I’m a CPA: 3 Tax Changes Middle-Class Filers Should Watch Out for This Year
Written by
Gabriel Vito
Edited by
Rebekah Evans
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Some tax rules changed this year, but many filers could miss out because they won’t know what to look for.
“These provisions are new enough that it’s hard to make sure you’re taking advantage of them unless you’re actively watching for them,” said Gene Bott, certified public accountant (CPA) and partner at Tax Hive.
Here are a few tax updates worth checking before you file, especially for middle-class taxpayers.
No Tax on Overtime or Tips
If you earned overtime or tips last year, you may be eligible to deduct a portion of that income without itemizing, according to the IRS.
Only the extra portion of overtime pay qualifies. For example, if you normally earn $18 an hour and overtime pays $27, the deduction applies to the extra $9, not the full $27. Over time, that portion may reduce the income you’re taxed on.
Reported tip income may also qualify. This does not make tips tax-free, but it may lower the amount that gets taxed. The benefit is subject to income limits and is scheduled to apply to tax years 2025 through 2028.
“Watch out for potential deductions if you’re paid in tips or work overtime,” Bott said, specifically flagging both.
Your State Tax Deduction Just Got Bigger
If you live in California, New York, New Jersey or another high-tax state, this one’s worth a few minutes of your time. The One Big Beautiful Bill Act (OBBBA) raised the cap on state and local tax deductions from $10,000 to $40,000, but the higher limit is temporary and expires after 2029, per the Bipartisan Policy Center.
In plain English, this means when you file, you can either take a flat or “standard” deduction the IRS sets for everyone or you can add up what you actually paid in state taxes, property taxes and other eligible expenses and deduct that instead. You go with whichever number is bigger to reduce your taxable income.
For years, the $10,000 cap made that second option pointless for most people in high-tax states. Even if you paid way more than that, you could only count $10,000. Now that the cap is $40,000, the math may actually work in your favor for the first time in years.
It’s worth asking your accountant which option saves you more before you file.
Seniors May Qualify for an Additional Deduction
If you’re 65 or older, you may be able to trim an additional $6,000 off your taxable income this year on top of what you already get, according to the IRS. If you and your spouse are both over 65, that’s $12,000 extra, but only if you file jointly.
This is a new deduction, which means your tax software may not flag it automatically. If you filed the same way last year and didn’t change anything, there’s a good chance you’d miss it entirely.
This new provision from the OBBBA runs through 2028. If you’re not sure whether you qualify, it’s worth a quick call to your accountant before you file.
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