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Payroll Tax Implications of New Tax Breaks on Tips and Overtime

Before the One Big Beautiful Bill Act (OBBBA), tip income and overtime income were fully taxable for federal income tax purposes. The new law changes that.

Tip income deduction

For 2025–2028, the OBBBA creates a new temporary federal income tax deduction that can offset up to $25,000 of annual qualified tip income. It begins to phase out when modified adjusted gross income (MAGI) is more than $150,000 ($300,000 for married joint filers).

The deduction is available if a worker receives qualified tips in an occupation that’s designated by the IRS as one where tips are customary. However, the U.S. Treasury Department recently released a draft list of occupations it proposes to receive the tax break and there are some surprising jobs on the list, including plumbers, electricians, home heating / air conditioning mechanics and installers, digital content creators, and home movers.

Employees and self-employed individuals who work in certain trades or businesses are ineligible for the tip deduction. These include health, law, accounting, financial services, investment management and more.

Qualified tips can be paid by customers in cash or with credit cards or given to workers through tip-sharing arrangements. The deduction can be claimed […]

By Linkenheimer LLP|2025-09-09T16:10:50+00:00September 9th, 2025|1099, deduction, New Tax Laws|0 Comments

New Rules Could Boost Your R&E Tax Savings in 2025

A major tax change is here for businesses with research and experimental (R&E) expenses. On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) reinstated the immediate deduction for U.S.-based R&E expenses, reversing rules under the Tax Cuts and Jobs Act (TCJA) that required businesses to capitalize and amortize these costs over five years (15 years for research performed outside the United States).

Making the most of R&E tax-saving opportunities

The immediate domestic R&E expense deduction generally is available beginning with eligible 2025 expenses. It can substantially reduce your taxable income, but there are strategies you can employ to make the most of R&E tax-saving opportunities:

Apply the changes retroactively. If you qualify as a small business (average annual gross receipts of $31 million or less for the last three years), you can file amended returns for 2022, 2023 and/or 2024 to claim the immediate R&E expense deduction and potentially receive a tax refund for those years. The amended returns must be filed by July 4, 2026.

Accelerate remaining deductions. Whatever the size of your business, if you began to amortize and capitalize R&E expenses in 2022, 2023 and/or 2024, you can deduct the remaining amount either on […]

By Linkenheimer LLP|2025-09-08T19:36:59+00:00September 8th, 2025|deduction, New Tax Laws, research credit, tax implications|0 Comments

2025 Estimated Tax Payments: What You Need to Know

Mark Your Calendar

The third installment of 2025 estimated taxes is due Monday, September 15.

Heads Up: IRS Changed Their Mailing Address If you’re mailing paper checks to the IRS with form 1040-ES and live in one of these states, there’s a new address as of August 22:

Alaska, California, Colorado, Hawaii, Idaho, Kansas, Michigan, Montana, Nebraska, Nevada, North Dakota, Ohio, Oregon, Pennsylvania, South Dakota, Utah, Washington, Wyoming

New Address: P.O. Box 1300, Charlotte, NC 28201-1300

The IRS has also changed the mailing address for form 1040-V for the 2024 tax year. Taxpayers in Alaska, Arizona, California, Colorado, Hawaii, Idaho, Kansas, Michigan, Montana, Nebraska, Nevada, New Mexico, North Dakota, Ohio, Oregon, Pennsylvania, South Dakota, Utah, Washington, and Wyoming must now send payments to:

New Address: P.O. Box 93100, Louisville, KY 40293-1000

Don’t panic if you already sent it to the old address—the IRS says they’ll forward it and won’t penalize you. But hey, maybe this is the universe telling you it’s time to pay electronically?

Quick Note About Tax Changes The One Big Beautiful Bill Act (OBBBA) passed this July and includes several new deductions and credits that might affect your 2025 taxes.

Questions about how OBBBA might impact your specific situation? […]

By Linkenheimer LLP|2025-08-26T21:01:45+00:00August 25th, 2025|estimated tax payments|0 Comments

Business Meals — What’s Still on the Menu After 2025

Starting in 2026, the tax treatment of business meals changes dramatically. Under the Tax Cuts and Jobs Act (TCJA), employer-provided meals for the “convenience of the employer” including de minimis fringe benefit were limited to a 50% deduction. Unlike many other provisions that were extended or made permanent by the One Big, Beautiful Bill Act (OBBBA), this one wasn’t renewed. That means beginning in 2026, the deduction for these meals drops all the way to 0% at the federal level.

In plain terms: that stack of takeout boxes in the breakroom may keep your team happy, but it won’t trim your tax bill.

The big change: convenience meals lose their bite

Currently, meals provided by employers for their convenience and de minimis fringe benefit “meals” such as coffee, sodas, doughnuts etc.— qualify for a 50% deduction. Beginning in 2026, those expenses will no longer be deductible for federal tax purposes.

The exceptions: The restaurant industry can continue deducting employee meal expenses for kitchen and waitstaff and Crews of certain commercial vessels, oil platform/drilling rig workers, and of certain fishing vessels and processing facilities can continue to be 50% deductible.

California doesn’t play by the same rules

Here’s where things get tricky: California […]

By Linkenheimer LLP|2025-08-25T19:29:58+00:00August 20th, 2025|business, deduction, New Tax Laws|0 Comments

No Tax on Car Loan Interest Under the New Law? Not Exactly

Under current federal income tax rules, so-called personal interest expense generally can’t be deducted. One big exception is qualified residence interest or home mortgage interest, which can be deducted, subject to some limitations, if you itemize deductions on your tax return.

The One Big Beautiful Bill Act (OBBBA) adds another exception for eligible car loan interest. In tax law language, the new deduction is called qualified passenger vehicle loan interest. Are you eligible? Here are the rules.

“No tax” isn’t an accurate description

If you could deduct all your car loan interest, you’d be paying it with pre-tax dollars rather than with post-tax dollars — meaning after you paid your federal income tax bill. The new deduction has been called “no tax on car loan interest,” but that’s not really accurate. Here’s a more precise explanation.

The OBBBA allows eligible individuals — including those who don’t itemize — a temporary new deduction for some or all of the interest paid on some loans. The loans must be taken out to purchase a qualifying passenger vehicle.

Specifically, for 2025 through 2028, up to $10,000 of car loan interest can potentially be deducted each year. The loan must […]

By Linkenheimer LLP|2025-08-18T18:19:32+00:00August 18th, 2025|New Tax Laws|0 Comments