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USA Today
17-07-2025
- Automotive
- USA Today
'One Big Beautiful Bill' offers Americans lots of tax benefits. Here are a few to plan for
Tax season isn't close to opening yet, but now is the time to start planning to take advantage of new provisions in the massive tax and spending bill that became law earlier in July, experts say. No tax on tips and overtime and the $6,000 bonus deduction for seniors have been well publicized, but there's much more that can change your taxes. Other highlights include charitable contributions deductions, auto loan interest deduction for certain new vehicles and increased deductions and credits for families. 'Everyday taxpayers who received the standard deduction had no tax planning opportunities under the 2017 TCJA (Tax Cuts and Jobs Act),' said Brian Gray, certified public accountant and tax partner at Gursey Schneide. Now, there are many. Charitable contributions are no longer just for itemizers OBBB permanently brings back a charitable contributions deduction for those who take the standard deduction beginning in 2026. During the pandemic in 2020, the CARES Act allowed a temporary deduction of up to $300 for cash donations for individuals taking the standard deduction. The temporary deduction was extended and expanded to $600 for married couples filing jointly for 2021 and then expired. Under OBBB, 'year-end charitable deduction planning could be beneficial,' Gray said. 'You can deduct $1,000 per person, or $2,000 per couple, in above-the-line charitable contribution deductions if you cannot itemize.' An above-the-line deduction can be taken without itemizing. It's valuable because it lowers your adjusted gross income, which lowers your tax liability and may help you qualify for other deductions or tax credits. Interest deduction on personal auto loans OBBB has made new personal auto loan interest deductible for non-itemizers for the first time ever, said Brian Schultz, certified public accountant in Plante Moran Wealth Management's tax practice. Personal auto loan interest used to be deductible but only as an itemized deduction until the Tax Reform Act of 1986 eliminated it. Under OBBB, Americans can deduct up to $10,000 of interest on their taxes, beginning in 2025 through 2028. There are specific requirements to qualify for the deduction that could make it harder to take advantage of, some warn. For example, the purchase must be a new, U.S.-assembled vehicle for personal use, and income limitations apply. However, if you can find a qualified car and are eligible for the deduction, the calculus could change when deciding whether to buy or lease a car and how much each cost, Schultz said. More benefits for families There are two benefits families should be aware of even if they take the standard deduction, Schultz said. The OBBB permanently increases the annual maximum contribution to $7,500 (or $3,750 for married couples filing separately) from $5,000. Though the increase begins next year, enrollment in these plans starts soon in 2025, Schultz said. Other than a temporary increase during COVID to $10,500, (or $5,250 for married individuals filing separately) in 2021 from the American Rescue Plan Act, the contribution level had been stuck at $5,000 for 40 years, according to insurance brokerage Newfront. First, the credit rate increased to 50% from 35% of qualifying expenses, up to $3,000 for one child and up to $6,000 for two or more children, for families with the lowest incomes. There isn't an income ceiling, but the percentage gradually decreases as income rises. Second, the way the new credit rate phases down for taxpayers, the income threshold to receive the lowest 20% credit has jumped to $206,000 for a married couple filing jointly and $103,000 for individuals from pre-OBBB income levels of $86,000 and $43,000, respectively. These changes will result in nearly 4 million families seeing an increased tax credit, according to First Five Years Fund, a nonprofit focused on ensuring families have affordable access to quality child care and early learning programs. 'Under current law, a family with two young children making less than $150,000 typically receives around $1,200,' said Sarah Rittling, the organization's executive director, in a statement after Congress passed the OBBB. With the 'enhancements, that benefit would see a $900 boost that can make a meaningful difference for parents managing tight budgets.' With some planning, Americans may also be able to score a larger credit, Schulz said. For example, boosting a 401(k) contribution could reduce your taxable income enough to pick up a larger CDCC in 2026. 'A lot of new changes with income phaseouts,' he said. 'Be mindful of income levels.' Medora Lee is a money, markets, and personal finance reporter at USA TODAY. You can reach her at mjlee@ and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday.
The Hill
07-06-2025
- Business
- The Hill
A bond market meltdown might be inevitable
The recent surge in yields on long-dated U.S. Treasurys has generated concern in some circles. Jamie Dimon, the CEO of JPMorgan Chase, recently warned that the bond market is likely to crack as a result of spiraling government debt levels. 'I just don't know if it's going to be a crisis in six months or six years, and I'm hoping that we change both the trajectory of the debt and the ability of market makers to make markets,' he said. Others remain more sanguine and observe that interest rates have in fact normalized close to their pre-2008 global financial crisis levels. In the aftermath of the financial crisis, both real and nominal rates were stuck at unusually low levels for about a dozen years. But, since 2022, we have seen both policy and market rates edge toward their pre-crisis levels. With interest rates reverting back to their historical norms, is the current wariness surrounding the long end of the yield curve among key investors warranted? To evaluate the validity of such fears, it is worth reviewing recent U.S. fiscal history. During the past 45 years, the U.S. has had to deal periodically with the 'twin deficits' problem — the near-synchronous widening of the fiscal deficit and the current account deficit. In the past, bipartisan policy compromises pushed through by enlightened political leadership have helped America avoid a debt/currency crisis. In the early 1980s, the Reagan-era tax cuts contributed to a decline in U.S. government revenue that was not offset by cuts on the spending side and this led to a widening of the budget deficit. Meanwhile, the high interest rates associated with the Paul Volcker disinflation episode led to a sharp appreciation of the U.S. dollar and contributed to a deterioration of the trade and current account balances. This simultaneous deterioration of budget and current account balances gave rise to the twin-deficit hypothesis and highlighted the potential interconnectedness between fiscal deficits and trade deficits. Emergence of 'twin deficits' during the early 1980s generated significant concern in policymaking circles and led to concrete measures on both the fiscal front (in the form of the Tax Reform Act of 1986 and the Budget Enforcement Act of 1990) and on the exchange rate stabilization front (in the form of multilateral agreements such as the 1985 Plaza Accord and the 1987 Louvre Accord). In the Clinton era, further steps (such as the 1993 Omnibus Budget Reconciliation Act, the reduction in military spending associated with the post-Cold War peace dividend and the 1996 Personal Responsibility and Work Opportunity Reconciliation Act) were undertaken to improve the U.S. fiscal outlook. During the fiscal 1998 through fiscal 2001 period, the federal government even ran budget surpluses. Concerns regarding the 'twin deficits' reemerged during the George W. Bush era as fiscal and current account imbalances worsened. Prior to the 2008 global financial crisis, economists worried that the spike in budget and trade deficits was serious enough to threaten a dollar crisis. Following the collapse of Lehman Brothers in September 2008, however, there was a dollar shortage abroad and the U.S. currency actually strengthened. Furthermore, as household consumption collapsed and personal saving rate rose, the U.S. current account markedly improved in the post- global financial crisis era. During the Obama era, the 2011 Budget Control Act and the artificially suppressed borrowing costs (via Fed's quantitative easing and near-zero interest rate policies) helped ease the fiscal burden. Over the past five years, both the budget and trade deficits have deteriorated sharply. Budget deficits have exceeded 5 percent of GDP since 2020 and projections indicate deficits will remain elevated, raising concerns about fiscal sustainability. Critically, government borrowing costs have risen sharply since 2022. Historian Niall Ferguson has suggested that America's superpower status may be threatened as the U.S. government now spends more on interest payments than on defense. Unlike prior episodes, the current cycle of deteriorating external and fiscal imbalances is significantly more worrisome as the country appears to be beset by institutional decay and political ineptitude. Domestic and foreign investors in U.S. Treasurys are starting to fret about the absence of fiscal rectitude even as government debt-to-GDP ratios reach levels last observed in 1946. Additionally, illogical and inconsistent policies on the trade and foreign policy front raise the prospect of a so-called 'moron premium' being applied to U.S. assets. Legislative threats to tax foreign capital is raising alarm and will likely push up the cost of borrowing even further. Such actions are also fueling concerns about the pre-eminent reserve currency status of the U.S. dollar. Any diminishment of dollar's exorbitant privilege will affect U.S. fiscal sustainability. Unlike the 1990s, there is currently no political consensus on reining in fiscal profligacy and restoring fiscal sanity. Harvard's Ken Rogoff recently noted: 'To be sure, this isn't just about Trump. Interest rates were already rising sharply during Biden's term. Had Democrats won the presidency and both houses of Congress in 2024, America's fiscal outlook would probably have been just as bleak. Until a crisis hits, there is little political will to act, and any leader who attempts to pursue fiscal consolidation runs the risk of being voted out of office.' The late great MIT economist Rudiger Dornbusch once quipped: 'In economics, things take longer to happen than you think they will, and then they happen faster than you thought they could.' Recent spikes in bond market volatility and long-dated Treasury yields suggest that the moment of fiscal reckoning may finally be approaching. Vivekanand Jayakumar, Ph.D., is an associate professor of economics at the University of Tampa.
Yahoo
23-04-2025
- Business
- Yahoo
Is credit card interest tax-deductible?
Credit card interest is not tax-deductible for personal expenses. The government stopped allowing a tax deduction for credit card interest with the Tax Reform Act of 1986. Interest on student loans, mortgages, home equity loans and business expenses are still tax-deductible. Transferring a credit card balance to a card with a 0 percent intro APR period can help lower interest payments. If you've racked up some credit card debt and are paying interest each month, you might be looking for ways to offset your debt with deductions come tax season. However, while the Internal Revenue Service (IRS) once considered credit card interest tax-deductible, that's no longer the case. With the Tax Reform Act of 1986, the government stopped allowing tax deduction for consumers on credit card interest payments, arguing that the deduction encouraged growing consumer debt. Such a deduction may have also encouraged people to speculate on investments with their credit cards, considering that the tax deduction on the interest paid would have effectively lowered their costs. You may be out of luck if you were crossing your fingers for a write-off in the upcoming tax season when it comes to credit card interest. However, there are a few exceptions for individuals with business expenses, among a few other things. Currently, the government allows a deduction for interest paid on outstanding student loan debt, mortgage and home equity loan debt, business expenses and interest on money borrowed to purchase investment property. Any other kind of interest is considered personal interest and anything that falls under this category is not tax-deductible. The IRS spells out that the following types of interest are not deductible for tax purposes: Interest paid on a loan to buy a car for personal use Credit card and installment interest incurred on personal expenses Points (if you're a seller), service charges, credit investigation fees and interest relating to tax-exempt income, such as interest to purchase or carry tax-exempt securities While you can't get a break on the credit card interest you pay on your personal consumption, you could still put in for a tax deduction if you use a credit card to pay for business expenses. If you run a freelance business or are a gig worker — maybe driving for Lyft or Uber or delivering for DoorDash — and take on a loan for business purposes, maybe on your credit card, the interest you pay will be tax-deductible. If you use your credit card to pay for a business expense that is also partly personal, you can only deduct that part of the interest paid that relates to the business portion of what you spend. It may be better to have a credit card that is solely tied to your business to avoid any complications. However, the IRS does not require the use of a business credit card in order to qualify for a deduction in this case. Learn more: Business credit cards vs. personal credit cards Even though credit card interest is not tax-deductible, you can still take some steps to reduce the amount you pay in interest charges. For one, you could consider transferring any balance you carry on your card to another balance transfer card that comes with a promotional 0 percent interest rate. While this promotion goes on, you won't incur any interest charges on the debt. There's likely to be a balance transfer fee, though (typically 3 percent to 5 percent of the transferred balance). The key here is to be disciplined enough to pay off the debt before the promotional period ends. Otherwise, you will end up right back where you started, paying the full interest rate on the debt. Another tax-related way to lower your credit card interest payment is to spend any tax refund the IRS sends your way toward paying off your credit card debt. You may not be getting an actual tax deduction, but the refund will then effectively help you lower your card interest rate. Even though you can write off interest paid on a credit card for business expenses, keep in mind it is always best to try to avoid interest in the first place — especially when it's avoidable with the right discipline. You may be able to save a few bucks when tax season inevitably pops up on the calendar, but you'll save more by avoiding interest and fees by fully paying off your balance. If you can't, though, that's okay. Instead, you should try to plan ahead. If you know you are going to face a few large expenses for your business, sign up for a credit card with a 0 percent APR period and always pay your bills in full and on time. Sign in to access your portfolio
Yahoo
01-04-2025
- Automotive
- Yahoo
Trump Proposes Auto Loan Interest Tax Deductions for US-Made Vehicles
President Trump has announced his administration's efforts to create a new tax deduction for auto loan interest payments made on US-made vehicles to boost domestic manufacturing and counter potential tariff price increases. Trump is collaborating on the initiative with House Speaker Mike Johnson and floated the idea last week while signing a separate executive order imposing a 25% tariff on all auto imports. Trump's goal of allowing auto loan interest write-offs is early in its development, but industry professionals have already shared mixed perspectives on the plan. Jason Tamaroff of Tamaroff Auto Group in Michigan told Automotive News: 'I think that that [interest deductions] would be amazing. It could really help consumers.' Michael Cummings, vice president of California-based Cummings Automotive, noted how Americans could previously write off auto loan interest for all vehicles, not just imports, via itemized deductions until the Tax Reform Act of 1986. Still, Nick Anderson of Chuck Anderson Ford in Missouri thinks otherwise: 'I think it's Trump's way of trying to regulate interest rates and trying to get the Fed to lower rates. As far as customers being able to write off [part] of their interest, I don't foresee that happening,' Anderson said to GM Authority. Analysts at J.P. Morgan also expressed skepticism toward Trump's proposal's ability to counteract rising vehicle and loan costs. J.P. Morgan analysts estimate that auto loan interest write-offs could save consumers an average of $20 a month but anticipate that Trump's sweeping 25% auto tariff will increase monthly financing for new cars anywhere from $60 to $90 per month, according to CBT News. Trump feels that increased domestic vehicle production motivated by the new tariffs and possibly interest write-offs would offset lost tax revenue from auto loan interest deductions. Erica York, senior economist and research director at the Tax Foundation's Center for Federal Tax Policy, estimates that auto loan interest deductions could cost about $5 billion annually if structured as an itemized deduction, as reported by CNBC. From 2025 through 2034, the projected cost would be $61 billion. While Trump hasn't clarified whether his proposal would involve itemized or standard tax deductions, it's essential to note that almost 90% of taxpayers take the standard deduction since it tends to be more valuable for people, according to On The Money. Trump's tariff announcement last week wasn't the first time the President has proposed auto loan interest deductions. During an October speech in Detroit, Trump highlighted his desire to make the proposal a reality. Trump's goal of approving auto loan interest deductions is more complicated than it seems on the surface. Roadblocks to the plan gaining approval and paying off include savings falling short of rising vehicle costs stemming from tariffs, the need to generate more tax revenue, and choosing between itemized vs. standard deductions. Some also feel that an itemized tax break would primarily benefit higher-earning taxpayers. Jaret Seiberg, financial services and housing policy analyst for TD Cowen Washington Research Group, said the deductions 'mostly would benefit wealthier individuals buying more expensive cars as one has to itemize their taxes to get the tax break,' whereas modest-income Americans typically opt for the standard or above-the-line deduction.
