KSHB 41 reporter Grant Stephens covers downtown Kansas City, Missouri. He also focuses on stories of consumer interest. Share your story idea with Grant.
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With less than two weeks until the federal tax filing deadline, two new deductions are drawing attention. One deduction is for tipped workers and another is for seniors. Both could mean significant savings for qualifying taxpayers.
The tip deduction, approved under recent federal law, applies to tipped or hourly workers and allows qualifying earners to shield up to $25,000 in tips from federal taxation. Experts say those tips must be voluntary, meaning they are not automatically added to a bill as a gratuity. Taxpayers must keep detailed records including receipts and logs to claim the benefit.
Registered financial consultant Scott Dougan emphasized the importance of record-keeping.
“As long as you abide by those rules and keep track of everything and have all of your receipts, all your records, that's where you get the maximum impact for deducting the tips.” Dougan said.
When combined with the standard deduction, which is currently just over $15,000 for single filers and $31,000 for married couples filing jointly, the tip deduction can protect a combined $40,000 of income from federal taxes for single filers.
The second new deduction is aimed at older Americans. Sometimes referred to as a “senior bonus” deduction, it stacks on top of the standard deduction to shield more income for those who qualify.
Eligibility comes with income limits of $75,000 for single filers and $150,000 for married couples filing jointly. Crossing that threshold can begin phasing out the benefit.
Dougan warned that actions such as moving money from an IRA to a Roth account or taking a part-time job can push income past the limit, reducing or eliminating the deduction.
“So where that definitely comes into play, starting this year, is if you're doing a lot of tax planning, we're saying, 'Hey, I move money from my IRA to my Roth.' Well, that IRA money is going to fall into your 1040 and raise your limit, and you may phase yourself out of those things. So you've got to be very careful of where you're taking money from to supplement your Social Security, things like that, because you may just lose those deductions” Dougan said.
Both deductions are currently set to last through 2028, though tax experts say they could be extended. For now, they offer a valuable opportunity for taxpayers to protect more of their income if they plan carefully and track every dollar.
This story was reported on-air by a journalist and has been converted to this platform with the assistance of AI. Our editorial team verifies all reporting on all platforms for fairness and accuracy.
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