Americans may be able to save more on taxes thanks to Donald Trump’s One Beauty Act (OBBBA). The law introduces several new tax breaks that can lower taxable income and increase refunds. Most benefits focus on tipped and overtime workers, seniors, car owners and homeowners.
Under the new law, tip income is no longer taxed. Eligible workers will be able to deduct up to $25,000 of tip income from their taxable income through 2028, The Sun reports. Married taxpayers filing separate returns cannot claim this deduction.
Overtime pay can also enjoy tax deductions
Under OBBBA, qualified overtime income is also tax-free. Single filers, heads of household and qualifying surviving spouses can deduct up to $12,500 of overtime earnings. Married couples filing jointly can deduct up to $25,000 of overtime income, The Sun reports. This benefit will be available over the next two years.
New deductions for many taxpayers
Additional Republican spending measures tied to the bill create new “above the line” deductions. Single taxpayers can claim a $1,000 deduction. Married couples filing jointly can claim a $2,000 deduction.
Another tax benefit is available to car buyers. According to The Sun , Americans can deduct up to $10,000 in interest on a qualified loan for a new personal vehicle. This deduction applies to qualifying new car loans.
One of the greatest benefits for seniors
Americans 65 and older can deduct an additional $6,000 from taxable income. Married couples who both qualify can claim the $6,000 deduction. That means some married seniors can deduct a total of $12,000.
Qualified mortgage interest is still deductible by law. Property taxes are also deductible until 2028.
If you fall into the high-income category, you may not receive full benefits. Not everyone can take advantage of the full deduction. Once a taxpayer exceeds certain income limits, benefits begin to phase out.
Many Americans have been planning their refunds months in advance
A new survey from Talker Research finds that many Americans start planning how to use their tax refunds about six months before they receive them. The survey included 2,000 U.S. taxpayers. About 79% of respondents said they expected to receive some form of tax refund this year.
Tax refunds are important for family budgets
More than half of respondents (52%) said their tax refund plays an important role in their annual budget planning. Most said they planned to use the money for essential expenses. According to Talker Research, about 77% of people said they would use their refunds to purchase essential items.
Bills, groceries and debt top expenses
About 52% of respondents said they would use their refunds to pay bills such as rent. About 44% plan to spend it on groceries and other necessities. About 37% plan to use the money to pay off credit card debt. More than half of credit card debt holders (56%) say they have debt specifically for holiday season spending.
Some Americans plan to spend money on non-essential items
About 8% of respondents said they planned to use their refunds to purchase luxury goods. Among those who buy luxury goods, 37% plan to buy new clothes. About 28% plan to spend money on entertainment. About 26% want to buy a new mobile phone.
Average refund expectations remain high
The survey found that the average taxpayer expects to receive a tax refund of about $1,700 this year. This research was commissioned by TaxSlayer and conducted by Talker Research.
People have mixed expectations for refunds this year
About 22% believe they will receive larger refunds than last year. About 26% expect to receive less money than last year. Some 51% of people believe their refund amount will remain the same, according to Talker Research, cited by The Sun.
About 12% said they received more refunds than they expected last year. About 20% said their refund was less than they expected.
Why some people expect more refunds this year
Many respondents who expected to receive larger refunds said they had more taxes withheld from their paychecks via W-2 forms. Others said they made more money during the year. Some people want a larger refund because they recently had a new baby.
Why some expect fewer refunds this year
Some respondents said losing their jobs could reduce their refunds. Others said back taxes could reduce the amount they receive. Some point out that children no longer qualify for certain tax benefits when they grow up. Others blame higher tax rates for lower expected refunds.
OBBBA provides tax deductions for tips, overtime, seniors, vehicle loan interest, mortgage interest and property taxes, The Sun reports. These deductions can reduce taxable income and potentially increase your tax refund. At the same time, survey data shows that most Americans rely on refunds to cover daily expenses rather than luxury spending.
