Koufos CPA & EA PLLC

One Big Beautiful Bill Act Creates New Tax Deductions – Did You Know? (1/3)

As a result of Congress enacting the 2025 One Big Beautiful Bill Act, many people will have the opportunity to claim new tax deductions over the next several years. These deductions will be available both to those who itemize deductions and those who use a standard deduction.

One of the new deductions is for qualified tip income received in occupations where tipping is customary. The maximum deduction amount will be $25,000 per year, with a lower limit potentially applying for those who receive tips in the context of self-employment. People with modified adjusted gross incomes (MAGIs) above $150,000 (or $300,000 for joint filers) may not qualify for the deduction, or may receive a reduced deduction amount.

The IRS will release a detailed list of occupations that may be eligible for this new deduction sometime this fall. Only tips reported on an official tax document like Form W-2, 1099 or 4137 will qualify for the deduction. Therefore, tipped employees should continue submitting required monthly tip reports to their employers.

Receiving Online Payments - Did You Know?

If you are self-employed and receive payments through online payment processing platforms, take care to separate business and personal transactions. You can do this by setting up separate business accounts on the platforms, or by using features that allow you to specify the purpose of payments. Otherwise, the platforms may overreport your income.

IRS Impersonation Scams - Did You Know?

The IRS recently issued new warnings about ongoing IRS impersonation scams designed to steal people's money, identities or both. The first thing to know about these scams is that the IRS almost always initiates contact with a person by sending a letter through the mail on official letterhead. If you receive an IRS letter and have created an IRS online account, you can log in to your account to check whether the letter is authentic. Otherwise, if you have doubts about a letter you receive, call the IRS at 800-829-1040 for more information.

The IRS does not initiate contact through email or social media messages, and only sends text messages with the recipient's permission, for instance because the person signed up for notifications. If you receive a message supposedly from the IRS promoting mysterious stimulus payments or tax credits, it is almost certainly a scam. Delete the message and do not click any links, as the links typically lead to fake IRS websites created to steal people's tax refunds or personal information.

Finally, when reaching out by phone, IRS employees do not leave aggressive messages threatening people with arrest. They also never demand payment in a specific format, such as prepaid gift cards. If you are unsure about the legitimacy of a phone call supposedly from the IRS, hang up and call an official IRS customer service number for more information.

Flexible Spending Arrangements (FSAs) - Did You Know?

Considering a job change? Before leaving your current position, check the account balances in your flexible spending arrangements (FSAs). You generally cannot transfer an FSA to a different workplace, so you will want to use up those funds to avoid forfeiting them to your employer.

Employer Childcare Tax Credit – Did You Know?

Businesses that provide childcare services for employees may be eligible to claim a tax credit for some of the expenses involved. The Employer-Provided Childcare Tax Credit is offered to organizations that maintain on-site childcare facilities for employees, or provide resource and referral services like contracting with a qualified childcare facility.

To qualify for the Childcare Tax Credit, a business must incur expenses to provide childcare services for employees. The standard credit amount is 25% of costs associated with maintaining a childcare facility, or 10% of resource and referral costs, up to a maximum of $150,000. Eligible businesses may claim the credit as part of their general business credit, and so may carry any unused credit amount back one year, or forward up to 20 years. A business tax professional can help you structure the childcare services your enterprise provides for employees to meet the requirements for this business tax credit.

Workplace Health Benefits - Did You Know?

If you set aside pre-tax dollars for medical expenses through a workplace benefits program, pay careful attention to whether the plan is a flexible spending arrangement (FSA) or health savings account (HSA). Generally, you must use up an FSA balance each year or risk losing it. This restriction does not apply to HSAs. Rules may vary slightly depending on your employer's plan options.

Summer Tax Planning Reminders – Did You Know?

A variety of summer activities have the potential to generate taxable income, or to help you qualify for tax benefits. For example, if you engage in part-time, seasonal or gig economy work during the summer, then you may need to adjust your tax withholding or make estimated tax payments to account for the extra income. If your children work during the summer, they may need to file a tax return next spring to claim any IRS refunds they have coming.

Self-employed people who travel for business purposes may generally deduct travel expenses to reduce their taxable income. However, if a summer trip involves both business and personal activities, you must take care to only deduct expenditures that serve a clear, legitimate business purpose.

Finally, if you make improvements to your home this summer, then you may qualify for home energy tax credits. A variety of credits exist for projects that improve energy efficiency, or involve generating or using renewable energy like wind or solar power. You must carefully document all eligible expenses in order to claim these credits. Also note that the rules for energy credits may change after this year, so this summer might be the ideal time to complete a project. A tax professional can help you analyze the potential tax impacts of all your summer endeavors.

Overseas Tax Filing & Quarterly Installment Deadlines

If you are a U.S Citizen or Green Card Holder living abroad and have not filed your taxes yet, the deadline is coming up on Monday, June 16th, 2025.

If you are making quarterly estimated tax payments to the IRS, the due date for the April 1 – May 31 quarter of the year is also June 16th.

For payments made using IRS Direct Pay, you can make payments until 11:45PM EST, and for payments using a credit or debit card, payments can be made up to midnight on the due date.

Summer Day Camp Expenses – Did You Know?

Parents who paid for their children under the age of 13 to attend summer day camps may qualify to claim the Child and Dependent Care Credit on their tax returns. This credit provides assistance for parents who pay care expenses for a qualifying child so that they can work or seek work. You may also be able to claim the credit for day camp or other care costs for a dependent age 13 or older with a permanent disability. Note that expenses associated with sending children to overnight summer camps generally do NOT qualify for this credit.

To qualify for the Child and Dependent Care Credit, you must have earned income, and your adjusted gross income (AGI) must not exceed limits set by the IRS. Typically, the credit covers 20-35% of qualifying day camp or other childcare expenses, up to a maximum of $3,000 for one child or $6,000 for two or more children.

When claiming the Child and Dependent Care Credit, you generally must provide the name and taxpayer identification number (TIN) of the day camp or care provider on your tax return. In most cases, married taxpayers must file a joint return in order to get the credit, although exceptions exist for cases where spouses live apart. A tax professional can help you determine whether your summer day camp or other childcare expenses qualify for this valuable credit, and if so, help you maximize your credit amount.

National 529 Day - Did You Know?

If you put money in a 529 account for education, withdrawal of earnings are tax-free if used for qualified educational expenses. Qualified educational expenses include tuition, fees, housing, meals and books. Many states offer a full or partial tax deduction for 529 plan contributions. They may also offer incentives and promotions to encourage families to open and contribute to 529 accounts today on National 529 Day.

The Tax Cuts and Jobs Act (TCJA) also expanded eligibility for 529 savings plans. Up to $10,000 per year may be used for Kindergarten through Grade 12 education (public, private, or religious schools).

Capital and Ordinary Operating Expenses - Did You Know?

If you have business income, including income from self-employment activities, then you may have both capital expenses and ordinary operating expenses. Capital expenses relate to assets with lasting usefulness, like equipment, computers, machinery and furniture. Different tax rules apply for these two types of expenses, so make sure to keep them separate.