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

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.

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.