Individual Tax

Business Tax

State Tax Updates

Individual Tax: Tax highlights from The One Big Beautiful Bill Act (OBBBA) for 2025

 

No tax on tips and overtime pay: Effective 2025 through 2028

  • Tip Deduction: the bill allows a deduction up to $25,000 per qualified taxpayer (individual and self-employed) for qualified tips. (Phase out: when the taxpayer’s Modified Adjusted Gross Income (MAGI) exceeds $150,000 ($300,000 for a joint return)
  • Overtime Deduction: the bill provides a deduction up to $12,500 ($25,000 on joint return) per taxpayer for qualified overtime compensation for tax years 2025-2028. (Phase out: when the taxpayer’s MAGI exceeds $150,000 ($300,000 for a joint return)

Auto loan Interest: a new “above-the-line” deduction up to $10,000 annually is available for eligible taxpayers who purchase a new; U.S.-assembled; personal-use vehicle (not business or commercial use) for tax years 2025 through 2028. The deduction phases out at MAGI of $100,000 for single / $200,000 for a joint return.

  • The loan must have originated after December 31, 2024 and before January 1, 2029. (Refinanced loans are also eligible as long as the original loan qualified).
  • The vehicle must be new, and you must be the original owner. (used vehicles and leased vehicles do not qualify).
  • The vehicle must be a passenger vehicle with a gross weight of less than 14,000 pounds.

Deduction for Seniors: Effective for 2025 through 2028, individuals who are age 65 or older (on or before the last day of the taxable year) may claim a “Senior Bonus Deduction” of $6,000 (This deduction is in addition to both the current standard deduction plus the extra standard deduction for age 65 (+) under existing law). This deduction is per eligible individual ($12,000

total for a married couple where both spouses qualify). Deduction phases out for taxpayers with MAGI over $75,000 ($150,000 for a joint return).

For more information on the above topics click the IRS link below.

https://www.irs.gov/newsroom/one-big-beautiful-bill-act-tax-deductions-for-working-americans-and-seniors

Increase in the SALT deduction cap for 2025: Taxpayers who itemize deductions on their federal income tax return (using Schedule A) can deduct certain state taxes. The federal SALT deduction cap for individual taxpayers for tax years beginning in 2025 rises from $10,000 to $40,000 for single filers and married couples filing jointly ($20,000 for married filing separately).

For more deductions and changes under OBBBA, click the following link:

One, Big, Beautiful Bill provisions | Internal Revenue Service

Individual Tax: Tax Planning Strategies to Consider before Year-End for 2025

  • Realize Losses on Stock and minimize Tax on Capital Gains
  • Tax-Free Qualifying Transfers from IRAs To Charities (QCD)
  • Required Minimum Distribution (RMD) Planning
  • Consider a Health Savings Account (HSA) or Health Flexible Spending Account (FSA)
  • Retirement Planning: Account Set up; Contributing to 401(k); Roth 401(k); SEP; Conversions of Traditional IRA to Roth IRA etc.
  • Consider Year-End Donations
  • Child and Family Tax Credit
  • Consider Section 529 Education Savings Plans: contributions and distributions.
  • Check withholding prior to year-end or pay final estimated tax payment by 1-15-26.
  • SALT and PTE deductions

For more tax planning strategies, contact your financial and tax advisors before year-end.

Individual Tax: Tax highlights from The One Big Beautiful Bill Act (OBBBA) for 2026

 

Estate Tax Credits. The federal estate and generation-skipping transfer tax exemption rises to $15 million per individual ($30 million per married couple) in 2026. (indexed for inflation).

Charitable contributions: Individuals who take the standard deduction may claim an above-the-line deduction of $1,000 ($2,000 for a joint return) for cash contributions to qualified charities.

  • Charitable deductions for individuals who itemize will only be allowed to the extent that contributions exceed 0.5% of the taxpayer’s Adjusted Gross Income (AGI). Contributions below this threshold are non-deductible but can be carried forward to future years (up to five years for most contributions).
  • Further caps apply on all itemized deductions for taxpayers in the highest income tax bracket.

529 Plan Changes:

  • K–12 withdrawals doubled: now $20,000 per year.
  • Expanded qualified expenses include books, supplies, exams, tutoring, continuing education, and workforce training.

Business Tax: Tax highlights from The One Big Beautiful Bill Act (OBBBA) for 2025

 

Employer reporting requirements for No Tax on tips and overtime: Employers and other payors are required to file information returns with the IRS and SSA and provide statements to taxpayers showing the total amount of cash tips received and qualified overtime compensation paid during the year.

Practical Considerations:

  • For Employers: While the IRS is providing penalty relief for 2025 regarding the new reporting requirements (refer Notice 2025-62), it is advisable to begin preparing systems to track and report tip amounts and occupation codes for employees in eligible positions. This will facilitate compliance in future years when penalty relief is no longer available.
  • For Self-Employed Individuals: The deduction for qualified tips is limited to the “net” income (after deductions) from your trade or business. Be sure to maintain clear records of both your tip income and business expenses.

Full Expensing of Domestic Research and Experimental Expenditures

For tax years beginning after December 31, 2024, taxpayers may immediately deduct all domestic R&E expenditures paid or incurred in the taxable year. This is a permanent change under new Section 174A(a), which overrides the prior requirement to capitalize and amortize these costs over five years. (Taxpayers can elect to capitalize and amortize domestic R&E expenditures over a minimum of 60 months).

In addition, taxpayers may accelerate and deduct unamortized domestic R&E costs that were capitalized in tax years 2022 to 2024 either in full in 2025 or spread ratably over 2025 and 2026. Eligible small businesses (generally those with average annual gross receipts of $31 million or less for the prior three years) may retroactively apply Section 174A to amend prior returns)

Foreign R&E expenditures must still be amortized over 15 years. In addition, if the foreign R&E property is disposed of, the remaining costs must continue to be amortized and cannot be deducted immediately.

Bonus Depreciation: the bill allows 100% bonus depreciation for qualified property acquired and placed in service on or after January 19, 2025.

Business Tax: Tax Planning Strategies to Consider before Year-End for 2025

  • Qualified Business Income deduction (QBI) ·
  • Purchase of Equipment, Office Furniture, and Company Vehicles
  • Year-End Bonuses for Owners
  • Retirement Plan Selection
  • Contribute to or Establish a Solo 401(k); SEP; Simple IRA; or Profit-sharing plans.
  • Research & Development (R&D) Tax Credit and deductions (see above)
  • 100% bonus depreciation
  • State or PTE tax payments

For more tax planning strategies, contact your financial and Tax advisors before year-end.

Business Tax: Tax highlights from The One Big Beautiful Bill Act (OBBBA) for 2026

 

Meals and Entertainment: The deduction for employer-provided meals furnished on business premises for the convenience of the employer will be non-deductible. Meals provided during recreational or social events for employees, meals provided as taxable compensation, and promotional/public-facing event meals remain fully deductible.

Charitable contributions: Corporate charitable contributions are tax-deductible only to the extent they exceed 1% of the corporation’s taxable income for the year and are limited to a maximum deduction of 10% of taxable income. Contributions that exceed the 10% limit or fall below the 1% floor may be carried forward for up to five years, subject to the same limits in future years.

Reporting and Information Returns: The reporting threshold for most payments on Forms 1099-MISC and 1099-NEC, which was historically $600, is increased to $2,000. This means that businesses and payers will only be required to file Forms 1099-MISC or 1099-NEC if payments exceed $2,000.

State Tax Updates: Key tax highlights for Maryland effective in 2025 and 2026

 

New Top Individual Income Tax Brackets

Effective for tax years 2025 and forward, two new higher brackets have been added:

  • 6.25% on Maryland taxable income between $500,001 and $1,000,000 for single filers (and between $600,001 and $1,200,000 for joint filers, heads of household, and surviving spouses).
  • 6.5% on Maryland taxable income over $1,000,000 for single filers (and over $1,200,000 for joint filers, heads of household, and surviving spouses).

Capital Gains Surtax: A new 2% state-level surtax applies to net capital gains for individuals with federal adjusted gross income (AGI) over $350,000.

Exemptions include:

  • Gains from the sale of a primary residence (if sold for less than $1.5 million).
  • Assets held in certain retirement accounts.
  • Sales of property used in a trade or business if the cost is deductible under IRC § 179.

Standard and Itemized Deductions:

Standard Deduction Increase:

  • For joint filers, heads of household, and surviving spouses: $6,700.
  • For other taxpayers: $3,350.

Itemized Deduction Limitation:

Taxpayers with federal AGI over $200,000 ($100,000 if married filing separately) must reduce their Maryland itemized deductions by 7.5% of the excess over the threshold.

Other changes:

Counties will now be allowed to impose a local-level tax of up to 3.3%, with the ability to change from a flat tax to a progressive tax if done in a revenue-neutral manner.

Effective July 1, 2025, the legislation expands the Maryland sales and use tax base to include sales of data or information technology services. Maryland imposes 3% sales and use tax on Data services, information technology services, system software publishing services, and application software publishing services as defined by NAICS codes 518, 519, 5132, and 5415. Examples of services include cloud storage, web hosting, data processing, IT consulting, and software development services.

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