A ‘New’ (and hopefully enjoyable) Newsletter
Hello! 👋 Welcome to my newsletter!
Taxes can be a bit of a moving target, can't they? To help you stay ahead of the game, I'm planning to launch a newsletter. It'll be packed with tips and updates on how we can work together to lighten your tax load.
Preparing for year end
Maximizing Contributions and Avoiding the Underpayment Penalty
Most tax-deferred accounts, like IRAs and HSAs, give you until April 15 of the next year to make contributions. However, if you're dealing with Maryland 529 or ABLE accounts, you'll need to make sure your contributions are in by December 31 of the current year. For employer-sponsored 401(k)s, you might have one more shot to add to your contributions with your next paycheck depending on your paycheck cycle.
If you expect to owe more than $1,000 in taxes this year, this one is important! Another deadline to be aware of is the January 15 estimated payments deadline to avoid the dreaded underpayment penalty. You can avoid the penalty by doing one of the following:
If your Adjusted Gross Income (AGI) for last year was $150,000 or below, pay either:
90% of your 2025 tax liability, or
100% of your 2024 tax liability.
If your Adjusted Gross Income (AGI) for last year over $150,000, pay either:
100% of your 2025 tax liability, or
110% of your 2024 tax liability.
Not sure you if you owe? Let’s get in-touch and we can estimate your tax liability for the year and schedule a payment for January 15, if required.
Tax Code Changes
Big Changes for This and Next Year
With the passage of the One Big Beautiful Bill Act, there will be a lot of changes that may affect you.
Permanent Changes
Child Tax Credit (CTC)
The CTC for children under the age of 17 will be $2,200 for 2025, and adjusted for inflation for future years.Mortgage Interest
Mortgage Interest deduction limit is now permanently set for loans up to $750,000. PMI is now deductible as mortgage interest.Business Deductions
The 20% QBI deduction is now permanent, as well as restoration of 100% bonus depreciation. R&E costs may now also be fully deducted.Estate and Gift Tax Exemption
This exemption is now permanent and set at $13.99 million for 2025, increasing to $15 million in 2026.Clean Energy Credits
Almost all clean energy credits are terminated, with some very small exceptions being made and temporarily available for a short time.
Temporary Changes (2025-2028)
*Income phase-out limits apply
State and Local Tax (SALT) Deduction
The SALT deduction has now been increased to $40,000. A substantial jump from $10,000. If you have been leveraging the Pass-Through Entity Tax (PTET), there are no changes to this workaround.Qualified Tip Deduction*
Tips up to $25,000 may be deducted from taxable income.Qualified Overtime Pay Deduction*
Overtime pay over your regular hourly wage my be deducted up to $12,500 for single filers or $25,000 for joint filers. For example if you make $15/hour and your overtime wage is $22.50/hour, you may deduct $7.50/hour from your taxable income.Car Loan Interest Deduction*
You may deduct up to $10,000 of interest paid on car loans. Vehicles must be new, for personal-use, and assembled in the United States.Trump Accounts
Children born between 2025 and 2028 will receive $1,000 in an individual investment account called a “Trump Account”. There are no details on how, where, or when these accounts will be available at this time. It is projected these accounts will be available some time in 2026.
These are just some of the changes. If you have questions regarding your specific tax situation, do not hesitate to reach out.
High-Earner Strategies
Backdoor and Mega Backdoor Roth IRAs
Roth IRAs are a great tax planning tool as it allows you to pay taxes on contributions and withdraw everything (including earnings) tax free. You may think you are not eligible due to income limits, but there are “backdoor” options to get these accounts set up.
The Mega Backdoor Roth is an interesting one utilizing a 401(k) and allows you to build a pretty big Roth account. The Mad Fientist has a really great blog post that goes over the general details on how a Mega Backdoor Roth will work.
If you’re interested in learning more, reach out today!
A Quick Reference for Common Accounts
Contribution Increases for 2026
401(k)
$24,500 per employee with a $8,000 catch-up contributions for those 50+, and a special "super catch-up" of $11,250 for ages 60-63.
Individual Retirement Account (IRA) including Roth
$7,500 per taxpayer with a $1,100 catch-up contribution for those 50+.
Health Savings Account (HSA)
$4,400 for self-only coverage and $8,750 for family coverage, with a $1,000 catch-up contribution for those 55+.
Dependent Care Flexible Spending Accounts (FSAs)
Permanently increased to $7,500.
Maryland 529
Remains at $5,000 per taxpayer.
That’s it for now.
Let me know what you think of this newsletter! I’d love to get your feedback and I’m very much looking forward to working with you as tax season approaches.
Happy Holidays from Capital Compass Tax and Finance!