Wayne R Thompson CPA

The IRS is providing implementation guidance on the One, Big, Beautiful Bill. Below are the expansions and changes to deductions affecting taxpayers as they prepare for the filing season.

The standard deduction increases for tax year 2026, to:
$32,200 for married couples filing jointly
$16,100 for single filers and married individuals filing separately
$24,150 for heads of household

Deduction for Seniors:
Additional $6,000 per taxpayer aged 65 or older
$12,000 if both spouses qualify
Phase-out begins at modified adjusted gross income of:
$75,000 for single filers
$150,000 for joint filers

Overtime deduction:
It applies only to the overtime premium portion of wages
Modified adjusted gross income caps annually at:
$12,500 for single filers
$25,000 for joint filers

Tips deduction for tax year 2026:
Up to $25,000 of qualified tip income is deductible
Phase-out begins at modified adjusted gross income of:
$150,000 for single filers
$300,000 for joint filers

Car loan interest deduction:
Effective 2025 through 2028
Up to $10,000 per year for interest on qualified new vehicle loans
Phase-out begins at modified adjusted gross income of:
$100,000 for single filers
$200,000 for joint filers

Here’s a bullet-point summary of the key individual and business provisions in the "Big Beautiful Bill":

🧾 Individual Taxpayer Provisions
Permanent Lower Tax Rates

Makes 2017 tax cuts permanent (e.g., 39.6% → 37%, 25% → 22%, 15% → 12%).

Estimated $2 trillion back to taxpayers over a decade.

Permanent Higher Standard Deduction

Standard deduction increases (originally doubled in 2017) made permanent.

Saves taxpayers ~$1 trillion over the next decade.

Increased SALT Deduction Cap

State and Local Tax (SALT) cap temporarily raised from $10,000 to $40,000 through 2029.

New Car Loan Interest Deduction

Deduct up to $10,000 of car loan interest on new, American-made vehicles (through 2028).

Income limits apply.

Increased Child Tax Credit

Increased from $2,000 to $2,200 per child.

Phases out at $200K (single) / $400K (married).

Higher Senior Deduction

Increased from $2,000 to $6,000 per senior (or $3,200 to $6,000 if married).

No Tax on Overtime Deduction

Deduction of up to $12,500 (single) / $25,000 (married) against overtime income.

Phases out at $150K/$300K income.

No Tax on Tips Deduction

Deduction up to $25,000 on qualified tip income.

Applies to hospitality, personal care, retail—not to specialized professions (e.g., doctors, lawyers).

💼 Business Tax Provisions
Permanent QBI Deduction

20% deduction for qualifying business income made permanent.

Income thresholds increased by $25K–$50K.

100% Bonus Depreciation

Immediate write-off for tangible business assets (vehicles, machinery, etc.) extended permanently.

100% R&D Expensing

Full write-off for qualifying research and development costs.

Extended Opportunity Zone Credit

Continued ability to defer/avoid capital gains tax via Opportunity Zone investments.

Criteria for Deductible Business Travel

For travel expenses to be recognized as deductible by the IRS, they must satisfy several criteria, the most important is as follows:

Ordinary and Necessary - The expense should be common and accepted in your field and industry. For example, if attending conferences is a standard part of business operations in your sector, the costs associated with such events are typically considered ordinary and necessary.

INCOME TAX REFUNDS

It’s taking the IRS more than 21 days (and up to 90 to 120 days) to issue refunds for tax returns with the Recovery Rebate Credit, Earned Income Tax Credit and Additional Child Tax Credit.

As such, it's important to file your tax returns as soon as you can.

IRS tax filing season will begin today, Monday January 24, 2022.

VIRTUAL CURRENCY TRANSACTIONS

Because of the prominence of virtual currency transactions, the IRS has doubled down on investigating every taxpayer's involvement in this. As such, one of the first questions that you need to answer and make your tax preparer aware of is if whether at any time during 2021 you received, sold, sent, exchanged or otherwise acquired virtual currencies e.g. bitcoin. These transactions are taxable in a similar manner like capital gains on sale of stocks.

IRS TAX START AND DEADLINE

The IRS announced that the nation's tax season will start on Monday, January 24, 2022, when they will begin accepting and processing 2021 tax year returns.

The tax deadline for personal tax returns will be April 18, 2022. because of the Emancipation Day holiday in Washington DC on April 16, 2022, marking the end of slavery in DC.

TUITION AND FEES DEDUCTION

The tuition and fees deduction was repealed beginning with the 2021 tax year. That "above-the-line" write-off was worth up to $4,000. However, to balance out the loss of the tuition and fees deduction, the phase-out thresholds for the lifetime learning credit were permanently increased. For the 2020 tax year, the credit was gradually reduced to zero for joint filers with a modified AGI from $118,000 to $138,000 and single filers with a modified AGI between $59,000 and $69,000. Beginning in 2021, the phase-out range for married couples filing a joint return is $160,000 to $180,000, and it's $80,000 to $90,000 for single filers. (The same phase-out ranges apply to the American Opportunity tax credit.)

STUDENT LOAN FORGIVENESS

Normally, if a student loan is canceled, forgiven, or otherwise discharged for less than the amount you owe, the amount of canceled debt is considered taxable income. However, starting in 2021, this rule is suspended for most canceled student loan debt that was incurred for a post-secondary education. The change is only temporary, though. In 2026, forgiven student loan debt will once again be taxed.

The rule allowing workers to exclude up to $5,250 of college loans paid by their employer in 2020 from taxable wages was also extended through 2025. The $5,250 cap applies to both student loan repayment benefits and other educational assistance offered by an employer.

CHARITABLE CONTRIBUTIONS

For the 2020 tax year, a new "above-the-line" deduction was allowed for up to $300 of charitable cash contributions. Only people who claimed the standard deduction on their tax return (rather than claiming itemized deductions on Schedule A) could take this deduction.

The write-off was originally scheduled to expire after 2020, but it was later extended to 2021 – with one important enhancement. For 2020, one deduction was allowed per return, meaning married couples who filed jointly could only deduct $300, not $600. However, for 2021, one deduction is allowed per person, which means married couples can deduct up to $600 on a joint 2021 tax return.

The 2020 suspension of the 60%-of-AGI limit on deductions for cash donations by people who itemize was also extended through the 2021 tax year.

UNEMPLOYMENT COMPENSATION

The American Rescue Plan Act made up to $10,200 of unemployment compensation ($20,400 for married couples filing jointly) exempt from federal income tax for households with an adjusted gross income less than $150,000 (the IRS sent refunds to people who filed their return before the exemption was enacted).

Unfortunately, the exemption only applied to unemployment compensation received in 2020. So, for 2021, unemployment compensation are taxed like wages.

STANDARD DEDUCTION

The standard deduction amounts were increased for 2021 to account for inflation. Married couples get $25,100 ($24,800 for 2020), plus $1,350 for each spouse age 65 or older ($1,300 for 2020). Singles can claim a $12,550 standard deduction ($12,400 for 2020) — $14,250 if they're at least 65 years old ($14,050 for 2020). Head-of-household filers get $18,800 for their standard deduction ($18,650 for 2020), plus an additional $1,700 once they reach age 65. Blind people can tack on an extra $1,350 to their standard deduction ($1,700 if they're unmarried and not a surviving spouse).