NEWS: Some of the provisions of July’s tax changes go into effect on Oct. 1. Regarding one of them, the “No Taxes on Tips” provision, the U.S. Treasury is seeking public comment on what jobs it will apply to.
WHY THIS MATTERS TO YOU: A variety of tax changes brought by the “One Big Beautiful Bill” will have a financial impact – much for the worse, some for the better – for many Americans.
The new federal fiscal year begins Wednesday, which means it’ll be the first month we begin to see some of the impact of the tax bill that Congress passed, and the president signed, a few months ago. If you want to get a tax credit for buying an electric vehicle, for instance, buy it before Wednesday.
And, a much bigger issue, Medicaid funding for any health clinic that provides abortions ends, as does the Supplemental Nutrition Assistance Program’s SNAP-Ed funding, which provides schools, seniors, nonprofits and communities with enhanced nutrition and wellness programs.
On the up side, the public can weigh in on what jobs will be covered in the misnamed “No Taxes on Tips” provision.
Let’s take a look.
Weigh in on ‘No Taxes on Tips’ jobs
The public comment period for what jobs will be included in the “no taxes on tips” provision in July’s new tax law has started and continues until Oct. 22. Before we talk about that part of it, let’s review what “no taxes on tips” really means. [For what “no taxes on overtime” and “no taxes on Social Security” really mean, read July’s It’s Your Money column].
Beginning this year and ending with the 2028 tax year, people who work in some tipped jobs may be able to take a tax deduction of up to $25,000 for tips.
If you qualify, you get a tax deduction when you file your tax return. A tax deduction reduces your taxable income – in other words, you’re taxed on the income that comes after the deduction. It can make a big difference, or a small difference, depending on what income bracket you’re in and if the deduction changes that. A tax credit, which this is not, reduces the amount of taxes you owe and is usually a bigger financial windfall.
The IRS requires tipped workers, for any month they receive $20 or more in tips, to report the total to their employer by the 10th day of the following month. When you file, you report your tips on your tax return, and they’re part of your gross income. Your employer will also have them on your W-2 form. This doesn’t change with the new law.
To get the deduction, you must report your tips accurately to your employer and have the required documentation for them.
If your gross annual income is more than $150,000, the amount you can deduct phases down. My guess is that there aren’t many tipped workers who are making that much a year.
There are 70 jobs being considered as qualifying for this tax deduction. One question is whether back-of-house workers who split tips with front-of house (wait staff, etc.) will get the deduction. Since it’s a tax rule, it’s ultimately up to the IRS.
To learn more about what qualifies as a “tip,” who may qualify for the deduction and how to file a comment, visit the IRS’s page on the topic.
Anyone who wants to weigh in must submit a written or electronic comment by Oct. 22. A public hearing will be held at 10 a.m. Oct. 23. The IRS asks that commenters submit their comments electronically via the Federal eRulemaking Portal at www.regulations.gov, and indicate IRS and REG-110032-25. They provide instructions on how to do it on the webpage. The Department of the Treasury (Treasury Department) and the IRS will make all the comments submitted publicly available.
Just a side note: If you don’t report your tips to your employer, you also may not be reporting them on your tax return and not paying taxes on them.
The downside of this is that when it comes time to collect Social Security, that’s income that won’t count. Another downside is that if the IRS ever catches up with you, you’ll have to pay the back taxes you owe on the tips, as well as a penalty equal to 50% of the Social Security and Medicare taxes you owe on them.
If you report tips but don’t report them accurately, the IRS can impose a penalty of 20% on any underpayment.
While this all may not seem “fair,” keep in mind that your fellow untipped friends, family and neighbors, who may not have incomes any higher than yours, are paying their full plate of taxes. It’s only wealthy people who can get away without paying.
Oct. 1 changes that will affect your wallet & community
SNAP-Ed nutrition program eliminated. The SNAP-Ed program, part of the Supplemental Nutrition Assistance Program [food stamps], has partnered with schools, nonprofits and food banks for 33 years to provide nutrition and exercise programs. The programs keep people healthy, provide extra food and nutrition where it’s needed, and help those who get SNAP benefits make good choices. The federal government provided $546 million for such programs last year, with the amount of money it saves through increased health and nutrition uncountable.
SNAP-Ed will end Oct. 1.
Some of the programs SNAP-Ed provided in New Hampshire in fiscal year 2024, according to UNH Extension, were:
- In Manchester, 11 schools, serving nearly 6,000 students, implemented a strengthened wellness policy that guaranteed at least 20 minutes to eat lunch, ensured six annual nutrition lessons, and required staff training in nutrition education.
- At Dr. Norman W. Crisp Elementary in Nashua, all 385 students participated in school-wide breakfast events, increasing engagement and helping to reduce the stigma associated with school meals.
- NH SNAP-Ed, NH Hunger Solutions and New England Dairy Council co-lead the annual NH School Breakfast Challenge, which aims to boost student breakfast participation. School breakfast participation in New Hampshire is among the lowest in the country, the Extension said, yet breakfast provides consistent, nutritious meals that low-income students rely on.
- Provided resources and technical assistance to early childhood educators to incorporate evidence-based nutrition education and physical activity into their classroom routine.
- Partnered with the New England Regional Farm to Early Childhood Education Coalition to connect Head Starts to local food procurement and gardening opportunities,
- Helped lead the NH Nutrition Pantry Program, providing coaching and resources to food pantries across the state to expand their capacity and promote client-centered food distribution. In fiscal year 2024,15food pantries in the state partnered with SNAP-Ed to implement 61 changes aimed at improving nutrition access for clients.
- Doubled SNAP dollars for local fresh fruit and vegetables, which saves money, boosts nutrition, and supports local farmers and independent grocery stores.
- SNAP-Ed promotion efforts for Granite State Market Match and Double Up Food Bucks reached an estimated 12,128 people who might not have been reached otherwise.
- Supported 11 NH school and community gardens, providing hands-on educational opportunities to build food and nutrition security.
- Led 14 Walk with Ease programs across the state, helping participants increase their brisk walking by 72%.
- In Nashua, developed a comprehensive support system serving more than 100 low-income seniors across four housing sites, offering nutrition and wellness programs along with access to nutritious food, including local fresh produce.
- Launched a “Boost Your Brain & Memory” program, teaching participants to make lifestyle changes such as increasing physical activity and improving nutrition, to support brain health and healthy aging. Participants increased physical activity by 28% and consumption of vegetables by 38%.
Funding for health care clinics that provide abortion services paused. Federal Medicaid funding for any health care clinic that provides abortion services is paused for a year, beginning Oct. 1.
It isn’t just funding for abortion services that’s been cut, it’s for any services, including cancer screenings, STI testing, and prenatal care. Most smaller health care clinics rely on Medicaid funding as a big part of their budget, which means that these clinics will no longer be funded.
Millions of women rely on Planned Parenthood and other women’s health clinics for their primary care, particularly in rural areas where there aren’t many other options.
In New Hampshire, Planned Parenthood health centers serve nearly 10,000 patients annually at four health centers in the state, and about 20% of them are Medicaid recipients. And by the way, even though abortion is legal in New Hampshire, the state does not allow Medicaid to pay for it. So none of the Medicaid money that goes to these clinics is paying for abortion services.
The organization said that the funding cut “harms patients and hurts communities.”
“It would make it harder for patients, especially those on Medicaid, from getting basic, preventive care they rely on from their trusted provider,” the organization said in an August news release. “PPNNE health centers support some of the most vulnerable patients in our communities. PPNNE health centers are often the only health care provider a patient sees in a year. The consequences are devasting.”
In fiscal year 2024, PPNNE said its health centers in New Hampshire provided:
- 23,025 STI tests
- 5,455 visits for contraception, family planning and pregnancy testing
- 917 cervical cancer screenings
- 580 breast exams
“Even though this has nothing to do with abortion services, anti-abortion lawmakers are willing to sacrifice the affordable health care of patients here in New Hampshire – where abortion is legal,” the release said.
Added to the issue is that, since 2021, the state’s Executive Council has repeatedly rejected contracts for family planning services at health care clinics, which is also having an impact on health care services for women.
No more electric vehicle rebates and tax credits. Beginning Oct. 1, the rebate for low-to-moderate income people who bought a used electric vehicle and the tax credit for those who bought a new one, is gone. Buy the vehicle by Sept. 30 if you still want the financial break.
The rebate for used vehicles was $4,000 or 30% of sticker price. Buyers couldn’t make more than $75,000 for individual tax filers, $150,000 for joint filers and $112,500 for a head of household. The way it works is that when you file your taxes, you get a certificate for an immediate “tax credit,” that you bring to the dealer who sold you the car, and they give you the rebate. That means you still pay what you owe in taxes, but get the rebate, which, theoretically, offsets it.
Those who bought a new electric vehicle by Sept. 30 got a tax credit of up to $7,500. Income limit was $150,000 for individuals, $300,000 for joint filers and $225,000 for head of household. This is an actual tax credit that lowers the amount of taxes you owe when you file your return.
For both, there were restrictions on what cars qualified, including where they were made.
The $1,000 tax credit for installing EV charging equipment at a home or business ends June 30 next year, so if you’ve bought an EV, you still have time to get that done and get a tax credit for it.
No more clean fleet vehicle tax credit. If you own a business that has company vehicles, you may have been able to get the Qualified Commercial Clean Vehicle Tax Credit. Those also go away Sept. 30.
The credit was for vehicles used for business, not for resale. It was 15% of the vehicle’s cost for a plug-in hybrid and 30% for one powered solely by an electric motor or fuel cell. The maximum amount was $7,500 for vehicles that weigh less than 14,000, and up to $40,000 for those that weighed more.
No streamlined Medicare Savings Program enrollment. The Medicare Savings Program, administered by Medicaid, allows low-income individuals to save money before taxes to help pay Medicare Part B premiums.
Under the Biden administration, the Centers for Medicare & Medicaid Services finalized a rule to make MSPs more accessible and easier to enroll in. That was due to go into effect Oct. 1, but has been put off until Oct. 1, 2034.
Medicare Part B is for necessary medical treatment that’s not covered by standard Medicare, and people who get it must pay a premium, just like with private insurance. To qualify for MSP, an individual must be have income between 100% and 120% of the federal poverty guideline. The enrollment process is difficult to navigate, and the new rule was intended to help those who need the program by making the process easier.
Reach Award-winning Ink Link columnist Maureen Milliken at mmilliken@manchesterinklink.com