
- Employer Student Loan Payments: $5,250/year (permanent)
- American Opportunity & Lifetime Learning Credits: Now require school EIN

🔹Other Changes
- 1% tax on foreign transfers (money orders, cashier’s checks)
- Gambling losses: Only 90% deductible
- Miscellaneous itemized deductions: Permanently eliminated

❌ What’s Going Away
- EV Tax Credits: Gone after Sept 30, 2025
- Home Energy Credits: End after 2025
- Alternative Fuel Property Credit: Ends June 30, 2026

✅ What Should You Do Now?
- Plan ahead for 2025 filing: Use tips and overtime deductions if eligible
- Review your SALT strategy: Higher cap may make itemizing worthwhile
- Consider major purchases: Car loans may bring tax savings before 2028
- Start saving for kids: Trump Accounts arrive in 2026

Thank you for reading! Please let me know if you have any questions.

TAX PEACE 🕊️
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To provide tax & accounting solutions that help individuals & businesses achieve financial peace, confidence and long-term success.