US federal tax answers, with sources

• Can domestic research and experimental costs be deducted right away again under section 174A?

  Yes. For amounts paid or incurred in taxable years beginning after December 31, 2024, new IRC §174A allows domestic research or experimental expenditures to be deducted in the year paid or incurred. Foreign research costs still have to be amortized over 15 years under IRC §174.

• Can my client deduct car loan interest under the 2025 tax law?

  Yes, for taxable years 2025 through 2028, if the loan was taken out after December 31, 2024 to buy a new vehicle for personal use whose final assembly happened in the United States. Up to $10,000 of interest a year counts, reduced by $200 for each $1,000 of modified AGI above $100,000, or $200,000 on a joint return.

• Can non-itemizers deduct charitable donations in 2026, and what is the new 0.5% floor?

  Yes. Starting with 2026 returns, a taxpayer who doesn't itemize can deduct up to $1,000 of cash contributions to qualifying charities, or $2,000 on a joint return. Itemizers face a new floor: only charitable contributions above 0.5% of their contribution base (roughly AGI) are deductible.

• How does the $6,000 senior deduction work?

  For taxable years 2025 through 2028, each taxpayer or spouse who is 65 or older by the end of the year gets an extra $6,000 deduction, on top of the regular additional standard deduction for age. It shrinks by 6% of modified AGI above $75,000, or $150,000 on a joint return, and it is available whether or not the taxpayer itemizes.

• How does the deduction for qualified overtime ("no tax on overtime") work?

  For taxable years 2025 through 2028, IRC §225 lets workers deduct qualified overtime compensation: the part of FLSA-required overtime pay above their regular rate, which is usually the extra half in time-and-a-half. The deduction is capped at $12,500, or $25,000 on a joint return, and drops by $100 for each $1,000 of modified AGI above $150,000 ($300,000 joint).

• How does the deduction for qualified tips ("no tax on tips") work?

  For taxable years 2025 through 2028, workers in occupations that customarily received tips by December 31, 2024 can deduct up to $25,000 of qualified tips a year under IRC §224. The deduction drops by $100 for each $1,000 of modified AGI above $150,000, or $300,000 on a joint return, and the $25,000 cap is per return, not per spouse.

• How does the wash sale rule work, and how is it reported on Form 1099-B and Form 8949?

  If a client sells stock or securities at a loss and buys substantially identical stock or securities within 30 days before or after the sale, IRC §1091 disallows the loss. The disallowed loss is added to the basis of the new shares, so it is deferred, not lost.

• How much is the child tax credit for 2025 and 2026?

  The child tax credit is $2,200 per qualifying child for both 2025 and 2026, and up to $1,700 of it per child is refundable. It phases out above $400,000 of modified AGI on a joint return and $200,000 on other returns.

• Is 100% bonus depreciation back for 2025 and 2026?

  Yes. The One Big Beautiful Bill Act made 100% bonus depreciation under IRC §168(k) permanent for qualified property acquired and placed in service after January 19, 2025. Property acquired before January 20, 2025 still follows the old phase-down: 40% if placed in service in 2025 and 20% in 2026.

• What are the 2026 gift tax annual exclusion and estate tax exemption?

  For 2026 the gift tax annual exclusion is $19,000 per recipient, the same as 2025. The basic exclusion amount for estates of people who die in 2026 is $15,000,000, up from $13,990,000 for 2025, and the 2025 tax law set that $15,000,000 in the statute with inflation indexing after 2026.

• What are the 2026 HSA contribution limits?

  For 2026, the HSA contribution limit is $4,400 for self-only coverage and $8,750 for family coverage, plus a $1,000 catch-up for account holders 55 or older. The IRS has already set 2027 at $4,500 and $9,000.

• What are the 2026 QBI deduction thresholds?

  For taxable years beginning in 2026, the section 199A threshold is $403,500 for joint returns, $201,775 for married filing separately and $201,750 for all other returns. The limits phase in fully at $553,500, $276,775 and $276,750, a wider range than in 2025.

• What are the IRS standard mileage rates for 2026?

  Because of higher fuel prices, the IRS raised the 2026 rates on July 1: business miles are 72.5 cents through June 30, 2026 and 76 cents from July 1. Medical and moving miles go from 20.5 to 23.5 cents, and charitable miles stay at 14 cents all year.

• What do the box 20 codes on a partnership Schedule K-1 mean?

  Box 20 of a partnership Schedule K-1 (Form 1065) carries other information the partner needs to finish their own return, each item marked with a code. The ones that come up most are A and B for investment income and expenses (Form 4952), N for business interest expense, and Z for the section 199A information used on Form 8995 or 8995-A.

• What is a Trump account and how is it taxed?

  A Trump account is a traditional IRA set up for a child under 18 under IRC §530A. Family and others can contribute up to $5,000 a year, with no deduction, starting 12 months after the law was enacted. The money can't come out before the year the child turns 18 and must be invested in low-cost US stock index funds until then.

• What is the 1099-NEC and 1099-MISC threshold for 2026?

  For payments made in 2026 and later, a business files Form 1099-NEC for nonemployee compensation of $2,000 or more, up from $600. The same $2,000 floor applies to rents, prizes and awards, other income and medical payments on Form 1099-MISC, and it is indexed for inflation starting in calendar year 2027.

• What is the Form 1099-K threshold now?

  Payment apps and online marketplaces (third party settlement organizations) only have to file Form 1099-K for a payee whose gross payments exceed $20,000 and whose transactions number more than 200. The One Big Beautiful Bill Act restored that pre-2021 rule retroactively, ending the planned drop to $600.

• What is the SALT deduction cap for 2025 and 2026?

  The cap on itemized state and local tax deductions is $40,000 for 2025 and $40,400 for 2026, half that for married filing separately. It shrinks by 30% of modified AGI above $500,000 in 2025 and $505,000 in 2026, but never below $10,000, and it drops back to $10,000 for years after 2029.

• What is the section 179 deduction limit for 2025 and 2026?

  For taxable years beginning in 2025, a business can expense up to $2,500,000 of section 179 property, reduced dollar for dollar once property placed in service tops $4,000,000. For 2026 the inflation-adjusted figures are $2,560,000 and $4,090,000.

• What is the standard deduction for 2026?

  For tax year 2026 the standard deduction is $32,200 for married couples filing jointly and surviving spouses, $24,150 for heads of household, and $16,100 for single filers and married people filing separately. The extra amount for age 65 or blindness is $1,650 per condition, or $2,050 if the person is unmarried and not a surviving spouse.

• When does an S corporation shareholder have to file Form 7203?

  An S corporation shareholder files Form 7203 with their return in four situations: claiming a deduction for their share of an aggregate loss, receiving a non-dividend distribution, disposing of stock, or receiving a loan repayment from the corporation. In other years it isn't required, but the IRS suggests completing and keeping it anyway so basis stays consistent.

Not finding your question?