For Your Consideration
Mike Lowry
Congress passed the One Big Beautiful Bill this year and gave taxpayers a special Christmas present when they file their 2025 federal income tax due April 15, 2026. Especially helped are low- and middle-income Americans, senior citizens, and even some children.
Senior citizens will have an extra $6,000 standard deduction for individuals 65 or older. For married couples, this deduction can total $12,000. This deduction is expected to allow 88% of Social Security recipients to pay no federal income on their benefits.
Employees and self-employed individuals can deduct qualified tips they receive up to a maximum annual deduction of $25,000. Other workers can deduct qualified overtime compensation up to $12,500. These two deductions are available for tax years 2025 until 2028 tax year. An American child born after Dec. 31, 2024, and before January 1, 2029, can have a special account called a Trump Account established. The account will receive a $1,000 donation deposited from the government. Parents can contribute up to $5,000 additional money to the child’s account and the parents’ employers also can make an annual contribution to the child’s account up to $2,500 (this contribution would be at the employers’ option and any such donation from an employer is not viewed as taxable income to the employee). Money in the account can be invested in a variety of mutual fund type of programs investment programs.
The account belongs to the child, but the funds are locked away until the child reaches adult age. At 18, the child can make a partial withdrawal of funds for college or vocational training costs or to other employment opportunities.
At age 25, the child can gain full access to the full amount for these approved purposes. Only at age 30 will the former child be allowed to use the money freely for anything they choose.
How much the Trump Account will grow is dependent on many factors but the $1,000 initial contributions with no other money contributions will grow to an estimated $5,000 to $6,000 when the child is 18 and about $18,000 when the child reaches age 28. This amount would be greatly increased with annual additional contributions by parents and employers.
The Trump Accounts cannot be opened until July 4, 2026, and contributions can be made at that time. More details can be found on the IRS website and forms can be found.
Overall, taxpayers will also benefit from the new increase in the standard deductions. The standard deduction for the 2025 tax year will now be $15,700 for single filers and $31,500 for married couples fi ling jointly. T he standard deduction for 2026 tax year will increase and become $16,100 for single filers and $32,200 for married couples filing jointly.
The standard deduction is the fixed amount the IRS allows you to deduct from your annual total income if you don’t itemize deductions on your tax return. This determines what your taxable income is. The lower your taxable income, the lower your tax bill.
The government has adjusted the tax brackets to reflect inflation, which helps to prevent “bracket creep,” where taxpayers are pushed into higher tax brackets due to inflation without an actual increase in real income.
The changes to the standard deduction and tax brackets mean taxpayers may have a reduction in their overall tax burden for 2025 over 2024 and even further deduction when filing their 2026 tax return.
Congress has finally given us a tax bill that is not full of loopholes for the rich and powerful but seeks to benefit average Americans. Special thanks to those, including our 6th District Congressman Ben Cline, responsible for getting the new tax laws passed.
Important Update
As I was preparing this column, it was announced Michael and Susan Dell have made one of the largest philanthropic commitments in modern U.S. history by pledging $6.25 billion to support the Trump Accounts in the new tax bill.
Dell’s money will create similar accounts for children under 10 years of age born before 2025 and thus not eligible for the $1,000 government-funded program. The money is expected to create a $250 donation to these American children. It is estimated their donation will fund roughly 25 million children.
To be eligible for the Dell program, the children must live in zip codes where the median household income is below $150,000. (The 2023 median income for Rockbridge County was $63,975 in 2023, up from $61,903 in 2022, so area children under 10 born before 2025 are eligible for this money.)
To apply, go to the IRS website and make a copy of IRS Form 4547 to open a Trump Account on behalf of the child. This form can be used to create a fund or to apply for either the $1,000 federal fund or for older children of qualifying age for the Dell contribution funds.
