The IRS has announced new guidelines regarding the Big Beautiful Bill, which introduces significant tax reforms for the 2025 filing season. The bill focuses on middle-class workers, boomers, and retirees, offering a $6,000 deduction for taxpayers aged 65 and older, which aims to help them retain more retirement benefits. It also eliminates federal income tax on tips and overtime pay, utilizing deductions based on income brackets. Taxpayers must be aware that these new provisions affect their taxable income and potential tax liabilities differently.
The new $6,000 senior deduction is a huge win for retirees. Having this extra deduction helps lower their taxable income. This means that more of their Social Security checks and retirement benefits stay in their hands instead of being taxed.
The tip deduction is capped at $25,000 annually and begins to phase out for incomes above $150,000.
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