For millions across the country, the 2026 midyear mark is as much a time for financial planning as it is for celebration. This summer marks America's 250th birthday — a historic milestone for our country's independence.

But while the nation was founded on a rebellion against unfair taxes, tossing your computer into the nearest harbor probably wouldn't work when it comes time to pay the IRS; December 31st is the final deadline for most 2026 tax year money moves.

Instead, you might just want to look to the wisdom of founding father and financial thinker, Benjamin Franklin, this planning season.

Franklin famously noted that, "nothing can be said to be certain except death and taxes." And though you can't escape either, you can control how much you overpay the government.

By applying Ben Franklin's wisdom to midyear tax planning today, you could help secure your retirement nest egg, fund intergenerational wealth, and potentially lower your tax bill in 2026. Here's how.

1. "The Doors of Wisdom are never shut."

Popularized in the 1755 edition of the Almanac, Franklin quoted this proverb to challenge the status quo in how we do things; it's easy to fall into a routine of wash, rinse, and repeat.

But routinely doing your taxes the same way every year can cost you. Gain a little midyear tax wisdom through the following ways:

• Learn midyear strategy. You don't have to wait until April to learn a new tax strategy. Platforms like the IRS Video Learning Portal and tax software academy portals offer free, year-round webinars to help you spot planning opportunities before the year-end deadline strikes.
• Revitalize your filing plan. Your revenue streams may change, and so should your taxes. For instance, if your financial situation has simplified, you might no longer need an expensive tax professional anymore. Alternatively, if you've bought property or started a business, doing taxes yourself might cause you to overlook certain tax deductions and credits.
• Save with free tax tools. There are several ways to file your taxes for free each year. For example, the IRS reports that millions of taxpayers have saved over a billion dollars collectively using IRS Free File alone. Evaluate free filing tools available to you now, while you're outside of the chaotic tax season stress.

2. "Beware of little expenses; a small Leak will sink a great Ship."

In the Almanac, Poor Richard warns that "a little punch" or extra tea now and then might seem like "no great Matter," but accumulated tiny expenses can sink your long-term financial ship.

In terms of midyear tax planning, the lesson is simple: Don't miss the small stuff. Now is the perfect time to audit your tax records before the end-of-year holiday chaos.

• Audit your health accounts. Check your Flexible Spending Account (FSA) or Health Savings Account (HSA) balances. Ensure your medical procedures, prescriptions, and qualifying purchases are properly documented with clean receipts (no matter how small), and budget out your remaining FSA funds if your plan has a strict year-end deadline.
• Track new tax provisions. If you plan on claiming provisions from the 2025 Trump tax bill, tracking documentation is key. For example, the car loan interest deduction allows you to deduct up to $10,000 in interest, but only if the vehicle was bought new, is used primarily for personal use, and had its final assembly in the U.S. Make sure you qualify for all the tax deductions and credits you plan on claiming.
• Organize the paper trail. Start digging through your kitchen junk drawer or email folders. You'll want to make sure you have your tax mileage log on file if you're, say, a ride-share driver, or have your gambling tax documentation if you've placed a bet this year. Start the family's designated "tax folder" now to avoid unnecessary stress later.

3. "Early to Bed and early to rise, makes a Man healthy, wealthy, and wise."

Printed in the 1735 edition of the Almanac, this phrase originally praised the discipline of an industrious lifestyle. Let's modernize that approach and polish it into a midyear tax mantra:

"Early to check and early to optimize makes you more planned, less stressed, and energized."

Corny, sure.

But a midyear checkup ensures you aren't accidentally giving Uncle Sam an interest-free loan — or worse, setting yourself up for an IRS underpayment fee or penalty. Here's the phrase broken down:

For more information on how to plan your tax payments and optimize your withholdings, check out Kiplinger's reports on Estimated Tax Payments and 13 Things Every Worker Needs to Know About Withholding.

4. "Having been poor is no Shame, but being ashamed of it is."

Printed in 1749, this quote reminds us that financial struggle is often a consequence of shifting circumstances, not a lack of virtue. In tax planning, knowing how to handle these financial pivots — and leveraging the IRS code to protect your downside — can be a key tool in your tax toolbelt.

Here's how we can relate that to our midyear tax planning strategy:

• Harvest your investment losses. Know when a position isn't working out. Through tax-loss harvesting, you can sell underperforming equities to counteract your capital gains. If your losses exceed your gains, you can use them to offset up to $3,000 of ordinary income, carrying the rest over to future years.
• Strategize charitable giving. If you want to support a cause close to your heart, plan those donations now rather than scrambling in December. Strategizing early helps you maximize itemized charitable deductions and navigate the new 2026 rules on charitable giving.
• Utilize a QCD. If you're age 70½ or older, you can make a qualified charitable distribution (QCD) directly from your IRA to an eligible charity. This counts toward your required minimum distribution (RMD), the minimum annual amount you must withdraw after reaching a certain age, and also helps keep that money out of your AGI, potentially lowering your tax bill.

5. "Money can beget Money, and its Offspring can beget more."

Moving away from the Almanac, this quote comes from Franklin's 1748 essay, "Advice to a Young Tradesman." Franklin was explaining compound interest, noting that money is of a "prolific generating nature."

Retirement accounts and legacy planning are perfect examples of compounding wealth while avoiding high taxes. And midyear is a great time to double-check that your savings vehicles are on track.

• Maximize pre-tax contributions. If you're currently working and in a higher tax bracket than you expect to be in retirement, maximize your traditional 401(k) or other traditional IRA contributions now. It lowers your taxable income today and gives you more immediate cash flow to save or invest. Later, when your federal tax bracket is (hopefully) a little lower, you'll be taxed on the contributions when you withdraw them.
• Plan the "perfect" Roth conversion window. If you anticipate an upcoming low-income year — maybe you're freshly retired but haven't started drawing Social Security or reaching your RMD age yet — plan a potential Roth IRA conversion ahead of time. Converting traditional retirement funds into a Roth during a low-income year allows you to pay a low tax rate on the conversion, but while there are six reasons to convert to a Roth, there are reasons not to.
• Evaluate your estate tax plan. Check in with your financial advisor about your new estate tax exemption amount. Are you optimizing for the stepped-up basis of inherited assets, leaving appreciated equity without capital gains after death? Also, review whether you should use the annual gift tax exclusion to pass tax-free assets to children or grandchildren in 2026.

From shifting brackets to new legislative bills, tax planning is typically a moving target that requires at least a bi-annual checkup.

While a great financial professional can help you tailor these moves to your specific roadmap, keeping these five pieces of financial wisdom in mind may help you avoid being caught off guard and keep you focused on what matters most this summer — celebrating.

Happy planning!

This article is for informational purposes only and does not constitute professional tax or financial advice. Tax laws (including state taxes) are subject to change and vary by individual circumstances. Consult with a qualified tax professional regarding your specific situation.

Explore More

• Here's the age at which most Americans hire a pro to do their taxes.
• Ever heard of the rubber duck rule of retirement tax planning?
• Vacationers: Pack these 11 travel items that are totally HSA-eligible.

Drive through eastern Loudoun County, Virginia, and you will quickly understand why some parts of the area are often referred to as "Data Center Alley."

Massive, windowless gray cement structures rise up behind fences and security gates, while cranes loom over roads once lined with trees, now covered in mud from construction traffic, working to make way for yet another data center.

This mixed suburban/rural area is now home to the world’s largest concentration of data centers. Around 200 facilities are currently operating in Loudoun alone, with more planned, and they handle over one-third of the world’s daily internet traffic.

While supporters argue these centers are vital to the digital economy, many residents — not only in Virginia but across the United States — are concerned about their rapid expansion, energy and water use, and broader environmental impact.

Critics also highlight that these facilities often create fewer permanent jobs compared to the tax incentives they receive. As tensions grow, the question becomes: where do residents and lawmakers go from here?

The great data center debate

Data centers are specialized facilities that house a variety of computing components, including servers, networking equipment, and extensive drives.

Their prevalence has increased in recent years, as every time someone streams a movie, stores photos, shops online, uses social media, or interacts with AI chatbots, information is processed through these centers worldwide.

There are now reportedly around 4,000 data centers in the U.S., which some see as a good thing, helping create jobs and generate revenue.

But…data centers place significant demands on local infrastructure.

• Modern data center campuses can span dozens or even hundreds of acres and often require new power lines, substations, roads, and other infrastructure.
• Many consume significant amounts of electricity. (Just a few years ago, data centers accounted for an estimated 4% of total electricity use in the United States. By 2028, that figure is expected to climb to as high as 12%.)
• Data centers also typically rely on large diesel-powered backup generators to ensure uninterrupted operations during power outages, which raises concerns about local air quality in some communities. (According to the U.S. Environmental Protection Agency, diesel exhaust from backup generators contains fine particulate matter and nitrogen oxides that are associated with respiratory issues like asthma.)

Notably, data centers and water have emerged as another point of contention.

Depending on the design and cooling technology, large facilities can consume hundreds of thousands of gallons of water per day to cool server racks. Some large campuses reportedly use volumes comparable to those of a small town, raising sustainability questions in some communities.

Still, states and local governments across the country have spent years competing to attract data center development, often by offering generous tax incentives.

Data center tax exemptions

In recent years, 38 states have offered generous incentives, including sales tax exemptions on servers and equipment and property tax reductions, to win a larger share of the industry's explosive growth.

Increasingly, however, several of those states are facing backlash not just from residents but also from some lawmakers.

As a result, some are moving toward requiring greater transparency, shifting infrastructure costs onto developers, reexamining tax incentives, or studying the industry's impact on electricity and water supplies and local communities.

Some examples:

Illinois: Late last week, Gov. JB Pritzker directed the state's Department of Commerce to completely halt the processing of all new data center tax exemptions starting July 1.

"Illinois has an opportunity to continue leading in technological innovation and economic growth, but we also have a responsibility to protect working families and local communities as the data center industry rapidly expands," Pritzker stated in a release.

Ohio: In May, Ohio Gov. Mike DeWine ordered the state’s Tax Credit Authority to freeze all pending and new data center sales tax exemption requests. The halt came after a state report revealed that the exemption cost Ohio $1.5 billion in 2025 alone.

In a release regarding the issue, DeWine wrote, “I fully support the Ohio General Assembly's work to study the issue and bring forward facts about data centers, including the local benefits to communities when tax exemptions are granted.”

Georgia: Lawmakers in the Peach State are moving to phase out data center tax suspensions after a state audit revealed the exemptions will cost a projected $2.5 billion this year.

Data centers in Virginia: What’s happening

In Virginia, lawmakers in the Senate want to let a multibillion-dollar annual data center tax exemption expire, while the Virginia House is reportedly trying to tie any remaining tax breaks to strict environmental and clean-energy compliance rules.

According to the Commonwealth’s tax disclosures, the existing data-center sales-tax exemption in the Old Dominion state cost an estimated $1.6 billion last fiscal year.

That massive exemption and the growing backlash over the more than 600 data centers already in the Commonwealth are sticking points in a budget process that must be completed by the end of June.

At the same time, in some other states, resistance to data centers has led to new legislation. (This is not an all-inclusive list.)

• In Oklahoma, Gov. Kevin Stitt signed the Data Center Consumer Ratepayer Protection Act of 2026 into law, effective July 1. The law is designed to prevent utility cost hikes for residents.
• New York lawmakers just passed the Responsible Data Center Development Act (A11560), which, once enacted, will impose a one-year moratorium on permits for new data centers of 20 megawatts or more.
• Monterey Park, California, became the first U.S. city to enact a ban on data center developments after roughly 88% of local voters approved a June 2 ballot measure.

As of June 2026, according to various online trackers, more than 25 states are either advancing data-center-related legislation or have enacted measures that address grid cots, reporting requirements, utility regulation, tax incentives, or local authority over data centers.

What about Congress? In March 2026, Sen. Bernie Sanders (I-Vt.) and Rep. Alexandria Ocasio-Cortez (D-N.Y) introduced the Artificial Intelligence Data Center Moratorium Act. The measure, which would temporarily pause new data center construction nationwide while Congress develops federal rules for AI infrastructure, hasn’t gained traction on Capitol Hill.

Are data centers bad? Bottom line

The debate over the good and not-so-good aspects of data centers shows no signs of going away.

A recent Gallup poll finds that 71% of Americans now oppose the construction of AI data centers in their local communities (with 48% strongly opposed). The pollsters note that local data center construction is more unpopular in the U.S. than building a nuclear power plant.

This “not in my backyard” sentiment is split between environmental concerns (expressed by 50% of respondents) and economic fears, e.g., higher utility bills (about 20% of respondents), according to Gallup. Pollution, negative views of AI, and quality-of-life concerns were also factors for some.

While polling data help explain national sentiment, grassroots opposition efforts highlight local concerns.

• In Hood and Hill Counties, Texas, residents hoped to block eight proposed data centers by attending town halls in large numbers, though developers are fighting back in court. A similar effort occurred in Champaign County, Illinois, leading to a moratorium to protect a crucial aquifer.
• In Sand Springs, Oklahoma, residents mobilized in response to reports that local officials had allegedly signed non-disclosure agreements to annex 827 acres of agricultural land for a tech campus.
• Residents in Box Elder County, Utah, along with Alliance for a Better Utah, have filed a lawsuit against state development agencies over a 40,000-acre AI project backed by celebrity investors. They argue it undermines local voter oversight and grants big tech unchecked control over their water, roads, and tax structure.

Meanwhile, among those polled by Gallup who favor having a data center in their communities, the most cited reason why was potential job growth.

To that end, a Brookings Institution analysis finds that while data centers do create local jobs, it is likely “fewer than advocates claim.”

Some independent estimates put the total at a few dozen to a few hundred long-term on-site positions once a given center is constructed.

Read More

• How Data Centers are Impacting Retirees in Some States
• 10 Cheapest Places to Live in Virginia
• From the Pink Tax to Surveillance Pricing: Are You Paying More without Knowing?

If you own an electric vehicle, time is running out to take advantage of the EV charger tax credit. The Alternative Fuel Vehicle Refueling Property Credit covers up to 30% of the cost of a home EV charging station, including eligible hardware and installation expenses, up to $1,000.

The credit was originally extended through December 31, 2032. However, the GOP's One Big Beautiful Bill eliminated the tax credit, and it's now set to expire on June 30, 2026.

If you've been considering installing a home charging station, you might want to act soon to take advantage of the credit before it disappears.

Where you install the charger matters

To qualify for the credit, the IRS (PDF) requires you to install the charger in a home in an eligible low-income community census tract, or a nonurban census tract. According to the IRS, about two-thirds of Americans live in census tracts eligible for the credit.

A census tract is a small geographic region or neighborhood as defined by the U.S. Census Bureau. Census tracts allow the government to collect and organize data about these specific areas.

To determine if you live in a tract that’s eligible for the tax credit, use the U.S. Department of Energy 30C Tax Credit Eligibility Locator, which allows you to look up your address, and it identifies whether your home is in an eligible tract.

Not every home will qualify for the credit. If you have a second home, the charger must be installed at your primary residence to qualify for the credit.

Which types of EV chargers qualify

The EV charger tax credit applies to Level 1 and Level 2 chargers; the chargers must be new.

Level 1 chargers use standard 120V outlets and can be used for lighter charging needs, but most homeowners install Level 2 chargers, which are faster and can fully charge typical electric vehicles overnight.

When shopping for an EV charger, consider how you tend to use your vehicle, your typical charging needs and the types of features that you might want.

For example, smart scheduling can charge your vehicle during off-peak times when energy rates are lower, and smart chargers can provide detailed summaries of energy usage and can send you notifications to remind you to charge your car.

Both the hardware and the installation could count toward the tax credit.

Below are a few top-rated Level 2 EV chargers we found:

Do you need an electrician?

Many Level 2 chargers require professional installation. Depending on the location of the charger and the capacity of your electrical panel, an electrician might need to upgrade the panel to handle the additional electrical load.

The installation will typically require an electrical permit, which a licensed electrician can usually obtain on your behalf. If you live in a homeowners association (HOA), you might also need approval before installing a charger.

Installing a charger can become more complicated if you rent your home or live in a condo. In these situations, you might need approval from a landlord, property owner or condo board. You might also have to follow building rules or bylaws that could affect where the charger can be installed or what type of charger you can use.

What records should you keep for the tax credit?

It's essential to carefully organize and keep records of the charger installation for the tax credit. As you move through the process, be sure to retain the following:

• Receipts. Keep receipts for the charger, related equipment and installation costs.
• Permits. Save all permit paperwork, including the signed permit card showing the installation passed inspection.
• Electrician invoices. Retain all invoices from your electrician, including charges for permits, panel upgrades and installation work.
• Proof of payment. Keep proof of payment for all expenses, such as credit card statements, receipts or canceled checks.
• IRS Form 8911. You'll use IRS Form 8911 to claim the tax credit when you file your taxes. Be sure to keep an extra copy of the form for your records.

Is it worth rushing before the deadline?

Installing an EV charger is a significant project, so it’s important to research your options and choose a charger that fits your needs.

That said, the tax credit could provide meaningful savings. Most home chargers cost between $500 and $900, while installation can range from about $1,000 to $3,000 depending on the complexity of the project and the condition of your existing electrical panel.

For example, if your total project cost came to $2,800, you could potentially receive an $840 tax credit. If you were already planning to install a charger, it might be worth completing the project before the June 30 deadline.

To meet that deadline, though, you’ll likely need to move quickly, especially if permits are required.

Start contacting electricians now to check their availability and ask whether they believe the installation can realistically be completed in time.

To qualify for the EV charger tax credit, the installation must be fully completed by June 30.

Related Content

• 3 Smart Ways to Lower Your Car Payment Without Buying a New Car
• Should You Rent an EV for Your Road Trip? As Gas Prices Rise, Let's Look at the Costs
• Time to Stop Driving? When Older Drivers Need to Hang up the Car Keys

You're sitting at your kitchen table, ready to file your own taxes, and it hits you — your college student might have earned enough to file an income tax return.

That part-time job, summer internship, or freelance gig can quickly raise questions for the whole family, even when it seems like they didn't make much. That's because whether your college kid actually needs to file under IRS rules depends on how much they earned and what type of income was involved.

And then there's another looming question: if they do file their own return, can you still claim them as a dependent? Here's what you need to know.

Should a college student file a tax return?

Many parents naturally assume that a dependent college student only needs to file a tax return if their earnings exceed the standard deduction amount. (For 2025 returns (those being filed now in the 2026 tax season, the amount is $15,750 for single filers.)

While that's true in some cases, it really depends on the type of income they received during the year. Two IRS rules primarily apply here.

Rule 1: W‑2 earnings

Dependent students generally don’t need to file for W-2 income unless their total earned income exceeds their dependent standard deduction. That's the greater of $1,350 or earned income plus $450, not to exceed $15,750 for 2025.

A $3,000 W2 summer job is below that threshold, so filing usually isn’t required.

Rule 2: Unearned and 1099 income

Unearned income (interest, dividends, taxable scholarships) triggers a return if it exceeds $1,350, even if the student also has W-2 earnings.

Self-employment or freelance income reported on a 1099 must be filed if net earnings exceed $400, regardless of W‑2 earnings.

In many situations, filing results in a refund of withheld taxes rather than an amount owed. But these are simplified examples, and your tax situation may be different.

When 1099 gig income comes into play

Maybe your college student took on freelance opportunities (e.g., tutoring, graphic design, driving for DoorDash, or even getting Venmo payments for babysitting). That income is typically reported on a 1099-NEC form or, in some cases, a 1099-K.

• If their net self-employment earnings exceed $400 — even if total income is modest — they’ll need to file a federal tax return and include Schedule C to report business expenses.
• They’ll also calculate self-employment tax (15.3% for Social Security and Medicare), though they can deduct half of that amount on their 1040, which reduces their taxable income. However, the $400 filing threshold is based on net earnings before this deduction.

Note: Keep in mind that the IRS receives copies of 1099 forms directly from the payers. So skipping the filing could potentially lead to an automated notice later.

For example, if your child earned $2,000 from summer gigs and can deduct $500 for expenses like supplies or mileage, their net income would be $1,500, which exceeds the $400 filing threshold.

For college students with 1099 gig income, the outcome might involve a small amount owed after deductions.

For instance, $8,000 in gross freelance earnings minus $1,500 in valid expenses, like mileage or materials, could result in roughly $6,500 in net earnings and roughly $920 in self-employment tax.

Related: Stop Using Your Smartwatch for Mileage (Until You Read This IRS Rule)

Claiming your college student as a dependent even if they file

Let's turn to that second big question: your ability to claim your college student as a dependent.

The good news is that their filing a return, for a refund or to report 1099 income, doesn't automatically prevent you from claiming them as a dependent. That's as long as you provide more than half of their total support.

That said, many high-earning families encounter limitations on federal education credits due to the income phaseout ranges for joint filers.

• American Opportunity Tax Credit: The AOTC is worth up to $2,500 but begins to phase out at adjusted gross income (AGI) of $160,000 to $180,000 (joint) and $80,000 to $90,000 (single filer).
• Lifetime Learning Credit: The LLC is worth up to $2,000 but begins to phase out at the same AGI as for the AOTC.

If your household income puts you above these ranges — which isn't uncommon for some families who are able to afford college — these credits aren't available to you regardless.

Unfortunately, your student faces the same barrier.

Since you provide over half of their support, they have to check the box on their return indicating that "someone can claim me as a dependent," which disqualifies them from claiming the AOTC or LLC.

In effect, it's a situation where parents miss out on claiming those key education tax credits due to income levels, while your student misses out due to their dependent status.

Reasons to file taxes when you don't have to

Even if your student's earnings don't cross the tax filing thresholds, it might sometimes make sense for them to submit a return.

That's because for W-2 jobs, employers commonly withhold between 10% and 22% for federal taxes upfront.

On $3,000 in earnings, that could mean a $450 or more refund with a straightforward filing.

Though you might skip a filing if there was no withholding at all, and all scholarships received are nontaxable, meaning they covered only tuition and required books. (Room, board, or other expenses can bring a scholarship into taxable territory.)

One more incentive to file: the student loan interest deduction. If your college student paid interest on qualified federal or private loans (up to $2,500 deductible), they might qualify. But that's only if they're not claimed as your dependent and meet MAGI limits for the 2025 tax year.

If a parent is the legal borrower (e.g., a Parent PLUS Loan) and they pay the interest, they can claim the deduction as long as the student is their dependent and the parent's income is below the phaseout ($170,000–$200,000 for 2025).

Note: With this tax break, the deduction is only "lost" if the student is the borrower and the parent is claiming them as a dependent.

State taxes for college students?

So…you're already navigating federal rules, but state taxes add another layer.

As with federal tax rules, whether your college student needs to file a state return depends on their income, where they earned it, and the state's specific thresholds. (Those can sometimes be lower than the IRS limits.)

For example, a $3,000 summer job might not trigger a federal filing requirement but instead trigger a state filing. That's especially if taxes were withheld or your college student worked across state lines.

If your student attends school out of state, their campus paycheck might withhold for the school state, while summer earnings at home follow your home state's rules.

In states with no income tax, like Florida or Texas, this is more straightforward. However, places like California or New York might require filing if there's withholding or part-year work, even below federal levels.

And, check your student's pay stubs for state deductions, since filing a return can mean getting that money back as a state tax refund.

Worth noting: Filing a state return can, in some cases, unlock state education credits. But some require the student to file independently and not be claimed as your dependent. So, for some families, that creates the same double bind as federal education tax credits.

Filing taxes as a college student: Bottom line

So, overall, when deciding whether your child needs to file, W-2 earnings offer some flexibility. When dealing with unearned income, that generally requires filing at $1,350, while 1099 gigs generally trigger filing once net earnings exceed $400.

You can usually still claim your student if you provide most of their support.

Running the numbers through IRS Free File or tax software can help capture any refunds. And, of course, if you have questions about your family’s specific situation, consulting a trusted tax professional can be a smart step.

Related

• The Little-Known Tax-Free Way to Help Pay Your Student Loan
• 14 Education Credits and Deductions to Know
• Does Your Child Need to File a Tax Return?

The recently enacted tax law, known by some as the "big, beautiful bill," has changed the federal child tax credit (CTC) math for millions of American families.

While the headline news is a boost to $2,200 per child, the "fine print" in the 2026 CTC rules has quietly tightened eligibility in ways that could cost you your entire refund.

Take our quiz to see if you're set to claim your maximum credit.

Read More

• How Much is the Child Tax Credit for 2025 and 2026?
• Does Your Child Need to File a Tax Return This Year?
• IRS Reveals Family Tax Credit Amounts for 2026

Turning 65 can come with meaningful tax advantages. That's especially true now, given changes under the Trump/GOP tax bill enacted in July of last year.

From a larger standard deduction and new bonus deduction for older adults to lesser-known breaks tied to retirement income or age, several provisions can help older adults lower their federal tax bill.

To get you started, here are five tax strategies that can help you keep more of your hard-earned retirement income.

Key tax savings for seniors over 65

1. Claiming the Extra Standard Deduction and Senior Bonus Deduction

Taxpayers age 65 and older are eligible for an extra standard deduction on their federal return on top of the regular standard deduction amounts.

For 2025 federal returns (being filed now in this 2026 tax season), these deductions include:

The senior bonus deduction is different than the extra standard deduction for older adults. It is temporary and requires a valid Social Security number (SSN), but it can be claimed even if you itemize deductions, subject to income phase-outs.

Keep in mind: Claiming both the extra standard deduction and the senior bonus deduction can reduce your taxable income.

Learn More: How the $6,000 Senior Bonus Deduction Works

2. Deducting higher medical expenses

As retirees transition into retirement, they often face rising medical expenses.

To help manage these costs, the IRS offers a tax benefit for those who itemize deductions, allowing them to subtract eligible medical expenses that exceed 7.5% of their adjusted gross income (AGI).

Eligible expenses include:

• Medicare Part B and Part D premiums
• Medicare Advantage or supplemental insurance
• Long-term care insurance (deduction limited by age, see IRS Pub 502)
• Prescription drugs, doctor visits and hospital care
• Transportation for medical care

Keep in mind: Tracking all eligible medical costs throughout the year can help ensure you claim all available deductions and potentially lower your tax burden.

Learn More: What Medical Expenses Are Tax Deductible?

3. Making Qualified Charitable Distributions (QCDs)

At 70½ and older, you can donate up to $108,000 per year (for the 2025 tax year, $111,000 for the 2026 tax year) from a traditional IRA directly to a qualified charity through a Qualified Charitable Distribution (QCD). (The QCD limit is indexed for inflation.)

Benefits:

• Counts toward your Required Minimum Distribution (RMD)
• The amount of the QCD is excluded from taxable income

Keep in mind: QCDs must go directly from your IRA to the charity to qualify. Using QCDs can satisfy your RMD while keeping funds out of taxable income, which might also help reduce Medicare premiums (IRMAA surcharges) and taxes on your Social Security benefits.

Learn More: How Qualified Charitable Distributions Work

4. Managing Social Security taxes carefully

Social Security benefits may be taxable depending on your total income, which the IRS measures using provisional income. Depending on your provisional income, up to 85% of your Social Security benefits may be taxable.

"Provisional income" is calculated as: Adjusted Gross Income (AGI) + tax-exempt interest + ½ of your Social Security benefits

Where AGI includes:

• Wages, pensions, and traditional IRA/401(k) withdrawals
• Taxable investment income (interest, dividends, capital gains)

Keep in mind: Spreading taxable withdrawals from retirement accounts across multiple years or using Roth IRA withdrawals strategically can help minimize how much of your Social Security benefits are taxed, preserving more of your retirement income. Filing separately can trigger higher taxable amounts, so consider your filing status carefully.

Learn more: 6 Things to Know About Taxes on Social Security

5. Converting traditional IRA funds to a Roth IRA strategically

Converting part of a traditional IRA to a Roth IRA in lower-income years can provide long-term tax benefits:

• Pay taxes on the converted amount in the year of conversion
• Future qualified withdrawals from the Roth IRA are generally tax-free
• Reduces future Required Minimum Distributions (RMDs)

Keep in mind: Partial Roth conversions in years when income is lower can spread taxable income over time and potentially reduce future tax liabilities. Roth conversions can temporarily increase provisional income and affect taxes on Social Security in the conversion year.

Learn more: Reasons to Convert Your IRA to a Roth

Bonus Tip: Reviewing state tax breaks for seniors

Many states offer retirement-specific tax relief, like:

• Pension or retirement income exclusions
• Property tax reductions or freezes
• Higher eligibility thresholds for credits for older adults

Keep in mind: State-level tax relief is often overlooked by some taxpayers but can help save more than federal deductions alone. It's important to check eligibility or consult a local tax professional to claim all the tax benefits you're entitlted to.

Learn more: Retirement Taxes: How All 50 States Tax Retirees

Retirement tax planning: Bottom line

Being 65 or older opens the door to a variety of deductions, credits, and planning strategies that can reduce your taxes — but every retiree’s situation is different.

How much you can save depends on factors like your retirement income, Social Security benefits, state tax rules, and whether you itemize deductions.

Keep in mind: These tips can put more money back in your pocket, but other considerations, like Medicare premiums, investment income, and state-level tax breaks, can affect your overall tax picture.

In any case, strategic planning can help you maximize available tax savings opportunities while avoiding surprises. Consult a tax professional to tailor strategies to your circumstances.

Read More

• The Extra Standard Deduction for Those 65 and Older
• Overlooked Tax Deductions for Retirees
• How to Calculate Taxes on Social Security Benefits

Nobody likes a tax season surprise — especially when it's a bill instead of a check. While the House GOP has projected $1,000 payouts for many taxpayers under the new 2025 laws, the reality for some will be a higher income tax bill or a shockingly lower refund.

Why the discrepancy? It can come down to life changes or missed opportunities. Maybe you no longer qualify for the student loan interest deduction, or perhaps you’re leaving money on the table by taking the standard deduction instead of itemizing.

To help you avoid a shock on filing day, here are six common ways you could be paying more income taxes than necessary.

1. You overlooked the new 2025 tax credits and deductions

The 2025 Trump/GOP tax and spending bill introduced a wave of temporary tax incentives that could significantly alter your income return this filing season.

For instance, new car owners might be eligible for a car loan interest deduction, and workers earning tips or overtime might now qualify for targeted tax breaks. With the federal tax code in such a state of flux, it’s easier to overlook a major deduction or credit.

However, new and continuing tax breaks come with strict eligibility requirements, most notably income phase-outs. If your earnings exceed specific thresholds, certain tax breaks disappear, leading to a higher tax bill than anticipated.

Here are a few common tax deductions and credits with income phaseouts:

• Student loan interest deduction. For 2025 income taxes, the phase-out begins at a modified adjusted gross income (MAGI) of $85,000 for single filers and $170,000 for married couples filing jointly.
• Traditional individual retirement account (IRA) deductions. If you're covered by a retirement savings plan at work, your ability to deduct traditional IRA contributions starts to phase out at a MAGI of $79,000 for single filers and $126,000 for married couples filing jointly (for tax year 2025).
• "Senior bonus" deduction. Adults age 65 and older might qualify for this temporary tax break, but their income phase-out is $75,000 for single filers and $150,000 for joint returns.

What should you do next year? Start by reviewing various tax deductions and credits you might be eligible for. Next, look for ways to lower your adjusted gross income (AGI) so you can maximize your eligibility for tax breaks. For instance, you might increase contributions to pre-tax accounts — such as a 401(k), FSA or HSA — to directly reduce your taxable income.

Related: An HSA Sounds Great for Taxes: Here’s Why It Might Not Be Right for You

2. You claimed the standard deduction when you should have itemized

Roughly 90% of taxpayers claim the standard deduction, but this "path of least resistance" might not get you the most bang for your buck. For the 2025 tax year, several shifts in federal policy have made itemizing more attractive than it's been in years. For instance:

• The SALT cap increase. Until recently, the state and local tax (SALT) deduction was capped at just $10,000. But under the 2025 tax legislation, that cap has been raised to $40,000 for many filers. If you live in a high-property-tax state or pay significant state income taxes, this change alone could push your itemized total well past the standard deduction.
• Larger charitable contributions. New tax changes for 2026 charitable donations caused many taxpayers to donate larger gifts last year. If you increased your giving in 2025, those contributions could significantly tip the scales in favor of itemizing.

What should you do next year? Don't file out of habit. In a shifting tax policy environment, choosing whether you itemize or claim the standard deduction can change from year to year. Gather your property tax statements, mortgage interest summaries and receipts for donations and medical bills, and run the math on whether an itemized return could save you more on taxes.

Related: What's the standard deduction and who should itemize?

3. Your W-4 withholding is too low and outdated

Whether you’re starting a new role or settled into a long-term position, you should regularly review your Form W-4 (Withholding). This document tells your employer exactly how much to send to the IRS and state authorities on your behalf throughout the year.

If your tax withholding is out of date and too low, you might be build a debt to the IRS. Various life changes can increase your tax bill if your withholding isn't adjusted at least annually, like:

• Getting divorced or separated. Single and married-filing-separately statuses typically carry a lower standard deduction than those available to joint filers. Additionally, married separate filers might not qualify for certain tax breaks (like certain education tax breaks).
• Getting a pay raise. While a promotion, bonus, or raise is great news, that extra income could push you into a higher tax bracket, making your current withholding levels insufficient.
• Having a child leave home. When a child turns 17, they no longer qualify for the $2,200 child tax credit, even if they still live at home (though temporary absences, such as college, are exempt from this rule).

What should you do next year? Reviewing your withholding annually can help you avoid a surprise tax bill filled with interest and fees. Currently, the IRS failure-to-pay penalty is 0.5% of your unpaid taxes for every month (or part of a month) the balance remains, capping at 25%. Don't forget that most state agencies can apply their own underpayment penalties, adding another layer of cost to your tax bill.

4. Your side hustle income was underreported, or you missed estimated tax payments

Taking on a new side hustle during the past year means you probably owe taxes on the income generated from that work. Many freelancers and gig workers are surprised to learn that the IRS expects quarterly estimated tax payments if you anticipate owing $1,000 or more in federal taxes at year-end.

Whether you’re an Etsy seller, an Uber driver, or a freelance consultant, you'll probably receive some combination of the following tax forms when determining your income tax bill for the year:

• Form 1099-K: Reports payments received through third-party processors like PayPal, Venmo, or specialized gig platforms.
• Form 1099-NEC: Reports non-employee compensation for services you’ve performed as an independent contractor.
• Form 1099-MISC: Reports income not covered in the NEC category, like rental income.

*Note: All earned income is typically taxable regardless of whether you receive a tax form.

Failing to report your earnings throughout the year doesn't just lead to a higher bill come tax time, but can also trigger IRS underpayment penalties and interest.

Furthermore, if you aren't tracking your business expenses as you go, you might miss valid breaks (such as the home office deduction) and other overlooked tax deductions for the self-employed.

What should you do next year? Take time now to review the rules for reporting self-employment income. Depending on whether you're a full-time contractor or just a casual freelancer, your tax requirements might differ. For a deeper dive into maximizing your savings, check out Kiplinger’s report, 12 Tax Strategies Every Self-Employed Worker Needs in 2026.

5. Your tax-inefficient investments hurt your return

Did you sell a stock, bond, or piece of real estate for a profit last year? If so, that capital gain likely boosted your taxable income and potentially contributed to a higher tax bill. However, it isn't just what you sell that matters — it's where and how long you hold your investments.

Your income tax bill might be higher than expected because of these common oversights:

• Poor asset location. Keeping "tax-heavy" investments — such as high-yield bonds or actively managed mutual funds that payout frequent dividends — in a taxable brokerage account instead of a tax-deferred 401(k) or IRA.
• Frequent trading. Gains on assets held for less than a year (short-term) are taxed at ordinary income rates, which can reach as high as 40.8% when you include the net investment income tax (NIIT).
• Missing out on tax-loss harvesting. If you have winning investments, you can offset those gains by selling "losers" at a loss. If your losses exceed your gains, you can use up to $3,000 to offset your ordinary taxable income.

What should you do next year? Aim to maximize your contributions to 401(k)s, 403(b)s and IRAs to keep more of your growth tax-deferred until retirement (when your income tax rate might be lower). For your taxable accounts, try to hold investments for at least one year to qualify for lower long-term capital gains rates. Finally, make "tax-loss harvesting" a year-end habit to ensure you aren't paying more on your winners than you have to.

More: The Wash Sale Rule: Six Things to Know to Avoid Tax Pitfalls

6. You overlooked state-specific tax credits and deductions

While not every state has its own tax rules (and some states have no income tax at all), ignoring state-level credits and deductions is one of the easiest ways to overpay your year-end income tax bill.

Taking advantage of every tax break available to you could help save on state income taxes. To ensure you aren't leaving state money on the table, consider these tax resources and strategies:

• Stay current on state tax changes. Review applicable rules and any upcoming local changes to better prepare for your state income return.
• Look for how retirement taxes work in every state. If you're retired, how your state treats Social Security or pension income is vital — and could help you save on your next income tax bill.
• Check out the best low-tax states for middle-class families. Is your state a high-tax state? For some, a move across state lines might be the most effective tax strategy of all.

What should you do next year? Visit your state’s Department of Revenue website before you file. Many states have tax deductions, credits, and exemptions that can significantly reduce your state income tax liability.

Read More

• Tax Season 2026 Is Here: 8 Big Changes to Know Before You File
• 3 Popular Tax Breaks Are Gone for Good in 2026
• How to Lower Your Tax Bill Next Year
• 7 Bad Tax Habits to Kick Right Now

Oregon’s $1.41 billion tax surplus is officially returning to taxpayers. Thanks to the Oregon Surplus Kicker program, millions of eligible filers can now claim the tax credit on their 2025 state income return.

The credit pays out every two years, and only if state revenue projections rise above 2% — so the Oregon kicker isn't always a guarantee. Like prior years, strict eligibility requirements mean not all Oregon taxpayers qualify, either.

Here is what you need to know about the 2026 calculation and how to ensure you don't leave your potential share of the surplus on the table.

Key Points for Oregon tax kicker

• The 2026 Oregon tax kicker is based on your 2024 income tax liability.
• You may receive your Oregon kicker as early as February 18, 2026.
• The status of your Oregon kicker tax can be tracked two weeks after filing your state income return.

Oregon kicker 2026 FAQs

Oregon kicker in 2026: Who qualifies?

The Oregon kicker tax is a refundable credit that either shrinks your state tax bill or boosts your refund. Most Oregon taxpayers who file their 2025 state return are automatically given a kicker; however, there are a few eligibility requirements:

• You must have filed and owed taxes on a 2024 Oregon income return (before any tax credits were applied).
• You must file a 2025 Oregon income tax return, even if you're not required.

No longer a resident? Not a problem. Simply file an Oregon income return during the 2026 tax filing season (ensuring you meet the above eligibility requirements), and your kicker will be directly deposited into your bank account or mailed to your address, depending on your chosen tax filing preference.

How to calculate my 2026 Oregon kicker credit?

The Oregon tax kicker is based on 9.863% of your 2024 income tax liability. So, if you had a high state income tax liability that year, you'll likely get a bigger Oregon kicker (and if you had a low income tax liability, your kicker amount will be lower).

Let's look at an example:

• Say you owe $6,000 in Oregon income taxes on line 22 of your 2024 return (Form OR-40).
• Multiply $6,000 by the 9.863% Oregon kicker rate.
• Your Oregon kicker amount will be $591.78.

You can also use Oregon's "What's My Kicker?" tool to calculate your Oregon kicker surplus, provided you have some information on hand:

• Your full name.
• Your Social Security number.
• Your filing status for tax years 2024 and 2025.

The Oregon kicker tax is applied as a refundable credit against your state income tax refund (or state income tax liability). The kicker is delivered via your selected deposit method (mailed check or direct deposit) that you chose while filing your state return.

When does Oregon state start accepting income tax returns?

You won't receive your Oregon tax kicker until you've filed your state income return this year and met all other eligibility requirements.

• Filing is open. You can begin your Oregon income return now if you have all the necessary tax documentation.
• Refund start date. The Oregon Department of Revenue (DOR) may begin issuing refunds as early as February 18, 2026.
• Important note. The early February date applies only to e-filed returns.

Why you should file digitally in 2026. While Oregon continues to support paper returns, the state's DOR strongly recommends switching to e-filing this year. That's because the IRS was reportedly delayed in relaying important federal data to the state, so Oregon won’t even begin processing paper-filed income tax returns until late March. Filing digitally can avoid this bottleneck.

But you don't have to pay for tax software to get your Oregon kicker faster. Taxpayers can use:

• Direct File Oregon. A free service available directly through your state tax account (for most full-year residents).
• Free file taxes in other ways. Various online providers offer free e-filing for eligible taxpayers.

Where is my Oregon kicker tax refund?

The Oregon DOR recommends following these steps to track the status of your state tax refund:

• Wait two weeks before checking your refund status. About 95% of Oregon e-filed taxpayers receive their refunds within this time frame.
• Use the "Where's My Refund?" tool. If you still don't have your Oregon refund (and were expecting one), you can check the status after two weeks.
• Watch for your refund status to change. Reach out to the Oregon DOR if there's no change in your state income tax refund status after 20 weeks.

You can contact the Oregon DOR at 503-378-4988 or 800-356-4222 or via email at questions.dor@dor.oregon.gov. However, state officials caution that phone lines will be busy from February through June.

Why is my Oregon tax kicker so low?

If you owe any outstanding state debt, like child support, court fines, or school loans, part of your Oregon kicker tax may be used to satisfy those debts. Your state income tax refund (non-kicker amount) may be used to offset those liabilities, too.

The Oregon DOR typically sends you a Notice of Refund Offset letter detailing the debts paid from your state income tax return. Any remaining balance is issued to you around the same time.

Read More

• Oregon Tax Guide
• Tax Season 2026 Is Here: 8 Big Tax Changes to Know Before You File
• IRS Income Tax Refund Schedule 2026: When Will Your Refund Arrive?
• 2025-2026 Tax Brackets and Federal Income Tax Rates

You may have heard that the 2026 tax season, which officially began January 26, is the first to be impacted by President Donald Trump’s 2025 tax law, known by some as the "big, beautiful bill."

New tax changes, from revamped credits and one less free filing option to updated 1099‑K rules and new schedules for special breaks, could affect whether you owe money or get a tax refund, and how quickly the IRS processes your return.

On that note, the IRS is still implementing the changes and updating systems amid budget and staffing pressures. So be prepared this filing season for longer wait times for phone assistance and potentially slower resolution if your return needs extra review.

In the meantime, here are eight key 2026 tax season changes to know before you file.

1. The standard deduction for 2025 taxes is bigger

The 2025 Trump tax bill, signed into law on July 4, 2025, makes the lower individual tax brackets from the 2017 Tax Cuts and Jobs Act (TCJA, from Trump's first term as president) permanent. That means the seven federal income tax rates remain and range from 10% to 37%.

But for 2025 returns you'll file this tax season, the standard deduction increased to about $15,750 for single filers, $31,500 for married couples filing jointly, and $23,625 for heads of household.

(Those numbers reflect the higher base TCJA amount plus the Trump tax bill 2025 boost and inflation adjustment.)

Note: A higher standard deduction generally reduces taxable income and can simplify filing. But it can disadvantage taxpayers who would otherwise benefit more from itemizing deductions.

For more information, see 2025 Standard Deduction Changes Under the Trump Tax Law.

2. The SALT deduction cap has increased — for now

Speaking of the state and local tax deduction, the "big beautiful bill" raises the SALT cap from $10,000 to $40,000 for 2025 returns.

• The cap will increase by 1% annually through 2029. Phase‑outs begin for households with modified adjusted gross income (MAGI) over $500,000.
• Note: This expansion is temporary. After 2029, the SALT deduction cap is scheduled to revert to $10,000.

The higher cap will likely have the most significant impact on joint filers with high property‑tax bills in high‑cost housing markets. For many in that group, itemizing could now result in a bigger deduction than claiming the standard deduction.

For more information, see SALT Deduction: Three Things to Know.

3. Child tax credit amount and rules have changed

Taxpayers with children see a modestly higher federal child tax credit (CTC) for 2025, along with some eligibility rule changes.

• For 2025 returns, the maximum child tax credit is $2,200 per qualifying child under age 17. That's up $200 from last year and is subject to income limits.
• Up to about $1,700 of the credit can be refundable for eligible lower‑income families through the additional child tax credit, depending on earned income and other requirements.

Income‑based phase‑outs still apply. For most single filers, the CTC begins to phase out when MAGI exceeds $200,000. For most married couples filing jointly, it begins to phase out at $400,000, with the credit shrinking as income rises above those thresholds.

Co‑parents should coordinate which parent will claim each child for the year to avoid duplicate claims and processing delays.

To learn more, see Child Tax Credit 2025 and 2026: How Much Is It?

4. Older adults over age 65 get a 'senior' bonus deduction

Beginning with the 2025 tax year and running through 2028, individuals age 65 and older may claim an additional $6,000 deduction on top of their standard or itemized deduction, subject to certain conditions.

• This “senior bonus” deduction phase-out starts at modified adjusted gross income (MAGI) of $75,000 for singles (and $150,000 for joint filers), and disappears once income exceeds $175,000 (single) or $250,000 (joint).
• The deduction requires a Social Security number valid for work and is not available to those filing as married filing separately.

For retirees living on Social Security, pensions, and IRA withdrawals, that extra $6,000 can significantly reduce taxable income. That's especially when it's combined with the higher standard deduction and the existing extra standard deduction for people over 65.

Note: Tax software should automatically calculate the amount once the date of birth is entered, but paper filers should check the age boxes and follow the form instructions.

To learn more, see How the New Senior Bonus Deduction Works.

5. There are several new deductions and a Schedule 1‑A

The 2025 Trump tax bill also introduces several new “above‑the‑line” deductions and organizes them on redesigned schedules.

A revamped Schedule 1 now works with a new Schedule 1‑A to capture adjustments to income created by the new tax law. That includes the new car‑loan interest deduction and targeted tax relief for qualified tip income and overtime pay.

• For 2025 through 2028, individuals may deduct interest paid on a loan used to purchase a “qualified vehicle,” subject to a $10,000 annual cap and strict requirements, including final assembly in the United States and other eligibility rules.
• This deduction is treated as an adjustment to income, meaning eligible borrowers can benefit even if they don't itemize.
• For more information, see New Car Loan Interest Deduction: Which Buyers and Vehicles Qualify.

In addition, workers can claim new deductions for certain earnings: up to $25,000 of qualified tip income (subject to income phaseouts and specific occupation eligibility) and up to $12,500 of overtime pay for single filers ($25,000 fo joint filers), subject to income limits and qualifying work definitions.

These overtime pay and tip income amounts are generally claimed through the new schedules rather than directly on Form 1040, and they depend on accurate employer reporting of wages and tip income.

Note: For many filers who previously used only Form 1040, taking full advantage of these breaks may now require completing Schedule 1 and Schedule 1‑A. Expect your tax software or preparer to ask extra questions about car loans, tip reporting, and overtime pay in its income and deductions sections.

6. IRS Direct File is gone for 2026

After piloting a free Direct File tool in limited states for the past two filing seasons, the IRS is not offering Direct File for the 2026 tax season.

Taxpayers seeking free filing options must instead rely on IRS Free File (if eligible), commercial software (some exceptions may mean filing isn't free), volunteer tax‑prep programs such as VITA and Tax Counseling for the Elderly (TCE), or paper forms (IRS Free Fillable Forms) to file 2025 federal tax returns.

Learn more: A Free Tax Filing Option Has Disappeared for 2026.

7. Casual sellers get 1099-K threshold relief

Third‑party payment platforms remain a major source of information for the IRS. But the 2025 tax law backs away from the controversial $600 threshold for Form 1099‑K reporting.

Instead, the tax agency reverts to an old rule: platforms send a 1099‑K if you have more than $20,000 in gross payments and over 200 transactions in a year. That gives casual online sellers far more breathing room.

Some side‑gig workers and people who regularly use payment platform apps for business activity will still receive 1099‑Ks, and the IRS can compare those gross amounts to what’s reported on the return.

• Because a 1099‑K can also reflect non‑taxable reimbursements and sales at a loss, it helps to keep good records.
• Those records should separate actual taxable income from personal transfers and other non‑taxable amounts.
• Good tax records can help lower the odds of an IRS mismatch notice or make it easier to straighten things out if the tax agency flags a discrepancy.

See: Another 1009-K Rule Change for Your 2025 Taxes.

8. Small‑business owners see full expensing again

For 2025 returns, 100% bonus depreciation (or full expensing) is available and can increase the deduction you claim. However, the tax break only applies to qualified business equipment placed in service after January 19, 2025.

• Business owners should confirm the “placed in service” date for major purchases.
• The January 19 date, not when the equipment was ordered or paid for, determines how much can be expensed on the 2025 return.

2026 tax season changes: How to get ready before you file taxes

Given this mix of higher and new deductions, new schedules, and reworked rules, it makes sense to treat this filing season as more of a reevaluation rather than an automatic replay of last year.

• Check your withholding or estimated tax payments against the new tax brackets and deductions, gather any 1099‑K and new‑account forms, and confirm that you're eligible to use your desired filing method.
• As mentioned, because the IRS is rolling out these changes while managing budget and staffing cuts, taxpayers should anticipate longer phone wait times and slower processing for returns that need human review.

The IRS advises not waiting until the last minute to file, responding promptly to legitimate IRS letters (beware of tax scams), and using online tools where possible can also help reduce friction and improve the odds of a timely refund, if you're due one.

And, speaking of tax refunds…

As Kiplinger has reported, U.S. House of Representatives tax writers have said many filers could see 2026 refunds jump by roughly $1,000 under the new law if they claim every tax break they are entitled to.

Though, as always, whether a taxpayer receives a refund — and how much — will depend on their individual tax situation.

Read More

• Not Ready to File Taxes? 8 Things to Do to Prepare
• What's in the 2025 Trump Tax Bill and What It Means for Your Money
• IRS Tax Refund Schedule for 2026: What to Know
• Don't Overpay the IRS: 6 Tax Mistakes That Could Be Raising Your Bill

More than three-quarters of Americans 50 and older say they want to remain in their homes after they retire, but sharp increases in property taxes have made aging in place unaffordable.

Unlike income taxes, which often decline in retirement, property taxes are based on the value of your home — and in many parts of the country, assessed values have skyrocketed in recent years. Median property taxes rose by an average of 10.4% between 2021 and 2023, according to an analysis of the latest data available by LendingTree, an online marketplace for consumer loans. The median property tax in 2023 was nearly $3,000 ($2,969), but median property taxes in 50 metropolitan areas ranged from $1,091 to nearly $10,000, according to LendingTree.

Before writing a check for your next property tax bill, make sure you take full advantage of property tax relief programs offered by your state or locality. While more than 9 million Americans likely qualify for property tax relief, only about 8% apply for it, according to the AARP. “Many aren’t aware these programs exist or assume they’re not going to qualify,” says Nicole Heckman, vice president of well-being for the AARP Foundation.

The types of property tax relief available vary, not only by state but by individual counties and jurisdictions. Many states and jurisdictions offer expanded relief to homeowners who are 65 or older; some offer breaks to homeowners who are 61 and older. Veterans and residents with disabilities may also qualify for a reduction in their property taxes. While eligibility is often income-based, the income thresholds “can be pretty expansive,” Heckman says, so don’t assume you earn too much to qualify. In New Jersey, for example, homeowners with incomes of up to $500,000 are eligible for reimbursement of a portion of their property tax bill.

Tax relief isn’t automatic. In most cases, you must fill out an application and file it by a deadline set by your locality or state. Some jurisdictions require you to apply in person. Other states and localities allow you to apply online, but that can be challenging for older adults who don’t have broadband internet, Heckman says.

The AARP Foundation’s Property Tax Aide program, now in its fifth year, allows homeowners to research more than 140 programs in 50 states and Washington, D.C. Users can find details on eligibility, deadlines and where to get help. The average amount of relief provided through the program is $400, but some users have saved up to $1,000, Heckman says. Many states allow eligible homeowners to apply for up to three years of back tax relief, she says. “That can be a significant credit or refund.”

Some types of relief states and localities offer homeowners:

1. Tax credits and refunds

More than a dozen states offer property tax credits or refunds to eligible older adults in amounts ranging from $250 to $2,730. Pennsylvania provides rebates ranging from $380 to $1,000 for eligible older and disabled residents. Tennessee refunds all or a portion of property taxes paid by eligible residents.

Minnesota provides two types of property tax refunds: one based on homeowners’ income and the amount of their property taxes, and another based on how much residents’ property taxes have increased. (Some residents qualify for both, and the program isn’t limited to older adults.) Cindy Rieck, 68, of Pequot Lakes, Minn., whose home has nearly doubled in value since she purchased it in 2007, says she received a refund of $1,200 in 2024.

2. Expanded homestead exemption

Property taxes are based on the assessed value of your home, which may differ from its appraised or market value. A homestead exemption lowers the assessment, thus reducing your property tax bill. Most states offer some kind of homestead exemption for residents, but many states provide an additional homestead exemption for older adults.

Florida, for example, allows residents to exempt up to $50,000 of their home’s assessed value from property taxes (which will increase with the rate of inflation starting in 2025), but jurisdictions in the state have the option of providing an additional $50,000 exemption to eligible homeowners 65 and older.

Texas recently increased its homestead exemption to $140,000 for all residents. The state provides an additional $60,000 exemption for residents age 65 or older, for a total combined homestead exemption of $200,000. Texas now allows individual jurisdictions to add $3,000 to that amount.

3. Assessment freeze

In Arizona, homeowners ages 65 or older who have lived in their primary home for at least two years and meet income limits can have their property’s valuation frozen for three years. New Jersey has a “senior freeze” program that reimburses property tax increases for eligible residents who have owned their homes for at least three years.

4. Tax deferral

Illinois allows eligible homeowners 65 and older to defer up to $7,500 of property taxes on their principal residence. California, Maine, Minnesota, Vermont and Washington also allow eligible older adults to defer property taxes.

If you sign up for deferral, the state or locality will place a lien on your home; the taxes must be paid, usually with interest, after you die or sell the home. That’s important to consider when planning your estate. If your heirs sell the home, the back taxes will reduce the amount they’ll receive from the proceeds, and if they want to keep it, they’ll be on the hook for the taxes you deferred. “If you can afford it, you may decide you’d rather pay the tax now and not have something your heirs will have to worry about when they sell the property,” says Jared Walczak, vice president of state projects at the Tax Foundation in Washington, D.C., a tax-policy research organization.

Other options to cut your tax bill

Applying for property tax relief is just one way to lower your tax bill. Other options that may be available to you:

Claim a deduction
The One Big Beautiful Bill Act, signed into law in July, allows homeowners to deduct up to $40,000 in state and local taxes, up from a cap of $10,000. The provision takes effect in 2025 and expires in 2029. The legislation also expanded the standard deduction for eligible taxpayers 65 and older, so for many older adults, claiming the standard deduction will still provide the lower tax bill. However, if you live in a high-tax state and have other deductible expenses — large charitable contributions, for example — it’s worth running the numbers with your tax preparer or on a tax software program to determine whether you should itemize on your 2025 tax return.

Challenge your property tax bill
If you believe your assessment was inaccurate or outdated, you may be able to lower it by filing an appeal. Review your property’s record card, usually available on your locality’s website or by request. If you find an obvious error — four bedrooms instead of two, for example — your assessor may agree to lower the assessment on the spot.

If the information on your property’s record card is correct but you believe your assessment was higher than those for comparable homes in your neighborhood, you can use that information to file an appeal. Check your local government’s website for deadlines and procedures. Realtor.com offers a tool that will provide you with an estimate of the market value of your home, along with estimated values of other homes in your neighborhood. The tool is free but you must create an account to use it.

Note: This item first appeared in Kiplinger Retirement Report, our popular monthly periodical that covers key concerns of affluent older Americans who are retired or preparing for retirement. Subscribe for retirement advice that’s right on the money.

Related content

• States With the Lowest Property Tax in 2025
• The Cheapest Places to Retire in the US
• The Original Property Tax Hack: Avoiding The ‘Window Tax’
• New Trump Tax Bill: Five Changes Homeowners Need to Know Now

With the giving season officially underway, December 31 marks your critical tax deadline for charitable giving. About 30% of annual gifts occur before year-end, making this the prime time for taxpayers to maximize their 2025 itemized charitable donations tax deduction.

And for high-income earners, charitable giving in 2025 is particularly vital. Tax legislation in 2026 will cap the maximum federal tax benefit at 35%, effectively making contributions this year far more valuable. Plus, a new rule next year will further reduce the allowable charitable deductions for donors over a certain floor limit.

Here’s what you need to know.

Related: The 'Scrooge' Strategy: How to Turn Old Junk Into a Tax Deduction

Charitable deduction for high-income earners in 2025

Let’s first review why donating this year, in 2025, is more advantageous than in 2026. Basically, the 2025 Trump Tax Bill changed several rules regarding charitable donations. A couple of those changes affecting high earners are summarized in the following table.

As you can see, for 2026, a charitable contribution "floor" will be introduced for itemizers, regardless of income level. Only total contributions above 0.5% of your AGI will be deductible.

For example, if you had $200,000 AGI and donated $2,000, only $1,000 would be deductible.

Charitable contributions for high-income itemizers will also be subject to a cap in 2026. The new law imposes a 35% limit on the value of all itemized deductions for high earners, meaning taxpayers in the top bracket will receive a lower tax break compared to 2025.

While excess contributions can still be carried forward for up to five years, carryforwards used in 2026 and beyond will be subject to the new limitations.

So below are three ways for you to take advantage of the more advantageous donation rules in 2025 — especially if you’re a high earner.

1. Donate stock to charity (or other appreciated non-cash assets)

You may have heard that donating appreciated stock (or other non-cash assets) is a part of a good charitable deduction strategy. Well, that’s because donating these assets provides a “double” tax benefit.

• You can deduct the asset’s full fair market value, pre-tax. If your asset’s fair market value (FMV) is higher than “cost-basis” (what you paid), the gain is not taxable once donated to a qualified, public charity.
• This allows you to avoid capital gains tax. By transferring the asset directly to your chosen charity, you’ll avoid paying capital gains tax (up to 20%) on the increase in the asset’s value. Plus, you may also avoid paying the 3.8% net investment income tax (NIIT).

Of course, there are a couple of caveats when donating appreciated non-cash assets.

• Namely, the donated asset must have been held for more than one year before donation; otherwise, the asset will be donated at cost-basis, which could be significantly lower than the value of an appreciated stock.
• Also, donations of appreciated stock to a public charity are subject to a 30% AGI limit, which is higher than the AGI limit for cash (60%). Despite this difference, avoiding capital gains tax typically makes donating the asset (rather than selling and donating the cash) more tax-advantageous.

If you donate appreciated assets to specific types of accounts, your donations may also yield tax-free growth for future charitable giving. One such account that high-earners typically use is a donor-advised fund (DAF).

2. Use a donor-advised fund (DAF) bunching tax strategy

A donor-advised fund (DAF) allows you to claim an immediate tax deduction for your contributions this year (under the more favorable 2025 rules), while the fund recommends grants to your chosen charities over time.

Given the flexibility in timing, a DAF is often used in conjunction with a tax strategy called “bunching.” This is where you pay two or more years’ worth of itemized expenses in the current tax year to push your total itemized deductions over the standard deduction amount.

• If performed correctly, “bunching” your deductions gives you one year of high itemization followed by one year of the standard deduction, which maximizes your total tax savings for both years.
• Using a DAF-bunching strategy is particularly beneficial for high-income earners who anticipate a higher federal income tax rate in 2026, when charitable giving tax laws will be less favorable.
• Plus, tax-free growth in a DAF means you can pay out more money in the future, amplifying your philanthropic impact.

Also, bunching doesn’t just exist for charitable deductions. You can front-load other popular itemized deductions, like the state and local (SALT) deduction, the medical expense deduction, and even the mortgage interest deduction, to help push your deduction amount higher than the standard. Yet keep in mind that certain AGI limits and other IRS rules may apply to each itemized deduction.

3. Make a charitable IRA distribution (QCD)

A qualified charitable distribution (QCD) is a distribution from your IRA to a qualified charity of your choice. QCDs are particularly beneficial if you’re trying to avoid taking your required minimum distribution (RMD) and still want to meet your charitable giving goals for the year.

Here are the eligibility requirements for 2025:

• You must be age 70 ½ or older.
• You can donate up to $108,000 (or $216,000 if married spouses) in a single tax year.
• The distribution must be made from a traditional IRA, an inherited IRA, or an inactive SEP/SIMPLE IRA.

Although QCDs require that you “give up” a portion of your annual IRA distribution to a charity, that amount is excluded from your AGI.

This lower AGI may reduce your taxable income, thereby lowering your tax on Social Security benefits for the current year. Even better, reducing your AGI helps lower your income for the Medicare premium calculation two years later, potentially allowing you to avoid higher premiums.

But a QCD doesn’t qualify as an itemized “charitable deduction” on your income taxes, which may hamper your bunching strategy. You also can’t use a DAF to make a QCD, so be sure to review your complete charitable giving strategy before making one.

Changes to charitable donations in 2026

While we covered several notable ways to maximize your gifting strategy in 2025 if you’re a high-income earner, here are a couple of other gift tax changes going into effect in 2026:

• Increased estate tax exclusion. While the basic exclusion amount for individuals was $13.99 in 2025, the exclusion was increased to $15 million in 2026. This may affect your gifting strategy as a higher exclusion amount allows individuals to transfer more wealth to heirs estate tax-free.
• New non-itemizer charitable deduction. A federal deduction for non-itemizers up to $1,000 for single filers (or $2,000 for joint filers) will be available in 2026. However, you can’t use this deduction in conjunction with DAF or private foundations.

Of course, these changes may not affect everyone, depending on your gifting strategy. Also, state tax rules may differ. Consult with a qualified tax professional to discuss which tax strategies are best for your financial circumstances.

Read More

• 10 Retirement Tax Plan Moves to Make Before Year-End
• What is the Gift Tax Exclusion for 2025 and 2026?
• 2025 Roth Conversion Strategy: 6 Reasons to Convert (& When Not to)
• How Charitable Donations Can Reduce Your Taxes
• 3 Major Changes to the Charitable Deduction in 2026

By now, you've likely heard about the tax and spending megabill that President Donald Trump signed into law on July 4, 2025.

This new law, formally known as Public Law 119-21 and often referred to by Trump as the "big beautiful bill, reshapes many tax rules that you and other taxpayers rely on each year. But understanding the various changes and their implications can be confusing.

Essentially, the tax bill extends many of the lower tax rates and increased standard deduction base amounts from the 2017 Tax Cuts and Jobs Act (TCJA), which was enacted during Trump's first term as president. As a result, some concerns about "tax cliffs" — key provisions initially set to expire at the end of last year — have been alleviated.

The legislation introduces several new temporary tax deductions and credits, including those related to tips and overtime pay. However, the bill also eliminates or accelerates the phase-out of certain incentives, including the federal EV tax credit and other clean energy credits.

Some changes were effective as of 2025 (returns you just filed in early 2026), while others don't come into play until this year (impacting returns you'll typically file in early 2027).

• Cost-wise, the Congressional Budget Office (CBO) projects that this law will increase federal deficits by approximately $4.1 trillion in the next decade. That includes about $700 billion in added interest costs on federal debt.
• The law introduces substantial cuts to Medicaid and the Supplemental Nutrition Assistance Program (SNAP, formerly known as food stamps), which provide health and food support to millions of people in the United States.

It’s a lot to digest, but we’ll dive into many of the changes in more detail below, beginning with some key points.

New Trump Tax Bill

Trump tax bill summary

Congress passed the massive bill using the budget reconciliation process. That approach allows a single party, in this case, Republicans, to approve certain legislation with a simple majority.

GOP members in the U.S. Senate narrowly approved the bill after a tie-breaking vote from Vice President JD Vance. Republicans in the U.S. House of Representatives also approved the bill along party lines.

The megalegislation is considered by many Republicans to be the signature fiscal effort of Trump's second term. Here's an overview of some key tax provisions.

• The seven tax brackets and their lowered rates stay put for now, so taxpayers didn't see higher income tax rates creep back up after last year, as was feared.
• Similarly, the standard deduction remains nearly double what it was before 2017 and will continue to be adjusted each year for inflation. (For 2026, that’s $16,100 for singles and more than $32,200 for couples filing jointly.)

According to separate analyses by the CBO and the Joint Committee on Taxation (JCT), the benefits from this tax law aren’t spread evenly.

People with higher incomes are expected to receive the most significant tax breaks, while many lower-income households might see their overall resources decrease.

Middle-income families could experience small gains or losses, depending on their individual circumstances.

Other key points:

• The state and local tax (SALT) deduction cap, which limits how much you can deduct for state and local taxes, rises sharply (subject to income limits) from $10,000 to $40,400 for 2026 and then remains elevated through 2029 before dropping back in 2030.
• New temporary deductions allow taxpayers to deduct interest on car loans for new U.S.-assembled vehicles (up to $10,000 per year) purchased after 2024, with income phaseouts and expiration at the end of 2028.
• Employees in traditionally tipped jobs, as specified by the U.S. Treasury and IRS, can exclude up to $25,000 in tips from federal income tax through 2028, subject to income limits and specific eligibility requirements.
• Overtime pay up to $12,500 (or $25,000 for joint filers) can be deducted in the same period, again with income phaseouts.
• The federal Child Tax Credit of $2,200 per child remains, but requires a valid Social Security number.
• New child savings accounts (called Trump accounts) start with a $1,000 federal deposit for kids born in 2025–2028 and allow further yearly contributions subject to limits and rules.
• Increased estate tax exemption, raising the threshold to $15 million beginning in 2026, indexed to inflation.
• Meanwhile, Medicaid and SNAP funding take significant hits, resulting in reduced eligibility or enrollment, increased work requirements, and lower funding levels. Some expect millions to lose health care coverage or food assistance because of those program cuts.

Here’s more of what you need to know about those provisions and how they could impact your taxes.

This content is for informational and educational purposes only and should not be considered financial, investment, tax, or legal advice. The views expressed are general in nature and may not apply to your individual situation. You should consult a qualified financial advisor, tax professional, or attorney before making any financial decisions.

What’s in Trump's tax bill?

Note: This is not an all-inclusive list of individual tax changes in the massive bill.

Extended individual TCJA provisions

The new megareconciliation legislation extends the TCJA’s seven individual income tax rates and brackets. Taxpayers have avoided the “tax cliff” rate increases that were set to take effect after 2025 if Congress hadn’t acted.

For more information, see: Federal Tax Brackets and Income Tax Rates.

The 2025 GOP tax bill also maintains the nearly doubled base standard deduction, which for 2025 was $15,750 for single filers and $31,500 for married joint filers, indexed for inflation annually. (As mentioned, those amounts adjust to $16,100 and $32,200, respectively, for this year).

Related: Standard Deduction Changes to Know Now

Estate tax exemption increase

The lifetime estate and gift tax exemption was scheduled to be reduced by half in 2026 due to looming Tax Cuts and Jobs Act (TCJA) expirations.

However, under the new Trump tax bill, the lifetime estate and gift exemption increases, as of January 1, 2026, to $15 million ($30 million for married couples).

Meanwhile, gifts given before 2026 benefit from the already-high 2017 tax exemption.

Learn More: What's the New Estate Tax Exemption Amount for 2026?

SALT deduction cap change

The SALT deduction cap is raised from $10,000 to $40,400 (for 2026), and the base amount will remain elevated for the years 2025 through 2029.

As a result, taxpayers who itemize deductions can deduct a larger amount of state and local taxes (including income, sales and property taxes) from their federal taxable income.

This cap increases by 1% annually during that period but phases out for taxpayers with modified adjusted gross income (MAGI) exceeding $500,000, returning fully to $10,000 for all taxpayers starting in 2030.

Related: SALT Deduction: Three Things to Know

New Tax Deductions

Several new deductions included in the tax and spending bill are temporary.

Car loan Interest deduction

Taxpayers can deduct interest on car loans up to $10,000 per year for new qualifying vehicles assembled in the U.S., purchased after December 31, 2024. Eligible buyers might be able to reduce their overall tax liability without itemizing deductions.

The tax break applies to passenger cars, light trucks, SUVs and motorcycles used for personal purposes.

• The deduction phases out 20% annually beginning at $100,000 MAGI for single filers and $200,000 MAGI for joint filers, with full phaseout at $150,000 and $250,000, respectively.
• Vehicle Identification Numbers (VINs) are required on tax returns.
• This deduction expires December 31, 2028.

Learn More: New Car Loan Interest Deduction: Which Buyers and Cars Qualify

'No tax on tips' deduction

Employees in traditional tipping occupations (e.g., servers, bartenders, salon workers) can exclude up to $25,000 in tips earned from federal income tax for tax years 2025–2028.

That essentially means eligible tipped workers might keep more of their earnings by paying less in federal income taxes on tips they earn through 2028. But ...

• Income phaseouts start at $150,000 (single) and $300,000 (joint).
• Self-employed individuals in tipped trades are excluded.
• Payroll and state taxes still apply to tips.

See: 'No Tax on Tips' Approved: What You Need to Know for more information.

Overtime pay tax deduction

A deduction for overtime pay of up to $12,500 (single) and $25,000 (joint) is allowed from 2025 to 2028, subject to the same income phaseouts as the deduction for qualified tip income.

See What's Happening With Taxes on Overtime Pay? for more information.

Targeted Tax Breaks

Child Tax Credit under Trump tax law

• The Child Tax Credit (CTC) maximum is $2,200 per qualifying child, indexed to inflation starting in 2026. The refundable portion of the credit is capped at $1,700 per child.
• Valid Social Security Numbers are required for taxpayers and dependents to claim the credit.

To learn more, see: Child Tax Credit 2025-2026: How Much Is It?

Trump Account for kids

New tax-exempt Trump accounts receive a government-seeded $1,000 for children born from 2025 to 2028, with additional nondeductible contributions capped at $5,000 per year. These funds, after age 18, can be used for education, home purchase or retirement purposes.

For more information, see: The GOP Wants to Auto-Enroll Your Child in a Trump Savings Account.

Senior Bonus Deduction (65+)

Taxpayers age 65 and older receive a bonus $6,000 deduction through 2028, phased out starting for incomes above $75,000 (single) and $150,000 (joint).

The deduction is available for eligible taxpayers whether you itemize or take the standard deduction.

For more information, see our report: New $6,000 Bonus Deduction: What It Means for Taxpayers Over Age 65.

Other 'Big Beautiful Bill' Tax Changes

1099-K threshold reporting

The GOP tax and spending bill brings back higher thresholds for 1099-K reporting from payment apps such as (but not limited to) PayPal, Venmo, Cash App, Etsy, StubHub, eBay, and Airbnb.

Beginning in 2025, for payments you receive for a given tax year, you should only receive a Form 1099-K if:

• You receive more than $20,000 in gross payments and
• You conduct more than 200 transactions on a single platform within a year.

For more information, see: Another IRS 1099-K Threshold Change to Know.

Health Savings Account (HSA) changes

• For HSAs, the new 2025 tax law expands eligibility by allowing individuals enrolled in Bronze or Catastrophic Affordable Care Act (ACA) plans to contribute starting in 2026.
• It also permanently allows telehealth services and direct primary care fees to qualify as HSA expenses, broadening the types of health care costs that HSAs can cover.

However, other reforms like expanding eligibility for Medicare enrollees weren’t included.

What this means for most: HSAs largely retain their prior features, including triple tax advantages on contributions, growth, and qualified withdrawals.

Student loan changes under Trump

Though not tax-related, the Trump tax and spending bill also introduces a significant overhaul of federal student loan programs.

Popular income-driven repayment plans initiated under the Biden administration will be phased out, borrowing for graduate students and parents will be restricted, and some options for deferment due to economic hardship or unemployment will be eliminated.

Though recent news reports indicate that the Trump administration might follow through with processing student loan forgiveness under certain Biden-era programs.

There's more. While the pandemic-era American Rescue Plan Act (ARPA) excluded forgiven student loan amounts from federal taxable income through 2025, the Trump/GOP tax and spending bill doesn't extend that exclusion.

That means, unless Congress acts, student loan debt forgiven after December 31, 2025, will once again be considered taxable income at the federal level.

That could leave borrowers who were counting on Public Service Loan Forgiveness (PSLF) or other forgiveness programs facing an unexpected tax bill.

For more information, see: How Taxes and Student Loan Repayment Could Soon Change Under Trump.

Ending clean energy tax credits

The new tax law delivers a major shake-up to federal clean energy incentives, setting expiration dates for popular tax credits.

Homeowners planning to install rooftop solar or battery storage had until December 31, 2025, to qualify for the 30% residential solar tax credit; after that, the credit is eliminated.

To learn more, see: Homeowners Rush to Install Solar Panels.

The federal EV tax credit for new, used, and commercial clean vehicles ended for vehicles acquired and put into service after September 30, 2025.

For more information, see How the EV Tax Credit Works.

The credit for installing home electric vehicle (EV) chargers remains in effect for a period of time, expiring for equipment placed in service after June 30, 2026.

With these deadlines, some analysts say the law is expected to slow the momentum of clean energy adoption and raise the cost barrier for solar and EV upgrades.

Business provisions in the Trump tax bill

The Trump/GOP tax and spending bill impacts businesses as well. Some key changes include:

• Permanent 20% small business deduction for pass-through entities such as partnerships and sole proprietorships.
• Permanent 100% bonus depreciation and full expensing for business investments.

(A permanent lower corporate tax rate, initially set by the 2017 TCJA, remains.) Other key business provisions are summarized in the following table.

Health Care and Food Benefit Cuts

Medicaid cuts and rule changes

The bill enacts the most sweeping cuts to Medicaid since the program’s 1965 inception.

The legislation reduces Medicaid funding by roughly 18% over a decade — about $600 billion to $800 billion according to the Congressional Budget Office (CBO) — through a combination of new eligibility restrictions, asset tests, and work requirements.

• Most adults, including parents of children age 14 and older, will need to work at least 80 hours a month to keep coverage, with some exceptions.
• States will be required to reassess eligibility every six months, rather than annually.
• States could also impose co-pays up to 5% of household income and require monthly income verification.

The CBO estimates that 10 million to 12 million people could lose Medicaid coverage in the next 10 years, with additional losses expected from tighter Affordable Care Act enrollment rules.

The impact is expected to fall hardest on families with low incomes, people with disabilities and rural residents.

SNAP: Shrinking food assistance benefits

The bill’s approach to the Supplemental Nutrition Assistance Program (SNAP) is equally notable.

SNAP program funding (formerly known as food stamps) will be cut by about 20%, an estimated $230 billion over 10 years.

• Work requirements are expanded to cover adults up to age 64 (up from 50), and parents with children age 14 and older.
• States will be required to shoulder a greater share of SNAP costs or risk losing federal support entirely.

Many family advocates say these changes threaten to push millions into food insecurity, especially older workers and families in high-unemployment areas.

For more information, see Medicaid and SNAP Benefits at Risk Under Trump’s Tax Bill.

More Tax Changes for 2026

Gambling losses tax deduction change

Starting in the 2026 tax year, the new law limits gamblers to deducting only 90% of their losses against their gambling winnings. Previously, you could deduct 100% of your losses up to your winnings, meaning you weren’t taxed on net-zero or losing years.

This change applies to all gamblers and related gambling expenses. However, as Kiplinger has reported, several bills have been introduced proposing to reverse this, so stay tuned.

To learn more, see: Gambling Loss Deduction Limit Sparks Debate.

Charitable donation tax deduction

Under the new tax law, a significant change has been introduced to charitable giving incentives.

• As of 2026, individuals who claim the standard deduction will be able to deduct up to $1,000 annually for single filers and $2,000 for joint filers in cash donations to qualified charitable organizations.
• Previously, only those who itemized deductions could benefit from the charitable donation tax deduction.

Additionally, for high-income taxpayers in the 37% tax bracket, the value of charitable deductions has been capped at 35%, meaning they can receive a maximum of 35 cents in tax savings for every $1 donated.

For more information, see: Charitable Donation Tax Deduction: What to Know AND 3 Changes Coming to Charitable Deductions for 2026.

ACA Tax Credit expiration

The premium tax credit subsidies under Affordable Care Act (ACA) marketplace plans expired after December 31, 2025.

• Congress originally expanded these premium tax credits during the pandemic in 2021 and later extended them through the end of 2025.
• They substantially lower health insurance costs for more than 24 million people in the U.S., or roughly 7% of the population.
• Data show the tax credits have helped make coverage more affordable for a range of people, including the self-employed, small-business owners and those who lack access to employer or other coverage.

Deficit and Impact

The fiscal impact of the GOP tax bill

Proponents argue the bill’s tax cuts and spending changes will boost growth and jobs. But the numbers tell a more complicated story.

The CBO projects the bill will add about $3.3 trillion to the national debt over 10 years, even after accounting for the spending reductions and new revenue measures.

Other independent estimates, which factor in the interest on that additional debt, put the true cost closer to $4.5 trillion or more over a decade.

Public Perception

Who benefits from Trump's tax bill?

A Tax Foundation analysis shows the largest tax cuts will go to households earning $400,000 and above. The top 1% would receive a disproportionate share of benefits compared with those making $100,000 or less.

• Data show that most tax benefits will go to wealthier taxpayers, with the top 10% receiving approximately 80% of the total tax breaks.
• Meanwhile, lower-income Americans generally see fewer gains — or even lose resources — especially when cuts to Medicaid and food assistance programs like SNAP are taken into account.
• Middle-income families are expected to experience mixed results, depending on their individual circumstances.

What the polls say about the tax bill

What about the public? Some public skepticism was reflected in a CBS News/YouGov poll conducted in early June. About 47% of respondents said the bill would hurt the middle class, 54% believed it would negatively affect low-income people, and 60% expected the wealthy to benefit most.

More recent polling also shows public opinion is generally running against the bill.

According to a recent Pew Research Center poll, only 27% of Americans believe the big bill will help people like them, while 51% think it will hurt the middle class.

A Kaiser Family Foundation’s survey echoes those concerns: 56% of respondents say they're “very worried” or “somewhat worried” that the bill’s benefits will primarily go to the wealthy and corporations, rather than to ordinary families.

Because the megabill was passed by the GOP without Democratic support, the law has added to political divisions.

• Many are concerned about the hardship Medicaid and SNAP cuts could bring to vulnerable populations.
• New deductions for tips, overtime pay and car loan interest might help some taxpayers but add complexity to filing.
• Some environmental advocacy groups criticize the rollback of clean energy tax credits.

Republican lawmakers have focused on aspects of the law they believe support working families, while Democratic lawmakers often point to the high price tag and loss of medical insurance and care for millions.

Trump tax bill details: Bottom line

Understanding the fine print in the new tax law — including exactly which deductions expire when and income thresholds for phaseouts — can help you better prepare your finances and tax filings in the years ahead.

As always, consult a trusted and qualified tax professional or financial planner who can guide you and devise a strategy that fits your situation and goals.

Read More

• Income the IRS Won't Touch
• How Much is the Standard Deduction for 2026?
• New 2026 Income Tax Brackets Are Set: What to Know

Claiming family tax credits is a must if you're eligible. Not only can family tax breaks lower your tax liability, but they might increase your refund.

However, which credits you qualify for can change from year to year. The amounts of the credits can also change, since many are adjusted yearly for inflation.

While you might already know about the child tax credit and other family tax breaks for the previous year, here's what you can expect for the 2026 tax year (for income tax returns normally filed in early 2027). Read on.

1. Child Tax Credit 2026

President Donald Trump's 2025 tax and spending megabill, sometimes referred to as the "big beautiful bill (BBB), raised the federal child tax credit from $2,000 to $2,200 per qualifying child. That higher amount applies for 2026 taxes.

• The maximum refundable portion is worth $1,700 for 2026. That’s the same amount you could claim for 2025 tax returns.
• But there's one caveat: To claim the CTC, both the child and the taxpayer (parent or guardian) must now have Social Security numbers.

For more information about the current child tax credit, see Who Qualifies For The Child Tax Credit?

Note: Don't forget about state child tax credits. Currently, 15 states plus the District of Columbia provide their version of the child tax credit. Check out your state's Department of Revenue website to see if one might be available to you.

2. Higher adoption tax credit in 2026

The federal adoption tax credit for the 2026 tax year (taxes generally filed in 2027) is worth up to $17,670 (up from $17,280 from last year).

The adoption credit might be used for qualified adoption expenses paid to adopt a child and as an exclusion from income for employer-provided adoption assistance. However, you can't use the same qualifying expenses for both the credit and the exclusion.

The amount you can claim will also depend on your modified adjusted gross income (MAGI).

• For 2026, the credit phase-out begins at $265,080 and phases out completely at $305,080 or above.
• Additionally, there are a few limitations, including a special needs exception.

Trump's megabill also enhanced the adoption tax credit by making it partially refundable and allowing parents to claim up to $5,000 in credits.

For more information, see Kiplinger's report: Adoption Tax Credit: Do I Qualify?

3. Earned Income Tax Credit (EITC) 2026

The Earned Income Tax Credit is a refundable tax credit that's available to people with earned income below a certain threshold.

How much you get will depend on your filing status, the number of qualifying children in your household, and your earned income.

• For 2026, the credit is worth up to $8,231 (up from $8,046 for 2025) with three qualifying children
• For those with two qualifying children, the credit is worth up to $7,316 (up from $7,152 from last year).
• If you have one qualifying child, the credit is worth up to $4,427 for 2026 taxes.
• Those with no qualifying children can get up to $664 (up from $649 in 2025).

Additionally, for taxable years beginning in 2026, you won't be eligible for the EITC if your investment income exceeds $12,200.

Here are the income phaseout amounts for claiming the EITC for tax year 2026.

For more information about the EITC amounts for the upcoming tax filing season, see our report: Earned Income Tax Credit: What You Need to Know.

You might also be eligible for an earned income credit on your state tax return.

Several states, the District of Columbia, and New York City offer versions of the earned income credit. Check your state's and/or municipality's Department of Revenue website(s) for more information.

Explore More

• Quiz: Could Your Child's 529 Funds Jumpstart Their Roth IRA?
• Child Tax Credit: How Much Is It?
• The Earned Income Tax Credit
• Adoption Tax Credit: What You Need to Know

You might find that your most fruitful tax breaks aren’t hiding in itemized deductions — but they might be waiting for you after age 65.

Data from the IRS shows that 90% of taxpayers choose the standard deduction over itemizing at tax time, including retirees.

Where do you start? When federal tax breaks, such as the deduction for medical expenses, are disallowed for non-itemizers, claiming the standard deduction can seem counterintuitive.

Fortunately, there might be some good news this tax season for retirees. Five tax breaks are available to those 65 and older who are claiming the standard deduction on their 2025 income tax return (if you’re eligible). Here they are.

What tax deductions and credits can I claim with the standard deduction as a retiree 65 and older?

To find the five tax breaks available to those age 65-plus and retired (and who claim the standard deduction), Kiplinger first referenced IRS tax breaks available to this age group.

• Only tax credits and deductions were considered.
• Of those selected, tax breaks that could not be claimed with a standard deduction were disqualified.
• Additionally, federal tax breaks that required one or both spouses to work or go to school were excluded.
• Finally, information was gathered about state income tax breaks at large.

Even then, keep in mind that this listing is not exhaustive, and it’s important to check with your state’s Department of Revenue website regarding additional tax breaks for which you might be eligible. Consult with a qualified tax professional when necessary.

1. Extra standard deduction for retirees who are 65-plus

Not to be confused with the new standard deduction, the “extra standard deduction” is a tax break designed for those 65 and older to claim additional tax relief come filing time.

However, the amount of federal income tax relief you receive from the extra standard deduction depends on your filing status for the 2025 tax year:

• For married, filing jointly couples and surviving spouses, the amount of the extra standard deduction is $1,600 per qualifying individual.
• For single filers or heads of household, the amount of the extra standard deduction is $2,000.

Additionally, if you or your spouse is blind, you might receive more relief. The extra standard deduction is $3,200 per qualifying individual age 65 or older and blind (if married filing jointly) and $4,000 if single filing.

These amounts are stacked onto your regular standard deduction. For instance, if both you and your spouse are 65 and older, and your spouse is blind, the combined total of the standard deduction and extra standard deduction would be $36,300.

For more information on this tax break, check out Kiplinger’s report, The Extra Standard Deduction for People Age 65 and Older.

2. Bonus deduction for retired older adults

Introduced by the 2025 GOP spending bill, also referred to by some as the One Big
Beautiful Bill (OBBB), retirees might qualify for a new federal tax break, the bonus deduction.

Similar to the extra standard deduction, this temporary tax break is meant to provide relief to Americans 65 and older. It also stacks on top of the regular standard deduction and the extra standard deduction (though it can be claimed if you itemize).

Does this sound too good to be true? Maybe it is. Unlike the extra standard deduction, the bonus deduction has income limits that might preclude some retirees from claiming the tax break.

• The maximum deduction amount for married filing jointly couples is $12,000, while single filers might qualify for up to $6,000.
• However, the deduction amount begins to phase out for married couples who have $150,000 or more in income (single filers have a phaseout for income $75,000 or more).*
• The deduction is reduced by 6 cents for every $1 that’s above the phaseout threshold.
• The bonus deduction phases out completely when income is above $250,000 for couples and $175,000 for single filers.

For instance, if a qualifying single filer were 65-plus and had $80,000 in income, their bonus deduction would be $5,700 ($5,000 above the threshold multiplied by 6 cents, then subtracted from $6,000).

Check out Kiplinger’s report for more information on the bonus deduction and what it means for taxpayers age 65-plus.

*Note: “Income” for the bonus deduction is based on a taxpayer’s modified adjusted gross income (MAGI).

3. Car loan interest deduction for those 65-plus in retirement

According to the National Highway Traffic Safety Administration, 89% of people 65 and older drive. What’s more, data show that over one-quarter of new car purchases are made by this age group.

If you’re looking to buy a vehicle, there’s a new federal tax deduction for which you might be eligible. The OBBB introduced a temporary car tax break for qualifying taxpayers in 2025:

• The car loan interest deduction is worth up to $10,000 per year on qualifying vehicle loans.
• Single filers with income exceeding $100,000 (married filing joint couples with income above $200,000) will face a $200 phaseout of the deduction for every $1,000 of income above the income limit.*
• When income levels reach $150,000 for single filers ($250,000 for married filing joint couples), the car loan interest deduction is eliminated.

But while the car loan tax break might help some folks save on car buying costs, it’s important to note a couple of caveats. This federal tax break only applies to new, American-made vehicles purchased for personal use between 2025 and 2028.

For more information, check out Kiplinger’s report, New GOP Car Loan Tax Deduction: Which Vehicles and Buyers Qualify.

*Note: “Income” for the car loan interest deduction is based on a taxpayer’s modified adjusted gross income (MAGI).

4. Tax credit for low-income older adults claiming the standard deduction

Like all the other tax breaks on this list, you don’t need to be working or itemize your deductions to claim the tax credit for low-income older adults. The total tax credit amount is worth up to $7,500.

You must meet specific eligibility requirements. For instance:

• You must be 65 years of age or older to qualify, OR
• Under 65 but retired and on permanent and total disability, AND you received taxable disability income.

Additionally, your income must meet two income limit tests to qualify for the low-income older adult tax credit.

• The first income test is based on adjusted gross income (AGI).
• Your AGI must be under $17,500 if you’re single, a surviving spouse or head of household.
• Your AGI must be under $20,000 if you’re married and only one spouse is eligible for the credit. Otherwise, you’re subject to the $25,000 AGI limit if both spouses qualify.
• The second income test is based on your combined total nontaxable Social Security, pension, annuity and disability income. Single-filer income must be under $5,000, while married filing jointly couples must have under $7,500 (if both spouses qualify; otherwise, the limit is $5,000).

If, after all that, you’re not eligible for this retiree tax break — never fear. We have one more tax break on our list for retirees who claim the standard deduction.

*Note: Married filing separately couples who lived apart for the entire tax year may also qualify for the low-income older adult tax credit. However, these filers are subject to different income limits. The AGI limit is $12,500, and the combined total income limit is $3,750.

5. Property tax credits on your state income return (if you have one)

Did you know that nearly every state offers some type of property tax relief for retirees?

Whether it’s a homestead exemption, exclusion, property tax deferral or freeze on your property tax bill, there might be different types of relief from property taxes for older adults in many U.S. states.

However, here are a few states that offer a credit on your state income taxes, which you must claim come tax filing time to get relief. The selections below are worth up to $1,150 or more and are available to “older adults.”

• Massachusetts offers a “senior” property tax credit of up to $2,730 per year (annually adjusted).
• Michigan adults 65 and older might qualify for up to $1,200 through the state’s homestead property tax credit, provided their property taxes exceed 3.5% of their income.
• Montana “seniors” who are 62 or older might be eligible for a credit worth up to $1,150.

Eligibility rules apply, and the above list is not exhaustive. Property tax breaks aren’t just for homeowners. If you’re renting in retirement, check out your state’s Department of Revenue website to see if you qualify for property tax relief on your state income return.

Read More

• Test Your Retirement Tax IQ: How Much Do You Know?
• Retirement Taxes: How All 50 States Tax Retirees
• Most-Overlooked Tax Breaks for Retirees and People Over 65
• The Rubber Duck Rule of Retirement Tax Planning

Just when you thought you knew your federal income taxes, here comes a curveball: Key tax breaks have disappeared for 2026.

During his first presidency, Donald Trump signed the Tax Cuts and Jobs Act (TCJA) into law. The largest tax bill in recent decades temporarily halted several tax breaks, including deductions for individual investment costs, personal tax preparation fees, and home office expenses for employees.

Now in his second term, Trump and the GOP have extended many of the TCJA tax cuts and enacted several new temporary tax benefits in a law Trump often refers to as the One Big Beautiful Bill (OBBB).

This extensive tax and spending law, enacted on July 4, 2025, includes new incentives such as the car loan interest deduction, while also removing several tax credits and deductions that the TCJA previously suspended.

Here’s a list of tax breaks that have ended as of 2026 (beginning with returns you'll file in 2027) — and what that might mean for your household moving forward.

This article addresses personal income tax breaks on federal returns. Sole-proprietorships, S-corps, limited liability corporations (LLCs) and all other businesses might be subject to different rules under IRS regulations. Consult with a qualified professional for tax advice.

1. Which clean energy tax credits are gone?

Although most clean energy tax breaks were temporary, their expiration dates weren’t until 2032 or later, thanks to the Inflation Reduction Act passed during the Biden administration. Yet the new Trump tax bill eliminated several key residential energy tax breaks, effective 2026 (though some expired earlier).

Here are a few examples:

• Federal Electric Vehicle (EV) Tax Credit worth up to $7,500 (expired after September 30, 2025).
• Residential Clean Energy Credit worth up to 30% of qualifying installations (until December 31, 2025).
• Energy Efficient Home Improvement Credit worth up to $3,200 (until December 31, 2025).

About 1.2 million households have used credits for residential clean energy investments, resulting in $6 billion in savings, according to the latest data released by the U.S. Department of the Treasury. That amounts to an average tax benefit per family of around $5,000.

Without these incentives, some taxpayers who now want to make those same investments will lose tax savings in 2026 compared with just one year earlier.

However, it’s important to note that the federal tax credit for at-home EV charger equipment isn’t ending until June 30, 2026. This means you might be able to save up to $1,000 in federal income taxes if you install qualifying charging equipment by the deadline this year.

Related: Homeowners Rushed to Install Solar Panels Before 'Trump Tax Bill' Cut Credit.

2. Itemized deductions are not allowed, and the home office deduction for employees is gone

Before the TCJA, many miscellaneous itemized deductions could be claimed on your individual federal income tax return.

The deductions below were subject to a 2% adjusted gross income (AGI) floor, meaning you could only claim these tax benefits if the total of these expenses exceeded that threshold.

Here are a few examples of tax deductions that have expired in 2026:

• Unreimbursed work expenses, such as those for travel and transportation.
• Investment expenses, such as custodial fees and safe deposit box rentals.
• Hobby expenses (up to the amount of hobby income).
• Tax preparation fees (personal). (The rules are different if you have business income.)
• Home office deduction for employees.

These tax breaks were to return this year with the expiration of the TCJA, but the 2025 GOP tax bill ended them.

Of all the miscellaneous itemized deductions, unreimbursed employee expenses, non-business tax preparation fees, and investment expenses were the most popular, according to the Tax Foundation. More than 21 million households used these deductions about 13 years ago.

Republican lawmakers initially eliminated the miscellaneous itemized deductions to help fund the increased standard deduction. However, whether the standard deduction truly offsets these itemized deductions might vary from taxpayer to taxpayer (more on that below).

*Note: The moving expense deduction for work, although not a miscellaneous itemized deduction, was also eliminated by the OBBB (exceptions may apply to military personnel).

3. Family tax credits and exemptions: What the trade-off could mean for you

The personal and dependency exemption also ended in 2026.

This exemption, designed to connect tax liability to family size, was worth $4,050 per qualifying person in 2018, though the amount was adjusted for inflation annually.

The year before the TCJA was enacted:

• About 292 million people (PDF) claimed the personal and dependency exemption.
• This resulted in about $1.2 trillion in taxpayer savings, according to the IRS.

As with the miscellaneous itemized deductions, the elimination of this exemption was used to offset the increased standard deduction and higher child tax credit, according to the Tax Policy Center.

Yet, if you claim itemized deductions and have a large family, this trade-off might increase your taxable income compared with the law before the TCJA.

For example, consider a married, filing jointly couple with five children before the TCJA and after the OBBB was enacted.

*Inflation adjustment amount calculated as of September 2025 via USAfacts.org.

In the example, the family’s taxable income increases under the pre-TCJA law compared with the 2025 tax law. That’s because the increased standard deduction didn’t offset the combined itemized deductions and personal and dependency exemptions for the hypothetical household.

However, once the higher child tax credit is factored in, that same family could achieve a lower tax liability if they meet the updated eligibility requirements to claim the credit.

While the example shows a lower tax liability for 2025 than the law before the TCJA, the benefit a taxpayer could see for trading off the personal and dependency exemption for the increased child tax credit and standard deduction varies based on a taxpayer’s circumstances.

For instance, while a married couple with kids might save on income taxes owed with a higher child tax credit, a single filer with no children might not.

As noted earlier, the child tax credit also has new eligibility rules in the 2026 tax filing season. This includes a requirement that qualifying children and at least one parent must have a work-eligible Social Security number. As a result, about 2.7 million children who used to qualify for this tax credit might not be eligible this year.

Note: The personal and dependency exemption was subject to AGI phaseouts, and the child tax credit has a modified adjusted gross income (MAGI) phase-out.

Is the ‘AMT tax’ back from the dead?

Before the TCJA, 5.2 million Americans paid the Alternative Minimum Tax (AMT), per Tax Policy Center data. This "parallel tax system" was implemented to ensure that higher-income taxpayers pay a minimum amount of tax.

However, data from the Tax Policy Center shows that previous AMT rules might have disproportionately affected upper-middle-income taxpayers.

Through the TCJA, the individual AMT threshold was raised in a couple of ways:

• Increasing the exemption amount from $84,500 to $137,000 for married filing joint couples (single filers from $54,300 to $88,100).
• Raising the phase-out threshold from $160,900 to $1,252,700 for married filing joint couples (single filers from $120,700 to $626,350).

The result was that the number of taxpayers who paid AMT dropped from about 5 million to just 200,000 in 2018, according to the Tax Policy Center. Under the OBBB, the individual AMT exemption amounts were made permanent.

Starting in 2026, the phaseout has been lowered to $500,000 for singles and $1 million for married couples filing jointly. Once more, the phaseout rate for every dollar above this threshold was increased from 25% to 50%.

This means more income from higher earners will be subject to AMT this year.

In addition to the permanent elimination of tax breaks on this list, you could qualify to pay AMT for tax year 2026 even if you haven’t in recent years.

Read More

• 10 Tax Breaks for Middle-Class Families Who Claim the Standard Deduction
• IRS Income Tax Refund Schedule 2026: When Will Your Refund Arrive?
• Tax Deadlines by Month for 2026
• 2026 Family Tax Credits: Three IRS Changes You Need to Know Now

A mortgage refinance can provide various advantages, like reducing monthly payments, shortening a loan term, switching to a fixed-rate mortgage, or accessing cash for home renovations or other expenses.

These benefits have become particularly attractive to homeowners recently as anticipation surrounding the interest rate cut by the Federal Reserve in September drove down mortgage rates. And that led to a surge of refinancing applications and the strongest week of borrower demand in decades, according to the Mortgage Bankers Association (MBA).

“Homeowners with larger loans jumped first,” said Mike Fratantoni, MBA’s SVP and Chief Economist, regarding their weekly survey of mortgage applications for the week ending Sept. 12 . “The average loan size on refinances reached its highest level in the 35-year history of our survey.”

But as mortgage rates slide, homeowners considering a refinance should be aware of associated tax implications to maximize any potential benefits. Here's more to know.

Are cash-out refinances considered taxable income?

A cash-out refinance enables homeowners to tap into their home equity, freeing up funds to cover expenses like college tuition, medical bills, or home improvements.

The best part of a cash-out refi is that you won’t owe income taxes on the cash received. That’s because you are borrowing against your home’s equity, and the IRS expects that you’ll pay those funds back to the bank.

Additionally, money received from a home equity line of credit (HELOC) or home equity loan is also tax-free.

Aside from being tax-free money in your pocket, a cash-out refinance could provide other tax advantages. Let’s dive in.

Permanent cap on mortgage interest deduction

One of the most popular tax breaks some homeowners claim is a mortgage interest deduction when refinancing their home loan. However, you’ll need to itemize using a Schedule A of Form 1040 to claim this deduction.

There’s also a limit on the amount you can deduct on mortgage interest. President Donald Trump’s recently enacted tax cuts and spending legislation, dubbed the ‘big beautiful bill,’ makes that cap permanent for refinanced and original home loans. But there are income limits.

For 2025 and onward, you can deduct mortgage interest on the first:

• $750,000 if single or filing jointly
• $375,000 if married filing separately

For a deeper dive into how Trump’s megabill reshapes tax breaks for homeowners, see our related story: New Trump Tax Bill: Five Changes Homeowners Need to Know Now.

Tax-deductible home improvements for a cash-out refi

There are also other cash-out refinance tax rules that impact what you can claim as a tax deduction.

For instance, proceeds from the cash-out refi used to fund capital home improvements may qualify for a deduction. Capital improvements are permanent residential upgrades to enhance your property, outlined in IRS Publication 523.

If you’re a retiree in search of home improvement tax breaks, or have a family member who needs certain renovations done to make your home accessible. Some remodeling projects may also qualify for a medical expense deduction that you must itemize.

Some popular tax-deductible home improvements may include:

• Adding a swimming pool
• Implementing a new bedroom, office, or bathroom
• Installing home security systems

As a note, some tax breaks are expiring this year due to Trump’s new tax law. For example, clean energy tax credits for home improvements are being eliminated sooner rather than later. That includes tax incentives some homeowners could claim for installing energy-efficient home improvements like solar panels.

Tax breaks for buying down your rate

When you’re about to close on a mortgage refi, you have the option to buy down your rate via discount points.

Points paid during a traditional or cash-out refinance aren’t deductible in full the year you pay them. Some exceptions may allow you to deduct points fully in the year paid, like if you use part of the refinanced proceeds to substantially improve your main home.

However, discount points paid during a mortgage refi are generally deducted over the life of the loan, so you’ll have to plan accordingly.

So, what are mortgage points?

• Points are prepaid interest, which you pay upfront to lower the interest rate on your mortgage.
• One point equals 1% of the loan amount. That means that paying 1 point on a $300,000 mortgage would cost you $3,000, and could reduce your rate by about 0.25%.

To deduct mortgage points, you must meet all IRS requirements, and they should be included as an itemized deduction claimed on IRS Form 1040, Schedule A.

Rental property tax deduction

Here’s some good news: You can also claim tax deductions when refinancing a rental property, but they are generally amortized across your refinance loan term.

The rules are slightly different. For instance, when refinancing a primary residence, you can only deduct qualified points and interest, as well as certain renovations.

By contrast, refinancing a rental property also allows you to also deduct closing costs associated with obtaining a new mortgage, like loan origination fees. Other tax-deductible costs may include:

• Application fee: These are processing fees when applying for a refinance, and may include credit report fees as well.
• Appraisal costs: An appraisal for a rental property includes an analysis of potential rental income in your designated area.
• Discount points: As mentioned, these are points purchased to buy down the rate on your mortgage.
• Mortgage insurance premiums: A mortgage insurance premium can generally be deducted as a business expense in full the year they are paid.

Ensure you consult with a tax professional to determine what may qualify as a tax break when refinancing your rental property.

When to consider refinancing your mortgage

More than 81% of homeowners have a mortgage rate below 6%, according to data from Realtor.com. That’s at least 4 in 5 U.S. homeowners with outstanding mortgages, who may not be interested in refinancing at today’s rates.

However, refinancing a mortgage may be worth considering if interest rates have fallen considerably below the current loan rate. Some folks may also be interested in a refinance if they want to change their mortgage loan term, switch to a fixed-rate loan, or want to pull cash from their home equity to fund certain expenses.

All of these reasons may sway homeowners to refinance their mortgage, especially as market rates are on a downward trend.

Before refinancing your home loan, keep track of potential tax benefits you may claim, which are generally through itemized deductions. As mentioned, some may include deductions for qualifying home improvements or closing costs of the loan.

To get the best outcome, consult a trusted tax advisor who can guide you regarding potential tax breaks associated with home refinancing.

Related

• Save More with Tax Credits for Energy-Efficient Home Improvements While You Still Can
• Ten Tax Breaks for Homeowners and Homebuyers in 2025
• New Trump Tax Bill: Five Changes Homeowners Need to Know Now

Each week, in our Ask the Editor series, Joy Taylor, The Kiplinger Tax Letter Editor, answers questions on topics submitted by readers. This week, she’s looking at questions on expiring tax credits for energy-saving upgrades to your home. (Get a free issue of The Kiplinger Tax Letter or subscribe.)

1. When does the tax credit for solar panels expire?

Question: I'm planning to install solar panels in my house. I heard that the “One Big Beautiful Bill” (OBBB) is ending the federal income tax break for this. When does the tax credit expire?

Joy Taylor: The residential clean-energy credit is a nonrefundable income tax credit for people who install an energy system in their home that relies on a renewable energy source, such as solar. Solar panels and solar electric equipment are eligible for the credit, whether they are installed in a primary residence or vacation home. The tax credit is equal to 30% of the cost of equipment and installation, with no maximum dollar limit.

Under the OBBB, the residential clean-energy credit ends after this year. More specifically, it is repealed for property placed in service after December 31, 2025. Paying for the solar panels before January 1, 2026, is not enough to secure the credit. You will need to pay for them and get them installed by the end of 2025.

2. Can I carry over tax credits?

Question: I installed solar panels in my house earlier this year, and I think the tax credit I am eligible for will be less than the federal income tax that I will owe for 2025, so I plan to carry forward the credit to 2026. Now that the credit is repealed as of Dec. 31, if I don’t use up the full credit amount on my 2025 tax return, can I carry over the excess to next year or do I lose it?

Joy Taylor: The residential clean-energy credit for solar panel installation in your home is not a refundable credit. It can only be used to reduce the amount of income tax owed. If the credit exceeds your tax liability, the IRS won’t refund you the difference. Instead, any unused portion of the tax credit can be carried over to future tax years.

It seems to me that since you paid for and installed the solar panels in your home in 2025, you are entitled to the full tax credit, even if you can’t use the full amount on your 2025 tax return and have to carry forward any unused excess credit to future years. That’s because the credit is repealed for property placed in service after December 31, 2025, and you paid for and completed the installation before this date.

3. Is there a tax credit for a new central air system?

Question: I am thinking about replacing my central air conditioning system in my home with a new, energy-efficient model. Is there a federal income tax credit for this upgrade?

Joy Taylor: Yes, but you must install the new model in your home and pay for it by December 31, 2025 if you want a tax credit.

The energy efficient home improvement credit is for homeowners who install smaller home energy-saving upgrades, such as heat pumps, exterior doors and windows, central air-conditioning systems and boilers. Like the larger residential clean energy credit discussed above, the energy-efficient home improvement credit ends after this year, thanks to the OBBB. More specifically, it is repealed for property placed in service after December 31, 2025. Paying for the new central air conditioning system and installation fee before January 1, 2026, is not enough to secure the credit. You will need to pay for it and get it installed in your home by the end of this year.

The basic credit is 30% of the cost and installation of certain types of insulation, boilers, central air-conditioning systems, water heaters, heat pumps, exterior doors and windows, etc., that you put into your home. These items must also meet certain energy-efficiency requirements, depending on the product. There is a $1,200 general aggregate annual credit limit. But many specific upgrades have lower monetary credit limits and others have higher ones. Here are the item-by-item yearly caps:

• $150 for a home-energy audit
• $500 in aggregate for exterior doors (a maximum of $250 per door)
• $600 for exterior windows or skylights; natural gas, propane or oil water heaters; electric panels; central air conditioners; or natural gas, propane or oil furnaces or boilers
• $2,000 for biomass stoves or biomass boilers; electric or natural gas heat pump water heaters; or electric or natural gas heat pumps

4. How do caps work with multiple energy-saving upgrades?

Question: I know that there are monetary caps for specific items that qualify for the energy efficient home improvement credit. Can you explain how these caps work if you install multiple energy-efficient upgrades in your home at the same time?

Joy Taylor: Here are two examples that illustrate how the various credit limits baked into the energy efficient home improvement credit work. Let’s say that in 2025, you purchase and install in your home two exterior doors at a cost of $1,000 each, windows and skylights at a total cost of $2,200, and a $6,000 central air conditioner. Let’s assume for this purpose that each of these upgrades meet the energy-efficiency requirements for taking the credit. Your 2025 tax credit amount is $1,200. Now, change the facts. In 2025, you purchase and install in your home a natural gas heat pump that costs $7,000, a $4,000 natural gas tankless water heater, and a $6,000 central air conditioner. Again, let’s assume that each of these upgrades meet the energy-efficiency requirements. Your total maximum credit is $3,200 -- $2,000 for the heat pump. $600 for the water heater and $600 for the air conditioner.

About Ask the Editor, Tax Edition

Subscribers of The Kiplinger Tax Letter, The Kiplinger Letter and The Kiplinger Retirement Report can ask Joy questions about tax topics. You'll find full details of how to submit questions in each publication.
Subscribe to The Kiplinger Tax Letter, The Kiplinger Letter or The Kiplinger Retirement Report.

We have already received many questions from readers on topics related to tax changes in the OBBB and more. We will continue to answer these in future Ask the Editor round-ups. So keep those questions coming!

Not all questions submitted will be published, and some may be condensed and/or combined with other similar questions and answers, as required editorially. The answers provided by our editors and experts, in this Q&A series, are for general informational purposes only. While we take reasonable precautions to ensure we provide accurate answers to your questions, this information does not and is not intended to, constitute independent financial, legal, or tax advice. You should not act, or refrain from acting, based on any information provided in this feature. You should consult with a financial or tax advisor regarding any questions you may have in relation to the matters discussed in this article.

More Reader Questions Answered

• All Ask the Editor Q&As
• Ask the Editor: Reader Questions on QCDs
• Ask the Editor: Tax Questions on The SALT Deduction
• Ask the Editor: Questions on Four New Tax Deductions
• Ask the Editor: Questions on Inherited IRAs
• Ask the Editor: Questions on Home Sales and Taxes

What is “middle-class”? Although definitions might vary, the Pew Research Center might have an answer.

A recent Pew report found that a family of three could be considered in the “middle” of upper and lower incomes when annual household earnings are from $56,600 to $169,800*.

For these middle-income homes, there might be good news come tax time: The IRS has several key tax breaks available for federal income returns, regardless of whether you claim the standard deduction or itemize (which is even better news for the 90% of Americans who opt for the standard deduction).

Here are 10 tax breaks available to eligible middle-income taxpayers who claim the standard deduction on their 2025 income tax return.

*Note: Pew Research is based on 2022 Census Bureau Data and varies significantly by city and state.

New: Tax Refund Alert: House GOP Predicts 'Average' $1,000 Payouts in 2026

What tax deductions and credits can I claim with the standard deduction as a middle-class working family?

Kiplinger used the $56,600 to $169,800 “middle-income” range released by the Pew Research Center to find 10 tax breaks available to middle-class families in 2025.

However, it’s important to note that specific geographic location, number of children and other financial and personal circumstances factor into whether an individual or household might be considered “middle-class.”

Additionally, the list below doesn't include tax-incentivized benefits, such as those for health coverage, tax-free investments, such as municipal bonds, or tax-advantaged savings accounts, such as IRAs.

Only federal tax credits and deductions meeting these income criteria were considered.

Even then, keep in mind this listing is not exhaustive, and it’s important to check with your state Department of Revenue website regarding additional tax breaks for which you could be eligible. Consult with a qualified tax professional when necessary.

Child care and other dependents tax breaks

1. The Child Tax Credit (CTC) for middle-class families

Single-filer income limit before phaseout begins: $200,000*

Joint-filer income limit before phaseout begins: $400,000*

According to recent data, taxpayers with incomes from $100,000 to $200,000 receive the largest average federal Child Tax Credit (CTC) compared with lower and upper income groups.

If you want to learn more about the CTC as a middle-class taxpayer, here are some fast facts:

• For 2025, the credit is worth up to $2,200 per qualifying child under age 17 (age 16 and younger).
• The refundable portion of the credit (the amount you receive even if you owe no tax) is $1,700.
• For every $1,000 that your income is above the income limits, your CTC is reduced by $50.

Starting in 2025, a Social Security Number (SSN) is also required for parents or guardians claiming this tax break. Households with non-citizen parents are likely to be ineligible to receive the credit.

*Note: “Income” for the CTC is based on a taxpayer’s modified adjusted gross income (MAGI), though other types of excluded income (like foreign earned income) may be added back to calculate your CTC amount.

2. Child and Dependent Care Credit for middle-income families

Single-filer income limit before phaseout begins: $15,000*

Joint-filer income limit before phaseout begins: $15,000*

The Child and Dependent Care Tax Credit (CDCTC) is designed to reimburse families for qualifying child care expenses while the parents are working (or looking for work).

The total 2025 CDCTC amount is worth up to $3,000 for one child or $6,000 for two or more children.

Although the CDCTC has a low beginning phaseout limit of $15,000, it might be considered a “middle-class” tax break for two reasons.

• First, the CDCTC is nonrefundable (meaning low-income families who are owed a tax refund can't receive the full benefit).
• Secondly, higher earners receive a diminished benefit relative to their total income.

Additionally, the CDCTC has no upper phaseout limit, meaning many middle-class families with children might see some potential tax benefit.

• Families with an income of $15,000 or less qualify to have 35% of their qualifying child care expenses reimbursed.
• A 1% phaseout exists for each $2,000 your income exceeds the $15,000 amount.
• Families with $43,000 or more will receive the minimum credit rate of 20% on qualifying expenses. This translates to a CDCTC of $600 to $1,200, depending on the number of qualifying children.

The federal CDCTC is available to those with qualifying child care expenses for children under age 13 (age 12 and younger) (or dependents with disabilities). Qualifying expenses might include before- and after-school care, babysitters, day care, and preschool.

For more information on qualifying expenses, see Kiplinger’s report, The Child and Dependent Care Credit: How Much Is It?.

*Note: “Income” for the CDCTC is based on a taxpayer’s adjusted gross income (AGI).

3. Tax Credit for Other Dependents: The 'Family Tax Credit' for middle-class families

Single-filer income limit before phaseout begins: $200,000*

Joint-filer income limit before phaseout begins: $400,000*

The credit for other dependents might be beneficial for middle-income families with qualifying children age 17 and older (so they no longer qualify for the CTC). Other dependents might also be considered “qualified.”

The maximum $500 credit amount is available to taxpayers who have:

• Income below $200,000 (single filers) or $400,000 (married filing jointly).
• A qualifying dependent. This might include a child, parent, or other qualified individual. (See the IRS website for qualifying dependency rules.)

The credit phases out by $50 for every $1,000 (or fraction thereof) that your income goes beyond the income limits.

For more information, check out Kiplinger’s report How Caregivers for Adults Can Save on Taxes in 2025.

*Note: “Income” for the credit for other dependents is based on a taxpayer’s adjusted gross income (AGI).

4. Adoption Credit for middle-income families

Single-filer income limit before phaseout begins: $259,190*

Joint-filer income limit before phaseout begins: $259,190*

The National Council for Adoption (PDF) surveyed more than 4,200 adoptive parents across all 50 states and Washington, D.C. Of the responses, more than half had income above $75,000, which is within the Pew Research Center’s “middle income” range.

Families who finalize an adoption in 2025 can save up to $17,280 in qualified child expenses. This includes a new refundable portion of the credit worth up to $5,000, meaning that if you owe no federal tax, you might still get up to that amount refunded to you after you file.

Here are some other important facts about the federal adoption credit:

• Qualified adoption costs eligible for the credit include adoption fees, court costs or legal expenses, any travel costs, home study fees, and expenditures associated with re-adoption in your home state (if foreign adoption applies).
• Families adopting a U.S. child with special needs can claim the full tax credit without having any qualified adoption expenses.
• Parents with an income of more than $259,190 will receive a reduced credit, with a complete phaseout at $299,190 or more.

Any remaining nonrefundable adoption credit can be carried forward for up to five years to offset future tax liabilities.

*Note: “Income” for the federal adoption credit is based on a taxpayer’s modified adjusted gross income (MAGI).

Education Tax Breaks

5. The American Opportunity Tax Credit (AOTC) for middle-class families

Single-filer income limit before phaseout begins: $80,000*

Married-filing jointly income limit before phaseout begins: $160,000*

The American Opportunity Tax Credit (AOTC) is designed to help families afford college. This partially refundable tax break phases out completely for single filers with incomes above $90,000 and married couples filing jointly with incomes above $180,000.

You can claim the AOTC on:

• 100% of the first $2,000 spent on qualified education expenses (such as books, tuition and fees), plus
• 25% of the next $2,000 you spend on these qualifying expenses.

Thus, the AOTC combined total is worth up to $2,500.

Once more, if the credit amount exceeds your tax bill, you’ll get a refund for 40% of the remaining amount (up to $1,000 per qualifying student).

However, there are various eligibility requirements you must meet to qualify for the AOTC:

• You (or your dependent or spouse) must be enrolled in school at least half-time.
• The qualifying individual must attend an eligible educational institution, AND
• Pursue a degree or other educational credential.

Furthermore, you can only use the AOTC for the first four years of enrollment. For more information on eligibility requirements, check out Kiplinger's report, What Is The American Opportunity Tax Credit (AOTC)?

*Note: “Income” for the AOTC is based on a taxpayer’s modified adjusted gross income (MAGI).

6. The Lifetime Learning Credit (LLC) for middle-income families

Single-filer income limit before phaseout begins: $80,000*

Married, filing jointly, income limit before phaseout begins: $160,000*

The Lifetime Learning Credit (LLC) is similar to the AOTC, but with one major difference: The LLC can be used for non-degree courses.

This means that, while you might only use the AOTC four times per tax return, you can claim the LLC as long as you are meeting eligibility requirements:

• The qualifying individual must be enrolled for at least one academic period (semester, trimester, etc.) during the tax year at an eligible educational institution.
• You don’t need to be enrolled half-time, and the coursework can be used to improve job skills (instead of a degree program). You can also be a graduate student.
• Books, tuition, and fees might be qualified expenses if purchased from the educational institution as a condition of enrollment. Room and board, insurance, and transportation are not considered qualifying expenses for purposes of the LLC.

While the credit isn’t refundable, it is worth up to $2,000 per tax return (20% of $10,000 of qualified education expenses).

*Note: “Income” for the LLC is based on a taxpayer’s modified adjusted gross income (MAGI).

7. Student Loan Interest Deduction for middle-income families

Single-filer income limit before phaseout begins: Up to $85,000*

Married, filing jointly, income limit before phaseout begins: Up to $170,000*

Qualifying middle-class earners looking to further save on educational costs might be eligible to claim the student loan interest deduction. To qualify for this tax break, worth up to $2,500, taxpayers must:

• Have a private or federal student loan taken out to pay for higher education expenses (room and board, tuition and fees, books, supplies, and other necessary costs).
• Pay interest on the loan and be legally responsible for repaying the amount due.

The full $2,500 student loan interest deduction starts to phase out for incomes above $85,000 (single) and $170,000 (married filing jointly).

For tax year 2025, incomes exceeding $100,000 (single) and $200,000 (married filing jointly) are ineligible to claim this deduction.

*Note: “Income” for the student loan interest deduction is based on a taxpayer’s modified adjusted gross income (MAGI).

Income Tax Breaks

8. Tip Income Deduction for working middle-class families

Single-filer income limit before phaseout begins: $150,000*

Joint-filer income limit before phaseout begins: $300,000*

Due to the passage of the GOP reconciliation bill dubbed the “One Big Beautiful Bill” (OBBB), eligible taxpayers can now claim a new temporary tip income deduction for tax years 2025 through 2028. This could provide tax relief for up to 4 million tipped workers in the U.S..

The tip income tax deduction might be claimed regardless of whether you itemize or claim the standard deduction on your federal income tax return.

• The maximum deduction amount for tip income in 2025 is $25,000.
• “Qualified” tips include both voluntary cash and charged tips (such as credit card or PayPal).
• Payroll taxes still apply (that is, the deduction doesn’t reduce Social Security or Medicare taxes).

For every $1,000 your income exceeds the above limits, your tip income deduction is diminished by $100. The deduction completely phases out for single filers with income of $400,000 and joint filers with income exceeding $550,000.

As first reported by Axios, the U.S. Treasury Department has recently released a list of qualifying professions for this tax break. Qualified professions might include:

• Wait staff and bartenders.
• Food servers, chefs and cooks.
• Dancers, musicians, singers and digital content creators.
• Housekeeper cleaners and resort desk clerks.
• Home plumbers, electricians and landscapers.
• Private event planners, pet caretakers and tutors.
• Hairstylists, Tailors, makeup artists and pedicurists.

The total list has more than 65 jobs across eight categories.

*Note: “Income” for the tip income tax deduction is based on a taxpayer’s modified adjusted gross income (MAGI).

9. Overtime Tax Deduction for middle-income families

Single-filer income limit before phaseout begins: $150,000*

Joint-filer income limit before phaseout begins: $300,000*

Similar to the tip income deduction, qualifying non-exempt employees might be able to claim an overtime deduction on their 2025 federal income tax return.

This temporary deduction (only available until 2028) is worth up to $12,500 for single filers and $25,000 for joint filers who work more than 40 hours per week.

Here are a few more fast facts about the federal overtime pay tax deduction:

• You must be a non-exempt employee who earns overtime under the federal Fair Labor Standards Act (FLSA).
• The deduction only applies to the “extra” half of your time-and-a-half rate and not your entire overtime wages.
• The deduction is reduced by $100 for every $1,000 of income over the above income thresholds.
• You can claim the deduction regardless of whether you itemize or take the standard deduction.
• When single filers have income of $275,000 or more (and married filing jointly couples make $550,000 or more), the overtime deduction is completely phased out.

*Note: “Income” for the overtime pay tax deduction is based on a taxpayer’s modified adjusted gross income (MAGI).

Purchasing Tax Breaks

10. Car loan interest tax deduction for middle-income families

Single-filer income limit begins: $100,000*

Married, filing jointly, income limit begins: $200,000*

The OBBB also introduced a new temporary deduction for car loan interest. The car tax break is available for taxpayers, whether they itemize or claim the standard deduction:

• The car loan interest deduction is worth up to $10,000 per year on qualifying vehicles.
• Single filers with income exceeding $100,000 (married, filing jointly, with income above $200,000) will face a $200 phaseout of the deduction for every $1,000 of income above the income limit.
• When income levels reach $150,000 for single filers ($250,000 for married filing joint couples), the car loan interest deduction is eliminated.

A recent survey indicates that one-third of middle-income households plan to buy a car in 2025.** But while the car loan interest deduction might help some save on car buying costs, there are a couple of caveats to keep in mind:

• The personal-use car interest loan deduction only applies to new, American-made vehicles purchased from 2025 to 2028.
• Different tax rules apply to vehicles used for business.

For more information, check out Kiplinger’s report, New GOP Car Loan Tax Deduction: Which Vehicles and Buyers Qualify.

*Note: “Income” for the car loan interest deduction is based on a taxpayer’s modified adjusted gross income (MAGI).

**Santander US surveyed 2,200 U.S. households with income levels between $50,000 and $148,000.

Read More

• 'Most Americans' Outsource Their Taxes By a Certain Age. Should You?
• 12 Education Tax Credits and Deductions to Know
• The GOP Wants Your Child Enrolled in a 'Trump Account' for Savings
• Best States for Middle-Class Families Who Hate Paying Taxes
• 3 Critical Tax Changes Could Boost Your Paycheck in 2026

For many single parents, applying for available federal tax credits and deductions can be a lifeline to support their families each year.

The first step begins by selecting the appropriate filing status, which can help you claim popular family tax breaks, like the Child Tax Credit (CTC), and potentially result in a larger tax refund. For qualifying families, a refund can help cover basic expenses related to your child or household finances. So planning accordingly and knowing which tax breaks are available for you is essential, especially this year.

That’s because the Trump administration’s so-called ‘One Big Beautiful Bill’ includes new rules that impact the Child Tax Credit amount and who qualifies for the family tax break.

Here are some tax tips and changes you should consider if you’re a single parent.

File as a Head of Household

Navigating tax season with children doesn’t have to be intimidating, but before diving into tax credits, you should know your tax filing status.

Selecting the correct filing status on your tax return can help you maximize your tax savings as a single parent. The Head of Household filing status offers two main benefits:

You’ll be eligible for a larger standard deduction, and tax brackets are wider. That will come in handy when claiming certain tax breaks.

For instance, for the 2025 tax year, the standard deduction for a head of household filer is $23,625. Meanwhile, single filers are eligible for a deduction up to $15,750.

To qualify for the Head of Household filing status, you must meet the following criteria:

• Maintain a home for a qualifying person — this can include a child or a dependent
• Contribute more than half the cost of maintaining a household
• Are considered unmarried on the last day of the taxable year

If you believe you meet the Head of Household filing status criteria, that can make a significant difference in the amount of cash you may qualify for through a tax refund, like the Child Tax Credit.

Bigger Child Tax Credit in 2025

Parents and caregivers with dependent children under 17 can look forward to an enhanced tax break come tax filing season.

• Trump’s tax and spending package increases the federal Child Tax Credit from $2,000 to $2,200 per qualifying child, and indexes the amount to inflation annually.
• The maximum refundable portion is worth $1,700 in 2025. That’s the amount you can claim for tax returns generally filed in early 2026.

However, the amount you receive depends on your modified adjusted gross income (MAGI), the number of qualifying dependent children you have, and your filing status.

For example, the CTC begins to phase out when your MAGI exceeds $200,000 if you file as single, a head of household, or a qualifying widower. That means, if you’re a single parent, you can claim up to $2,200 per qualifying child if you earn less than that income threshold.

Folks who are married filing separately are ineligible for the CTC, and those filing jointly would have their credit phase out once their combined incomes surpass $400,000.

There’s also another major change that impacts who is eligible for the federal Child Tax Credit. To claim the CTC, the child and taxpayer (parent or guardian) must have a Social Security number.

For more information about the current child tax credit, see How Much is the Child Tax Credit for 2025?

Child Tax Credit 2025: New rules impact some parents

As mentioned, new rules for the child tax credit in 2025 affect the eligibility of some households, particularly mixed-status families.

Trump’s new policy requires children and parents or guardians to have a Social Security number to claim the federal child tax credit. This means that mixed-status households, including those with U.S. citizen children, are no longer eligible for the tax credit.

According to the Center for Migration Studies, as many as 4.5 million citizen and legally permanent resident children with SSNs will no longer qualify for the child tax credit under Trump’s new tax guidance.

Some states will be impacted more harshly than others, as an example:

• In California, an estimated 910,000 children would no longer qualify for the CTC
• In Texas, 875,000 U.S. citizen children would not qualify for the tax break
• In Florida, as many as 247,000 children would be prohibited from claiming the credit

Previously, parents who did not have a SSN were able to use an individual taxpayer identification number (ITIN) when filing their tax return to claim the CTC.

Don’t forget about other family tax breaks

While the child tax credit is a popular tax credit for families, there are also other tax breaks available for qualifying households. Some of these family tax breaks are enhanced starting in 2025.

• The Earned Income Tax Credit (EITC) is a refundable credit for low-and moderate-income workers with or without children.
• There’s an enhanced adoption tax credit for the 2025 tax year, and it’s worth up to $17,280.
• The Child and Dependent Care Tax Credit was permanently increased in Trump’s megabill, allowing households to claim 50% for qualifying expenses.

Lastly, if you’re not sure where to get started, it’s recommended that you seek guidance from a certified public accountant (CPA) or tax professional to help you determine which credits and deductions you may be eligible for.

Related Content

• 2025 Family Tax Credits: Four IRS Changes That Can Save You Money
• Trump’s ‘One Big, Beautiful Bill’ With Trillions in Tax Cuts: What to Know
• Biggest Winners and Losers in Trump’s New Tax Plan

The numbers are in, and experts are signaling the biggest winners and losers from the Trump administration’s new tax and spending package.

At the center of Trump’s megabill (sometimes called the "One Big Beautiful Bill" or OBBB) is the extension and temporary enhancement of tax cuts first implemented in the Tax Cuts and Jobs Act (TCJA) of 2017.

Signed into law on July 4, the GOP legislation is projected to add nearly $3.4 trillion to the national debt over the next 10 years.

The measure also pays for new tax cuts, estimated to decrease federal revenues by $4.5 billion through 2034, through significant funding cuts to key programs, including Medicaid and food stamps.

Some of the changes in the new tax law may be beneficial for some households, while others are barred from accessing key tax breaks.

Here’s a breakdown of which taxpayers stand to benefit — and which could pay more — under Trump’s sweeping new tax plan for 2025 and beyond.

Trump’s new tax law: Biggest losers

Rural hospitals and clinics that rely on Medicaid

Rural hospitals and clinics, already underdogs, now face even harsher struggles under Trump’s new tax landscape.

As Kiplinger has reported, hundreds of rural hospitals across the U.S. are anticipating imminent closures and potential service reductions due to Trump’s steep Medicaid cuts.

The Trump administration’s ‘big beautiful bill’ slashes Medicaid spending by an estimated $1.02 trillion to offset tax cuts. That’s the largest federal rollback to Medicaid to date.

Historically, patients in rural hospitals and clinics rely on Medicaid or the Children’s Health Insurance Program (CHIP) to pay for services.

As a result of Medicaid cuts, over 300 rural hospitals face immediate closure. Some experts predict that nearly every state will be impacted, with most expected to see more than 25% of hospitals shut down. In 11 states, some 50% or more of hospitals are at risk of closing their doors.

For more information, see Is Your Local Hospital Closing Soon Due to Medicaid Cuts?

People earning under $53,000 a year

The lowest earners in the U.S. will see little benefit from Trump’s tax cuts and spending bill.

• A household earning up to $18,000 a year would lose an estimated $165 in after-tax dollars by 2027; that’s a 1.1% loss of income.
• By 2033, households in this income group would see a loss of up to $1,520 on average, according to the Penn Wharton Budget Model.

Meanwhile, folks earning up to $53,000 a year could lose $65 on average by 2033 under the newly enacted ‘big beautiful bill.’

Families that rely on food stamps

To help pay for major tax cuts in the ‘one big beautiful bill,’ the Trump administration enacted significant changes to the Supplemental Nutrition Assistance Program (SNAP). That program was previously/also known as “food stamps.”

Trumps’s tax legislation cuts SNAP funding by about 20%, or $186 billion over the next decade, putting millions of families at risk of losing food stamps.

The new provisions to the program are projected to cause 22.3 million families to lose some or all of their benefits, according to the Urban Institute.

On average, households are projected to lose $146 each month in SNAP support under Trump’s tax legislation. That’s a loss of $1,752 for a full-year recipient.

Undocumented people with children

If you are undocumented or currently on the pathway to citizenship, Trump’s new tax legislation will impact your access to tax breaks.

This includes access to SNAP benefits, tax breaks for marketplace health insurance like the Premium Tax Credit (PTC), and key family tax credits like the federal Child Tax Credit (CTC).

• As a snapshot, 4.5 million children, the majority of whom are U.S. citizens, would no longer be eligible for the CTC under the OBBB as new rules require a parent to have a Social Security Number (SSN).
• Other education tax breaks you won’t have access to unless you have a SSN include the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC).

The new tax law also increases immigration fees and imposes new fees to take effect immediately.

For instance, a parole application now has a new fee of $1,000, and the temporary protected status (TPS) application fee increases from $50 to $500.

These are just some provisions that will impact undocumented individuals and households.

Student loan borrowers

The Trump administration is restructuring student loan borrowing as we know it. Under the new law, the Biden-era SAVE (Saving on a Valuable Education) plan is suspended.

This will impact 8 million borrowers enrolled in the program who rely on income-driven repayment programs as a path to loan forgiveness. Borrowers with loans in SAVE forbearance will see loans begin accruing interest on Aug. 1, 2025.

The OBBB eliminates the requirement that borrowers have a partial financial hardship to qualify for income-driven repayment (IBR) plans. Other changes include placing loan limits on part-time students, undergraduate, and parent borrowers.

The measure also reduces the number of repayment plans to just two programs.

For more information, see Trump Targets Student Loan Forgiveness: What it Means for Taxes and Repayment.

Biggest winners from Trump’s tax law

Homeowners in high-tax states

One provision in Trump’s ‘one big beautiful bill’ could help homeowners in expensive states put thousands of dollars back into their pockets.

The bill temporarily raises the cap on the state and local tax (SALT) deduction from $10,000 to $40,000 annually for folks with incomes up to $500,000.

The SALT deduction allows taxpayers who itemize to subtract certain state and local taxes from their federal taxable income. This can help you reduce your property tax, income tax, and sales tax burden.

As an example, see our report on how Californians can benefit from the new SALT cap.

Households with incomes above $96,000

If you earn $96,000 per year, Trump’s new tax cuts and spending legislation will put more money into your pocket.

• Those who make $96,000 annually can expect to receive $3,955 in after-tax income in 2027.
• Households earning $179,000 per year are projected to get $6,690 in after-tax dollars by 2027.
• Anyone who earns $272,000 annually will receive $9,455 in after-tax income by 2027, and that figure continues to grow the more you make.
• Those in the top 0.1% can expect to get up to $301,550 in after-tax dollars by 2027.

According to the Penn Wharton Budget Model analysis, most of the gains for high-earners come from “a boost to corporate profits” from reinstating the TCJA's initial cost recovery system and upholding reduced tax rates for multinational corporations.

By 2030, some of those gains will be reduced as the SALT cap reverts to $10,000, impacting high earners.

Workers who rely on tips

Millions of workers across the country rely on tips to support their income, and the ‘big beautiful bill’ allows some of that hard-earned cash to go untaxed starting this year.

The new tax law incorporates a measure known as the ‘No Tax on Tips Act.’ The provision allows workers who receive tips to deduct up to $25,000 in reported cash tips from their taxed wages at the federal level.

The deduction phases out for those earning over $150,000 ($300,000 for joint filers) and is scheduled to expire after 2028.

Data show that about 4 million people in the United States, or one out of every forty workers, depend on tips to pay for food on the table. No tax on tips is a big win for hospitality, services, and gig workers for the time being.

For more information, see: No Tax on Tips Bill Approved: What it Means for You.

Older adults 65 and older

Another win tucked within the so-called ‘One Big Beautiful Bill’ is a bonus deduction for older adults.

The new $6,000 deduction will be available to individuals age 65 and older, with eligibility set at $75,000 in income for single filers and $150,000 for couples. The deduction phases out above those levels.

This provision is temporary and will be available from 2025 through 2028, so you won’t want to miss out. It will also supplement the existing extra standard deduction available to older adults.

What’s missing from Trump’s campaign promise? GOP lawmakers didn't end federal taxes on Social Security benefits as part of Trump’s megabill. Economists had long warned that eliminating taxes on SS benefits was riddled with problems.

Raising the standard deduction for older adults appears to be a middle-ground effort to make up for this failed promise.

For more information, see 2025 Tax Deduction Change for Those Over 65.

Families with children

If you have children or are planning on growing your family, Trump’s new tax law includes some major expansions to existing family tax breaks.

To start, the federal child tax credit increases from $2,000 to $2,000 per qualifying child on your 2025 tax return. If Congress had failed to expand the tax break, the maximum child tax credit would have reverted to $1,000 in 2026.

Additionally, the maximum refundable portion is $1,700 in 2025. That’s the amount you’ll be able to claim on the tax return you generally file in 2026. The bad news: Not everyone will be able to claim the child tax credit.

To claim the CTC, the child and the taxpayer (parent or guardian) must have a Social Security number.

The Child and Dependent Care Tax Credit (CDCT) is also permanently enhanced from 35% to 50% for qualifying expenses under the newly enacted OBBB.

Lastly, the measure enhances the federal adoption tax credit for the 2025 tax year by allowing parents to claim up to $5,000 in credits and making the tax break partially refundable. The credit is now worth up to $17,280 (up from $16,810 in 2024).

For more information, see our report: The Child Tax Credit 2025: How Much Is It?

More on the OBBB

• New GOP Car Loan Deduction: Which Cars and Buyers Qualify
• ‘Unprecedented’ Private School Voucher Tax Credit in Trump’s Megabill
• How Trump's Tax Bill Will Boost or Shrink Your Next Tax Refund

You’ve heard about the recent “Trump megabill,” but how will it affect your tax refund? While some provisions could increase your tax liability next year, others might give you a serious payday.

For instance, the IRS reports that nine out of 10 taxpayers don’t itemize deductions. If that’s you, a permanently higher standard deduction could give you more money back.

However, new provisions, such as some involving the federal child tax credit, might squeeze your bottom line if you’re a noncitizen, potentially costing you more in taxes.

Several provisions in the new tax law are temporary. Those new tax benefits could go away as early as 2029.

Here are five tax policies in the so-called “One Big Beautiful Bill” (OBBB) that might increase or decrease your bottom line come tax season.

Related: Claiming the Standard Deduction? Here Are Ten Tax Breaks For Middle-Class Families in 2025

Standard Deduction

1. The standard deduction affects tax refunds

While the IRS already increased the standard deduction last fall due to inflation, the OBBB further raises it. For 2025, the standard deduction amounts are as follows:

• Married couples filing jointly receive $31,500.
• Single filers receive $15,750.
• Heads of household receive $23,625.

If you’re someone who claims the standard deduction (rather than itemizing), you could see a bump in next year’s tax refund or a corresponding reduction in your tax liability.

For instance:

• If you’re single, you’ll get $1,150 more in standard deduction dollars on your 2025 federal return compared with last year.
• If you’re married and filing a joint return, you’ll see a $2,300 increase in your standard deduction compared with last year’s return.

Note: The above amounts reflect the IRS's change to the 2025 standard deduction plus the OBBB increases.

If you’re an older adult, you could receive even higher savings on next year’s federal return under the new tax law, because the OBBB added a new bonus standard deduction of $6,000 (in addition to the usual extra standard deduction for older adults).

However, the temporary bonus deduction is dependent on modified adjusted gross income (MAGI), so you could miss out on this benefit.

The limits are $150,000 for married, filing jointly couples and $75,000 for single filers. The phaseout is 6% for every dollar above the income limits.

Here's an example to show how this works.

• A married, filing jointly couple who earns $150,000 and where both adults are 65 and older could receive a full $12,000 bonus deduction on their return.
• Yet, if that same couple were making $160,000 ($10,000 above the limit), the deduction is reduced by $1,200 (6% x $10,000 multiplied by two, since both adults are above 65).
• This would result in a deduction of $10,800 for the couple, rather than the full $12,000 benefit.

It’s also important to note that the OBBB permanently ended the personal and dependency exemption, which was $4,050 per qualifying taxpayer, spouse and child (indexed for inflation).

That change is likely to permanently decrease your tax refund, especially if your household has many people who would’ve qualified for the exemption.

SALT Deduction Cap

2. The ‘SALT refund’: How much is it?

If you itemize your federal return and live in a high-cost area, you could see a reduction in your tax liability. That’s because the state and local tax deduction (SALT) changed under the OBBB.

Most taxpayers claim the standard deduction these days. However, more Americans itemized their deductions before the 2017 Tax Cuts and Jobs Act (TCJA) capped SALT at just $10,000. Before that, the deduction was unlimited.

States with high property taxes and/or state income taxes, such as New York, New Jersey or California, might have suffered the most from the $10,000 cap on the SALT deduction, since they haven’t been able to fully deduct these types of taxes on their federal return since the TCJA was enacted.

But the OBBB temporarily increases the SALT cap to $40,000, meaning you could save more on federal 2025 taxes if you live in a high-cost area.

Let’s look at an oversimplified example to see how that might work:

• A couple with $200,000 in income claims the standard deduction for tax year 2025 and has no other credits, deductions or alternative minimum tax (AMT) liability. Their taxable income is $168,500 ($200,000 gross income minus $31,500 standard deduction).
• If that same couple were to pay $43,000 in state and local taxes that year, they might choose to itemize. This would reduce their taxable income to $160,000 ($200,000 gross income minus the $40,000 SALT cap).
• The net effect is an $8,500 reduction in taxable income on their federal return.

It’s worth mentioning that the SALT cap increase is temporary and will revert to $10,000 in 2030.

Taxpayers with $500,000 or more will have a 30% phaseout for every dollar their income exceeds the limit. The SALT cap reverts completely to $10,000 for incomes of $600,000 and higher.

Are you a high-income taxpayer? If so, here’s a simple example of how the new SALT cap deduction might impact you:

• A single filer makes $505,000 per year in MAGI and wishes to itemize to take the SALT deduction.
• Yet, $505,000 is $5,000 above the income limit, meaning the deduction is reduced by $1,500 ($5,000 times 30%).
• The total SALT deduction for this filer would be $38,500.

Child Tax Credit

3. How much money will I get back for a child tax credit?

The OBBB also changed the federal child tax credit (CTC) for qualifying children 17 and under by increasing the maximum amount from $2,000 to $2,200 (adjusted annually starting in 2026).

If you’ve got qualifying kids, the extra $200 you’re getting from the child tax credit could raise your next tax refund (or at the very least, lower your tax bill).

• For example, a couple with $350,000 and two children under 17 would see $4,400 in child tax credit savings.
• That’s $400 higher than last year’s federal return.
• Families with four children could also see an increase in child tax credit breaks from $8,000 to $8,800.

However, the CTC is reduced by $50 for every $1,000 (or fraction thereof) that your MAGI is above specific income thresholds.

These income caps remain at $200,000 or more (for single filers) and $400,000 or more (married filing jointly couples). If you make above those amounts, you’ll likely see less benefit from the new child tax credit in your tax refund:

• A single filer with one child age 17 and under and an income of $200,000 would see $2,200 in child tax credit savings.
• But if that same filer made $205,000 instead, their maximum child tax credit would be reduced by $250 ($5,000 is five times above the income limit, so $50 times 5 is $250).
• The total tax credit would then be $1,950 ($2,200 minus $250).
• Before the OBBB, the single filer with $205,000 would’ve seen a total tax credit of $1,750 ($2,000 minus $250).
• The net gain under the new law is $200.

But the new child tax credit doesn’t benefit everyone. Households with noncitizen parents might see an increase in their 2025 tax bill. That’s because the child tax credit now requires parents to have a Social Security Number (SSN).

As Kiplinger reported, this means that nearly 2.7 million children in the U.S. who previously qualified will no longer be eligible for the credit due to their parents’ immigration status, leading to a potential $5.94 million loss in tax savings ($2,200 multiplied by 2.7 million).

Tax on Tips and Overtime

4. Will I get a bigger tax refund if I work overtime or for tips?

Tax on tips also changed under the new Trump tax bill, though perhaps in an unexpected way. Prior law dictated that cash tips (including credit and debit card charges) were taxed like ordinary income.

Now, under the OBBB, there’s a temporary deduction for tips up to $25,000, subject to an income phase-out (more on that below).

Are you a service worker? Here’s a simple example of what the no tax on tips law might look like for you:

• A server at a popular restaurant earns $20,000 in annual tip income.
• On last year’s tax return, the server claimed the standard deduction and had no other income or tax breaks. The total taxable income on their federal return was $5,400 ($20,000 minus the $14,600 standard deduction for single filers).
• In 2025, that same server could have zero federal income tax if they claim the tip deduction ($20,000 minus $15,750 standard deduction, minus the $25,000 maximum tip deduction).

It’s important to note that the IRS hasn’t yet squared away the definition of what a “tipped employee” is, yet. It’s unclear which workers will be affected.

Once more, workers who don’t ordinarily receive tips, such as retail sales clerks, cooks or childcare workers, will most likely not gain a benefit from this law. Meanwhile, tipped workers earning more than $150,000 (or $300,000 for joint filers) will see a phaseout of the tip tax deduction.

For more information, check out Kiplinger’s report New 'No Tax on Tips' Bill Approved for 2025: What to Know Now.

Similarly, overtime rules changed with the new tax bill. The OBBB created a no tax on overtime deduction worth up to $12,500 for tax years 2025 through 2028. The deduction has the same income phaseouts as “no tax on tips” at $150,000 for single filers and $300,000 for married, filing jointly couples.

Are you an overtime worker? The “no tax on overtime” could increase your tax refund or lower your federal tax liability, regardless of whether you itemize or claim the standard deduction.

Note: Non-cash tips (like artwork) are still fully taxable as ordinary income and not eligible for a tip income deduction. Payroll taxes and state/local income taxes also still apply.

Business tax provisions

5. Key small business taxes: QBI, bonus depreciation and more

Several key tax provisions affecting small businesses are included in the OBBB. Here are a few:

• Permanently extending the “Qualified Business Income” (QBI) tax rate. QBI is the income your business earns after deducting qualified expenses (such as rent, utilities, business loan interest, etc.). The OBBB made the 20% deduction rate permanent.
• Making permanent “bonus depreciation.” Qualified property that you buy and place into service after January 19, 2025, is now eligible for immediate 100% expensing. Ordinarily, you’d have to wait to expense the asset above five, 10, 15, even 20 years.
• Providing more opportunities to use “Section 179” expensing. Similar to bonus depreciation, Section 179 allows businesses to deduct 100% of qualified equipment and software. But there’s a deduction limit, which makes it more beneficial for small businesses vs large corporations. OBBB increased the maximum deduction amount and phase-out threshold for expensing.

All three of these provisions could help small businesses save on their taxes in 2025.

For instance, QBI only applies to businesses set up as a “pass-through entity,” like plumbers, accounting firms, and graphic designers (certain limits might apply). Maintaining the rate allows business owners to deduct more income (compared with before the TCJA), and lower income taxes paid.

Another helpful provision in the OBBB affects Section 179 expensing.

• This special type of expense is generally for small to midsize businesses due to its dollar limits.
• The OBBB increased these limits, allowing businesses to now deduct up to $2.5 million in property (up from $1.25 million).
• Likewise, the phase out is $4 million (up from $3.13 million).

Are you a small business owner? Let’s look at a very simplified example to understand how Section 179 and bonus depreciation can work together to maximize your tax savings:

• Pineapple Plane Company purchased one new plane for $2 million in 2025. Under Section 179, the company deducts the entire cost this year, resulting in a $2 million reduction in taxable income.
• Now, let’s say Pineapple instead purchased a megaplane for $3 million. Under Section 179, the company can only deduct $2.5 million per year. That leaves $500,000 undeducted.
• But bonus depreciation allows Pineapple to deduct the remaining $500,000 if the company started using the plane after January 19, 2025.

Note: The Section 179 deduction cannot exceed the business’s taxable income. The example also assumes the planes have a depreciable life of 20 years or less.

What to watch for next tax season

While we covered five major ways your tax refund might be affected this year, other provisions in the OBBB and IRS changes could affect your taxes. Here are a few more to watch:

• New temporary car loan interest deduction, allowing you to deduct up to $10,000 in interest paid on new vehicles, subject to income phase-outs.
• New Trump Accounts, which might help your child save for future educational, homeownership, and entrepreneurial costs.
• After September 30, the IRS will stop sending paper checks. If you're someone who likes to receive your tax refund via the mail, you'll need to opt for a digital payment instead next filing season.

As always, it’s important to keep an eye on the ever-changing tax landscape, both on Capitol Hill and in your state and local governments. Consult with a tax professional on your specific financial situation.

Several provisions listed above are expected to receive additional clarification from the IRS by October 2025. Stay tuned for more updates.

More OBBB Changes

• New Cap on Gambling Loss Deductions Begins Soon
• The 2025 EV Tax Credit: Yes, It's Ending
• New Medicaid Cuts: Is Your Local Hospital Closing?
• Student Loan Forgiveness: How Taxes and Repayment Could Change

You may have heard of the Trump tax bill that was recently signed. This key piece of legislation, so-called the “One, Big, Beautiful Bill” (OBBB), impacts millions of Americans through its provisions on health, border security, and taxes.

But what you may not know is how the Trump megabill is expected to affect parents. For instance, some well-known federal tax breaks, like the federal child tax credit, will be boosted. Others, including the personal and dependency exemption, are disappearing forever.

Here are three changes parents should look out for in the OBBB in 2025.

Related: 10 Tax Breaks for Middle-Class Families Claiming the Standard Deduction

1. Child tax credit in ‘Big Beautiful Bill’

Under the OBBB, the federal child tax credit (CTC) has increased. Prior law allowed a credit on taxes up to $2,000 per qualifying child under the age of 17. The new law allows up to $2,200.

However, the new child tax credit amount comes with a couple of significant caveats:

• The $200 increase only applies to the nonrefundable portion of the tax credit, meaning that your taxable income factors in. Married filing joint couples with $400,000 or more (single filers $200,000 or more) will not be able to claim the full credit.
• A Social Security Number (SSN) is required for parents or guardians claiming the tax break. Before the OBBB, eligible families with children could claim the child tax credit regardless of parents' immigration status.

Households with non-citizen parents will likely be ineligible to receive the credit. This means that the nearly 2.7 million children in the U.S. who previously qualified will no longer be eligible for the credit due to their parents’ immigration status.

But for those who do qualify, the child tax credit has also been indexed for inflation starting in 2026. That will increase the credit amount every year based on inflation-adjusted numbers.

For more information, check out Kiplinger’s report, Here's How the Child Tax Credit 2025 Amount Will Increase Under Trump.

2. Trump account for kids and newborns

Trump’s megabill also introduces a new type of savings account. The “Trump Account” is designed to save annually for a child’s future educational, homeownership, and entrepreneurial needs.

While sharing some similarities with a 401(k), there are some marked differences. Namely, a Trump account:

• Allows parents, relatives, and others to contribute after-tax dollars (up to $5,000 per year) in a child’s name.
• Permits savings to grow tax-deferred until the child reaches 18.
• Gives children born between 2025 and 2028 seed money of $1,000 in each account.
• Auto-enrolls any eligible child who does not have a Trump account.

The last bullet point may be problematic if Trump's accounts are comparable to 401(k)s. About one-quarter of 401(k) accounts are forgotten, according to USA Today, amounting to $1.65 trillion in unclaimed assets across the U.S.

Since the seed money would likely come from taxpayer dollars, the auto-enrollment feature could lead to millions in tax dollars sitting idle.

However, in a poll conducted several years ago, CNBC reported that 53% of parents don't open any type of savings accounts for their children.

Trump accounts could encourage more Americans to save for their child’s future and “help produce new capitalists,” as Sen. Ted Cruz (R-Texas), who initially proposed the measure, disclosed to Semafor earlier this year.

For more information, check out Kiplinger’s report, The GOP Wants to Auto-Enroll Your Child in a 'Trump Account' for Savings.

3. ‘Big Beautiful Bill’ changes for parents

The Trump tax bill also made permanent the employer-provided paid family and medical leave (PFML) credit. Here’s a quick overview of what that means:

• Before, businesses could only take the PFML tax credit for employees who had worked at least one year for an employer. Now, employees who have worked at least six months and for at least 20 hours a week may qualify.
• Employers can continue to calculate the credit based on wages paid or, under the new law, on PFML insurance policy premiums.
• State or locally mandated paid leave now counts towards satisfying the eligibility requirements for the credit.

While the PFML tax credit is a business tax break, it is designed to encourage employers to offer paid leave to more of their employees.

Only about 27% of private industry employees have access to paid family leave through their employer, according to a recent report by Congress.gov. The expanded PFML tax credit could help more families spend time with their children or support their household during medical leave.

Other parent tax changes under the OBBB include:

• Making the federal adoption credit partially refundable, with a $5,000 maximum amount. The credit will also become inflation-adjusted.
• Permanently removing the personal and dependent exemption, which was worth $4,150 (indexed for inflation).

Before the Tax Cuts and Jobs Act (TCJA), 292.7 million people claimed personal and dependent exemptions, per the IRS. Total taxpayer savings were in the billions, so individuals could see a reduction in savings with the termination of this key tax break.

What’s still to come?

Although the OBBB has been signed into law, talks continue on Capitol Hill regarding childcare. This may lead to future changes for parents.

For instance, Sens. Katie Britt (R-Ala.) and Tim Kaine (D-Va.) are leading a bipartisan effort titled the “Child Care Availability and Affordability Act” to address current childcare cost challenges through tax code adjustments, like increasing the size and refundability of the child and dependent care tax credit (CDCTC). Some similar changes related to childcare contained in the OBBB are expected to be implemented in 2026.

While the U.S. continues to experience a shortage of affordable, accessible, and high-quality childcare options, future legislative efforts may greatly impact how parents and guardians care for their children. Stay tuned.

Read More

• Money for Your Kids? Three Key Ways Trump's ‘Big Beautiful Bill’ Impacts Your Child's Finances
• 2025 Family Tax Credits: Four IRS Changes That Can Save You Money
• Here's How the Child Tax Credit 2025 Amount Will Increase Under Trump
• States That Offer a Child Tax Credit

Each week, in our Ask the Editor series, Joy Taylor, The Kiplinger Tax Letter Editor, answers questions on topics submitted by readers. This week, she’s looking at questions on the new tax law. (Get a free issue of The Kiplinger Tax Letter or subscribe.)

1. Effective Date of Tax Changes

Question: Are the tax provisions in the so-called “One Big Beautiful Bill Act” (OBBB) retroactive to Jan. 1, 2025, or do they start in 2026?

Joy Taylor: The new law permanently extends most of the tax provisions in the 2017 Tax Cuts and Jobs Act that were slated to expire on December 31 and enhances some of them, provides brand new tax breaks, repeals several clean-energy credits in the 2022 Inflation Reduction Act, and more. Many of the changes begin in 2025, and others take effect next year.

Here are several examples of tax changes that take effect beginning in 2025:

• Higher standard deductions.
• The $6,000 bonus deduction for seniors.
• The bigger child tax credit.
• The $40,000 cap on deducting state and local taxes on Schedule A of the Form 1040.
• The new tax deductions for tip income, overtime pay and auto loan interest.
• 100% first-year bonus depreciation for business assets.
• And the higher “Section 179” expensing limit for business assets.

Here are some examples of tax changes that are scheduled to begin in 2026:

• The new $15 million lifetime estate and gift tax exemption.
• The higher child and dependent care credit.
• A new above-the-line deduction of up to $1,000 ($2,000 on joint returns) for charitable cash contributions.
• And a couple of haircuts for taxpayers who itemize deductions on Schedule A of the 1040.

2. Tax Credit for Solar Panels on Home

Question: I am thinking of installing solar panels on my primary home. Can I still get a federal income tax credit for this?

Joy Taylor: Yes, but the project must be completed by December 31 at the latest. The residential clean-energy credit equals 30% of the cost of materials and installation of alternative energy systems (such as solar panels) that you install in your home. The OBBB ends the tax break for post-2025 years.

Also repealed after this year is the smaller energy-efficient home improvement credit for homeowners who make smaller energy-saving purchases, such as for efficient central air-conditioning systems, water heaters, heat pumps, exterior doors, and windows. So if you’re thinking of making any of these energy-saving upgrades to your home, you’ll have to pay for the upgrades and complete them by December 31, 2025, to ensure a tax credit.

3. Interest on Auto Loans

Question: I bought a new car earlier this year, and I took out a loan to finance the purchase. Will I be able to deduct the interest that I pay this year on my 2025 tax return that I file next year?

Joy Taylor: It depends. The OBBB allows individuals who buy a new vehicle (car, minivan, SUV, van, pickup truck or motorcycle) for personal use after 2024 to deduct in each of 2025 through 2028 up to $10,000 of interest that they pay on their vehicle loans. This new car loan interest deduction is an above-the-line deduction, meaning it is available to taxpayers who take the standard deduction and to those who itemize on Schedule A of the 1040. The deduction begins to phase out at modified adjusted gross incomes over $200,000 for joint filers and $100,000 for other filers, and ends at modified AGIs over $250,000 for joint filers and $150,000 for others. Additionally, the vehicle’s final assembly must occur in the U.S.

4. Name Change

Question: I heard the newly passed tax law that President Trump signed on July 4 is no longer named the “One Big Beautiful Bill Act.” Why did the name change?

Joy Taylor: The short title of the new law was originally the “One Big Beautiful Bill Act.” However, shortly before the Senate voted on its version of the legislation, Senate Minority Leader Chuck Schumer (D-NY) argued that the title of the bill violated the technical budget reconciliation rules that Senate Republicans were using to pass the bill on a simple majority vote in the upper chamber. The short title was then struck from the bill prior to the Senate vote. The full title of the law is “An Act to Provide for Reconciliation Pursuant to Title II of H. Con. Res. 14.” Unfortunately, this doesn’t roll off the tongue quite as easily as the “One Big Beautiful Bill Act.” So you will see many people, including myself, continue to refer to the law as the “One Big Beautiful Bill.”

About Ask the Editor, Tax Edition

Subscribers of The Kiplinger Tax Letter and The Kiplinger Letter can ask Joy questions about tax topics. You'll find full details of how to submit questions in The Kiplinger Tax Letter and The Kiplinger Letter. (Subscribe to The Kiplinger Tax Letter or The Kiplinger Letter.)

We have already received many questions from readers on tax changes in the new “One Big Beautiful Bill Act.” We’ve addressed a few here, and we will answer more of these queries in a future Ask the Editor round-up. So keep those questions coming!

Not all questions submitted will be published, and some may be condensed and/or combined with other similar questions and answers, as required editorially. The answers provided by our editors and experts, in this Q&A series, are for general informational purposes only. While we take reasonable precautions to ensure we provide accurate answers to your questions, this information does not and is not intended to, constitute independent financial, legal, or tax advice. You should not act, or refrain from acting, based on any information provided in this feature. You should consult with a financial or tax advisor regarding any questions you may have in relation to the matters discussed in this article.

More Reader Questions Answered

• Ask the Editor: Questions on tax deductions and IRAs
• Ask the Editor: Questions on home sales and taxes
• Ask the Editor: Questions on Inherited IRAs
• Ask the Editor: Questions on Trump's Big Beautiful Bill (part 1)
• Ask the Editor: Questions on capital gains

The IRS has gone through unprecedented changes this year, and some developments orchestrated by the Trump administration have aggravated existing challenges.

The National Taxpayer Advocate, Erin Collins, released her fiscal year 2026 Objectives Report to Congress. While the government watchdog noted that the 2025 filing season was successful, there are several problem areas the agency has struggled to address.

These include refund delays for victims of identity theft, a lack of transparency on the agency's modernization strategy, and workforce challenges. Some of these problems are just the tip of the iceberg, but they can impact your experience as a taxpayer — with some folks already facing doubt as to how to address their taxpayer questions.

Here’s more of what you need to know about what to expect when tax season rolls around.

IRS Taxpayer Advocate Report cites several issues

While the 2025 tax season is over, a shrinking workforce and a lack of stable leadership in the IRS this year are starting to show cracks in the foundation of the agency. Research projects and modernization efforts are being suspended, and some folks are still waiting on refund delays.

These challenges can potentially worsen if the GOP keeps in promise to sunset programs like IRS Direct File, reduce allocated funding, and continue to cut down the workforce.

“As a recently retired IRS employee (took the Deferred Resignation Program) and an incredible 35-year career, it saddens me to see our agency suffer the personnel loss of hard-working and knowledgeable people,” wrote Martiza Flores-Travanti on LinkedIn, explaining that she’s had more friends and acquaintances unable to resolve issues with the IRS.

“I’m afraid we will all be receiving the ‘phone from a friend’ calls,” Flores-Travanti added. “The services to everyday Americans is diminishing. AI can’t do it all!”

IRS workforce challenges

The IRS started the year with a headcount of over 102,000 federal employees, and six months into 2025, that figure has dropped to just 75,702.

The changes to the agency came almost as soon as President Donald Trump was sworn into office, and created Elon Musk’s led Department of Government Efficiency (DOGE). The tech billionaire’s external government entity was tasked with dismantling federal agencies and other spending.

As reported by Kiplinger, the layoffs at the IRS impacted nearly every division. By the end of the 2025 tax season, more than 25% of the agency’s workforce had been cut down via layoffs, buyouts, or attrition.

Not to mention, this year, the IRS has been operating without consistent leadership.

• The agency had five commissioners or acting commissioners during the first four months of the year.
• Many of its most experienced leaders chose to leave the agency voluntarily.
• This left the agency with fewer frontline employees and managers with less experience to carry out the tax season.
• Trump’s controversial pick for Commissioner was just recently confirmed well past the 2025 tax season and had previously advocated for abolishing the IRS.

Taxpayer Services lost 1,836 during Trump’s first deferred resignation offer, and another 4,896 in its second resignation offer. A total of 829 cut ties with the IRS through a voluntary early retirement or voluntary separation incentive program.

The areas impacted, like Taxpayer Services, are responsible for processing tax returns, answering taxpayer phone calls, and more.

Already, the lack of IRS employees has caused important projects to be suspended. The agency sent a notice on July 1 that its Joint Statistical Research Program (JSRP) is on hold due to “unforeseen circumstances.” That division was designed to support research projects and use tax microdata to address tax administration research questions.

“Due to current staffing limitations, Statistics of Income (SOI) is unable to provide the necessary support for new projects,” the memo said.

The Trump administration plans a 20% reduction in appropriated IRS funding next year, which would amount to an overall 37% reduction in funding after counting the decrease in supplemental funding from the Inflation Reduction Act (IRA).

For now, all federal hiring efforts have been paused by the Trump administration. The Taxpayer Advocate recommends lifting the hiring freeze and providing a direct hire authority so Taxpayer Services can hire “essential filing season employees” this summer, and onboard them in time for the 2026 filing season.

Identity theft remains a weakness

The last problem you want to deal with as a taxpayer is having your identity stolen. What’s worse: getting that issue resolved will take years.

The IRS has promised over the past 18 months that it’s been working to resolve the Identity Theft Victim Assistance (IDTVA) cases, but the backlogs continue to this day. The agency handles two types of identity theft cases.

1. Potentially fraudulent. These are cases that the IRS processing filter flags as a risk. Taxpayers whose returns were incorrectly flagged must authenticate their identity to receive their refunds. The process can take several months to be resolved.
2. Stolen identity. These cases involve an individual stealing a taxpayer’s identity and Social Security number to file a tax return.

By the end of the 2025 filing season, the IRS had about 387,000 second-category cases in inventory, according to the NTA. These cases take an average of 20 months to resolve.

Some of the delays are also linked to a lack of personnel handling IDTVA cases. As reported by Kiplinger, the agency has been known to siphon employees from various departments to help Taxpayer Services during the filing season. This year was no different.

The IRS planned on siphoning identity theft personnel to assist Taxpayer Services in answering phone calls. Now, as both departments' workforce has been cut further, there’s no telling how Trump’s downsizing of the agency will impact pending IDTVA cases.

“Apart from the time and frustration these delays cause, victims entitled to refunds are waiting nearly two years to receive them,” wrote Collins. “We found these delays disproportionately affect vulnerable populations dependent on their refunds to meet basic living expenses.”

IRS modernization plan?

The IRS has relied on an outdated technology system for decades, with some “legacy” equipment dating back more than 25 years.

It’s not a new problem area by any means, and the IRS has acknowledged it has to modernize its systems. However, recent budgetary challenges and a shift in priorities, driven by Elon Musk’s Department of Government Efficiency (DOGE), have led to the suspension of some ongoing modernizing initiatives.

Before DOGE made a splash at the IRS, the agency had made notable strides to update its systems, enhancing online account features, increasing cybersecurity protocols, and launching new online tools like IRS Free File (which is now on the GOP chopping block)..

Musk’s DOGE, in partnership with the Treasury Department, believes that the IRS can effectively automate much of the agency’s work currently performed by employees. However, using AI to substitute employees has raised some concerns.

For instance, there’s no telling how AI can ensure fair compliance, provide quality service, and safeguard taxpayer privacy, according to the Taxpayer Advocate. So far, the IRS has no clear plan on how it will modernize its systems — another pain point for future taxpayer experience.

“Without such transparency, there is a real risk these initiatives could stall or deviate from their intended outcomes,” wrote the NTA.

What’s been long overdue is the digitization of paper. The IRS continues to buckle under the strain of paper returns, even during the 2025 tax season.

• The agency estimates that it would receive roughly 43 million paper tax returns and 19 million paper information returns in 2025.
• It also sends nearly 170 million paper notices to individual taxpayers and receives millions of mailed responses.
• For some taxpayers, any delays can lead to slower refunds.

While the IRS launched its Paperless Processing Initiative in 2023, the agency failed to meet its goal of digitally processing all paper-filed returns by the 2025 filing season.

“I often remarked that paper is the IRS’s kryptonite, and the IRS is buried in it,” wrote Collins, before adding that paper continues to be a vulnerability that “continues to hinder the agency’s effectiveness.”

Bottom line for the IRS

The IRS has undergone significant changes this year that can impact you as a taxpayer.

The 2025 tax season was “the smoothest yet,” as most taxpayers received their refunds without significant delays. As of April, the agency received over 140 million individual income tax returns and processed 138.1 million individual returns. Additionally, some 86 million refunds had been delivered, with an average refund of $2,942.

Still, nearly 3.4 million returns had been suspended due to errors, potential identity theft, or other issues. These delays add to other backlogs that still linger from past tax filing seasons:

• Some Employee Retention Credit (ERC) claims have remained pending since the pandemic.
• Identity theft cases can take up to two years to be resolved.
• Republican lawmakers want to eliminate IRS Direct File, a free filing service that relieves processing burdens for the agency's employees.

Here’s the latest on IRS changes:

• IRS Layoffs Spark Delays, Doubt This Tax Season
• IRS Shakeup: What Trump’s Commissioner Pick Could Mean for Your Taxes
• Trump Plans to Terminate IRS Direct File program

President Donald Trump’s sweeping tax cut and spending bill is now law, and one provision that would have helped the wealthy avoid capital gains tax was written out.

Tucked within the mega-legislation known as the “One Big Beautiful Bill” (OBBB) is a provision that some tax policy analysts call unprecedented, because it calls for a dollar-for-dollar federal tax credit for donations to private school voucher programs with no budgetary cap.

The legislation reduces the tax incentive for most charitable giving, while nearly tripling the tax incentive available to donors that fund free or reduced private K-12 schools, according to the Institute on Taxation and Economic Policy (ITEP).

Written out of the final version of Trump’s tax bill is a capital gains tax write-off. An earlier version of the partisan legislation allowed donors who contribute appreciated assets, such as corporate stock, to Scholarship Granting Organizations (SGOs) an additional tax benefit: capital gains tax avoidance.

The final version of Trump’s megabill could cost the U.S. as much as $25 billion per year, the National Education Association (NEA) estimates.

Here’s what you need to know about the private school voucher tax break, and what it could mean for your finances.

What is a tax credit voucher?

The private school voucher tax break, designed to reward individuals who make charitable donations to SGOs, is a modified version of the proposed Educational Choice for Children Act.

SGOs are non-profit organizations that distribute donated funds to students via scholarships, often for private school tuition. The awards can be used to pay for tuition, books and homeschooling costs.

How would the voucher tax credits work?

• In exchange for a donation to private K-12 school vouchers, taxpayers will get a dollar-for-dollar tax credit.
• The nonrefundable tax credit will be worth up to $1,700 (rather than 10%) of adjusted gross income as suggested originally.

The concept will promote private school choice by using public funds to help families pay for private school tuition or homeschooling expenses. That includes religious schools, which most voucher students attend.

It’s also referred to as “universal school choice,” a policy that the Trump administration has advocated for. It also aligns with Project 2025, a conservative policy agenda created by the Heritage Foundation.

Some states won’t participate in the school voucher tax break

When it comes to the nation’s first federal school voucher program, Republican lawmakers allowed states and the District of Columbia, to voluntarily elect to participate in the tax break program for the tax calendar year and if so, identify scholarship-granting organizations in the state.

Furthermore, the school voucher nonprofits can only administer school vouchers within their states. Private and religious schools will also be subject to federal regulations.

States won’t be forced to participate, thanks to pushback from such advocacy organizations as the National Education Association (NEA). That means Democratic-majority states such as California and New York can opt out of the school voucher program.

As a note, private school vouchers have appeared on various state ballots 17 times, and voters have rejected all of them, as reported by the NEA. The most recent votes were in Colorado, Kentucky and Nebraska in November of last year.

“There is no cap on how much the federal government will spend on this tax giveaway, and it is now a permanent part of the federal tax code,” wrote the National Education Association following the OBBA’s enactment. “NEA estimates that it will cost at least $25 billion per year.”

Who would qualify for the scholarships?

Under the GOP tax bill, SGOs will distribute donated money via scholarships to households earning at or below 300% of a given area’s median gross income.

It must also be for a qualified elementary or secondary education expense, including (but not limited to):

• Curriculum and curricular materials
• Books
• Fees for nationally standardized testing
• Online educational materials
• Tuition or fees for a private K-12 school and homeschooling expenses

Avoid capital gains tax under Trump's 'big bill'?

As initially drafted, Trump’s "big, beautiful bill" would have distributed $5 billion a year in federal tax credits for private school voucher donors each year. That budgetary cap was written off in the final version of the OBBBA.

Currently, donors to private school voucher programs will receive a dollar-for-dollar tax break equal to $1,700.

What else was eliminated from the final legislation? A lucrative tax shelter for the wealthy. An earlier draft of Trump’s “big beautiful bill” would have allowed private school voucher donors who contribute corporate stock, for example, to avoid capital gains tax.

Overall, the capital gains tax avoidance would have cost the federal government billions, ITEP estimates.

Other cuts to charitable donations

As mentioned, the dollar-for-dollar tax rebate for donors to private school voucher programs provision is “unprecedented at the federal level,” ITEP analysts say, as no other charity has ever received that kind of allowance.

What’s troubling: Trump’s tax bill could cut charitable-giving tax incentives for donors to most nonprofit groups while tripling the incentive to donors that fund private K-12 school vouchers.

• ITEP estimates that donors to children’s hospitals or other charities would receive no more than 35 cents in tax savings for each dollar donated, down from a maximum tax benefit of 37 cents under Trump’s megabill.
• Additionally, the OBBB stands to reduce the average benefit of itemized deductions for charitable giving by more than a quarter.

Some critics of voucher programs argue that public dollars should be used to boost spending in public schools, not to subsidize private education. The private school voucher tax credit could create an indirect way of funding private schools with taxpayer dollars.

The ‘One Big Beautiful Bill’: What’s next

Trump’s self-dubbed One Big Beautiful Bill was enacted into law on July 4, 2025.

The major tax cuts and spending package is slated to add roughly $3 trillion to the debt through the next decade, and nearly $5 trillion as temporary provisions from Trump’s Tax Cuts and Jobs Act (TCJA) were made permanent.

The measure also includes a variety of changes to family tax credits and education credits.

Stay tuned for more information on how the newly enacted OBBB might impact your finances.

Related Content

• Capital Gains Tax Rates 2025: What You Need to Know
• Which Capital Gains Are Taxable and How to Calculate Your Tax
• Homeschoolers Could Soon Save on Expenses With 529 Plans
• Money for Your Kids? Three Key Ways Trump's ‘Big Beautiful Bill’ Impacts Your Child's Finances

Since the U.S. Senate first unveiled its version of the GOP’s “Big Beautiful Bill,” several key changes emerged that set it apart from the U.S. House of Representatives' earlier proposal.

These differences, some of which were surprising, are already fueling debate in Washington and could have wide-reaching effects for families, businesses, and even nonprofit organizations.

And...it's worth noting that these proposals come as new polling from PEW Research suggests many U.S. taxpayers have doubts about the bill, with 54% of respondents saying the mega legislation will have a mostly negative effect.

Here's more of what you need to know.

Senate tax bill proposals

Like the House GOP version of Trump’s One Big Beautiful Bill Act, the Senate GOP's proposed bill proposes several tax changes and policy shifts that could impact taxpayers for years to come.

Some of the proposed Senate changes are somewhat surprising, from a more modest child tax credit increase to a larger charitable deduction and timing changes for some energy policy provisions.

These proposals set the stage for tough negotiations with the House as the massive reconciliation bill progresses through the legislative process in Congress.

Based on the latest legislative text, here are five key changes proposed in the Senate GOP tax bill.

1. More modest Child Tax Credit — and sharper Medicaid cuts

The federal child tax credit is one closely watched provision when it comes to tax reform. While Republicans in both chambers have proposed increasing the credit, the Senate’s version is notably less generous than the House’s.

• According to a draft of the Senate bill, the maximum child tax credit would be permanently set at $2,200 per child starting in 2025, with adjustments for inflation after.
• By contrast, the House bill would raise the credit to $2,500 per child for four years before reverting to $2,000, also indexed for inflation.

Some policy analysts note that many children could be left out, since neither version offers relief to families with low incomes who owe no federal income tax.

However, the Senate's decision to opt for a lower amount is a notable policy choice since past expansions of the CTC have been credited with reducing child poverty.

The Senate’s tax bill also would hit Medicaid harder than the House version, with a combination of deeper funding reductions and stricter eligibility policies.

The Senate proposal would slash federal Medicaid support by billions more than the House bill, with particularly steep impacts on states that expanded Medicaid under the Affordable Care Act (ACA).

Some health policy experts warn that these and other changes could result in millions more Americans losing Medicaid, especially among families with lower incomes and those in rural areas.

2. Permanent business tax breaks and a lower cap on State and Local Tax (SALT) deductions

The Senate proposes to make certain business-related tax breaks permanent — an approach that contrasts with the House’s temporary extensions.

That includes provisions like 100% bonus depreciation and expanded deductions for business interest, which are popular with industry groups but add to the long-term cost of the already expensive “big bill.”

At the same time, the Senate version initially maintained a $10,000 cap on federal deductions for state and local taxes (SALT), far lower than the $40,000 cap included in the House GOP version of the bill.

Some saw the move as a placeholder for negotiation. It quickly triggered backlash from some House Republicans representing high-tax states, whose constituents would benefit from a higher SALT cap.

*The provision was later modified to temporarily raise the SALT cap to $40,000 with annual increases for 2025-2029, at which time it would revert to the $10,000 limit in 2030. Some pass-through businesses could bypass the cap.

Related: SALT Cap Could Hurt Top 'Hidden Home Cost'

3. Larger above-the-line charitable deduction for non-itemizers

In an unexpected shift, the Senate bill expands the above-the-line charitable deduction for taxpayers who don’t itemize.

• The House bill would allow a deduction of up to $150 for individuals and $300 for married couples.
• The Senate proposal, however, would increase that to $1,000 for individuals and $2,000 for married couples.

Some nonprofit advocates have pushed for expanded tax incentives to boost donations at a time when many charitable organizations are facing financial stress. However, some policy analysts say the “big bill” provisions complicate charitable giving rules.

4. A larger bonus standard deduction for older adults

As Kiplinger has reported, the Senate bill would temporarily add a $6,000 special bonus tax deduction for those 65 and older, more than the $4,000 proposed in the House version.

This deduction would be available to itemizers and those taking the standard deduction, would stack on top of the existing extra standard deduction for those 65 and older, and begin to phase out at incomes above $75,000 for individuals or $150,000 for couples.

GOP lawmakers say the change is designed to help older taxpayers manage rising living costs.

For more information, see Senate Seeks $6,000 Bonus Tax Deduction for Those Age 65 and Older.

5. Rollback of clean energy credits — with some flexibility

Both the House and Senate bills propose rolling back many of the clean energy tax credits enacted under President Biden’s Inflation Reduction Act (IRA).

• However, the Senate GOP version would phase out incentives for wind and solar energy at a slower pace than the House, allowing more projects to qualify before the credits expire.
• The Senate bill would also preserve some incentives for geothermal, nuclear, and hydropower projects.

According to an NPR report, this compromise is already eliciting mixed reactions from industry groups and environmental advocates.

The One Big Beautiful Bill Act in the Senate: Bottom line

Overall, the House and Senate versions of the “Big Beautiful Bill” share broad goals like making most Trump-era tax cuts permanent, cutting non-military spending, and boosting border and defense funding. Still, the proposals differ in some key aspects.

As mentioned, the House bill features larger, temporary tax breaks, like a higher child tax credit and a more generous SALT deduction. It would also allow more in temporary deductions for tips and overtime pay.

In contrast, the Senate bill opts for smaller, permanent tax cuts, keeps the SALT deduction capped at $10,000, and would limit tip and overtime deductions.

Regarding Medicaid, the Senate would impose deeper funding cuts and stricter eligibility rules.

Some estimates project the House bill could add anywhere from $3.8 trillion to $5.3 trillion to the deficit over a decade, while the Senate version, with more permanent provisions and a slower phase-out of green energy credits, would potentially cost even more.

Also, the House would raise the debt ceiling by $4 trillion, whereas the Senate proposes a $5 trillion increase.

But stay tuned as GOP lawmakers in both chambers work toward a final version of Trump’s big reconciliation bill, which they say they still hope to pass by July 4.

Related

• Is the EV Tax Credit Going Away?
• Trump's 'One Big, Beautiful Bill': What to Know
• Big Tax Deduction Increase Proposed for Those Over 65

The tax deadline for U.S expats was June 16, but there are some tax credits and deductions you can still claim if you're an American living abroad.

Living overseas won’t let you off the hook from certain tax obligations, as you’re still required to file a tax return with the IRS. For some taxpayers, that means facing the burden of double taxation or having to file taxes both in the U.S. and their country of residence.

One of President Donald Trump’s campaign pledges included ending what some consider unfair double taxation for American expatriates. But the Trump administration has yet to keep that promise, so Americans living overseas needed to file their 2024 tax returns by the extended June 16 deadline.

Each year, many Americans choose to retire abroad to save on taxes. Luckily, there are ways you can reduce your U.S. tax burden further through credits and deductions.

There’s more: One of the tax credits on this list may be enhanced under the GOP’s version of Trump’s ‘One Big Beautiful Bill.’

Here are some key tax breaks that you don’t want to miss out on in 2025.

1. Foreign Earned Income Exclusion

One of the most popular tax breaks for U.S. expats is the foreign earned income exclusion (FEIE), which allows you to exclude some or all of your foreign earned income from your federal income taxes.

For the 2025 tax year (taxes due in 2026), eligible taxpayers can exclude up to $130,000 of their foreign earned income (that’s up from $126,500 for the 2024 tax year).

The exclusion is calculated using IRS Form 2555 and helps prevent double taxation on income earned abroad.

The FEIE is available to U.S. expats who:

• Have earned income from work in a foreign country
• Are self-employed and work outside of the U.S. or Puerto Rico
• Pass either the Bona Fide Residence Test or the Physical Presence Test

Taxpayers must also be physically present in a foreign country for at least 330 days during the tax year to claim the FEIE.

2. Foreign Housing Exclusion

If you live abroad as an American, you can also get a potential federal tax break for your housing expenses with the foreign housing exclusion or a deduction. This benefit can be used alongside the foreign earned income exclusion (FEIE).

The foreign housing exclusion or deduction must be for your tax home, meaning that the property is located in your main country of employment, post of duty, or business.

What’s the foreign housing exclusion? This tax break allows you to exclude qualified housing expenses from your foreign income. Generally, this is up to 30% of the maximum foreign income exclusion.

• For tax year 2025 (taxes filed in 2026), that amount is $39,000.
• The limit for 2024 (taxes typically filed earlier this year) was $37,950.
• This limit can vary depending on the location of your foreign tax home and the number of qualifying days in the tax year.

The foreign housing deduction works differently. The main difference is that only self-employed expats can claim this tax break.

3. Foreign Tax Credit

Taxpayers who paid or accrued certain foreign taxes can reduce their double tax burden by considering the foreign tax credit (FTC). To claim this credit, a tax must be imposed on you by a foreign country or a U.S. possession. For example, this can be a tax on an estate or investment.

Unlike the FEIE, the FTC provides a dollar-for-dollar credit for foreign taxes paid and applies to both earned and passive income. This tax break also allows taxpayers to carry over unused credits in future years.

You can claim this credit by filing the IRS Form 1116. Corporations must file IRS Form 1118 to claim the foreign tax credit.

On the flip side, if you want to itemize your deductions on foreign taxes, file a Schedule A (Form 1040). A few examples of itemized deductions include medical expenses, gifts to charities, and job expenses.

4. Child Tax Credit 2025

The federal child tax credit (CTC) is a tax break designed for families with qualifying children, and it's available to U.S. citizens who reside in foreign countries.

Here’s the catch: You won’t be able to claim the CTC if you use the foreign earned income exclusion, but you can if you claim an FTC.

As it stands, eligible households can claim up to $2,000 per child under the age of 17. If the credit surpasses your tax liability, you can receive some or all of the difference as a refundable credit.

• The refundable portion of the CTC, known as the Additional Child Tax Credit, is worth 15% of a family's earnings above $2,500 — up to a maximum of $1,700 per child for tax year 2024 (taxes typically filed in 2025).
• This credit phases down once a household income surpasses $200,000 for single parents or $400,000 for married couples.

Potential changes for the CTC

This version of the federal child tax credit under the Tax Cuts and Jobs Act of 2017 (TCJA) is slated to expire this year. If the Republican-controlled Congress doesn’t pass a legislative tax package, this means that the CTC will revert to $1,000 per child under age 17 after the end of the year.

As reported by Kiplinger, Republican lawmakers have proposed an expanded CTC in their version of Trump’s One Big Beautiful Bill.

The measure, which is currently undergoing revisions at the U.S. Senate, proposes the following changes to the CTC:

• Increasing the full child tax credit amount to $2,500 per child through 2028.
• Setting the full credit amount to $2,000 for subsequent tax years.
• Applicants must have a Social Security number to qualify for the credit.

For more information on how the would-be expansion of the child tax credit would work, see: Here’s How the Child Tax Credit Could Increase Under Trump.

Need more time to file your taxes?

While most taxpayers file their taxes on April 15, the IRS automatically grants U.S. expats a two-month extension. This year, that deadline is June 16.

If you need more time to get your tax documents in order, you can request an additional extension through Oct. 15, 2025. However, you’ll have to act fast to avoid penalties.

• To request an extension, you must file a Form 4868 (Application for Automatic Extension of Time to File U.S. Individual Income Tax Return) before June 16.
• Keep in mind, an extension to file does not exempt you from interest on unpaid taxes.
• Interest continues to accrue as of April 15, per IRS regulations.

Living abroad as an American can have its set of advantages and tax perks, as some countries can allow you to stretch your retirement savings. For instance, many Americans flock to Panama for its retirement benefits and no tax on inheritance.

Still, you’ll have to meet U.S. tax obligations for the time being. If you’re unsure of how to handle your taxes while living overseas, or want more tips on which tax breaks you may be eligible for, consult an international legal or tax professional.

For more tax tips for U.S. expats:

• Retirement Abroad? Three Countries Without Inheritance Tax
• Three Reasons to Retire in Panama in 2025
• IRS Tax Deadlines for June 16, 2025

Ever dream of having the “perfect” backyard space? You’re not alone.

According to a recent survey by data collection firm Talker Research, more than 40% of American homeowners plan to create a “backyard sanctuary” in 2025.*

However, the estimated average cost of completing their “dream exteriors” was $13,321. While substantial, this amount typically can’t buy you something lavish, such as an in-ground pool, which might cost around $30,000 to $60,000.

How can you make your dream backyard a reality and stretch your dollar? One solution might come from a seemingly unlikely source: Federal taxes.

Using an estimated budget of $13,321, Kiplinger compiled a list of projects that could fit your summer backyard while allowing certain tax benefits that could make these ideas more affordable.

*The survey was commissioned by Trex and administered online to 2,000 American homeowners.

Related: Can't wait for fall? Check out Kiplinger's coverage on The Fall Garden 'Tax': What to Plant and How to Prepare.

Backyard ideas for summer

Kiplinger used sample home projects from key federal tax laws to create the list of summer backyard ideas. Estimated costs were sourced through HomeGuide’s estimator tool in June 2025.

Yet, it’s important to note that current material prices, tariff impacts, scope of work and other factors can impact the cost of a home project. Consequently, price estimates are ever-changing. Consult your contractor before deciding whether a project is right for you and your budget.

*Note: The tax policy mentioned in this article pertains to federal taxes only. Check your state’s Department of Revenue website to see if you might be eligible for a state-level tax break.

Backyard renovation ideas: 2025

Estimated cost: $500 to $12,600

Thanks to the Inflation Reduction Act (IRA), the IRS offers a slew of federal tax incentives for energy efficiency in your outdoor area. These energy-efficient projects are one way to renovate your backyard this summer on a budget. For example:

• Your backyard door might qualify for a tax credit of up to $250. (The average exterior door costs from $500 to $1,900.)
• Central air conditioners, typically installed in back or side yards, might qualify for up to $600 off the installation costs. (A new central HVAC system generally costs a minimum of $7,000.)
• Solar panels can qualify for up to 30% off the installation costs. (Solar panels are generally priced at least $12,600 after the tax credit.)

These project ideas might not only save you on taxes, but also liven up your home’s summer landscape and cut your monthly energy bill.

However, if you're planning to take advantage of tax credits for energy-efficient home improvements, you might want to call your contractor soon.

The GOP’s latest proposal, called the “One Big Beautiful Bill,” includes a slew of tax provisions that could cut many "clean energy" tax incentives, including those for energy-efficient home improvements. This is why some homeowners are rushing to install solar panels before Trump cuts tax credits.

For now, these tax breaks are still available. If you start planning your project in the summer, you could finish before any potential changes to federal tax policy are made.

Backyard ideas to increase home value

Estimated cost: $2,000 to $12,000

If you’re looking to sell your home in the future, you might be wondering what backyard summer projects could add the most “value” to your property.

Here are a few value-added backyard ideas to get you started:

• Installing a snazzy new patio or deck, which might cost from $2,000 to $10,000, assuming 10-foot by 20-foot dimensions.
• Adding a fence for Fido or to make backyard barbecues more private. The average cost of fencing your yard can be $4,000 to $12,000, assuming a 200-foot straight fence.

Although these so-called “capital improvements” can be a bit pricier than other projects on this list, they can add value to your home, increasing your home’s tax basis. This could, in turn, affect your capital gains tax on the sale of your home.

For example:

• If you purchased a home for $200,000 and later sold the house for $500,000, part of your $300,000 difference could be subject to capital gains tax.
• But if you can prove $50,000 of home upgrades, your home’s tax basis would be $250,000. The difference between the selling price of $500,000 and the new tax basis of $250,000 is less than before and might not be taxed.
• This capital gains exclusion could prevent you from paying capital gains taxes on your home sale, while simultaneously leading to a higher selling price for your house (giving you more money).

However, you might want to look out for property taxes, which could increase as your home’s value rises. While this wouldn’t affect short-term move-out dates, it might affect you if you live in your home for longer than a year.

In particular, studies have shown that 75% of adults age 50 and older want to age in place. But if you live with someone who needs a medically necessary home improvement, you might qualify for the medical expense tax deduction on your federal return.

For more information, check out Kiplinger’s report, Tax-Deductible Home Improvements for Retirement in 2025.

Backyard projects on a budget

Estimated cost: $1,000 to $6,900

If you’re a business owner, these backyard ideas could be perfect. The IRS allows a home office tax deduction for qualified business expenses incurred to set up or maintain a business. This includes independent contracting, freelancing and other self-employed work.

If you use your backyard for a business purpose, the following projects might qualify for a federal tax deduction:

• Permanent storage sheds that are used to store business equipment and materials. A shed costs, on average, at least $1,000 (assuming 10 feet by 10 feet dimensions).
• Pathway or driveway improvements could be partially tax-deductible (if they're used for business purposes, as when your clients visit your office). The cost of a new concrete two-car driveway can be around $1,700 to $6,900.

But before you claim a business expense or home office tax deduction, be sure you meet the strict guidelines.

For instance, home office deductions typically require that you use the area regularly and exclusively for business, while for most business expense deductions, you must prove the expense is for the “ordinary and necessary” operations of your business.

There are other requirements you must meet, including careful documentation of the improvements, so make sure you can claim the deduction before filing your federal return. You might want to consult with a qualified tax professional before breaking ground on your new project.

Read More

• Summer Activities That Can Impact Your Taxes
• Ten Tax Breaks for Homeowners and Homebuyers
• How Long Should You Keep Tax Records?
• Home Office Tax Deduction: Work-from-Home Write-Offs

California’s soaring electricity rates could get worse if Republicans pass their version of President Donald Trump’s tax and spending cuts megabill.

A new analysis warns that electricity bills for households in California could increase 7.2%, while business utility bills would spike as much as 8.5% over the next decade if Congress repeals clean-energy tax credits created by the Inflation Reduction Act (IRA).

That’s because tucked within the partisan reconciliation bill are provisions that call for the construction of energy-related projects to begin within 60 days of the bill’s passage to receive a credit. Developments must produce electricity by the end of 2028 to be eligible for certain energy credits.

The tight deadline couldn’t come at a worse time for the Golden State.

California utility bills have skyrocketed in recent years, with some residential areas seeing energy costs climb as much as 67%. Most of the approved rate hikes are intended to help investor-owned utilities build underground power lines and mitigate wildfire damage.

It also comes as many Californians impacted by the Eaton and Palisades fires are still in the thick of rebuilding their communities. While the 100th day mark of the fires was in April, homeowners and business owners are still struggling to recover.

Higher electric bills are just the tip of the iceberg.

As California Gov. Gavin Newsom and the Trump administration clash over the Golden State’s federal funding. Here’s what else is on the line when it comes to your finances.

GOP proposes energy tax credit changes

Senate Republicans plan to release their version of Trump’s major tax cuts and spending bill dubbed the ‘big, beautiful bill’ soon, but some GOP lawmakers are showing signs of regret.

Thirteen House Republicans in support of the megabill are urging Senate Republicans to roll back some provisions tied to clean energy credits. The internal political pushback could signal that the major 1,000-plus page reconciliation bill passed through the House floor in a rush.

“While we were proud to have worked to ensure that the bill did not include a full repeal of the clean energy tax credits, we remain deeply concerned by several provisions,” said Republicans in a letter, led by Rep. Jen Kiggans, (R-VA).

House GOP lawmakers pointed to provisions they would reconsider, “including those which would abruptly terminate several credits just 60 days after enactment for projects that have not yet begun construction,” as well as “restrictions to transferability.”

The concerns allude to certain amendments passed by the House version of the reconciliation bill, which would target the investment tax credit (ITC) under Section 48E and production tax credit (PTC) under Section 45Y.

In brief, they would:

• Make these credits unavailable for solar, wind, battery, and other technology projects that begin 60 days after the bill is enacted.
• The measure would impose a placed-in-service deadline of Dec. 31, 2028, or else no credit would be available.

“This approach jeopardizes ongoing development, discourages long-term investment and could significantly delay or cancel energy infrastructure projects across the country,” the representatives wrote.

It’s important to note that the energy tax credits could still face revisions as they move through the Senate.

California’s electricity prices could rise further

The proposed legislative changes to the Inflation Reduction Act (IRA) ‘technology-neutral’ tax credits would lead to higher electricity and natural gas prices, job losses, and a significant economic slowdown in California over the next decade.

If these federal tax credits are repealed, higher utility bills are just one pressure point Californians will have to face, according to the National Economic Research Associates (NERA) study.

• Job loss: The economic impact would result in 44,200 fewer jobs between 2026 and 2032, and a $4.78 billion decrease in the state’s gross domestic product.
• Gas prices: Natural gas prices would increase in households and businesses by 2.3% and 3.5%, respectively.
• Electricity bills: Meanwhile, electricity bills would climb by 7.2% for households and 8.5% for businesses within the next decade.

According to the Center for American Progress (CAP), federal investments from the IRA helped stimulate job creation in manufacturing clean energy projects, building electrification, and other tech across the country.

Newsom threatens withholding tax money from the federal government

Adding to the economic uncertainty in California are ever-growing tensions between Gov. Gavin Newsom and the Trump administration.

• The Trump administration announced plans to claw back a large portion of federal spending in California, according to CNN.
• This would include the “full termination” of major grants for the University of California and California State University Systems, which would begin as soon as this month.

The Democratic governor was quick to bite back, threatening to boycott federal tax payments.

“Californians pay the bills for the federal government. We pay over $80 BILLION more in taxes than we get back,” Newsom wrote in a social media post. “Maybe it’s time to cut that off.”

Californian residents and businesses contributed about $83 billion more in federal taxes in 2022 than they received from the federal government, a recent study showed. That was after the state paid $692 billion in federal taxes and received $609 billion in federal funding.

The Golden State is the largest donor state in the nation, far outpacing New Jersey, which contributed about $28.9 billion, and Massachusetts at $27 billion.

U.S. Treasury Secretary Scott Bessent responded in a post on X that Gov. Newsom was “threatening to commit criminal tax evasion” and “leave California residents on the hook for unpaid federal taxes.”

What’s next for California

Higher electricity bills may be the last issue Californians want to deal with right now.

Utility bills in the Golden State have skyrocketed nearly 50% for residential customers in recent years, surpassing inflation and the national average, according to the state’s nonpartisan fiscal and policy advisor.

The sharp increase in electricity bills is due to the growing threat of wildfires, the state’s Legislative Analyst’s office said. Higher rates allow utility companies to work on wildfire mitigation projects, like building underground powerlines.

Senate Republicans still have the opportunity to revise amendments on the GOP version of Trump’s ‘one big beautiful bill’ before the bill reaches a vote. Potential changes to energy tax credits can impact your everyday utility bills, so stay tuned.

Related Content

• Trump’s ‘One Big, Beautiful Bill’ With Trillions in Tax Cuts: What to Know
• California Tax Deadline Extension: What to Know for 2025
• California Fires: How to Recover Tax Records and Other Important Documents
• Save More with Tax Credits for Energy-Efficient Home Improvements While You Still Can

If you already own an electric vehicle, you’re not alone — over 3.5 million people in the United States have registered EVs, with nearly 300,000 new ones sold in just the first quarter of 2025, as reported by Kelley Blue Book and Cox Automotive.

But proposed mega legislation, known as the One Big Beautiful Bill, from Republicans in the U.S. House of Representatives could have soon hit your wallet with a new annual federal fee to raise more than $800 million a year for the Highway Trust Fund.

Lawmakers say the fee is needed as more drivers opt for electric vehicles and gas tax revenues shrink.

Regarding the proposal, House Transportation Committee Chairman Sam Graves said in a statement: “For far too long, EVs have operated on our nation's roads without paying into the system. Plain and simple, this is a fairness issue, and it's time these roadway users pay their share for the use of the road.”

Worth noting: This idea isn’t new. Many states already charge annual fees for EV owners, typically ranging from $100 (like in California and Illinois) to $250 (e.g., in New Jersey).

Still, the proposed federal fee, which did not make it into the final version of the bill passed on July 4, 2025, would have matched the highest in the U.S. and would have applied to all EV owners, regardless of when they purchased their vehicle. Hybrid vehicle owners would also have faced a new $100 annual fee under the proposal.

Here’s more of what you need to know.

House GOP proposed $250 EV fee

The original House GOP version of Trump's sweeping tax and spending bill included a new $250 annual federal fee for electric vehicle (EV) owners, regardless of when they bought their car.

As mentioned, if approved, the fee would have been collected by the Federal Highway Administration and is intended to ensure EV drivers contribute to the Highway Trust Fund. That fund is traditionally supported by gas taxes paid by drivers of internal combustion vehicles.

However, consumer advocates pointed out that the proposed $250 fee was actually more than three times what a typical new gas-powered car owner pays in federal gas taxes each year.

The federal gas tax is 18.4 cents per gallon and hasn’t changed since 1993. That means most drivers pay far less than $250 a year toward highway maintenance.

• If the $250 annual EV fee had been approved, it would have gone into effect as soon as the bill was signed into law.
• However, the exact timing for when owners would have had to pay the fee would depend on how quickly the Federal Highway Administration finalizes the rules and sets up the payment system.
• The proposal instructed the FHWA Administrator to establish the process for collecting the fee after the law was enacted, so there might have been a short phase-in period before owners were required to pay.

It’s also important to note that the House GOP version of Trump’s "big beautiful bill" didn't stop at new EV fees. It includes two other major changes that made it into the final bill and impact the car market.

Elimination of EV tax credits

The House bill would phase out the federal tax credit for new electric vehicles, worth up to $7,500, after 2026. (The final bill ends this credit after September 2025.)

This marks a return to pre-Inflation Reduction Act rules and could significantly impact affordability for new EV buyers.

New car loan interest deduction

As Kiplinger has reported, the House GOP bill also introduces a temporary above-the-line deduction for car loan interest, capped at $10,000, for loans taken out on eligible vehicles in 2025 through 2028. That provision is in the final OBBB legislation enacted on July 4, 2025.

The deduction is subject to income phase-outs and only applies to loans for vehicles assembled in the United States.

While the deduction could provide relief for some buyers, it’s limited in duration and scope.

For more information, see New GOP Car Loan Deduction: Which Vehicles and Buyers Qualify.

Trump Musk fallout and Tesla stock

Tesla CEO Elon Musk (formerly of Department of Government Efficiency, DOGE, fame) has recently been critical of the GOP tax mega reconciliation bill, calling it a “disgusting abomination.”

The Congressional Budget Office says the bill could add $3 trillion or more to the deficit.

On X (formerly Twitter), Musk wrote, “Shame on those who voted for it: you know you did wrong.”

Trump fired back on Truth Social, suggesting Musk’s outrage was really about the bill’s plan to eliminate the $7,500 federal tax credit for electric vehicles — a move Trump implied could hit Tesla’s bottom line hard.

As the two traded barbs, Tesla’s stock took a nosedive on June 5, plunging more than 14% and wiping out over $150 billion in market value.

Notably, Tesla was already facing business headwinds.

• Tesla’s stock had dropped nearly 18% year-to-date, and the company’s global sales have fallen.
• May data showed a 36% year-over-year drop in Germany and a 15% decline in China.

Despite his recent criticism, Musk has previously seemed to support the Trump administration’s approach to EV policy.

While Musk has warned that ending the EV tax credit could “devastate” the broader EV market, he has also previously suggested that Tesla could ultimately weather the changes better than some competitors.

What’s next for EV owners and car buyers?

Since the so-called One Big Beautiful Bill has become law, car buyers could lose access to federal purchase incentives. At the same time, only some buyers would benefit from the new temporary auto loan interest tax deduction.

This article has been updated to reflect the passage of the OBBB.

Related

• Is the EV Tax Credit Going Away?
• Tesla Drags on Stocks Amid Trump Musk Fued
• Most Americans Don't Like Trump's 'Big Beautiful Bill'

Editor's Note: Since this article was written, President Donald Trump has signed the so-called "One Big Beautiful Bill" (OBBB) into law.

You may have heard that the House Republicans’ “One Big Beautiful Bill Act” includes many tax and spending changes that could affect your finances. The massive $3 trillion, 1,000-page legislation passed the House by one vote on May 22, focusing on making many of Donald Trump’s 2017 tax cuts permanent.

Numerous provisions in the bill could impact your wallet, from a proposed state and local tax deduction increase to Medicaid changes and cuts, tax deductions for cash tips, overtime pay, specific car loan interest, and higher HSA contribution limits.

However, analyses show that many of the proposed tax cuts disproportionately benefit upper-income households. Additionally, some provisions are set to expire after 2028, meaning the tax relief could be temporary unless Congress acts again.

But…while the bill passed the U.S. House of Representatives, it has a way to go before its provisions become law.

The U.S. Senate needs to weigh in, and then the House would have to approve any changes before the legislation would make its way to President Trump’s desk. And it sounds like the upper chamber is ready and willing to make some changes.

Here's more of what you need to know.

Senate Republicans debate Trump's “One Big Beautiful Bill”

Changes to the House GOP bill are pretty much certain to be proposed, as multiple key Republican senators have publicly stated their opposition to major provisions.

• On CNN’s “State of the Union,” Sen. Ron Johnson of Wisconsin, who has been quite vocal on the issue, said there is enough Republican opposition in the Senate to hold up President Trump’s tax and spending bill unless it includes deeper spending cuts and more serious efforts to reduce the federal deficit.
• Sen. Rand Paul (R-Ky.) has stated his opposition to the bill's debt ceiling provision (more on that later), saying, "There's nothing fiscally conservative about expanding the debt ceiling more than we've ever done it before."
• During an Oval Office press conference, Trump said he expected the package to be "jiggered around a little bit," as part of the legislative process.

Meanwhile, House Speaker Mike Johnson (R-La.) wants the Senate to avoid major modifications, to deliver the final version to President Trump by July 4.

So, while we wait to see what happens, here’s how some major provisions could affect your wallet — and hurdles to watch as the bill moves through the Senate.

1. Medicaid cuts and SNAP benefits

What the House Bill Says: The House bill proposes to cut Medicaid and SNAP by up to $1 trillion combined over the next decade, by some estimates, to offset the cost of new tax breaks and other spending priorities.

Why GOP Senators Might Change It: Some Senate Republicans, especially those from states with large Medicaid populations, are concerned about the political and practical fallout of such deep cuts.

Sens. Susan Collins (Maine), Lisa Murkowski (Alaska), and Josh Hawley (Mo.) have pointed to Congressional Budget Office estimates showing that the bill’s $700–$880 billion in Medicaid cuts — resulting from new work requirements, shorter enrollment periods, and tighter eligibility rules — could lead to between 7.6 and 10.3 million Americans losing coverage.

Many of those affected would reside in red states, heightening the political stakes for GOP senators whose constituents depend on Medicaid.

Sen. Hawley described the proposed Medicaid cuts as “morally wrong and politically suicidal,” emphasizing in a May 2025 op-ed that many Republican voters rely on those benefits.

It’s also worth noting that some senators are pushing for even deeper cuts to control the deficit, while others worry about the impact on vulnerable constituents and may seek to soften the reductions.

What the Senate proposed: The Senate bill would cap Medicaid provider taxes at 3.5%, a change that some say could cost states billions in matching federal funds.

2. State and Local Tax Deduction (SALT) cap increase

What the House Bill Says: The House bill raises the SALT deduction cap from $10,000 to $40,000 for joint filers making less than $500,000, with a phase-out for those above that income level. The cap would increase by 1% per year from 2026 to 2033, then remain at that level.

Why GOP Senators Might Change It: Several Senate Republicans, especially from low-tax states, question why the federal government should subsidize residents of high-tax, often Democratic-leaning states.

There’s skepticism about whether this provision is fair, and some senators are likely to push for a lower cap or additional restrictions to prevent the benefits from flowing mostly to wealthier taxpayers in so-called "blue states." Though it should be noted that the SALT cap also impacts residents in so-called "red states."

What the Senate Proposed: The Senate has so far proposed what some see as a placeholder, which keeps the SALT deduction cap at $10,000.

3. Child Tax Credit expansion and eligibility

What the House Bill Says: The House bill temporarily increases the maximum Child Tax Credit to $2,500 for 2025–2028, after which it reverts to $2,000 (adjusted for inflation). The bill also restricts eligibility for certain families, like those with mixed immigration status.

Why GOP Senators Might Change It: Some Republicans, like Sen. Hawley and Vice President JD Vance, have previously called for a more generous or permanent child tax credit.

• Specifically, Hawley proposed increasing the child tax credit from $2,000 to $5,000 per child and expanding eligibility to include all payroll taxpayers, not just those with income tax liability.
• As Kiplinger reported, Vance backed a $5,000 child tax credit during the 2024 presidential campaign.

So, the temporary nature of the increase, combined with eligibility restrictions, may not be enough for some lawmakers, who could possibly push for a larger or longer-lasting benefit as negotiations move forward.

What the Senate Proposed: The Senate would trim the CTC to $2,200.

4. EV Tax Credit repeal

What the House Bill Says: The House bill repeals or phases out many clean energy and electric vehicle tax credits established under the Inflation Reduction Act of 2022. That includes terminating most residential energy efficiency and clean energy credits after December 31, 2025, several years earlier than initially scheduled.

For electric vehicles, the bill ends the main federal EV tax credit for most new purchases after 2025, with only a limited exception for manufacturers that have sold fewer than 200,000 qualifying vehicles.

The legislation also eliminates or shortens incentives for domestic manufacturing, renewable energy projects, and clean hydrogen production, requiring many projects to begin construction within just 60 days of enactment to remain eligible.

Why GOP Senators Might Change It: Some Senate Republicans represent states with growing green energy sectors and are reportedly worried about job losses or economic harm.

According to the Joint Committee on Taxation, these changes could reduce support for clean energy by up to $561 billion over the next decade, putting billions in new investments and jobs at risk.

There’s reportedly discussion about adjusting the phase-out schedule or carving out exceptions to protect specific industries.

What the Senate Proposed: The Senate proposal makes the phaseout slower than in the House version.

5. Deficit spending and tax cuts overall

What the House Bill Says: The House bill is projected to add nearly $4 trillion to the deficit over the next decade, despite including about $1.5 trillion in proposed spending cuts. Data from the Congressional Budget Office and the Penn Wharton Budget Model show those cuts are concentrated in programs like Medicaid and SNAP, with the burden falling most heavily on low-income Americans.

• The bill makes many of the 2017 Trump tax cuts permanent and introduces new tax reductions, which analyses indicate would disproportionately benefit higher-income households.
• Additionally, the House version of the bill includes a provision to raise the federal debt ceiling by $4 trillion.

Why GOP Senators Might Change It: Fiscal conservatives in the Senate, including Sens. Johnson and Paul, argue that the spending cuts aren’t deep enough to justify the tax cuts’ fiscal impact. Paul’s assessment — “The math doesn’t really add up” — echoes the concerns of some others in his party.

Those senators could push for more aggressive spending reductions or other changes to make the bill’s long-term impact on the federal budget more acceptable.

Raising the debt ceiling has also sparked debate. Some argue that such a significant increase is fiscally irresponsible and would make the GOP "own the debt" going forward.

Treasury officials have warned that failure to raise the debt limit could risk a government default as soon as August if Congress doesn’t act.

What the Senate Proposed: The Senate has proposed a higher debt limit of $5 trillion.

Is the Senate eyeing Medicare cuts?

Senate Republicans are reportedly considering changes to Medicare as part of their efforts to find additional spending cuts to offset the cost of the reconciliation bill.

The focus of these discussions is on what they describe as "waste, fraud, and abuse" within the Medicare program, with a focus on overpayments in privately run Medicare Advantage plans. According to several news reports, one proposal gaining traction involves cracking down on "upcoding," a practice where insurers classify patients as sicker than they are to receive higher government reimbursements.

Notably, President Trump, who previously indicated he wouldn't touch Medicare, has reportedly signaled his support for these efforts. The notion now seems to be that these moves wouldn't impact beneficiaries directly, but instead go after inefficiencies and improper payments.

The Big Beautiful Bill: Looking Ahead

With internal GOP debates over Medicaid cuts, the SALT deduction, the child tax credit, energy tax credits, and the deficit, the path forward for the “One Big Beautiful Bill” is anything but smooth.

Adding to the pressure, President Trump, who seems to oscillate between supporting potential Senate changes to the bill and wanting just to move forward, took to Truth Social last week, urging,

“The Senate must pass the ‘One Big Beautiful Bill’ and send it to my desk. It’s time to make America win again—no more delays, no more excuses. Our economy and our workers are counting on it.”

At the same time, Trump's ally, Elon Musk, formerly of Department of Government Efficiency (DOGE) fame, blasted the bill, calling it a "disgusting abomination."

In a post on X on Tuesday, Musk also described the bill as an "enormous, outrageous, waste-ridden Congressional spending package."

(Trump and Musk traded barbs regarding the bill and a lot of other topics all day on June 5.)

Several Republican senators and prominent budget watchdogs are voicing concerns similar to Musk’s, warning that the bill would lock in lower federal revenues just as other spending and interest payments are reaching record highs.

They argue that claims of deficit reduction are misleading, since the bill’s math depends on comparing it to a scenario where the 2017 tax cuts fully expire — a scenario few in Congress considered realistic.

Buckle up. The coming weeks and months will be crucial in shaping any final legislation.

This story has been updated to include developments involving Elon Musk and Senate discussions over Medicare.

Read More

• Trump’s One Big Beautiful Bill With Trillions in Tax Cuts
• What’s Happening With Taxes on Overtime Pay
• New GOP Car Loan Tax Deduction: What to Know

The health premium tax credit (PTC) is almost 13 years old. Thanks to Obamacare, eligible individuals who otherwise can’t get affordable coverage through their employers can purchase coverage from the marketplace and qualify for the PTC to reduce their monthly premiums. People who can get affordable health coverage through their employers don't qualify for the PTC, nor do individuals who are eligible for Medicare, Tricare, Medicaid or other federal health insurance programs.

Temporary PTC easings are ending

Prior to 2021, the PTC was available only to people with modified adjusted gross incomes (AGI) ranging from 100% to 400% of the federal poverty guidelines, who bought insurance through the marketplace, such as on healthcare.gov, and who met certain other rules. Modified AGI for this purpose is your AGI plus tax-free interest, nontaxable Social Security benefits and tax-exempt foreign earned income.

During the height of the COVID-19 pandemic, federal lawmakers enhanced the PTC for 2021 and 2022, letting more people qualify for the subsidy. Congress also increased the credit amount for many qualifying individuals. Lawmakers later renewed these enhancements, but made them temporary through 2025.

For 2025, individuals with modified AGI over 400% of the federal federal poverty level will qualify for the PTC to the extent that the cost of the benchmark silver plan on the marketplace exceeds 8.5% of their income.

However, beginning in 2026, the rules revert to those that were in place for pre-2021 years, so that only individuals with modified AGI between 100% and 400% of the poverty level will get PTCs. That means that fewer people will qualify for the PTC. Also, the credit amounts for most everyone else who would still qualify for PTCs will be much lower than before, meaning individuals would be paying higher premiums for health insurance.

This will begin to impact people seeking marketplace coverage for 2026 on healthcare.gov later this fall, unless Congress acts to extend the PTC easings. And the impact will continue to be felt for each year thereafter. Letting the PTC enhancements lapse could eventually lead to 3.7 million people losing heath insurance each years because they can't afford the monthly premiums. And this is a conservative figure.

Extending the PTC easings isn't a goal of President Trump or of most congressional Republicans. Even while GOP lawmakers in Washington, D.C., are hard at work on a tax deal to extend expiring provisions in the 2017 Tax Cuts and Jobs Act and to provide additional tax relief, there is silence on the PTC. The House-passed "One Big Beautiful" bill doesn't extend the easings. And though we expect that Senate Republicans will make some changes to the House package, adding PTC relief isn't in the forecast. It's possible that Congress could address PTC relief later on this year in a different tax bill, but that appears to be a longshot.

How does the premium tax credit work?

The PTC is estimated when you go on the marketplace to buy health insurance. The estimated credit for 2026 will be based on your expected 2026 income. To figure this out, you would begin with your 2024 modified AGI and add or substract any expected income changes that you anticipate having for 2026. The lower your modified AGI, the bigger the credit.

Most people who qualify for the PTC will generally elect to have it paid in advance directly to the health insurance company to lower their monthly health insurance premiums. If you opt for this, you must file a federal tax return, even though your income may be below the filing threshold or you expect a refund. You would use IRS Form 8962 to compute the PTC amount, list any advance payments made to the insurer (which you would find on the Form 1095-A that you receive from the health insurance marketplace), and reconcile the two figures. If your PTC exceeds the advance payments, then you can claim the excess PTC on your Form 1040. If the PTC is less than the advances, most people would need to repay part or all of the excess.

Beware of an IRS audit red flag

Erroneous reporting of the PTC on your Form 1040 is an easy red flag for the IRS. Its computers flag filed tax returns showing modified AGIs that exceed the limit to take the PTC. Also, the IRS receives Form 1095-A from the health insurance marketplace that shows which taxpayers have selected to have their PTC paid in advance to reduce monthly premiums, and the amounts of those advance payments. So before you file your Form 1040, double-check that you qualify for the PTC and that you accurately report it.

Also, if you are currently enrolled in marketplace coverage, let the marketplace know of any changes that could affect your 2025 PTC amount. For example, if your lost your job and report lower income, the marketplace will increase the subsidy amount for future months, thus putting more money into your pocket. The exchange will also decrease the subsidy if you report higher income, for example, maybe you sold investment property or you found a new job. Notifying the marketplace now can mitigate surprises when you file your Form 1040 next year.

Related Content

• What Are Your Chances of an IRS Audit? 18 Audit Red Flags
• Trump's ‘One Big, Beautiful Bill’ With Trillions in Tax Cuts: Passes House
• Four Changes to Medicare in the One Big Beautiful Bill Act

If you are mulling installing solar panels on your roof or making other energy-efficient improvements to your home, you may want to act quickly to take advantage of one of two federal income tax credits. First, is the residential clean energy property credit for homeowners who install a power system that uses solar or other renewable energy. Second, is the energy-efficient home improvement credit for homeowners who make smaller energy-saving purchases for their homes.

How long these two credits — which reduce the taxes you owe dollar for dollar — will remain on the books, and what, if any, changes will be made, are currently open questions. On May 22, the House passed its One Big Beautiful Bill that would extend the tax changes in the 2017 Tax Cuts and Jobs Act that automatically expire at the end of 2025. The bill also provides lots of other tax breaks.

The House's One Big Beautiful Bill would also scale back many of the green energy tax credits that were created, expanded or renewed in the 2022 Inflation Reduction Act., including the home energy savings tax credits. Specifically, the bill would repeal the residential clean energy property credit and the energy efficient home improvement credit, effective for property placed in service after 2025.

Now it's the Senate's turn. The odds are good that Congress will pass a tax package sometime this summer, despite a series of hurdles that lawmakers will have to overcome. However, the Senate will make some changes to the bill, including possible revisions to the green energy tax credits.

Since homeowners may claim a home energy credit only for the year the improvements are made, if you’re thinking of making any energy-saving upgrades, you’ll want to pay for them and get them completed before December 31 to ensure a tax credit. They should be claimed using IRS Form 5695.

The residential clean energy property credit

This tax break is for homeowners who install an alternative energy system that relies on a renewable energy source, such as solar, wind, geothermal, or fuel cell or battery storage technology. Think solar panels, solar-powered water heaters, geothermal heat pumps, wind turbines, fuel cells, etc. The credit equals 30% of the cost of materials and installation or systems that you install in your home. There is no maximum credit dollar limit for solar, geothermal, wind, or battery storage systems. But for fuel cells, the credit is capped at $500 for each half-kilowatt of power capacity.

Unused residential clean energy property credits can be carried forward to reduce tax owed in future years. Homeowners who install a renewable energy system sometimes qualify for a rebate. These rebates are nontaxable, but they reduce the system’s cost for figuring the credit.

• Read more: Are Clean Energy Tax Credits a Thing of the Past?

The energy efficient home improvement credit

The basic credit is 30% of the cost and installation of certain types of insulation, boilers, central air-conditioning systems, water heaters, heat pumps, exterior doors and windows, etc., that you install in a home. These items must also meet certain energy-efficiency requirements, depending on the product. There is a $1,200 general aggregate yearly credit limit. But many specific upgrades have lower monetary credit limits and others have higher ones.

Here are the item-by-item yearly caps: $150 for a home-energy audit; $500 in aggregate for exterior doors (a maximum of $250 per door); $600 for exterior windows or skylights, and $600 for natural gas, propane or oil water heaters, electric panels, central air conditioners, or natural gas, propane or oil furnaces or hot water boilers. And $2,000 for biomass stoves or biomass boilers, electric or natural gas heat pump water heaters, or electric or natural gas heat pumps. Unlike the residential clean energy property credit, you cannot carry forward any unused energy-efficient home improvement credits to future years.

As an example, let’s say that in 2025, you purchase and install in your home two exterior doors at a cost of $1,000 each, windows and skylights at a total cost of $2,200, and a $6,000 central air conditioner. Your 2025 tax credit amount is $1,200. Now, change the facts. In 2025, you purchase and install in your home a natural gas heat pump that costs $7,000, a $4,000 natural gas tankless water heater, and a $6,000 central air conditioner. Your total maximum credit is $3,200: $2,000 for the heat pump. $600 for the water heater and $600 for the air conditioner.

For more on these credits and the documentation they require, read Tax Credits for Energy-Efficiency Home Improvement in 2025.

Note: This item first appeared in Kiplinger Retirement Report, our popular monthly periodical that covers key concerns of affluent older Americans who are retired or preparing for retirement. Subscribe for retirement advice that’s right on the money.

Related content

• IRS Solar Tax Credit Payouts Soar as Scams Target Homeowners
• Heat Pumps Help You Save on Home Cooling and Heating
• Tax Credits for Energy-Efficiency Home Improvement in 2025
• Are Clean Energy Tax Credits a Thing of the Past?
• Five Quick Tips To Reduce Electric Bills As Prices Surge

Last year, data show Americans drove away from dealerships with more than 16.3 million new vehicles, with roughly 80% of buyers reportedly relying on financing to purchase.

So far in 2026, average car prices are about $50,326, according to Kelley Blue Book, with interest rates for car loans hovering around an average of 7.0%.

For a 5-year loan, that roughly translates to $262 a month just in interest. For those who need a new car, those costs can strain budgets.

Now, a new tax break could ease that burden by allowing borrowers to deduct auto loan interest from their taxes. Trump’s new so-called "big, beautiful bill" offers a tax deduction for car loan interest.

But while the provision sounds like it would provide savings, it’s important to note that not every car or buyer will qualify for the tax benefit.

So, if you’re thinking about buying a new car, here’s what you need to know.

‘Big, beautiful bill’ car loan interest deduction

Trump and the GOP's new tax megabill, known by some as the "big beautiful bill: (BBB), became law on July 4.

That $3.4 trillion legislation primarily extends or makes permanent tax breaks from Trump’s 2017 Tax Cuts and Jobs Act (TCJA). But it also offers some new tax breaks, one of which involves vehicles.

Here’s how the auto loan interest tax deduction works:

• The measure temporarily lets car buyers write off up to $10,000 a year in interest paid on qualifying auto loans
• The tax break starts with purchases made in 2025 and runs through 2028.
• You don't have to itemize to claim the deduction.

But not every buyer or vehicle will qualify.

• To qualify, the car must be new, for personal use, and meet a "final assembly" in the United States requirement — a rule some industry manufacturers say could exclude many popular imports. (Think popular models from Honda, Hyundai, Nissan, and Toyota.) More on that below.
• Cars, minivans, vans, SUVs, pickup trucks, or motorcycles, weighing less than 14,000 pounds qualify, according to the IRS. ATVs, trailers, campers, used cars, and vehicles assembled abroad are not eligible.
• The deduction is limited to $10,000 per year and phases out for individuals earning more than $100,000 or couples making over $200,000. So, higher-income households will see less benefit.
• The deduction applies to new cars with loans originating after December 31, 2024, and only if the vehicle has final assembly in the U.S.

Remember: These changes apply to loans taken out in 2025 and after, but just for three years, through 2028.

The IRS also notes: "If a qualifying vehicle loan is later refinanced, interest paid on the refinanced amount is generally eligible for the deduction."

What is U.S. 'final assembly'?

The IRS recently issued a fact sheet stating that the place of final assembly for purposes of the car loan interest deduction is the location listed on the vehicle's information label.

How can you find that information?

• The IRS says that every new vehicle at the dealership should have an information label that lists the final assembly location.
• You can also look up the Vehicle Identification Number (VIN).
• The National Highway Traffic Safety Administration VIN decoder tool could also be useful in indicating where your car was assembled.

Who benefits from the auto loan interest deduction?

Supporters of the deduction argue it will provide direct financial relief to car buyers at a time when both vehicle prices and interest rates remain high.

Rep. Bill Huizenga (R-Mich.), who introduced the Made in America Motors Act, which proposed a similar but lower tax break, called the deduction “a win for American taxpayers, auto workers, and Michigan.”

Huizenga noted in a statement that making car loan interest tax-deductible fulfills a Trump presidential campaign promise and “provides financial motivation for individuals and families to purchase American-made vehicles.”

Sen. Bernie Moreno (R-Ohio) sponsored a bill with a similar proposal, the USA CAR Act.

“Thanks to President Trump, we are finally ensuring every car sold in America is made in America and that working Americans can actually afford to buy a car in the first place. I’m proud to lead the way in the Senate,” Moreno said when introducing his bill.

• Proponents also stress that, as mentioned, the deduction is structured as an above-the-line benefit, so taxpayers can claim it even if they claim the standard deduction on their federal returns.
• Some advocates also see the measure as a way to incentivize buying vehicles with final U.S. assembly.

Meanwhile, others question how much relief the deduction will actually provide and whether it is the most effective way to help car buyers.

Jonathan Smoke, chief economist at automotive services and technology provider Cox Automotive, and his team reportedly analyzed the proposed auto loan interest deduction last year. They found that if the average car owner pays $2,000 in interest over a year, they could save about $400 on their taxes under the initial House GOP version of the proposal.

However, given the overall costs of buying a car, Smoke told Bankrate the company doesn’t “think [the car loan tax deduction is] as exciting a proposition for driving more vehicle sales.”

There are also concerns about the deduction’s fairness and fiscal impact.

The benefit phases out for higher-income households, but some analysts argue that those with the means to buy new cars, especially more expensive models, are more likely to benefit.

On the other hand, many lower-income buyers and those purchasing used or imported vehicles could be left out.

And then there’s the cost: the Joint Committee on Taxation estimates the provision would cost over $57 billion in lost federal revenue, raising questions about its broader economic trade-offs.

Tax Filing: Your interest statement and Schedule 1-A

To claim the new auto loan interest deduction, taxpayers must be prepared to file a specific tax form and provide key documentation, especially for the 2025 tax year.

• For tax years 2025 through 2028, the IRS says you will claim the deduction by filing a new form with the IRS: Schedule 1-A (a new attachment to your Form 1040).
• To properly claim the benefit, you must include the Vehicle Identification Number (VIN) of the qualified vehicle on your tax return.

IRS transition relief for 2025 tax reporting

Recognizing that lenders need time to update their systems, the IRS has issued transitional relief for the 2025 tax year reporting.

No New Tax Form for 2025: Lenders are not required to file a new IRS information return with the IRS for interest paid in the 2025 calendar year.

Your Required Statement: Lenders must still provide borrowers with a statement showing the total amount of interest paid on the qualified vehicle loan during 2025. This statement must be made available to you by January 31, 2026.

Statement Delivery: Lenders can satisfy this requirement through various means, including an online account portal, a regular monthly statement, or an annual summary.

Action for Buyers: You should confirm your interest total by requesting this statement from your lender and keep it, along with the VIN, to accurately complete Schedule 1-A when you file your 2025 federal income tax return.

What about electric vehicles?

If you purchased an eligible EV before September 30, 2025, it looks like electric vehicles qualify for the car loan interest deduction, provided they meet the same requirements as other vehicles under the Trump/GOP 2025 tax bill.

That's because the deduction doesn’t seem limited by vehicle type, so qualifying EVs and plug-in hybrids would be eligible for the car loan interest tax break if they are U.S.-assembled and the loan meets the bill’s other requirements.

But it’s worth noting that while the Trump tax bill contains this new car loan interest tax break, the legislation ended the up to $7,500 federal EV tax credit for new electric vehicles and $4,000 for used EVs as of October 1, 2025.

So, the takeaway is that if you purchased a qualifying new EV by September 30, 2025, you could be eligible to benefit from both the federal EV tax credit (up to $7,500) and the new auto loan interest deduction for 2025. But check with a tax professional who can consider the specifics of your situation.

What about Trump auto tariffs?

Data show that Trump’s auto tariffs introduced in 2025 are already driving up car prices across the U.S.

• The 25% tariff on imported vehicles and parts has reportedly pushed the price of an average new vehicle up by 2.5% in April.
• That’s more than double the typical monthly increase for this time of year, according to Cox Automotive and Kelley Blue Book analyses.

True Car reports that some foreign models have seen increases of $5,000 to $10,000. Global supply chains also affect domestically produced automobiles, some facing added costs of about $2,000 to $3,000.

Note: When it comes to the new car loan interest deduction, most imported vehicles, subject to the new 25% tariff, won't meet this U.S. assembly requirement and will not be eligible for it.

However, some U.S.-assembled vehicles may still include imported parts affected by tariffs. As a result, higher parts costs from tariffs could still push up prices for some qualifying models.

Buying a car: Bottom line

Even with the car loan tax deduction, car buyers shouldn’t lose sight of the bigger financial picture.

The price of the car, interest rates, insurance, upkeep, and any new fees all add up quickly. It’s also important to keep tabs on your credit score, since that can make a big difference in what you pay over the life of your loan.

Recent tariffs could also play a role: a 25% tariff on most auto parts could push prices even higher, even for models assembled in the U.S.

No matter what tax breaks are on the table, it’s worth taking the time to run the numbers, shop around for the best financing, and make sure your car purchase truly fits your needs and budget.

This article has been updated to include information about transition relief from the IRS.

Related

• How Claiming the EV Tax Credit Works for 2025 Taxes
• Here’s What’s Happening With Trump's Tariffs
• What's in Trump's 2025 Tax Bill?
• Stop Using Your Smartwatch for Mileage (Until You Read This IRS Rule)

Many people seek out and use clean energy tax incentives, but that might be history soon. A new tax law signed by President Trump on July 4, 2025, will eliminate many federal energy-efficient tax benefits, including electric vehicle (EV), solar panel, and clean energy home improvement credits.

According to the Kelley Blue Book, a record-breaking 1.3 million EVs were sold in the U.S. last year, with 87% taking advantage of the federal tax credit. Meanwhile, the U.S. Treasury Department reports that over 3.4 million households have received $8.4 billion in tax credits for energy efficiency upgrades.

But the GOP’s so-called “One Big Beautiful Bill” might end affordability for many who wanted to use clean energy tax incentives.

Which credits will be eliminated? And in what ways might you still “go green” when the tax breaks do disappear?

Read on.

Clean energy tax credits in the new Trump tax bill

During the Biden presidency, many clean energy tax credits were created, expanded, or extended under the Inflation Reduction Act (IRA).

As a result of that legislation, the federal government offered several tax credits promoting energy efficiency:

• The electric vehicle (EV) tax credit, worth up to $7,500 for new qualifying “clean vehicle” EVs.
• The previously-owned clean vehicle credit, worth up to $4,000 or 30% of the sales price (whichever is less), for used EVs.
• The alternative fuel vehicle refueling property credit, also called the “EV charger tax credit,” worth up to 30% of the cost of qualifying “green” equipment (maximum $1,000).
• The energy efficient home improvement credit, worth up to $3,200 on qualifying items like doors, windows, and natural gas heat pumps.
• The residential clean energy credit, worth up to 30% of qualifying expenditures, like solar panels.

…there were also various other energy credits included in the IRA.

Together, those tax breaks have helped many Americans afford to “go green” and cut their tax bills when installing certain energy-efficient home upgrades.

Most IRA-sponsored clean energy initiatives were initially set to expire at the end of 2032. However, under the new Trump tax bill, key provisions could be eliminated as early as September 30, 2025.

Energy bill cost when tax credits go away

Tax incentives help people afford clean energy upgrades like solar panels and EVs. By eliminating energy tax breaks, fewer people may obtain the benefits they offer, like lower energy bills.

According to a recent analysis by Energy Innovation, a non-partisan policy firm, repeal of federal clean energy tax credits could make electricity bills rise across the U.S.

The average American household could see an increase in its annual energy bill of:

• About $40 to $60 by 2030
• By about $56 to $150 in 2035
• And about $140 to $220 in 2040

In total, repealing these tax credits could cost taxpayers $6 billion annually over the next five years. By 2040, American households could lose $25 billion per year.

Notably, that analysis doesn’t include any current or potential Trump tariffs.

Parts for clean energy initiatives, like EVs and solar panel pieces, are typically made abroad in countries like Mexico and China.

When a tariff war occurs, as happened earlier this year (and continues to progress), consumers generally pay the price.

Consequently, energy-efficient tax breaks would be needed to combat raised prices from tariffs on imported energy products.

Otherwise, the hit to energy incentives would be twofold: Raised prices from tariffs, and elimination of tax credits that could have helped absorb the higher prices.

‘Go green’ clean energy ideas: Rebates and state tax programs

While many clean energy initiatives are under fire under Trump's tax plan, there are ways you may be able to “go green” even when the elimination of energy tax credits occurs:

• Apply for the High-Efficiency Electric Home Rebate Program, which offers qualifying homeowners rebates on stoves, heat pump water heaters, electric wiring, and more.
• Check out the Low Income Home Energy Assistance Program (LIHEAP), which helps eligible households pay heating or cooling bills.
• Regularly schedule maintenance on your HVAC, purchase “smart” energy usage appliances, or look around your interiors for potential air leaks in windows, doors, or attics. Timely repairs may save you up to 15% on heating and cooling costs, according to Energy Star.

Finally, check your state’s Department of Revenue website for energy-related tax credits or rebate programs. Several states have decided to stand against potential federal reform on the clean energy front.

For example, California Gov. Gavin Newsom announced last year that if the EV tax credit is eliminated, the Golden State might provide rebates for eligible EV purchases.

States like New Mexico and North Carolina have also set goals for 100% clean energy by 2045 and 2050, respectively.

Read More

• Homeowners Rush to Install Solar Panels Before Trump Cuts Tax Credits
• Save with Tax Credits for Energy-Efficient Home Improvements While You Can
• Is the EV Tax Credit Going Away Under Trump?

If your claim for the Employee Retention Tax Credit (ERTC) is still pending, the Trump administration’s newly enacted tax cuts and spending legislation contains some provisions that may impact you.

The so-called ‘One Big Beautiful Bill’ disallows all pending ERC claims submitted after January 31, 2024, these are claims related to the third and fourth quarter of 2021.

Taxpayers who already received an ERC refund for this period, or filed ERC claims before January 31, 2024, won’t be impacted by the new law. That’s a step back from previous versions of the megabill, which aimed to disallow all ERC claims filed after January 31, 2024 — including those claimed.

Other major provisions affect pending ERC claims, including a prolonged audit window for claims submitted during Q3 and Q4 2021. There are also new and expanded penalties for advisors and promoters of the credit who failed to meet due diligence.

Here's how the Trump administration reshaped how the ERC works moving forward.

The problem with ERC refunds

The controversial employee retention tax credit was designed to help businesses retain employees during the COVID-19 pandemic. But certain promoters and tax preparers misled many businesses into engaging in fraudulent ERC practices.

The actions of these predatory ERC promoters led to a significant rise in improper ERC claims.

Since then, the IRS has paused and unpaused the program and dealt with major processing delays and lawsuits regarding the tax break. As reported by Kiplinger, staffing shortages due to the Trump administration’s shrinking of IRS workforce may also cause further delays on pending claims.

So, where does the IRS stand with pending ERC claims?

• As of April 15, 2025, the window for filing ERC claims officially closed.
• The Taxpayer Advocate, a government watchdog for the IRS, registered 597,000 unprocessed claims as of the spring. Thousands of disallowance notices were already issued.
• Trump’s new law will effectively disallow claims filed after January 31, 2024, with the exception of claims that have been paid.

Trump enacts major changes to ERC

Supporters of Trump’s ‘One Big Beautiful Bill’ argue that provisions to the tax code are designed to curb fraud, abuse, and wasteful spending in part by redirecting funds from the Employee Retention Tax Credit to other tax breaks.

The megabill implements three new provisions that impact the Employee Retention Tax Credit. These major changes include:

• Retroactively terminating all ERC refund claims filed after January 31, 2024.
• Extending the auditing period for the IRS to scrutinize ERC claims filed during Q3 and Q4 2021, for six years after the claim date.
• Cracking down on promoters who prepared claims without due diligence by adding new penalties.

As noted, these provisions do not apply to ERC claims for 2020 or the first and second quarter of 2021.

New Employee Retention Tax Credit rules

The OBBB implements three major changes to the Employee Retention Tax Credit and who may be able to claim the tax break moving forward. Let’s dive into what each of these provisions could mean for you.

1. Limitation on credits and refunds

The new law invalidates all ERC claims filed after January 31, 2024, regardless of their statutory deadlines. The final deadline to apply for the credit was April 15, 2025, for 2021 tax periods. The retroactive disallowance will impacted millions of taxpayers with pending cases.

2. Extension of limitations on assessment

Another provision tucked away in the bill extends the statute of limitations concerning the Employee Retention Credit. The IRS now has six years to audit ERC claims, giving the IRS additional time to make adjustments or denials.

In other words, the IRS can audit pending ERC claims as late as January 31, 2030, for claims filed on the January 31, 2024, deadline. The extended statute of limitations applies only to ERC claims for the third and fourth quarters of 2021.

3. Enforcing new penalties on promoters

Finally, the GOP tax bill adds new penalties targeting “COVID-ERTC” promoters. Those are individuals who provide aid, assistance, or advice concerning the credit, charge contingency fees, or receive significant revenue from said services.

Additionally, the promoter (including promoter firms) must have made at least 20% to 50% of their taxable income based on fees charged from clients respective ERC claims.

The new penalty applies to “any COVID-ERTC promoter” who assisted with ERC refund claims during the third and fourth quarters of 2021, and consists of:

• A $1,000 penalty per violation for failing to meet ‘due diligence’ requirements in determining ERTC eligibility.
• There is still pending guidance related on the enforcement of this penalty, as the IRS has yet to provide an exact definition of meeting ‘due diligence’ standards related to ERTC promoters.

Provisions could present constitutional challenges

According to a study from the Bipartisan Policy Center, the proposed reforms to the Employee Retention Tax Credit, along with other cuts to programs like the EITC, could have yielded over $123 billion over a decade.

However, the retroactive legislation would invalidate millions of pending claims made in good faith by businesses and nonprofits that complied with requirements during a period of financial struggle. Blocking the credit could also result in significant financial hardship for some businesses that anticipated receiving the credit.

An analysis of one of the early versions of the megabill by global law firm Eversheds Sutherland LLP noted that disallowing the ERC for some taxpayers retroactively could be problematic.

“Given the Congressional history of inducing taxpayers to claim the ERTC and the IRS’ large number of unprocessed claims, the proposed legislation appears ripe for constitutional challenge,” the publication co-authored by Cassandra Bradford and Joseph O’Brien noted of the initial draft.

Employee Retention Credit: What’s next

The ERC has had a troublesome history, and these new provisions could add some challenges for taxpayers with pending claims.

As reported by Kiplinger, the Trump administration’s efforts to shave down the IRS could also mean that those outstanding ERC claims could face further delays. As of the spring, the agency still faced a backlog of nearly half a million ERC claims, with many pending for more than a year.

Stay tuned for more information on the ERC, as this is developing news.

Related Content

• IRS Sued for Millions Over Employee Retention Credit (ERC) Delays
• What’s Happening With the Employee Retention Credit and the IRS?
• Incorrect ERC? IRS Points to Five New Red Flags

The nation’s largest anti-hunger program is slated to face its most significant funding rollback in history to offset President Donald Trump’s massive tax cuts bill.

To pay for new tax cuts, Trump's so-called 'One Big Beautiful Bill,' reduces federal funding to the Supplemental Nutrition Assistance Program (SNAP), by nearly $300 billion over the next decade. Some policy analysts said the sweeping changes would “eviscerate” SNAP.

The life-saving program, formerly known as “food stamps,” helps over 40 million families with low incomes afford groceries each month. That’s about 1 in 8 people, including 1 in 5 children.

“This would be the largest SNAP cuts in history by far, which would result in food being taken away from the hungry,” wrote Bobby Kogan, senior director of federal budget policy at the Center for American Progress (CAP).

The cuts to SNAP would come at a time of rising food insecurity and food prices.

Overall, the cost of food is expected to increase 3.5% this year. Experts warn that Trump’s sweeping tariffs on our closest trade partners will drive up the costs of canned food and other produce.

Here’s what you need to know about the potential changes coming to SNAP.

How SNAP worked before Trump's tax megabill

SNAP, formerly known as food stamps, is an anti-hunger program that helps over 40 million U.S. low-income families, older adults, veterans, and folks living with disabilities afford grocery costs.

The federal government fully funds SNAP benefits, while state governments contribute 50% of the program’s administrative costs.

Eligibility for the program is based on income and household size. Each state designs its own SNAP application process, and you can apply for benefits in person, online, or by mail.

• Folks eligible for SNAP receive an EBT (electronic benefit transfer) card.
• On average, SNAP participants in 2025 receive about $187 per month or $6.16 per day.
• Households may use it to purchase food at more than 261,000 retailers authorized to participate in the SNAP program.

You cannot use SNAP to purchase alcoholic beverages, cigarettes, vitamin supplements, or non-food grocery items. Additionally, you’ll have to reapply for the benefit program every six to 12 months. Older adults and people with disabilities must reapply every 12 to 24 months.

Trump's tax cuts defund SNAP and implement changes

The 'one big beautiful bill' introduces new policy changes to the nation’s largest nutritional assistance program.

Republican lawmakers approved at least $290 billion in cuts to SNAP over the next decade. That would defund the public program by nearly 30%, according to the Center for American Progress (CAP).

The new tax legislation calls on states to shoulder a portion of the federal benefit program’s costs, expand the age at which work requirements apply, and require applicants to be U.S. citizens or green card holders to be eligible. It would also prevent future administrations from increasing SNAP benefits beyond inflation.

The stricter work requirements for SNAP would also limit the eligibility of many.

• To qualify for SNAP benefits, Trump's megabill increases the age limit for adults required to work (20 hours a month) from 54 to 64 years of age.
• Under the previous tax code, those with dependents under 18 are exempt from having to meet SNAP work requirements — 80 hours a month.
• The new law requires parents or guardians of children aged 14 to 17 to work at least 80 hours per month to keep benefits.

Anti-hunger advocates argue that the cuts are short-sighted and would make it harder for certain parents and caregivers of children as young as seven to access food.

“This fails to recognize the barriers that caregivers and older adults face in the workforce,” said Jason Gromley, senior director for Share Our Strength and its No Kid Hungry campaign, in a statement.

Why Republicans cut SNAP benefits

Republicans who advocated to slash SNAP said the provisions aim to reinforce work and root out waste.

In short, they believe that more folks should work to get assistance and that the federal government is overspending on the public assistance program.

This comes as studies show that strict work requirements do not increase employment.

A statement released by GOP lawmakers from the House Committee on Agriculture, which oversees SNAP funds, said that overall costs for the program had increased to $110 billion annually, up from $60 billion in 2019.

Rolling back $290 billion in SNAP funds over a decade allowed Republican lawmakers to extend and temporarily enhance certain tax cuts from Trump’s Tax Cuts and Jobs Act (TCJA), which were set to expire by the year-end.

Some of the TCJA tax cuts, which were extended and temporarily enhanced, include key family tax breaks like the Child Tax Credit (CTC).

For more information, see our related story: 2025 Family Tax Credits: Four IRS Changes That Can Save You Money.

Food security matters

Gutting the federal aid program is adding further pressure to food banks, as some already report shortages caused by high demand.

It’s worth noting that Republican states could feel the worst impact from the proposed $290 billion cut to SNAP, as government data shows their residents and those in rural communities are more likely to rely on the program.

“Our food bank network is gravely concerned about the impact these debilitating cuts will have in our state,” said Celia Cole, CEO of Feeding Texas, the state association of food banks. “Families across Texas are already struggling to find affordable food and healthcare, pay their rent, and put gas in the car.”

Trump's SNAP changes could also destabilize your state’s budget.

• Trump's 'one big beautiful bill' includes a cost-share plan, which would require states like Texas to pay up to 25% of food benefits and raise the state’s administrative costs from 50% to 75%.
• As an example, the Texas Legislature would have to front over $1 billion a year to keep the SNAP program afloat.

“A vote for this bill will result in more kids facing hunger – in every state, in every community, in every zip code,” said Gromley, with the No Kid Hungry campaign.

States sue Trump over SNAP sensitive data

A coalition of 21 states and Washington, D.C., introduced a federal lawsuit on July 28, 2025, challenging the U.S. Department of Agriculture and the Trump administration after the agency demanded states hand over private data for food assistance applicants and beneficiaries.

The information includes Social Security numbers, names, birth dates, and home addresses dating back five years. The agency also requires information related to immigration status and other household members.

The USDA suggested that states that refuse to turn over private data would be denied federal funding for SNAP, multiple reports show.

California and New York Democratic attorneys general are leading the lawsuit, citing that the Trump administration's effort to collect private data on low-income households is illegal. The data would likely be used to fuel mass deportations.

"President Trump continues to weaponize private and sensitive personal information — not to root out fraud, but to create a culture of fear where people are unwilling to apply for essential services," said California Attorney General Rob Bonta in a statement. "We’re talking about kids not getting school lunch; fire victims not accessing emergency services; and other devastating, and deadly, consequences."

"We will not comply with this illegal demand," added Bonta. "We'll see the President in court."

Those included in the lawsuit include: Arizona, California, Colorado, Connecticut, the District of Columbia, Delaware, Hawaii, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New York, New Jersey, New Mexico, Oregon, Rhode Island, Washington, Wisconsin, and Kentucky.

This is a developing story.

Related Content

• Here's How the Child Tax Credit Is Increasing Under Trump
• Trump's ‘One Big, Beautiful Bill’ With Trillions in Tax Cuts
• The TCJA: Key Facts on the 2017 Tax Cuts and What's Next for 2025

On July 4, 2025, President Donald Trump signed the GOP's long-anticipated tax cuts and spending package, and it includes changes to the federal child tax credit (CTC).

At the centerpiece of the legislative tax proposal known as the “One Big Beautiful Bill (OBBB) makes Trump’s 2017 Tax Cuts and Jobs Act (TCJA) permanent. The bill also increases the CTC from its current top rate of $2,000 to $2,200 starting this year, in 2025. Recipients must have a Social Security number.

Also, the maximum amount of the refundable portion of the child tax credit wouldn't exceed $1,400 per qualifying child, subject to inflation.

The TCJA previously raised the CTC temporarily from $1,000 per child to $2,000 through 2025. For the 2024 tax year (returns just filed in April), eligible families could receive a refundable credit worth up to $1,700.

Here’s more of what you need to know.

New CTC amounts for 2025

The newly enacted "One Big Beautiful Bill" increases the child tax credit to $2,200 starting in 2025. As mentioned, the measure indexes the amount of inflation starting next year.

Claimants must have a Social Security number to qualify. Additionally, the maximum refundable portion of the CTC is $1,400 (indexed to inflation).

New child tax credit limits accessibility

What does the Social Security Number (SSN) requirement look like for mixed-status households?

Currently, the CTC is available for dependent children if the children are U.S. citizens, regardless of the parents' citizenship status. This includes lawful residents and undocumented immigrants.

The new rule requires that taxpayers (and their spouses, if married and filing jointly) have their work-eligible SSN to claim the CTC. In other words, if one parent doesn't have an SSN, the family won't be able to claim the federal child tax credit.

The Center for Migration Studies estimates that over 4.5 million children, the majority of whom are citizens, would no longer be eligible for the credit under the OBBB.

• This means that nearly 1 million children in California could no longer be eligible for the federal CTC due to one parent lacking a Social Security Number.
• In Texas, some 875,000 children could also be blocked from receiving the credit.
• In Florida, an estimated 247,000 children would be ineligible for the CTC.

Previous child tax credit amount

Before the OBBB, eligible families could claim a federal child tax credit worth up to $2,000 per child under age 17. If the credit surpassesed your tax liability, you could receive some or all the difference as a refundable credit.

• The refundable portion of the CTC (known as the Additional Child Tax Credit or ACTC) was worth 15% of a family’s earnings above $2,500, up to a maximum of $1,700 per child for tax year 2024.
• The credit phased down once a household income surpasses $200,000 for single parents or $400,000 for married couples.

Additionally, the 2017 TCJA (Trump's first set of tax cuts) included a $500 nonrefundable credit for families with older children and adult dependents, which was subject to the same CTC phased-out rules. That is known as the “Other Dependent Tax Credit” or ODCT.

Leaving low-income children out

While tax package increases the value of the child tax credit above $2,200 per child, tax policy analysts warn that millions of children are forgotten.

The failure to make changes to the structure of the credit would “largely leave low-income children out,” according to an analysis by the Tax Policy Center. Some 17 million children, or one in four, would continue to receive less than the full tax credit or no credit at all due to their family's income.

Families that earn less than $2,500 effectively receive no credit under the CTC. If a family owes little or no federal income tax, the nonrefundable credit might not benefit them. (At that income level, it only reduces tax liability to zero and doesn’t generate a refund.)

The current structure of the credit phases in at a rate of 15 cents for each dollar, regardless of the number of qualifying children in the family.

Child tax credit increase: Bottom line

As the Republican-led Congress moves forward with implementing their tax plan, advocates of the CTC, like Robert Greenstein, founder and former president of the Center on Budget and Policy Priorities (CBPP), warn that there are still ways to improve the child tax credit framework.

“Depending on how such changes are crafted, they could either help children in lower-income working families or bypass them while favoring children in families higher on the income scale, with incomes of up to half a million dollars a year,” wrote Greenstein for the Brookings Institution.

Stay tuned to our coverage to see how those changes will impact you and your family.

Related

• Child Tax Credit: How Much Is It for 2025?
• States That Offer a Child Tax Credit
• Trump’s ‘One Big, Beautiful Bill’ With Trillions in Tax Cuts: GOP Plan Revealed
• Three Major 2025 Tax Changes for Parents in 'Big Beautiful Bill'

President Trump is at it again with tariff proposals. On his social media platform Truth Social, Trump floated a 100% tariff on all movies produced outside the United States. As you would guess, the post is sending shockwaves through Hollywood and raising alarm bells for moviegoers.

While such a tariff wouldn’t impact a movie like Sinners (filmed in the United States), many blockbusters are filmed in international locations. (Think of action franchises set in European capitals, like Mission: Impossible with scenes shot in Paris and London, or sci-fi epics shot in New Zealand like Avatar and The Lord of the Rings trilogy.)

So, could this policy, if adopted, impact what we see in theaters and how much we pay for a ticket? Read on.

Movie tariffs? What was announced?

Back in May, President Trump declared via social media that his administration would immediately begin imposing a 100% tariff on any film made outside the U.S. and imported for American audiences.

“The Movie Industry in America is DYING a very fast death. Other Countries are offering all sorts of incentives to draw our filmmakers and studios away from the United States. Hollywood, and many other areas within the U.S.A., are being devastated. This is a concerted effort by other Nations and, therefore, a National Security threat. It is, in addition to everything else, messaging and propaganda! Therefore, I am authorizing the Department of Commerce, and the United States Trade Representative, to immediately begin the process of instituting a 100% Tariff on any and all Movies coming into our Country that are produced in Foreign Lands. WE WANT MOVIES MADE IN AMERICA, AGAIN!”

Trump, who renewed his desire for such a tariff on September 29, claims the measure is necessary to protect American jobs and the domestic film industry, which he says is undercut by foreign governments offering lucrative incentives to lure overseas productions.

He has also framed the issue as a national security threat, suggesting that foreign-made films could be used for propaganda.

Both the May and September announcements lacked specifics, leaving studios, distributors, and theater owners scrambling to understand which films would be affected.

Would the tariff hit only foreign-made blockbusters? Or, would it also apply to smaller international films and even U.S. productions partially filmed abroad?

The lack of clarity has only added to industry and moviegoer anxiety.

Movie industry: What about film tax credits?

All of this begs the question, why now and why movies?

The U.S. film industry has been facing several challenges. For example, the pandemic, labor strikes, and the rise of streaming have all contributed to a decline in traditional movie production.

• In 2020, feature film production reportedly dropped by 40% due to COVID-19 restrictions, marking a historic low for the industry.
• The Los Angeles Times reports that the 2025 box office is off to a weak start, with revenues down and few breakout hits.

Meanwhile, some studios have increasingly turned to overseas locations to take advantage of tax breaks and lower production costs. Cities like London, Vancouver, and Sydney have become hotspots for major Hollywood shoots, some say at the expense of jobs in U.S. cities.

Trump sees this tariff as a way to reverse that trend. Essentially, he wants to make it more expensive for studios to film abroad. He has also criticized California leadership for not doing enough to keep productions local, while some state officials have countered with proposals for bigger tax incentives.

However, some argue that film tax credits, incentives offered by state governments to encourage filmmakers to produce movies in their states, could be more effective than a sweeping tariff.

It’s worth noting that there is currently no federal film tax credit in U.S. but state-level credits allow producers to recover a portion of their spending on things like local labor, equipment, and services, effectively reducing the overall cost of production.

• For instance, New York offers a 30% refundable tax credit on qualified production expenses, with an annual cap of $700 million.
• California is considering raising its annual cap from $330 million to $750 million and recently introduced refundable film credits to stay competitive.

Newsom calls for 'federal partnership'

In response to Trump’s initially proposed 100% tariff on foreign films, California Gov. Gavin Newsom unveiled a plan for a sweeping federal tax credit program to strengthen the American film industry.

Building on successful California incentives, Newsom called for at least $7.5 billion in federal tax breaks to encourage film and television production to remain in the U.S.

He took to X (formerly Twitter) on May 5, 2025, to make his case, writing, “California built the film industry – and we’re ready to bring even more jobs home. We’ve proven what strong state incentives can do. Now it’s time for a real federal partnership to Make America Film Again. @POTUS, let’s get it done.”

In a media statement, Newsom added, “America remains a cinematic leader, and California is fully committed to attracting more production here.”

What could a new tariff mean for moviegoers?

If the tariff goes into effect as described, it could have a dramatic impact on ticket prices.

Analysts warn that a 100% tariff would increase the cost of importing foreign-made films, which could easily be passed on to consumers.

That could mean a $15 movie ticket might double to $30 for films shot outside the U.S., a price jump that could discourage many from going to the theater. That's especially true with already high prices of many essential goods and tariffs threatening even higher costs on everything from soda and metals to toys, furniture, food, and phones.

Studios would also face tough choices. Many rely on international locations to keep costs down and add visual variety to their films. If filming abroad becomes too expensive, they may return more productions to the U.S. But that could mean higher production costs and potentially fewer movies.

And...this latest announcement comes as Trump’s approval ratings on the economy have fallen to their lowest levels of his presidency.

Recent polls show about only 36–40% of Americans approve of his management of the economy, while disapproval has climbed to 56% or higher. Many seem to be worried about his new tariff policies, plus inflation, and a potential recession.

Movie tariff: Bottom line

At this point, the devil is in the details. The administration hasn’t clarified whether the tariff would apply to films with only some scenes shot abroad, or to streaming-only releases.

In response to Trump’s announcement, U.S. Commerce Secretary Howard Lutnick posted on X: “We’re on it.”

Plus, there’s already blowback. Some industry leaders are telling Deadline the proposal is “insane,” and other experts question whether the executive branch can legally impose such a broad tariff on movies.

Stay tuned.

This story has been updated to include information about Gov. Gavin Newsom's response.

Read More on Tariffs

• Trump Tariff Update: What's Happening Now
• Which States Will Be Hardest Hit By Trump Tariffs?
• How Tariffs Work and What They Mean for You

Retirement often evokes images of leisure, but sadly, we must also consider tax planning. And while federal taxes usually dominate the conversation, state taxes, which can significantly impact retirees on fixed incomes, often fly under the radar.

(That's particularly true now, with all the talk of tariffs and 2025 federal tax reform (also known as President Trump's "one big beautiful bill.")

So, we're exploring some state tax incentives to help you maximize your retirement savings.

Whether you're enjoying retirement or still planning, this information can hopefully guide you to a great retirement destination in the United States.

States with no income tax

Nine states don’t tax individual income (including retirement income), making them attractive for retirees looking to reduce their tax burden.

A retiree with a $50,000 annual income could save $2,000 to $5,000 yearly in a no-income-tax state compared to a state with an average income tax rate.

As of 2025, these states are Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming.

A couple of things to note: As of 2025, New Hampshire fully phased out its tax on interest and dividends. Also, while Washington state doesn’t tax most earned income, it has a long-term capital gains tax — 7% on assets sold for a profit exceeding $270,000 as of 2024.

State retirement income incentives

Some states offer targeted retiree tax relief, even if they tax other forms of income. That can be helpful for retirees working part-time or with income sources beyond retirement accounts.

For instance, Pennsylvania doesn’t tax retirement income and offers a flat tax rate of 3.07% on other income sources. That can provide a more predictable tax environment for those who supplement their retirement income.

Illinois fully exempts distributions from pensions, 401(k)s, IRAs, and Social Security.

In Iowa, residents 55 and older pay no state income tax on retirement income. Mississippi exempts retirement plans and pensions. However, early withdrawals are taxable.

Grocery and sales tax relief

Even in tax-friendly states, sales taxes, especially on groceries, can add up. Consider these sales tax breaks:

• Alaska: No state sales tax (local taxes may apply).
• Delaware, Montana, New Hampshire, and Oregon also don’t have state sales tax
• Florida and Texas: Exempt most grocery items from statewide sales tax
• Nevada: Unprepared grocery items are exempt from state sales tax
• Plenty of other states have long-exempted groceries from tax

While not income-tax-free states, Oklahoma and Kansas recently eliminated state sales taxes on groceries. Illinois is set to eliminate its 1% grocery tax in January 2026.

This matters: Data show that in 2023, retirees spent an average of $4,497 annually on groceries consumed at home.

In 2025, a household's average monthly grocery bill is about $500. So, a family spending that much on groceries in Florida could save $30–$60/month compared to a state that taxes groceries at 4%. Over a decade, that's up to $7,200 in savings.

Property taxes and homestead exemptions

High property tax can significantly offset income and sales tax savings. However, several states offer homestead exemptions, particularly for older adults and retirees. Here are a few to consider.

• Alaska: Up to $150,000 off home value for those 65 or older who meet specific requirements
• Florida: Up to $50,000 (combined exemptions for eligible taxpayer properties)
• Texas: Up to $150,000 for older adults (pending a 2025 vote)

New Jersey, Maryland, and Washington, D.C., offer property tax relief programs for older adults in 2025, with New Jersey introducing a combined application for multiple programs, including “Stay NJ.”

For more information, see "What's Going on With NJ Property Tax Relief Programs?

Maryland's Howard County provides an Aging-in-Place Tax Credit, and Washington, D.C., offers a 50% property tax reduction for eligible individuals over 65.

Estate and inheritance taxes

As you plan for the future, preserving wealth for heirs becomes a primary concern.

As of 2025, 38 states have eliminated estate or inheritance taxes. The absence of these taxes can lead to significant savings for your loved ones, depending on the size of your estate.

A few:

• Florida and Texas: Combine no income tax with no inheritance or estate taxes
• Arizona: Has a low flat income tax rate of 2.5% and no estate or inheritance tax

Veteran tax benefits?

Approximately 18 million Veterans reportedly reside in the U.S.(though it’s hard to say how many are retirees), and various states offer Veteran-focused tax breaks.

Maryland allows Veterans over age 55 to exempt up to $20,000 in retirement income from tax, regardless of disability status. Illinois exempts military retirement pay, Survivor Benefit Plan payments, and other military benefits from state tax for all its veterans.

Virginia has a growing deduction for military retirees, allowing them, as of 2025, to exclude up to $40,000 of their retirement pay from state taxes.

Additionally, as of 2025, most states fully exempt military retirement pay from state income tax.

Other retiree tax breaks

Some states offer other targeted tax breaks that can be particularly appealing to retirees.

• Georgia allows residents 62 and older to exclude up to $35,000 of their retirement income from state taxes, increasing to $65,000 for those 65 and older.
• Colorado now allows residents between 55 and 64 to avoid paying taxes on Social Security benefits if their adjusted gross income (AGI) stays under $75,000 for single filers or $95,000 for joint filers.
• Meanwhile, West Virginia is set to eliminate its taxes on Social Security benefits by 2026, becoming more tax-friendly for retirees.

For more information, see: New Social Security Tax Reforms Change Benefits in Two States.

Some states also offer tax breaks for long-term care insurance premiums and medical expenses.

For example, Montana provides a tax credit for long-term care premiums paid for a qualifying family member. The maximum account is up to $5,000 per family member in a tax year or $10,000 for two or more family members.

New York provides a 20% tax credit for qualifying long-term care insurance premiums, up to $1,500, for state-approved policies.

Where to retire: Tradeoffs and future considerations

Don't forget to look at the complete picture when considering a retirement state for tax savings.

For example, Washington and Texas have no income tax but higher property taxes. Nevada and Florida offer no income tax but relatively higher sales taxes. Alaska offers several tax breaks but a relatively high cost of living, particularly in remote areas.

Plus, some states with income tax may have a lower overall tax burden for particular residents. A study by the Institute on Taxation and Economic Policy found that families in California earning below $145,900 faced an overall tax burden close to the national average, which is surprising considering California's high-tax reputation.

Also, as we move through 2025, many states are reducing tax rates, which can lower one's tax burden and free up income for other retirement pursuits.

Nebraska lowered its top individual income tax rate from 5.84% to 5.2%, North Carolina reduced its flat personal income tax rate from 4.5% to 4.25%, and West Virginia decreased its top tax rate from 5.12% to 4.82%.

Retirement Taxes

Finding balance

By focusing on states that align with your income sources and spending habits, you can help safeguard your nest egg and enjoy retirement on your terms. Remember that tax laws can change, so stay informed about updates in your state.

And while considering tax savings can help you make a well-informed decision for a fulfilling and secure retirement, ultimately, the ideal retirement destination balances financial benefits with quality of life.

Note: This item first appeared in Kiplinger’s Retirement Report, our popular monthly periodical that covers key concerns of affluent older Americans who are retired or preparing for retirement. Subscribe for retirement advice that’s right on the money.

More on Retirement Taxes

• Taxes in Retirement: How All 50 States Tax Retirees
• Social Security and Your Taxes: Five Things to Know
• Are No Income Tax States Better to Live In?
• Retirement Income Tax and the IRS

Are you expecting a tax refund this year? Millions of taxpayers are, but as many as 1 million individuals could unknowingly be missing out.

The average refund amount this tax season was $3,116, according to the latest data from the IRS. As of April 4, the tax agency has paid over $211 billion in tax refunds after processing over 100 million tax returns. More than 140 million individual tax returns were expected to be filed by the April 15 deadline.

For many U.S. households, the federal tax refund is the largest check they will receive this year. Some folks, particularly those who don’t file because they don’t earn enough, may be missing out on a bunch of tax breaks and deductions.

The IRS warns that close to a million individuals who fail to file prior-year returns are potentially owed a tax refund each year. Even though the April 15 federal deadline has passed, the IRS doesn’t penalize you if you’re due a refund check.

Here are some popular tax credits you don’t want to skip. Some could be expiring this year.

You may qualify for the Earned Income Tax Credit

The earned income tax credit (EITC) is a federal tax break designed for workers with low- and moderate-income, with or without children who work part or full-time. It’s also a refundable credit, meaning you can get a refund even if you don’t owe taxes.

Nationwide, 23 million eligible workers received $64 billion in EITC last year. As reported by Kiplinger, the average taxpayer received about $2,743 in tax credits for the 2023 tax year (taxes filed in early 2024). This year, your refund could be bigger.

• For 2024, the EITC is worth up to $7,830 for eligible families with three or more children, up from $7,430 the previous year.
• Meanwhile, eligible workers ages 25 to 64 without kids can claim up to $632 for 2024.

Some states have also built a supplemental tax credit for individuals eligible for the federal EITC.

For example, Rhode Island became the first to create its own version of the earned income credit in 1986. To date, 31 states plus the District of Columbia and Puerto Rico offer EITC.

You can also claim local EITC in Montgomery County, Maryland, New York City, and San Francisco. According to the Institute on Taxation and Economic Policy (ITEP), around 700,000 households claimed the local level EITC.

Don’t miss the Child Tax Credit

The child tax credit (CTC), claimed by more than 46 million taxpayers each year, is a family tax break for parents and caregivers with dependent children under 17.

This year, you can get up to $2,000 per child. How much you’ll receive depends on your modified adjusted gross income (MAGI) and filing status. The refundable portion of the credit is worth up to $1,700.

Like the earned income tax credit, some states have enacted an additional child tax credit payment for households that are eligible for the federal credit.

For example, Minnesota offers the largest state child tax credit in the nation. For the 2023 tax year, more than 223,000 Minnesotan taxpayers claimed the tax break, which averaged $1,242. Eligible households may qualify for a tax credit worth up to $1,750 per qualifying child, with no limit on the number of children claimed.

So, make sure your state offers the child tax credit.

It’s worth noting that the federal child tax credit is slated to decrease by the end of 2025 due to sunsetting provisions of President Donald Trump’s Tax Cuts and Jobs Act (TCJA). The Republican-led Congress is drafting a comprehensive legislative package referred to as Trump’s ‘one big beautiful bill’ to expand this and other tax cuts.

If lawmakers fail to expand the TCJA in time, the child tax credit will drop to $1,000 per qualifying child.

Child and Dependent Care Tax Credit

The child and dependent care tax credit is a non-refundable tax break for working parents or caregivers. It’s also at risk of being repealed by the Republican-led Congress to help fund Trump’s proposed tax cuts.

Currently, the credit is worth 20% to 35% of qualifying expenses and is based on your adjusted gross income. The maximum amount of qualifying expenses you can claim for the 2024 tax year is:

• $3,000 for one qualifying person
• $6,000 for two or more qualifying dependents

There’s also a Credit for Other Dependents

If you don’t qualify for the federal child tax credit, you may be able to claim the Credit for Other Dependents. This credit can be claimed in addition to the Child and Dependent Care Credit and the EITC.

• The maximum credit amount is $500 for each qualifying dependent
• The credit phases out if the taxpayer’s income is more than $200,000 (single), or $400,000 (for couples filing jointly)

Worth noting: This tax credit was created as part of Trump’s Tax Cuts and Jobs Act of 2017 and is due to expire at the end of the year unless Congress extends the provision.

Tax breaks for college students

If you’re a student, taxes are likely the last thing on your mind. However, you could be missing out on education tax credits and deductions that can help you recover some of the expenses tied to your college costs.

This tax season may also be the last chance for you to claim popular tax breaks like the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC), as they are earmarked on the list of potential tax breaks on the GOP’s chopping block.

What are these tax credits good for?

• With the AOTC, eligible taxpayers (a student, parent, or spouse) can claim up to $2,500 in relief for qualified expenses. These may include tuition, fees, and necessary items such as books or supplies.
• The Lifetime Learning Credit is a tax credit that covers 20% of the first $10,000 of qualified education expenses, or a maximum of $2,000 per return. There’s no limit on the number of years you can claim this tax break.

You can still file for free

If you missed the April 15 tax deadline, don’t panic just yet. You can still file your tax return, and if you are due a refund, the IRS won’t penalize you for filing a late return.

You can also file for free directly with the IRS, but the clock is ticking.

• Taxpayers who have yet to file their 2024 tax return and earned $84,000 or less last year have until Oct. 15, 2025, to file with an IRS Free File partner.
• Qualified taxpayers in 25 states have until Oct. 20, 2025, to file with IRS Direct File.

In case you missed it, the Trump administration reportedly plans to eliminate the Direct File program. So, this could be your last opportunity to use the free filing program.

Related Content:

• What Happens If You Missed the Tax Deadline?
• States With 2025 IRS Tax Deadline Extensions
• 12 Education Tax Credits and Deductions to Know

Influencers and content creators have tax obligations, and these days, more and more are starting as children.

You may have seen families on popular social media platforms like YouTube, TikTok, or Instagram featuring their children and expanding their online footprint. People under 18 have also grown more active on social media, making money from sponsored posts, affiliate marketing, brand representation, and subscribers, just to name a few examples.

The number of “kidfluencers”, or children who are social media influencers, has been growing over recent years. On a smaller scale, CBS News reports that a child with at least 1 million followers could earn as much as $10,000 per sponsored post.

But the cash earned by being an influencer isn’t a "free lunch." If your child or children are earning income, they may need to file a tax return this year. Those earnings may also impact your tax liability.

Furthermore, some states have recently passed landmark laws providing child influencers with protections similar to those for child actors. Those laws, which come in the wake of several scandals involving kidfluencers being taken advantage of, give children legal rights to a share of the profits earned.

Here’s what families need to know about handling taxes if their children earn income from social media.

How much does my kid have to make to file taxes?

Some child influencers may have little to no earnings and won’t have to file a return this tax season. However, other minors may earn incomes high enough that they must meet tax filing obligations.

As reported by Kiplinger, if a child only has earned income from wages, they must file if their income exceeds the standard deduction for the 2025 tax year, which was increased to $15,700 following the July 2025 tax legislation.

The filing threshold is much lower for other types of income:

• Minors must file a 2025 federal income tax return if they received $450 or more in tips or self-employed income.
• For unearned income (such as dividends or interest), the filing threshold is $1,350 for the 2025 tax year.
• Unearned income that exceeds $2,700 is taxed at the parent's rate unless the child's rate is higher (often referred to as the "kiddie tax").

There’s one caveat: Even if a minor doesn’t earn enough to file taxes, they may opt to file a return to receive a refund of tax withheld from their earnings. Parents or guardians can also claim a child as a dependent regardless of whether they file, except for a few exceptions.

For more information: Does Your Child Need to File a Tax Return This Year?

Some states offer more protections to child influencers

Most states across the country don’t have many legal protections for child social media influencers, according to the University of Chicago Law School.

However, as family influencer and parent-facilitated child influencer content has become more common, some states have stepped up to safeguard minors from being exploited for profit.

Many of these families make thousands of dollars annually from associated brand deals, merchandise, and paid subscription models. Videos or vlogs often showcase families' day-to-day activities, vacations, and more.

• A report from CNBC showed that you need a minimum of 5,000 Instagram subscribers and about 308 sponsored posts a year to generate $100,000.
• The draw has led some parents to abandon traditional jobs and become full-time influencers featuring their families.

Child influencer laws to know

Here are some states paving the way for children to safeguard their finances.

California

In California, Gov. Gavin Newsom signed legislation in 2024 that protects children and teenagers featured in online content from financial abuse.

The legislation expands the Coogan Law (California Child Actor’s Bill) to include minors who are employed as online content creators. Essentially, parents and guardians must create a trust for their children and contribute to the account based on how often they appear in content.

• Marketers and those hiring child influencers must verify the existence of Coogan trust accounts and deposit 15% of earnings directly into those accounts.
• If the minor is featured on 30% of monetized digital content, 65% of their gross earnings must be put into a trust account.

The new law became effective January 1, 2025.

Illinois

Illinois passed a state Child Labor Law that requires parents of influencer children to set a portion of their earnings in a trust account, mirroring California’s Coogan Law.

• Under the law, if a child appears in at least 30% of a parent or guardian’s social media content over a 30-day period, and gathers enough views to receive compensation, the minor is entitled so some of those earnings.
• A trust fund must be made in the minor’s name, to be accessed once they turn 18.
• Parents must keep records of the content created.

The legislation has been effective since July 1, 2024.

Minnesota

The state of Minnesota stepped up its protections for children influencers in several ways.

• The Minnesota House passed legislation in 2024 that prohibits parents from including children under 14 in their vlogs or videos.
• On their own, minors under 14 are also barred from “engaging in the work of content creation.”
• If your child is age 14-17 and appears in at least 30% of content creator’s material over a 30-day period, they are entitled 30% of the generated revenue.
• Modeling California’s Coogan Law, the income must be placed in a trust account for the minor and be accessible once they reach adulthood.

The law on children influencer content became effective on July 1, 2025.

Keep track of your child’s earnings

If you or your child is social media content creator, make sure you keep track of any earnings as they may be subject to taxes this tax season. With the April 15 federal tax deadline around the corner, you don’t want to accidentally file late and incur unwanted penalties or fees.

As mentioned above, some states have enacted or are slated to issue new protections for child influencers this year. This could change how you report some earnings on your tax return, so it’s recommended that you talk to a trusted certified public accountant (CPA) or tax professional.

Likewise, even if your child earns enough income to file a tax return, you can still claim them as a dependent on your tax return. You could still be eligible to claim popular tax breaks for families like the Child Tax Credit (CTC) or Earned Income Tax Credit (EITC).

Related Content

• Tax Benefits of Hiring Your Kids Plus IRS Rules to Follow
• Child Tax Credit: How Much Is It for 2024 and 2025?
• Trusts for Child Influencers: What Families Need to Know
• Does Your Child Need to File a Tax Return This Year?

Taking care of an older adult, disabled spouse, or other family member can, for some, be as rewarding as it is challenging. Giving your loved one a safe and secure environment is often crucial for their quality of life. But the physical and emotional toll as well as the daily financial costs of caregiving might be daunting.

AARP estimates family caregivers spend an average of about $7,200 per year on out-of-pocket costs for dependents. And that’s not counting the time you can’t work (or maybe work a full schedule) while caring for someone.

Some tax deductions provide relief for childcare. But what about adults? Fortunately, the IRS (and some states) offer several tax breaks for dependents 18 or older that you, as the caregiver, might be eligible to claim on your taxes.

So, let’s look at “qualifying relative” requirements before covering some potential adult dependent care tax breaks.

Qualifying relative test

A caregiver may claim a qualified dependent, like a parent, spouse, or other qualifying relative if all the following conditions are met:

• The dependent is a U.S. citizen, “resident alien,” or resident of Mexico or Canada.
• You paid over half the support for your relative during the tax year.
• You or your relative are not qualifying dependents of another taxpayer.
• The relative lives with you all year as a household member (this rule does not apply to specific relatives, including parents.)
• Your relative’s gross income for the tax year must be less than $5,050 (Social Security income might be excluded if exempt from taxable income).

Additionally, you can’t claim your spouse as a dependent if you file jointly. Also, qualifying relatives shouldn’t file and claim a dependent on their taxes, if they are already a dependent on yours. See the IRS website for further eligibility requirements regarding dependents.

Federal Tax Breaks for Caregivers of Adults

IRS Tax credit for other dependents

If you’re a caregiver of a qualifying relative, you may be eligible for the Credit for Other Dependents (ODC). This is a non-refundable tax credit for caregivers who can’t claim the child tax credit or additional child tax credit for their dependents.

The maximum credit amount for the ODC is $500 per qualified person. However, the credit is reduced if your adjusted gross income (AGI) exceeds $200,000 for single filers ($400,000 for married filing joint couples).

Use the Interactive Tax Assistant on the IRS website to check your eligibility for this tax credit.

Child and dependent care tax credit for adults

The child and dependent care credit (CDCC) may be available if you paid someone to care for a qualifying relative. To qualify for the CDCC, you (and your spouse) must have:

• Lived in the U.S. for over half the year (exceptions may apply to military personnel).
• Paid someone to care for your dependent so you (and your spouse, if filing jointly) could work or look for employment.
• Paid expenses for the care of a qualifying relative who was incapable of self-care and who lived with you for more than half of the year.

The credit’s value is based on your income and a percentage of the expenses you incurred to care for your dependent. The maximum credit is worth $3,000 for one qualifying person or $6,000 for two or more.

Caregivers may claim medical expenses for their parents

If you paid medical expenses for a qualifying relative, you may be eligible to deduct those costs on your tax return. Caregivers can claim the medical expense tax deduction for qualified costs only. This deduction requires you to itemize instead of claiming the standard deduction.

Here are a few examples that may qualify for the medical expense tax deduction:

• Out-of-pocket costs for doctors, dentists, optometrists, and other medical professionals.
• Hospital stays or health insurance and Medicare premiums.
• Prescription drugs, insulin, glasses or contact lenses, hearing aids, and dental work.
• Long-term care costs, like in-home care or assisted living.
• The cost of a service dog.
• Certain tax-deductible home improvements for retirement.

However, medical expenses are deductible only to the extent that costs exceed 7.5% of your adjusted gross income (AGI). Also, you should maintain all receipts for medications, appointments, and other items for which you wish to claim the deduction.

Who qualifies as head of household?

Unmarried taxpayers may qualify for the head of household filing status. Unlike single filers, who can claim $14,600 as a standard deduction, heads of household can claim $21,900. If you qualify for head of household filing status, you may also fall under a lower tax bracket versus filing single.

Here are the eligibility requirements for head-of-household tax filers:

• Unmarried, single filer as of December 31 in the applicable tax year.
• Pay more than half of the cost of keeping up your home.
• Pay more than half the cost of keeping up your parent’s home (even if your parent did not live with you). (If you claim a non-parent dependent, they must live with you to qualify for head of household filing status).

Additionally, any money an aging parent gives you to offset their expenses isn’t counted as taxable income. Instead, this amount is counted as funds your parent paid for their own support (and may be applicable in determining whether you paid for “more than half the cost” for their care in the tax year).

Other Ways to Save on Caregiver Costs

Adult care: Tax-advantaged health accounts

As a caregiver, you could incur significant medical costs for your adult dependent. Fortunately, there are savings accounts for these (sometimes unexpected) costs.

• Flexible spending account (FSA), OR
• Health savings account (HSA).

While both FSAs and HSAs offer a way to save for medical costs, each account has slightly different eligibility requirements. Also, depending on your tax situation, one account may be more advantageous to you. Consult with a qualified tax professional to determine the best option.

Can I use my FSA to pay for dependent care?

Flexible spending accounts (FSAs) are tax-advantaged savings accounts that help cover immediate (within a year) medical costs. For instance, if you know your dependent parent has a root canal coming up but is otherwise healthy, you may open an FSA to save for that expense.

FSA contributions are taken tax-free from your paycheck. In 2025, you can contribute the following to a valid FSA plan:

• Up to $3,300 if single.
• Up to $6,600 if your spouse has a separate plan.

But you lose your contributions if you don’t withdraw the money for qualified expenses within the plan year. So you’ll want to get an estimate for upcoming medical costs before contributing to an FSA account.

To open an FSA, your employer must offer the account as part of their employee benefits package. Self-employed taxpayers do not qualify.

HSA family plan may provide caregiver tax savings

Health savings accounts (HSAs) are tax-advantaged savings accounts that help cover long-term (more than a year) medical costs.

For example, you may use an HSA if your qualified dependent has a chronic illness that requires repeated medical treatments over multiple years. HSAs allow you to roll funds indefinitely to pay for qualifying medical expenses. This gives you more flexibility in when to use the funds than a FSA.

You may also benefit from the HSA’s “triple tax advantages:”

• Contributions are tax-deductible.
• Investments grow tax-free.
• Qualifying withdrawals are tax-exempt.

You can contribute up to $8,550 in 2025 to a valid family-coverage HSA plan.

To open an HSA, you must enroll in a high-deductible health plan (HDHP) (either with or outside your employer). Self-employed taxpayers must find a financial institution that offers HSAs and enroll in an HDHP. You cannot contribute to an HSA if you’re enrolled in Medicare.

Dependent adult state tax breaks

The tax breaks described above apply to federal taxes. However, states may also offer tax benefits for caregivers.

For example, Maryland’s Caregiver Expense Grant Program reimburses caregivers for 30% of qualifying expenses of more than $2,000 annually, up to a maximum of $2,500 (income limits apply). Oklahoma provides up to $2,000 for its “Caring for Caregivers” tax credit or $3,000 for those caring for veterans or individuals with dementia (income limits must be met).

So be sure to check out your state’s Department of Revenue or Grants Management websites for any applicable tax credits, grant programs, or savings available to you.

Related Content

• How to Calculate Taxes on Social Security Benefits
• Six Tax Breaks That Get Better With Age
• Tax-Deductible Home Improvements for Retirement
• Most-Overlooked Tax Breaks for Retirees

President Donald Trump recently signed an executive order calling on the federal government to phase out the use of paper checks and switch to electronic payments by September 30, with some limited exceptions.

The U.S. Treasury now has approximately six months to phase out paper checks for various purposes, including tax refunds and Social Security payments.

According to the White House, the Trump administration aims to “modernize how the government handles money, switching from old-fashioned paper-based payments to fast, secure electronic payments.”

In other words, all government departments and agencies must issue disbursements via electronic funds transfer (EFT) methods, like direct deposit, debit/credit card payments, digital wallets, and real-time transfers.

Payments made to the federal government, like taxes, fees, fines, or loans, will also have to be made electronically, with limited exceptions.

As noted, exceptions are supposed to be made for individuals who don’t have access to banking services, or for certain special cases, such as emergency payments. Treasury Secretary Scott Bessent must provide an implementation plan for the measures within 180 days, according to Trump’s directive.

“Paper-based payments, such as checks and money orders, impose unnecessary costs, delays, and risks of fraud, lost payments, theft, and inefficiencies,” the White House order published March 25 stated. “Digital payments are more efficient, less costly, and less vulnerable to fraud.”

What does this mean for you? Here's more of what you need to know.

Related: Check out Kiplinger's tax blog for the 2025 filing season. We're providing live updates, news, information, and commentary to help you navigate your taxes.

Social Security checks no more?

The Treasury's elimination of paper checks for Social Security payments will require those receiving benefits by check to transition to electronic payment methods, like direct deposit or prepaid debit cards. Data show that more than 450,000 individuals receive paper Social Security checks.

• This change could pose challenges, particularly for those older adults who are less familiar with digital banking systems.
• Vulnerable populations, including those without reliable internet access, may also face difficulties adapting to the new system.
• Though, as mentioned, the order provides for a process to be developed to address some cases of undue hardship.

Additionally, the transition could strain Social Security Administration resources as recipients seek assistance updating their payment information.

Many individuals who are unable to make changes online will require in-person support. That will be challenging, given the Trump administration's cuts to the federal agency, including the closure of many Social Security local offices.

We'll have to wait and see how the order is implemented and what types of safeguards and processes will be put in place to address these and other concerns.

Cracking down on mail theft

Notably, the Trump administration's move to phase out paper checks comes as more taxpayers have fallen victim to mail theft in recent years.

As reported by Kiplinger, last summer, two former postal workers were charged with stealing more than $4 million in U.S. Treasury checks at the John F. Kennedy International Airport between June 2021 and August 2023. The checks included Social Security benefits, pandemic stimulus checks, and tax refunds.

Mail theft cases like that are just the tip of the iceberg.

The FBI and United States Postal Inspection Service (USPIS) warned that check fraud is growing more common, particularly via mail theft. Cases involving fraudsters have nearly doubled from 2021 to 2023, harming businesses, consumers, and government entities.

The top five reasons you can fall victim to mail theft include the following:

1. Checks left in residential mailboxes overnight

2. Checks placed in blue collection boxes after the last pickup

3. Break-ins at USPS facilities

4. Postal service employees are getting robbed

5. Bribery and collusion of USPS employees

How bad has mail theft gotten? The U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) reported in September that mail theft-related check fraud totaled more than $688 million between February 2023 and August 2023.

FinCen’s analysis of the 15,417 reports related to check fraud identified three outcomes. Some 44% of stolen checks were altered and then deposited, 26% were used as templates for counterfeit checks, and 20% were fraudulently signed and deposited.

Lawmakers also tackle mail fraud

Last month, several bipartisan measures targeting taxpayer refunds, rights, and protections moved one step further on Capitol Hill.

As reported by Kiplinger, one piece of legislation specifically aims to reduce the risk of IRS tax refund mail theft by giving taxpayers the option to request a direct deposit if their check is stolen.

Congresswoman Nicole Malliotakis (R-NY) introduced a bipartisan measure, the Recovery of Stolen Checks Act, alongside Reps. David Kustoff (R-TN) and Terri Sewell (D-AL).

“Many of my constituents are hardworking taxpayers and when a check goes missing or is stolen, it directly impacts their livelihood,” said Malliotakis. “Having reissued payments delivered via direct deposit is a commonsense solution to this systematic and widespread problem, and will prevent criminals from preying on taxpayers and stealing their hard-earned money.”

Malliotakis’ district has faced a spike in mail fraud cases, with at least $5.3 million in checks stolen across 377 cases as of Feb. 12, 2025. Check amounts ranged from a few hundred dollars up to $500,000. One constituent had their check reissued four times until it was successfully received.

Tax refund check: What you can do today

With tax season underway, the best action you can take to minimize the risk of mail fraud is to file your tax return electronically and request direct deposit.

Taxpayers who file electronically can use the ‘Where’s My Refund’ tool to check the status of their tax refund within 24 hours of filing. If you’ve filed a paper return, you can track your refund within four weeks.

However, as of March 14, 2025, the IRS issued approximately 49.8 million tax refunds. Of these, approximately 1.5 million refunds were issued as paper checks, reflecting the difference between total refunds and direct deposits.

So, if you’re concerned that your refund is delayed or may have been stolen, you can also request a refund trace directly with the IRS via the ‘Where’s My Refund’ tool, by calling the agency’s automated system, or by contacting a customer service representative at 800-829-1040.

There’s one exception: Those filing jointly won’t be able to initiate a refund trace through the automated system and may be asked to complete a Form 3911, Taxpayer Statement Regarding Refund, to start the process.

Keep in mind that some federal refunds may take longer to process. You can refer to Kiplinger’s tax refund calendar to determine when you may expect your mailed check or direct deposit.

Additionally, if the tax refund or check you suspect was stolen, lost, or destroyed is from a state program, you should report your case to your State Comptroller’s Office.

Related Content

• Mail Theft Crisis: Why Your IRS Tax Refund Is At Risk
• Legislation Cracking Down on IRS Tax Refund Mail Theft Advances
• Tax Season 2025 Is Here: Key IRS Changes to Know Before You File
• What's Happening With Trump's Tariffs?

In a controversial move, President Donald Trump is taking steps to fulfill one of his campaign promises: dismantling the U.S. Department of Education. Trump just signed an executive order designed to significantly reduce the federal government's role in education.

In a recent interview, Trump reportedly said of the department: "I expect it will [be shut down entirely]. You'll have a few people left just to make sure [the states are] teaching English, you know, you say reading, writing and arithmetic."

When signing the order at the White House on March 20, the President added, "We're going to eliminate it, and everybody knows it's right."

It’s important to note that the President cannot immediately eliminate the Education Department due to its establishment by Congress. And recent surveys show a majority (58% and more in various voter surveys) of people don't want to abolish the Department of Education.

However, the initiative reflects Trump's vision of decentralizing education policy. Here’s more of what you need to know.

Education Department executive order

Trump’s order directs newly confirmed Education Secretary Linda McMahon to begin the complex process of winding down the department's operations. The goal is to redistribute its functions to transfer educational responsibilities to state and local governments.

Here are some key elements:

• Decreased funding for specific federal education initiatives, particularly in areas of diversity, equity, and inclusion (DEI) and "gender ideology"
• Development of a strategy to redirect federal education funds to states, local governments, and individual students
• Maintenance of federal support for students with disabilities and underprivileged schools
• Continuation of federal student loan programs

The Trump administration has already significantly reduced the department's workforce by approximately 50% through layoffs and voluntary departures.

While supporters hail this move as a step toward educational freedom and local control, some critics argue that it could lead to inconsistent educational standards across the country and potentially reduce resources for disadvantaged students.

So, as President Trump works to dismantle the Department of Education, many questions are emerging not only about the future of education policy but also key education-related tax benefits.

Are education tax credits at risk under Trump?

As Kiplinger has reported, Republican lawmakers recently circulated proposals for significant changes to the tax code, some of which target popular tax credits.

Among proposals reportedly under consideration are modifications to or eliminating significant federal tax breaks like the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC).

The AOTC currently provides up to $2,500 a year for eligible higher education expenses during a student's first four years of college. The LLC offers a 20% credit on up to $10,000 in annual education expenses with no limit on years claimed.

Those potential reforms, which haven't yet been set in stone, are part of broader tax policy discussions as the administration seeks to make tax cuts from Trump's first term permanent. According to proposals under consideration by House Republicans, eliminating the AOTC and the LLC is estimated to save the government $85 billion over 10 years.

Will scholarships be taxable?

Republican lawmakers are also said to be exploring changes to education-related tax policies, with one proposal targeting the tax-exempt status of scholarships. If embraced, that potential shift could have far-reaching implications for students and families.

• Currently, scholarships and fellowships used for qualified educational expenses are not subject to federal income tax.
• However, a proposed system could introduce tax on various forms of educational financial assistance, possibly including some state-sponsored programs.

That could significantly affect college affordability, particularly for families who depend on scholarships to fund higher education.

Under the potential new approach, scholarship funds that are currently tax-free when applied to tuition and required course materials might be reclassified as taxable income for students.

According to proposals being floated by the House Budget Committee, Republicans estimate that they can save $54 billion over 10 years by eliminating the exclusion of scholarship and fellowship income from taxation.

What happens if Trump closes the Department of Education?

The potential closure of the Department of Education under President Trump's administration has sparked widespread concern about the future of crucial educational programs and services in the United States.

One pressing issue is the fate of the federal student loan program, which manages a vast amount of student debt affecting millions in the United States.

What happens to student loans?

• If the Education Department is effectively shuttered, the administration of these loans would likely shift to another federal agency. This could possibly be the U.S. Treasury Department, though Trump has now said student loans will be handled by the U.S. Small Business Administration.
• This transition could substantially change loan servicing, repayment plans, and forgiveness programs.
• Borrowers would still have to repay their loans but would face significant uncertainty and chaos regarding their existing loans and future financial aid.

The impact on students with disabilities is another major area of concern.

The Department of Education plays a crucial role in enforcing federal laws that protect the rights of students with disabilities and ensure they receive appropriate accommodations and services in schools.

With the department's workforce significantly reduced, there are worries about how effectively these protections can be maintained and enforced nationwide.

• The potential weakening of federal oversight could result in inconsistent implementation of disability rights across different states, potentially leaving students without adequate support.
• The allocation and management of federal funding for special education programs is another critical issue.
• The federal government provides substantial funding to states for special education services. If the Department of Education is eliminated, it's unclear how this vital funding would be distributed and overseen.

It's also worth noting that many states are already struggling to fully fund special education services. So, any disruption in federal support could exacerbate these challenges, potentially leading to reduced services for students.

National Education Association (NEA) president, Becky Pringle stated the following in a release:

"If successful, Trump’s continued actions will hurt all students by sending class sizes soaring, cutting job training programs, making higher education more expensive and out of reach for middle class families, taking away special education services for students with disabilities, and gutting student civil rights protections."

As this situation unfolds, educators, parents, and students are unfortunately left with many unanswered questions about the future of federal education policy and financial support and, yes — tax policy as well.

Related

• Education Tax Credits and Deductions
• What is the American Opportunity Tax Credit
• Tax Breaks for Parents of Children With Disabilities
• Are Scholarships Tax-Free?

Idaho parents with children enrolled in a private or homeschool may be eligible for a new refundable tax credit.

Idaho Gov. Brad Little signed the Parental Choice Tax Credit program into law on Feb. 28, which would provide up to $5,000 per K-12 student for certain expenses related to the education, including tuition and fees for enrollment. For tax year 2025 and subsequent years, families with children aged 5 to 21 with disabilities would be eligible for up to $7,500.

The $50 million measure is designed to provide “even more abundant schooling options for Idaho students and families,” Little said in a press release, adding that the state recently contributed close to $17 billion into its K-12 public school system and increased public funding approximately 60% in the last few years.

“Idaho can have it all – strong public schools AND education freedom,” added Little.

The bill passed in a Senate vote of 20-15, despite facing a flood of opposition from public school advocates and government officials.

Of note, President Donald Trump endorsed the measure saying it would provide the “very best education for their child.”

Some opponents raised concerns that subsidizing private schooling would impact public school funding in rural areas, while others argue it is unconstitutional because it supports directing taxpayer money to religious schools.

Here’s what you need to know about Idaho’s first educational choice program.

Parental Choice Tax Credit: Who's eligible?

All Idaho residents between the ages of five and 18 can participate in the Parental Choice Tax Credit program. Students who have a disability are eligible through age 21.

• For tax year 2025, the program will prioritize applicants with a modified gross income at or below 300% of the federal poverty level — $93,600 annually for a family of four.
• In 2027, priority will be given to parents who received the credit in the first two years of the program, followed by applicants with incomes below the mentioned threshold.

Does that mean there’s an income limit? No, there is no income limit to claim this credit. Only that priority will be given first to applicants at or under 300% of the federal poverty line.

Your child doesn’t have to be a former public school student to be able to apply for this credit, either.

What expenses will the credit cover?

Idaho’s Parental Choice Tax Credit will cover out-of-pocket qualifying expenses related to your child’s education in a non-public school. Specifically, these expenses include tuition and fees for enrollment at a private school, microschool, or learning pod — also known as homeschooling.

Academic instruction may be given in person, online, virtually, or via a combination of all the mentioned options, according to the legislation.

Other eligible expenses include:

• Tutoring
• National standardized test assessments
• Assessments used to determine college admission
• Industry-recognized certification exams
• Preparatory courses for standardized assessments, also known as “college-prep”

It also includes the cost of textbooks, curricula, and transportation to a private school, microschool, or learning pod. For tuition and fees to qualify, the school must be accredited or a parent must provide evidence of the child’s academic progress. This includes proof that the child is being taught in English language arts, mathematics, science, and social studies.

As noted, parents cannot claim the credit for any semester in which their child was enrolled full-time or part-time in a public school, public charter school, public virtual charter school, public magnet school, or part-time public kindergarten.

Are applications open?

The application period for Idaho’s latest education tax credit is projected to open January 15, 2026.

To apply, you must have claimed each eligible student as a dependent on your state individual income tax return. You must also be the only parent claiming the credit for the child.

At the time of applying, parents or guardians may opt to receive a one-time advanced payment for the refundable credit per eligible student. The payment will be delivered within 60 days, according to government officials.

As mentioned, priority will be given to applicants with an adjusted gross income at or below 300% of the federal poverty level.

Education leaders say the move is “anti-public school”

The Idaho Education Association, the state’s teachers union, characterized the measure as a push by “anti-public school” lawmakers.

IEA members and other pro-public school education voters sent thousands of emails and letters in opposition of the bill, now turned law, that gives a tax credit to parents of private school students.

Local reports reveal that before the bill was introduced, Idaho's House Revenue and Taxation Committee had received more than 1,000 emails, with 94% opposing the voucher program.

In short, the measure is taxpayer money directed toward private schools.

“Voucher proponents—eager to help out-of-state billionaires plunder Idaho's public school budget—are already planning how to exploit and expand this program during 2026's legislative session,” IEA President Layne McInelly said in a statement. “Each year, they will try to siphon more and more tax dollars away from public schools as a gift to private and religious schools and their patrons.”

Sen. Kevin Cook (R-Idaho Falls), who serves on the Senate Local Government and Taxation Committee, said the funding system for the credit may likely impact more than education.

“When somebody says it won’t affect public schools— it will affect everything,” Cook said. “It will affect your roads, your schools, your bridges, everything that we do here at the State of Idaho. It will affect (it) because you’re taking that money away.”

Note: This article has been updated to clarify the application period for the new tax credit.

Related:

• 12 Education Tax Credits and Deductions
• Idaho Tax Guide
• Child Tax Credit 2025: How Much Is It?

Did you know Colorado has over 30 state tax credits? This filing season, you may qualify for another: the family affordability tax credit is designed to help families with children, especially those with lower incomes.

This tax credit is offered to Coloradans for the first time thanks to legislation passed last year. “This historic effort will significantly reduce childhood poverty in Colorado,” said Speaker Pro Tempore Chris deGruy Kennedy (D-Lakewood) and one of the bill’s sponsors. “[It will] boost the incomes of hardworking families, and help millions of Coloradans who are feeling the greatest impacts of the cost of living in our state.”

But who is eligible for this new tax break and how much can you expect to receive? Read on.

What is the new tax credit for families in Colorado?

The Colorado family affordability tax credit is new this year. The tax break is designed to help lower-income residents with children under 17 at the end of the tax year.

Income eligibility requirements for tax year 2024 are as follows:

• Single, head of household, and married filing separately taxpayers must have an adjusted gross income (AGI) of $85,000 or less.
• Married filing joint filers must have an AGI of $95,000 or less.

You can also use the Get Ahead Colorado state tool to check your eligibility for this tax credit and many others.

Colorado tax refund credit

The 2024 Colorado family affordability tax credit is refundable, meaning eligible Colorado families will receive money back even if they owe nothing in taxes.

But how much you get depends on three factors:

• Filing status.
• Adjusted gross income (AGI).
• Age and number of children (families can receive up to $3,200 per child 5 and younger and up to $2,400 per child 6 to 16).

The amount of benefit you can receive ranges from $90 to $3,200 per child. There’s a phaseout for higher incomes.

For instance, families with the lowest AGI amounts and two children (one in each age category) may receive up to $5,600 in tax benefits.

But if your AGI is $67,000 (and you have one child age 5, and another age 15):

• Single filers are only eligible for a total credit of $1,365.
• Married filing joint taxpayers are only eligible for a total credit of $2,135.

For complete tables on all the income levels and phaseout amounts, see Colorado’s Department of Revenue website.

Note: The family affordability tax credit is only offered if there’s a surplus in state revenue. If next year’s state budget is low, the credit may be lower than the above amounts, or not offered at all.

Colorado child tax credit 2024

While the family affordability tax credit is new, tax breaks for Colorado families are not. Colorado also has a child tax credit for families with younger children:

• Married filing joint taxpayers with incomes of $85,000 or less ($75,000 for single filers) may qualify.
• Families can get up to 10-60% of the federal child tax credit per child 5 or younger.

For more information, check out Kiplinger’s report States That Offer a Child Tax Credit.

Colorado tax credits

The Centennial State offers several family and student tax credits you may claim in the 2025 filing season, including:

• The Colorado Promise tax credit, providing two years of tuition and fees for qualifying students.
• Colorado’s state child and dependent care tax credit, worth up to 50% of the federal child and dependent care tax credit.
• The Low-Income Child Care Expenses Credit, worth up to $1,000 for two or more dependents.
• Child care contribution credit, for taxpayers who contributed to qualified child care facilities and programs in the state.

Be sure to scroll through the list of Colorado tax credits on the state’s Department of Revenue website before filing your taxes this season. Also, don’t forget to check the box on your return claiming your Colorado TABOR refund when filing taxes.

Related Content

• Don't Miss Your Colorado TABOR Refund When Filing Taxes
• States That Offer a Child Tax Credit
• Colorado’s New Property Tax Reform Could Save You Hundreds

President Donald Trump’s attempt to hollow out the IRS workforce revealed a major flaw. Who’s going to process millions of tax returns in their absence?

The Trump administration fired approximately 6,700 IRS workers on February 20, smack in the middle of the 2025 tax filing season. While they comprise a sliver of the tax agency’s approximate 100,000 full-time employees — internal sources say some worked in crucial areas such as auditing and compliance teams.

This comes barely two weeks after the president’s downsizing “efficiency” head Elon Musk said workers essential to tax filing must work until May 15 even if they accepted the Trump administration’s controversial federal employee buyout offer, the deadline of which was put on hold temporarily by a federal judge.

Federal employees exempt from the buyout through the tax filing season include people in Taxpayer Services, Information Technology, and the Taxpayer Advocate Service. These are teams comprised of professionals responsible for operations support, direct customer assistance, accounts management, and run compliance checks, to name a few functions.

They also manage tax returns across the seven processing centers — Andover, Atlanta, Austin, Cincinnati, Fresno, Kansas City, and Ogden. The IRS expects more than 140 million individual tax returns for tax year 2024.

The IRS has been known to siphon employees from other departments to meet tax filing deadlines in previous years, and the latest downsizing efforts are troubling.

Here’s what downsizing the tax agency can mean for you and your taxes, based on problem areas the IRS has been working to improve.

Continued delays in IRS in ERC claims processing

If you’re still waiting on your ERC refunds, you won’t want to hear this.

As of last fall, the IRS still faced a backlog of about 1.2 million Employee Retention Credit (ERC) claims, with many pending for more than a year.

The ERC is a pandemic-era refundable credit enacted to encourage businesses to keep their employees on payroll during the COVID-19 crisis. As previously reported by Kiplinger, abusive promoters advertised the ability to claim the ERC to unsuspecting employers, leading to a surplus of ERC fraud and erroneous claims.

The IRS restarted processing ERC claims following a one-year pause, but it’s been slow to reduce its backlog. At one point, the agency encouraged taxpayers to participate in a temporary Voluntary Disclosure Program to self-correct improper ERC claims at a discount.

The IRS claim withdrawal remains open. So far, there’s no clarity on whether pending cases will be resolved soon.

To say the least, some outstanding businesses aren’t happy. The tax agency was sued for millions over prolonged delays back in October 2024, and more lawsuits may pile up.

If the Trump administration gets enough IRS employees to voluntarily resign or issues furloughs in the future, there’s no telling when people will get their ERC claims resolved.

For more information see: IRS Sued for Millions Over Employee Retention Credit (ERC) Delays.

Identity theft delays may worsen

A judge temporarily blocked Tesla and SpaceX CEO Elon Musk from accessing the U.S. Treasury Department’s payment system. Musk gained temporary access to the department’s sensitive information system, raising alarm bells of fraud risk.

The tech billionaire is Trump’s appointed head of the newly created Department of Government Efficiency (DOGE), which aims to cut government spending and reshape the federal workforce.

The Treasury Department has information containing your name, address, Social Security number, and government payments including your Social Security check. So if there’s a breach, will the IRS be able to handle it?

The IRS closed the door on more identity theft cases last year, but the average time to reach a resolution and process refunds to affected victims was nearly two years.

At the end of 2024, the IRS had a total inventory of over 470,000 Identity Theft Victim Assistance (IDTVA) cases to triage, according to the National Taxpayer Advocate (NTA).

The delays were once again due to staffing shortages. Last year, the IRS temporarily reassigned staffers from IDTVA processing to answer phone calls in Taxpayer Services during tax season to achieve better customer service response times.

This year, the IRS again made the business call to siphon IDTVA employees from identity theft casework to answering phones during the 2024 filing season.

• In total, the IRS lost 552 IDTVA employees to attrition in FY 2023 and 2024
• During the same time, it hired 663 new employees

If you’re a victim of tax-related identity theft, Trump’s plan to reduce the workforce could mean you may have to wait even longer to resolve your case. It may also mean that your calls to the IRS customer service will go unanswered.

General processing delays

Reducing the IRS workforce may negatively impact customer service toll lines and processing of paper returns.

• 66% of taxpayer mail was delayed and considered late by the end of 2024
• It took 20 days, instead of 13 days to process paper returns last year
• Manual reviews could take as long as 180 days

According to the Taxpayer Advocate, only 32% of callers reached an IRS employee last year during tax season, and 29% of callers reached an employee during the full year. That was better than in previous years, but it still required reassigning employees from other departments to answer phone calls.

The Trump administration’s hiring freeze on the federal government doesn’t help. Not to mention, the hiring pause on the IRS is indefinite.

Bottom line on Trump IRS plans

The IRS has struggled to overcome staffing shortages for decades, and the Trump administration’s goal to shave down the federal workforce may crumble its progress.

The tax agency has faced continued challenges in employee recruitment, hiring, training, and retention, according to an analysis by the Taxpayer Advocate. For many key areas within the IRS, the clock is ticking.

An estimated 63% of the current IRS workforce is eligible to retire within the next six years, according to the 2024 NTA annual report to Congress. Over the past two years alone, at least 16% to 36% of employees have left Taxpayer Services, depending on the job position.

Separately, the IRS just lost another $20 billion in key funding which may impact the agency's capability to audit certain groups, mainly wealthy individuals. Republicans have also pushed the idea of abolishing the IRS.

All of these changes may impact taxpayers like you as you wait for your tax returns to be filed and processed in upcoming years. So stay tuned.

Related Content:

• Trump Buyout Offer Paused Before Deadline: What It Means for You Now
• Trump Wants You Out of the IRS, But You’ll Have to Wait Until May
• No New IRS Agents? What Trump’s Federal Hiring Freeze Means for Your Tax Return

Tax refunds are coming in smaller this year, and the drop may be due to certain family tax credits haven’t been delivered yet.

The IRS reported that the average refund amount via direct deposit was $2,252 based on 33 million tax returns processed through February 14. That’s down 31% from $3,265 during the same period last year when the agency processed over 34 million returns.

It’s still early in the tax season, meaning refund amounts still have time to even out or climb higher as more tax returns come in.

Additionally, under current law, the IRS cannot issue refunds for tax returns claiming the Earned Income Tax Credit (EITC) or the Additional Child Tax Credit (ACTC) before mid-February. Those numbers aren’t reflected in the latest statistics.

Here’s what you can expect regarding your refund amount in the coming weeks.

Tax refunds average amount

Though IRS tax refunds came in $1,000 smaller this week, here are some key reasons why refunds may increase for some taxpayers.

Tax experts this year hinted that refunds could come in slightly larger due to inflation-related changes to the standard deduction and tax brackets for 2024. There’s also an extra standard deduction benefit for people over 65.

These changes impact your taxable income and generally translate to a bigger refund. That’s if your filing status and tax credits are the same as last year.

Here are three reasons why your refund may be better this year.

1. Larger standard deduction

Most taxpayers benefit from the standard deduction, and there’s good news this year. The 2024 standard deduction amounts for returns you’re filing now, in early 2025, are slightly larger.

That means you’ll get a broader chance to lower your tax liability and potentially get a larger tax refund. For single taxpayers and married individuals filing separately, the standard deduction rises to $14,600 for 2024, an increase of $730 from the previous year.

For couples who file jointly, the standard deduction is $29,200. As for heads of households, their deduction is $21,900 for the 2024 tax year.

If you are at least 65 or blind, you can claim an additional standard deduction benefit worth $1,950 for 2024. The extra deduction amount is doubled if you and your spouse meet that criteria.

Planning ahead? The IRS announced the 2025 standard deduction, and it’s the largest it has ever been.

2. Tax brackets adjusted for inflation

The IRS adjusts tax brackets each year to reflect upticks in the cost of living, to prevent what is sometimes referred to as “bracket creep.”

However, if a taxpayer's income increases more than the inflation rate, they could move into a higher bracket. In some cases, that can impact the amount of tax credits and deductions they are eligible to claim.

For instance, popular credits like the child tax credit phase out the higher your income level is.

The federal income tax rates haven’t changed for the 2024 tax year: 10%, 12%, 22%, 24%, 32%, 35%, and 37%.

For more information see our guide: 2024 and 2025 Federal Tax Brackets and Income Tax Rates

3. Earned Income Tax Credit

The Earned Income Tax Credit (EITC) is an often-overlooked refundable tax break available for workers with low and moderate incomes, with or without children.

As Kiplinger reported, the amount you get depends on your income, filing status, and the number of qualifying children in your household. Most importantly, due to 2024 inflation adjustments, the EITC credit amounts and income thresholds are slightly larger than a year ago.

• No qualifying children: $632
• 1 qualifying child: $4,213
• 2 qualifying children: $6,960
• 3 or more qualifying children: $7,830

Some good news: the EITC income and credit thresholds increased for 2025. That could lead to a bigger refund next year as well.

Check your refund status for updates

Tax season is underway, and the IRS has already received over 33 million tax returns through February 14. The tax agency expects more than 140 million individual tax returns to be filed by the April 15 deadline.

If you’ve electronically filed your tax return, the ‘Where’s My Refund’ tool can show you the status of your tax refund as early as 24 hours after the IRS receives your return. Those who file a paper return can check their refund status four weeks after mailing a return.

As mentioned, there’s one exception. The IRS isn’t legally allowed to issue EITC or Additional Child Tax Credit (ACTC) refunds before mid-February, which may keep some refunds on hold for early filers.

If you electronically filed your tax return and expect an EITC or ACTC refund, you can check your refund status by Feb. 22. The first refunds should be delivered by March 3, according to the IRS.

Remember, your tax refund amount may be slightly bigger this year if your income levels and tax brackets haven’t changed significantly. So stay tuned for more updates as the tax season continues.

For more information and live updates, follow our tax team on Filing Taxes 2025: Live Updates, Tax Tips, and Strategies from Kiplinger.

Related Content:

• Tax Season 2025 Is Here: Key IRS Changes to Know Before You File
• Where’s My Refund? How to Track Your Tax Refund Status
• IRS Direct File Will Be Permanent, Competing With TurboTax, H&R Block

President Donald Trump is urging Republicans in Congress to pass a comprehensive legislative tax policy package, and your eligibility for certain family tax breaks could change.

The measure aims to bundle Trump’s main policy goals into “one big, beautiful bill” and contains major policies including spending cuts, border security, and energy reforms. It would also address expiring tax breaks in the Tax Cuts and Jobs Act (TCJA), a law slated to sunset by the year-end.

A deficit of revenue to fund the mega-bill, which economists and policymakers argue benefits the wealthy, has caused GOP lawmakers to scramble and devise revenue plans, including looking at radical tax cuts.

A 50-page policy menu prepared by the House Budget Committee was obtained by Politico, listing a flood of tax policies at risk of getting gutted or redrawn by the GOP.

The cuts collectively amount to over $5 trillion and include key family tax breaks that help sustain low- to moderate-income families across the country.

Here are some tax breaks in danger of being reduced or gutted entirely.

What’s happening to the Head of Household filing status

House Republicans aim to make the nearly doubled standard deduction created by the Tax Cuts and Jobs Act (TCJA) permanent. The provision, notably, would further increase the standard deduction by including an extra year of inflation adjustment.

Under the GOP’s proposal, the “head-of-household” filing status, which offers lower tax rates and a higher standard deduction for unmarried taxpayers who have children or are caring for a loved one, would not be eliminated.

For tax years 2025 through 2028, the standard deduction amount for those with a head of household filing status would increase by $1,500. According to estimates from the Joint Committee of Taxation, if this provision passes, it would increase the standard deduction amount in 2026 from $12,150 to $24,500.

Worth noting: A leaked GOP budget memo indicated that repealing the head of household filing status would result in $192 billion in savings over the next decade. The measure would have penalized single parents raising children or adults claiming a dependent on their own.

Parents need a Social Security number to claim the Child Tax Credit

Vice President JD Vance once floated the idea of expanding the federal Child Tax Credit during the 2024 campaign, but this provision seeks to reduce its reach substantially.

The federal child tax credit is a key tax break that provides qualifying households up to $2,000 per qualifying child under 17. As a partially refundable credit, if the CTC exceeds taxes owed, families may receive up to $1,700 per child as a refund for the 2024 tax year.

Unless Congress acts before the year-end, the child tax credit is set to revert to $1,000 per qualifying child in 2026. The age limit for qualifying children would also decrease to 16 due to expiring provisions from the TCJA.

According to the White House, before the page was temporarily unavailable under the new administration, the CTC was available to 40 million U.S. families each year.

That number is thanks to rules that currently allow taxpayers to claim the child tax credit as long as the child has a valid Social Security Number (SSN), even if the parent or guardian doesn’t have one.

The GOP proposal would require parents and children to have a Social Security Number to claim the CTC. This would yield $27.7 billion over the 10 years.

As reported by Kiplinger, Trump’s tax plan for the child tax credit would temporarily increase the credit amount to $2,500 through 2028. The credit would decrease to $2,000 for subsequent tax years. Additionally, the maximum refundable portion of the CTC wouldn’t exceed $1,400 per qualifying child (subject to inflation).

Require SSN for the American Opportunity Tax Credit

If you, your child, or your spouse expect to get some savings for pursuing a higher education, the requirements to claim this tax break are changing.

The American Opportunity Tax Credit (AOTC) is a credit for qualified education expenses paid for an eligible student for the first four years of higher education. For 2024 (taxes typically filed in 2025), taxpayers get a maximum annual credit of $2,500 per eligible student.

Some qualifying expenses include tuition, required enrollment fees, or course materials such as books or supplies.

Under current law, to qualify for the credit, you must submit a taxpayer identification number (TIN) or an adoption taxpayer identification number (ATIN). Under Trump’s tax proposal, the person applying for the AOTC must have a Social Security Number to be considered eligible for the tax break.

A released budget memo from Republican lawmakers showed that eliminating the AOTC would yield $59 billion in 10-year savings. So far, it seems like the credit will stick around if Trump’s legislative package is successful. However, its reach will be limited by the new requirement.

Bottom line on GOP tax cuts

Family tax credits aren’t the only tax policies at risk of being eliminated or reformed under the GOP’s watch.

Republican lawmakers also singled out a laundry list of tax policies that they can potentially pull revenue from, including but not limited to:

• Eliminating or rewriting eligibility standards for certain education tax credits
• Capping SNAP maximum benefits
• Ending taxes on overtime
• Eliminating taxes on tips, and more

No matter the size of your household, some of these changes can impact you directly. So, stay tuned for more information as this is developing news.

Related Content:

• Child Tax Credit: How Much Is It for 2024 and 2025?
• Should Tax on Tips Stay or Go Under Trump
• The Fine Print: What Trump Isn’t Telling You About His 2025 Tax Plans