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- How Trump's 2025 Tax Bill Affects Your Returns: Child Credit, Senior Bonus & More -part 2
How Trump's 2025 Tax Bill Affects Your Returns: Child Credit, Senior Bonus & More -part 2
These changes will directly impact your 2025 tax return and beyond. Understanding these updates now can help you plan better and potentially save money.
In partnership with
Key Highlights:
Permanent and Expanded Child Tax Credit
Example: Expanded Child Tax Credit
Senior Deduction: Extra Tax Relief for Older Americans
Example: Retired Couple Tax Savings
Tax Planning Tips for 2025
Frequently Asked Questions
Permanent and Expanded Child Tax Credit
Families with children will benefit from the permanent Child Tax Credit increase
The Child Tax Credit has been permanently expanded under the new law. Starting in 2025, families will receive $2,200 per qualifying child (up from $2,000). This credit will continue to adjust with inflation beginning in 2026, helping families keep pace with rising costs.
Who Qualifies for the Child Tax Credit?
To qualify for the full credit, your child must:
Be under age 17 at the end of the tax year
Have a valid Social Security number
Be claimed as your dependent
Be related to you (your child, stepchild, foster child, sibling, or descendant)
Example: Expanded Child Tax Credit
A married couple with three children and $95,000 in income. For tax year 2025:
They would receive $6,600 tax credit ($2,200 × 3 children)
This directly reduces their tax bill by $6,600
If they owed $10,000 in federal taxes before credits, they would now owe just $3,400
Under previous tax law: They would receive $6,000
Under the new tax law: They would receive $6,600
Potential tax savings: Approximately $600
Senior Deduction: Extra Tax Relief for Older Americans
The One Big Beautiful Bill Act introduces a special deduction for seniors aged 65 and older. This provision offers a $6,000 deduction per qualifying individual for tax years 2025 through 2028.
Seniors will benefit from a special $6,000 tax deduction under the new law.
How the Senior Deduction Works
This deduction is available to both itemizers and non-itemizers and applies to each qualifying individual in the household who is 65 or older. The deduction phases out when modified adjusted gross income exceeds $75,000.
Note: The senior deduction phases out at a 6% rate for every dollar of income above $75,000 ($150,000 for joint filers).
Example: Retired Couple Tax Savings
Robert and Susan are both 68 years old and retired. In 2025:
Combined retirement income: $70,000
Both qualify for the senior deduction
Under previous tax law: No special deduction for being seniors.
Under the new tax law: They can claim a $12,000 deduction ($6,000 each).
Potential tax savings: Approximately $1,440 (assuming 12% tax bracket)
Consulting with a tax professional can help seniors maximize their new tax benefits.
Important Considerations for Seniors
Who Qualifies:
| How It Differs from Social Security Changes:
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Self-employed? Track your expenses now and be ready for tax time!
Tax Planning Tips for 2025
Planning ahead can help you maximize your tax savings
Steps to Take Now:
With the Child Tax Credit permanently set at $2,200 per child, families should ensure they have proper documentation for each qualifying child, including Social Security numbers and proof of relationship
Service workers should keep detailed records of tips to maximize the new tip deduction
If you're 65 or older, plan to take advantage of the new $6,000 senior deduction
Remember these provisions are temporary (2025-2028)
Save documentation proving U.S. assembly for vehicle purchases
Small business owners should consider purchasing depreciable assets to take advantage of claiming 100% Bonus depreciation (for more info click below):
Frequently Asked Questions
When do these tax changes take effect?
The changes take effect for the 2025 tax year. You'll see these changes when you file your taxes in early 2026.
Do I qualify for the tip income deduction?
You qualify if you receive cash tips in an occupation where tipping was customary before 2025 (i.e. restaurants, bars). The tips must be voluntarily paid, and you must have a valid Social Security number. High-income earners are excluded.
How do I prove my tip income qualifies for the deduction?
You'll need to maintain proper documentation of your tip income. This includes keeping a daily tip record (like IRS Form 4070A), ensuring tips are reported to your employer, and verifying that your W-2 accurately reflects your tip income. The IRS has not yet released specific guidance on additional documentation requirements for the new deduction.
How does the senior bonus deduction work?
If you're 65 or older, you can deduct an additional $6,000 from your taxable income. This amount phases out at a rate of 6% once your modified adjusted gross income exceeds $75,000 (single) or $150,000 (married filing jointly).
Can I claim both the overtime deduction and the tip income deduction?
Yes, if you qualify for both deductions, you can claim them both on your tax return. Each deduction has its own limit ($25,000 for tips and $12,500 for overtime for single filers), and both are subject to the same income phase-out thresholds. However, you must have proper documentation for each type of income.
How do I know if my vehicle qualifies for the car loan interest deduction?
To qualify, your vehicle must have had its final assembly in the United States. You can verify this by checking the vehicle's window sticker (for new cars) or by using the National Highway Traffic Safety Administration's VIN decoder tool. Your car dealer should also be able to provide documentation confirming U.S. assembly.
How 433 Investors Unlocked 400X Return Potential
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