The Resilient Dollar

Good news first! Those tax cuts you remember from a few years ago? They’re here to stay for good! That means more certainty when you’re planning your family budget. But wait, there’s more:

• Tips and Overtime are Less Taxed! If you’re a waiter, a delivery driver, or just someone who works extra hours, a big chunk of your tips (up to $25,000) and overtime pay (up to $12,500 for singles, $25,000 for couples) will now be free from federal income tax. This is a huge win for a lot of working people.
• A Nice Bonus for Older Folks: If you’re 65 or older and your income isn’t super high (under $75,000 for singles, $150,000 for married couples), you get an extra $6,000 deduction on your taxes. Every little bit helps, right?
• More Help for Families with Kids: The tax credit you get for having kids is now permanently a bit bigger – $2,200 per child. That’s more money directly helping families.
• Local Tax Relief (Especially if you own a home!): If you pay a lot in state and local taxes (like property taxes or state income tax), the old limit on how much you could write off on your federal taxes was tiny. Now, it’s been quadrupled to $40,000 for five years! This could mean a significant chunk of money staying in your pocket.
  • For example: A married couple in a high-tax state with a combined income of $450,000 who pay $25,000 in state income taxes and $15,000 in property taxes (a total of $40,000 in SALT payments) would have been limited to a $10,000 deduction under the previous rules. With the new law, they could potentially deduct the full $40,000, significantly reducing their federal tax liability. 

For my friends who own a business or are self-employed: That special “20% tax break” on your business income? It’s now permanent, which is awesome for long-term planning. It also has some tweaks that make it easier for more types of businesses to get that break. Plus, businesses can now instantly write off the full cost of new equipment and research – time for that new gadget or tool you’ve been eyeing!

This part is a bit tougher. For programs like Medicaid (which helps with healthcare) and SNAP (food stamps), there will be new rules about working. If you’re an able-bodied adult, you’ll generally need to show you’re working, volunteering, or training for at least 80 hours a month to keep your benefits. They’ll also be checking eligibility more often.

My big worry is how this might affect schools and families. Less money for these programs could mean fewer health workers in schools and fewer kids getting free school meals. If you or someone you know relies on these, it’s super important to understand these new rules.

If you’re planning on getting a new car soon, here are some key things to know:

• Electric Car Deals are Fading: If you were thinking about an electric car because of those special federal tax credits (which could save you thousands!), you need to act fast. Those credits are going away after September 30, 2025. So, if you want that discount, now’s the time to buy! Even without the credit, electric cars can save you money on gas and maintenance over time, but the starting price will feel higher.
• New Tax Break for Car Loans: There’s a new, temporary tax deduction for some interest you pay on your car loan, up to $10,000. But here’s the cool part: it’s for cars that are mostly built in the U.S. This is a nice little extra saving if you’re getting a loan for a new ride.

If you have student loans, get ready for some changes starting in July 2026. Some popular payment plans are going away and will be replaced with new options. Also, some specific student loans (like Grad PLUS) will have new limits.

And about saving for kids – you might hear about “Trump Accounts.” Let me make this super clear: Your Roth IRA is safe and sound! It’s still one of the best ways to save for your retirement, where your money grows tax-free and you pull it out tax-free when you retire.

“Trump Accounts” are a different kind of savings account. They are mostly for saving for a child’s future, such as college or their first home. The government will actually kick in a one-time $1,000 deposit into these accounts for certain kids born between 2025 and 2028. These accounts are generally invested in a broad stock market index like the S&P 500.

You put money in after taxes, but when you take it out for those specific reasons, you still pay some tax (it’s a lower tax rate, but not zero like a Roth). Plus, the money generally needs to be used or taken out by the time the child is 31 years old, or else it gets taxed like regular income. So, they’re not a long-term retirement fund like a Roth.

This new law is a lot to take in, but don’t get overwhelmed! Here’s what I’d suggest:

1. Check Your Paycheck: With new tax breaks, you might be able to have less tax taken out of your paycheck each week. See if you can keep more of your hard-earned money now!
2. Grab Those New Deductions: If any of these new tax breaks apply to you (like the tips deduction, the senior deduction, or that bigger local tax cap), make sure you use them!
3. Talk to a Pro: Honestly, with all these changes, it’s a smart idea to chat with a tax expert or financial planner. They can look at your specific situation and tell you exactly how this new law affects you and how to get the most benefits.
4. Stay in the Loop: Laws can change, and we’ll learn more as time goes on. Keep an eye on trustworthy news sources for updates.

This law is a big shift, and it’s going to affect many of us. By understanding these changes, we can all make smarter choices for our money and our future. What’s your take on this?