With ample new tax breaks available to them, individuals and businesses can potentially get larger refunds, trim their tax bills, and greatly cut costs during the approaching tax-filing season. They are entering a new period of tax planning under new tax laws, where they could benefit from leveraging widespread changes such as the earned income tax credit for individuals and a hefty deduction for seniors.
In the business world, there are tax deductions tied to retirement plans they offer employees, deductions for asset and equipment costs, and other investment tax breaks.
However, not everyone will qualify for the increase. Harris says eligibility depends on income, filing status, SSN requirements, and whether each taxpayer meets the rules for the credits. To maximize benefits, she suggested that taxpayers review their eligibility for the expanded credits, adjust their withholding early, and file electronically with direct deposit for faster refunds.
On the “no tax on tips” and “no tax on overtime” provisions, she says not all occupations will benefit equally. Harris says the tip deduction mainly applies to workers in jobs that customarily and regularly receive voluntary tips. They include servers, bartenders, hotel staff, valets, taxi drivers, hairstylists, barbers, nail techs, massage therapists, entertainers, and delivery workers, among others.
She says the overtime deduction is broader and based on whether an employee receives qualified overtime pay under federal wage rules, not on occupation, so many hourly workers across industries may benefit from that portion.
She says even if someone doesn’t qualify for the tip or overtime benefits, they may still see tax savings from the higher standard deduction and expanded credits for individuals if eligible.
However, the credit is subject to income phase-out limits, so higher-income taxpayers may see the credit reduced or eliminated. Families must meet strict eligibility rules, including adopting an eligible child and having properly documented qualified adoption expenses. “Because the rules are detailed and income-sensitive, taxpayers should review their situation with a professional to ensure they maximize the credit correctly.”
She recommended taxpayers try to contribute as much as they possibly can, review income limits for Roth eligibility and IRA deductions, and use credits like the Saver’s Credit when eligible to optimize immediate tax savings and long-term financial growth.
She advises that companies should also evaluate capital purchases and investments for benefits like Section 179 expense and bonus depreciation. She says it allows them to deduct large amounts of equipment and asset costs upfront instead of over time.
In addition, qualifying R&D expenses may generate valuable credits, and expanded business interest deductions can further reduce taxable income. “Strategic tax planning before year-end helps businesses lower current tax liability, improve cash flow, and create long-term tax efficiency for future years.”
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Source: Black Enterprise
