NEW TAX BILL

On Friday, July 4th President Trump signed the new tax bill - the One Big Beautiful Bill Act also known as OB3.  It will take some time to review all 940 pages of the legislation and even longer for the IRS to issue numerous regulations and directives to implement it.  As more information becomes available, Turner's Tax Service will post updates here.  For now, here's what we know, based on articles in the New York Times, Forbes and the Wall Street Journal.

THE GOOD NEWS

• Existing tax brackets and rates remain largely the same.
• The standard deduction is increased by $750 ($1500 for couples).
• The cap on the amount of state and local taxes that you can write off as an itemized deduction is increased from $10,000 to $40,000 through 2030.  After that it reverts to $10,000.  The cap is reduced for those making over $500,000 a year.
• A new deduction of $6000 is created for those over 65 but ends after three years.  The deduction decreases for those with income over $75,000 ($150,000 for couples) and is reduced to zero once income reaches $175,00 ($250,000 for couples).  SOCIAL SECURITY REMAINS TAXABLE.
• A new deduction of up to $25,000 is created for income from tips but ends after three years.  The deduction phases out for those making more than $150,000 ($300,000 for couples).
• A new deduction of up to $12,500 ($25,000 for couples) is created for overtime wages but ends after three years.  The deduction phases out for those making more than $150,000 a year.  Salaried employees are not eligible.
• A new deduction of up to $10,000 a year in interest paid on auto loans is created if you purchase a new car that goes through final assembly in the Unites States.  The deduction phases out for those making more than $100,000 ($200,000 for couples).
• Mortgage insurance premiums are restored as an itemized deduction.
• Up to $1000 in charitable donations ($2000 for couples) can be written off in 2026, even for those taking the standard deduction.  
• The child tax credit is increased from $2000 to $2200 and is tied to inflation after that.
• Babies born in 2025 through 2028 will receive a $1000 deposit into a special investment account controlled by the government.
• The adoption tax credit will be partially refundable.  
• The threshold for estates being taxed is increased to $15 million.
• There are additional eligible expenses that can be paid from 529 plans.
• As on July 1, 2026 FAFSA eligibility calculations will no longer take into account certain assets of family farms, fishing operations or small businesses.
• Starting July 1, 2026 Pell Grants can be used for non-degree programs like job training but only if the school doesn't give grant aid that equals or exceeds the cost of attending the school.

THE BAD NEWS

• The bill ends tax credits for residential energy credits, including solar and geothermal, at the end of 2025
• The bill ends the credit for electric or plug-in hybrid vehicles purchased after September 30, 2025.
• A new work requirement is imposed in order to receive Medicaid unless the taxpayer has children younger than 14. Eligibility must be redetermined every six months rather than once a year. 
• A new work requirement is imposed on those 18 to 65 to qualify for Food Stamps unless the taxpayer has children younger than 14.  
• Additional rules and paperwork are imposed to qualify for health insurance provided by the Affordable Care Act.
• Beginning in 2026 only 90% of gambling winnings can be offset by losses, making 10% taxable income. 
• Beginning July 1, 2026 additional options for repaying student loans are added but new borrowing limits are put in place.