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Yahoo
20 hours ago
- Automotive
- Yahoo
Financing a Car? Find Out If This New Tax Deduction Could Lower Your Costs
There are several ways to buy a new car, from purchasing one outright with cash to financing it through a car loan. Now, however, a provision in the recently passed One Big Beautiful Bill (OBBB) provides a little tax incentive for anyone thinking of financing a car through 2028. Find Out: Read Next: 'As of 2025, when you buy an automobile for personal, nonbusiness use, not a lease, a loan you borrow for it can be deductible for interest. It hadn't been deductible for a while, so it's a significant change,' according to Alex Black, CMO of EpicVIN. Find out if this tax deduction can make it cheaper for you to finance a new car. What the Provision Says Effective immediately (and retroactively through 2025), for any car purchased between 2025 and 2028, you may deduct interest paid on a loan of a 'qualified vehicle' so long as the vehicle is for personal use. A qualified vehicle, according to the IRS page, 'is a car, minivan, van, SUV, pick-up truck or motorcycle, with a gross vehicle weight rating of less than 14,000 pounds.' This only applies to new vehicles, so used car buyers will have to find other ways to justify their purchases. Learn More: Focus on American Made For lovers of Japanese, German and other overseas carmakers, there won't be as much tax incentive for you. Ruth Calkins, auto expert and general manager at Findbyplate, pointed out that 'The OBBB limits its tax deductions to American assembled new vehicles alone, and does not include a provision for used vehicles, much less those assembled outside America.' While there's a lot of gray area around whether a car has been fully made or assembled in the U.S., you'll be able to get this answer through your car's vehicle identification number (VIN). However, unlike the clean vehicle tax credit that only covers electric vehicles (EVs), the OBBB vehicle loan deduction is more inclusive and accommodating of both internal combustion engine vehicles and EVs, Calkins said. And, since that EV credit is going to be phased out after Sept. 30, 2025, this might be a good way to get a bit of a break. Be Aware of Income Limitations While there is a limit on how much interest you can deduct, 'as long as the vehicle satisfies the eligibility requirements, the vehicle qualifies for the tax deduction,' Calkins said. Apart from the loan origination date, Calkins said, 'another caveat that buyers should take note of before daydreaming about all the things they could do with this tax break come next taxing season, is the income limitation.' Additionally, given that the deduction only extends to individual consumers with a modified adjusted gross income (AGI) of $100,000 or less, and $200,000 for those filing jointly, many people will not qualify for this deduction. Itemizers Only There's one more caveat, Black said. 'You will have to itemize your deductions in order for you to claim it, something not everyone does anymore since the standard deduction went up.' So, if you normally take the standard, this may not help you. What If You Bought a Car This Year Already? If you already took out a loan on an otherwise qualifying vehicle and you're wondering if you're eligible based on purchase date, the key is simple: If you purchased it in 2025, you can still qualify for the deduction. 'However, if you are already in a car loan [from 2024 or earlier], sorry — no discount for you,' Black said. How Much Can You Save? How much you can save will depend on how much you borrow and your interest rate, Black said. However, it is worth noting that the average person taking advantage of this tax break isn't going to spend anywhere close to $10,000 in auto loan interest in a year. According to car website Edmunds, you'd have to take out an auto loan of around $112,000, which is more than double the average price of a new vehicle, to even pay that much in annual interest. Let's say you did take out a $25,000 loan at 7% interest, Black said 'You'll pay roughly $1,750 in interest in year one. If you're in the 22% tax bracket, you might get nearly $400 off your tax bill. Not bad.' Overall Impact on Auto Buyers? Black suggested the tax credit may make more people choose buying over leasing and it can also soften the blow of rising interest rates a bit. 'It won't make a significant impact, though, but it could very well decide for price-conscious buyers.' More From GOBankingRates 7 Things You'll Be Happy You Downsized in Retirement This article originally appeared on Financing a Car? Find Out If This New Tax Deduction Could Lower Your Costs Error while retrieving data Sign in to access your portfolio Error while retrieving data Error while retrieving data Error while retrieving data Error while retrieving data
Yahoo
2 days ago
- Business
- Yahoo
The Impact of Trump's Big, Beautiful Bill on the Middle vs Upper Class
While there are still more than three years to go, one of the most consequential acts of President Donald Trump's second administration will likely be his signing of the One Big Beautiful Bill (OBBB) Act into law. Read More: Find Out: The OBBB was quite controversial — even among Trump's fellow Republicans — due primarily to its projected cuts to Medicaid, as well as its addition of trillions of dollars to America's national debt. Due to those controversial elements (among many others), the budget reconciliation law is expected by its supporters and opponents both to reshape America's economic landscape for years, if not decades, according to Newsweek. Critics of the OBBB, per The Guardian, have argued that it will ultimately only benefit America's wealthiest citizens while also cutting the benefits from the struggling and shrinking middle class. Meanwhile, Republicans have defended the law as one that will slash and burn excess taxation. So, which is true? Who does the OBBB benefit, if anyone? Who does it harm, if anyone? The Middle Class While the OBBB's detractors will argue that the law will do nothing but harm to the American middle class, there are benefits. For instance, the Child Tax Credit was increased to $2,000 per child per family (up from $1,000 previously). There were also changes made to the nature of tax withholdings, which allows workers to slightly increase their take-home pay; further, members of the middle class were able to increase their standard tax deductions and reduce their income tax rates. While these are concrete changes they do remain relatively minimal by comparison to the benefits bestowed upon the upper class. These middle class tax cuts of the OBBB are all set to expire at the end of 2025. On the opposite end of the spectrum, there are potential negatives for the middle class with regards to the OBBB. Perhaps most palpable will be the cost of an additional $3-6 trillion to the federal deficit — the cost of the OBBB will almost surely lead to much higher interest rates. Higher interest rates mean higher prices for nearly everything — financing a new car or home, stopping at the gas pump, and especially shopping at the grocery store. The inflation rate hangover of the COVID-19 era was a major factor in the American middle class in the 2024 election; the cost of the OBBB will certainly be felt by sensitive middle class shoppers in the years to come. The Upper Class In contrast to the middle class, the wealthy stand to gain a great deal from the OBBB. Specifically, the richest 20% of America will see its net income increased by approximately $13,000 per year thanks to various OBBB tax breaks. Speaking of tax cuts, the corporate tax rate was slashed from 35% to 21%, a massive break for the extremely wealthy who either own businesses or rather sizeable stock options. In addition, the Estate Tax exemption nearly doubled, allowing wealthy families the ability to pass on various familial assets valued up to $11 million without any tax penalties. Of note, these upper class tax cuts of the OBBB are permanent, unlike those for the middle class. Bottom Line While there are some benefits to the middle class in the OBBB, it's worth noting that most if not all of them are not only temporary but are rather minor when compared to the massive benefits bequeathed to the American upper class. Additionally, what benefits the middle class does receive are temporary, while those awarded to the upper class are permanent. Overall, the wealthy stand to gain far more than the middle class when it comes to the OBBB. Editor's note on political coverage: GOBankingRates is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. You can find more coverage of this topic on More From GOBankingRates 3 Luxury SUVs That Will Have Massive Price Drops in Summer 2025 4 Affordable Car Brands You Won't Regret Buying in 2025 The 5 Car Brands Named the Least Reliable of 2025 This article originally appeared on The Impact of Trump's Big, Beautiful Bill on the Middle vs Upper Class Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
3 days ago
- Business
- Yahoo
President Trump Promised to End Social Security Benefit Taxes. Here's What Seniors Are Getting Instead
Key Points The One Big, Beautiful Bill (OBBB) added a new $6,000 senior tax deduction. This will help many -- but not all -- seniors on Social Security save money on taxes. It's a far cry from the savings that would come from actually ending Social Security benefit taxes. The $23,760 Social Security bonus most retirees completely overlook › "Promises made, promises kept." That's how a recent White House article celebrated the One Big, Beautiful Bill's (OBBB) new senior tax deduction, set to take effect for the 2025 tax year. The Trump administration has claimed that, as a result of this change, 88% of seniors on Social Security won't owe any taxes on their Social Security benefits -- a follow-through on one of President Donald Trump's biggest campaign promises. It certainly sounds compelling, but as someone who's been writing about Social Security for years, it only took me one look at the data to realize that the OBBB change was far from an end to benefit taxes. The new deduction will help many seniors to a degree, but you need to understand what it is -- and isn't -- to know what kind of a difference it will make for you. How the OBBB senior tax deduction works The OBBB added a new $6,000 tax deduction for seniors 65 and older ($12,000 for married couples). This is on top of the standard deduction for their filing status, which the law also increased from $15,000 to $15,750 for single adults and from $30,000 to $31,500 for married couples, and the existing senior tax deduction ($2,000 for an individual or $1,600 per qualifying individual for a married couple). Tax deductions reduce the portion of your income you have to pay taxes on. For example, if you earned $50,000 this year and qualified for $15,000 in tax deductions, you'd only owe taxes on the remaining $35,000. So the OBBB change is definitely useful. It means you'll owe taxes on less money than you did before. That said, not everyone will be able to take advantage of this new deduction. Single adults with incomes over $75,000 and married couples with incomes over $150,000 will see their deduction decrease by $60 for every $1,000 by which their income exceeds these thresholds. Single adults with incomes greater than $175,000 and married couples with incomes exceeding $250,000 won't be able to claim the new deduction at all. So far, we can already see two key differences between the OBBB senior deduction and Trump's promise to end benefit taxes. Seniors under 65 receive no benefit from the OBBB deduction, even if they're on Social Security, and high earners who would have benefited from ending benefit taxes will experience no gains from this new change. But there's another big distinction to be made between Trump's promise and what he delivered. The tax savings fall far short of what Trump promised The OBBB senior tax deduction will give the average senior about $670 more in after-tax income, according to a Council for Economic Advisors report. But that's a far cry from the gains that would come from ending the benefit taxes that are still on the books, even after the OBBB's passing. Let's look at the example of a single 65-year-old who takes $50,000 from a 401(k) in 2025 and has annual Social Security benefits of $24,000. The government decides what percentage of your Social Security benefits to tax by looking at your provisional income -- your adjusted gross income (AGI), plus any nontaxable interest from municipal bonds, and half your annual Social Security benefit. In this case, that's $62,000. Then, it compares this amount to the following chart. Marital Status 0% of Benefits Taxable If Provisional Income Is Below: Up to 50% of Benefits Taxable If Provisional Income Is Between: Up to 85% of Benefits Taxable If Provisional Income Exceeds: Single $25,000 $25,000 and $34,000 $34,000 Married $32,000 $32,000 and $44,000 $44,000 Data source: Social Security Administration. Under Social Security benefit tax rules, 85% of their benefits would be taxable and get added to their AGI, bringing it to $70,400. So what does this mean for their taxes? The following table outlines this person's tax bill under pre-OBBB law, with the new OBBB standard and senior deductions in place, and in a scenario where the OBBB hadn't passed and benefit taxes were eliminated instead. Pre-OBBB Law With OBBB Senior Deduction If Benefit Taxes Were Eliminated 401(k) Withdrawals $50,000 $50,000 $50,000 Social Security Benefits $24,000 $24,000 $24,000 Adjusted Gross Income (AGI) $70,400 ($50,000 from 401(k) + $20,400 of SS benefits) $70,400 ($50,000 from 401(k) + $20,400 of SS benefits) $50,000 from 401(k) Standard Deduction for Single Filers $15,000 $15,750 $15,000 Senior Deduction $2,000 $8,000 $2,000 Taxable Income $53,400 $46,650 $33,000 Taxes Owed $6,662.00 $5,359.50 $3,721.50 Source: Author's calculations. In this example, the OBBB senior deduction and the increase to the standard deduction for all single filers would result in $1,302.50 in tax savings. However, eliminating Social Security benefit taxes would've saved $2,940.50 in taxes, even without the new deductions in place. So the Council of Economic Advisors' claim that 88% of seniors on Social Security won't pay any benefit taxes isn't accurate. The report says this is a result of "their total deductions exceeding their taxable Social Security benefits." But if we follow this logic, we could say that single filers who had $16,550 or less in taxable Social Security benefits in 2024 (equal to the $14,600 standard deduction for single filers plus the $1,950 senior deduction that year) didn't pay taxes on their Social Security benefits, when we know that's not true. If you have taxable Social Security benefits, you are paying taxes on them. The OBBB didn't do anything to change how benefit taxation works. An increasing number of seniors will encounter this tax as average benefits and living costs continue to rise. The OBBB's new senior deduction may provide a bit of relief, but it's a small gain compared to Trump's initial promise. It's also, for the moment, a limited-time offer. The law says it only applies until the 2028 tax year. Congress will have to decide whether to extend it for future years. Whether the government will actually end benefit taxes remains an open question. Many seniors want it to do so, but with Social Security facing insolvency, the program could really use the benefit tax revenue right now. However, if Congress makes broader changes to the program in the next few years to keep it sustainable for future generations, talk of ending benefit taxes may resurface. The $23,760 Social Security bonus most retirees completely overlook If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known could help ensure a boost in your retirement income. One easy trick could pay you as much as $23,760 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Join Stock Advisor to learn more about these Motley Fool has a disclosure policy. President Trump Promised to End Social Security Benefit Taxes. Here's What Seniors Are Getting Instead was originally published by The Motley Fool Sign in to access your portfolio
Qatar Tribune
3 days ago
- Business
- Qatar Tribune
Disentangling the economic implications of ‘Big Beautiful Bill'
The One Big Beautiful Bill (OBBB) will stand in history as one of the most impactful and disruptive initiatives of the second Trump Presidency. Spanning close to 900 pages, it took shape after months ofgruesome negotiations and political maneuvering in Congress. It finally passed by narrow margins in the Senate and House, with 51-50 and 218-214 votes respectively, before President Trump signed it into law on July 4th, the US Independence Day. At its core, the bill enacts significant changes to the US tax code, extending and expanding tax cuts for high income individuals and corporations, while scaling back funding for safety-net programs, and re-defining spending priorities. The reforms sparked intense debates over its distributional impact and long-term sustainability. Given the magnitude and span of the OBBB, its macroeconomic implications are substantial in scale, and wide-ranging in scope. In this article, we analyse the main aspects of the OBBB along three key dimensions. First, the bill is set to have a meaningful expansionary impact on the economy over the next decade. According to estimates by the Congressional Budget Office (CBO), real GDP would increase on average by 0.5% over the 2025-2034 period, relative to a scenario without the implementation of the bill. This is a relevant impact on the economy, considering that average annual economic growth in the US has been 2.2% over the last two decades. The effects would be largest in the short term, with the bill boosting GDP by 0.9% in 2026. The initial push in economic activity would come to a large extent from an increase in aggregate demand, due to higher disposable income for more prosperous households, and items that incentivize investments. Beyond 2026, lower tax rates will improve the incentives to work, increasing labour participation and working hours and, therefore, promoting growth. Overall, the different growth mechanisms point to a positive and significant boost to economic activity. Second, the OBBB will substantially increase the US federal deficit and the path of debt in the coming years. The bill includes a battery of measures that will put pressure on public finances, including the extension of tax cuts, reduced corporate tax revenues, and expanded deductions. On the other hand, some spending cuts are included, mainly targeting entitlements and safety-net programs, but are smaller in relative terms. Over the period between 2025 to 2035, the bill would add an estimated USD 4.6 trillion to the deficits. As a result, federal debt is expected to reach close to 128% of GDP by 2034, its historical maximum. This far surpasses the 119% mark reached in 1946, when the country was absorbing the costs of the World War II economy and the immediate post-war recession. The sizable increase in the volume of US Treasury debt will certainly test the appetite of international markets, leading to a rise in interest rates. The increase in the supply of Treasury instruments will result in a fall in their price, and therefore an increase in yields. The CBO and Yale Budget Laboratory estimate the OBBB will increase interest rates on 10-year Treasury notes by an average 14 to 30 basis points (b.p.) over the period 2025-2034. This increase in debt costs is not negligible, but it is not exceptionally disorderly considering fluctuations in yields that are typically observed on any given year. Although the upward shift in the trend of debt is substantial and raises some long-term sustainability concerns which eventually need to be addressed, it is unlikely that these dynamics will generate major disruptions in financial markets over the next 10 years. — By QNB Economics
Yahoo
4 days ago
- Business
- Yahoo
Why the Social Security Administration Loves Trump's ‘Big Beautiful Bill' — Should You?
President Trump campaigned with the promise to end taxes on Social Security. The One, Big, Beautiful Bill (OBBB) is Trump's cornerstone piece of legislation aimed at making that promise a reality. While seemingly welcome news to the near 58 million beneficiaries aged 65 and older (according to the Social Security Administration [SSA]), the pledge isn't exactly as it seems. Check Out: For You: Upon passage of the OBBB, the SSA hailed provisions that it says will benefit Social Security recipients. Here's why the SSA loves the OBBB and what it really means for retired Americans. Why the SSA Loves it According to the SSA, a significant number of beneficiaries depend on monthly Social Security checks for at least half of their income. Knowing this, the SSA is actively highlighting the relief now available to recipients. 'The bill ensures that nearly 90% of Social Security beneficiaries will no longer pay federal income taxes on their benefits, providing meaningful and immediate relief to seniors who have spent a lifetime contributing to our nation's economy,' the SSA said in a press release. Before passage, only 64% of retirees didn't pay taxes on Social Security benefits, according to the White House. Putting more money into the wallets of retirees is a good thing, and the SSA is wise to promote the fact. See Next: Yes, If You're at the Right Income Level The OBBB was a massive piece of legislation, with a reported 900 pages, according to NPR. However, one thing is clear — the OBBB doesn't eliminate taxes on Social Security benefits. Thanks to the Byrd Rule, it wasn't able to do that, according to CBS News. What the OBBB does provide is a new deduction for retirees of $6,000 per person, providing an indirect benefit for individuals on Social Security. The deduction is available to both people who take the standard deduction or itemize. If you're married, both spouses can claim the deduction, but there is a phaseout. 'The deduction will phase out at a 6% rate when modified adjusted gross income exceeds $75,000 for single filers and $150,000 for joint filers. The deduction is fully phased out at $175,000 for single filers and $250,000 for joint filers,' per the Tax Foundation. The deduction isn't indefinite as it ends at the end of 2028. For middle-class retirees, this could be a beneficial, albeit temporary, way to reduce taxes. No, If It Doesn't Impact You It's easy to hear headlines that there's no more taxes on Social Security and think it's a good thing. Unfortunately, there's more beneath the surface. Not all retirees will feel the impact of the new deduction for older Americans. Lower-income retirees will see little to no change, according to the Tax Foundation, 'Those taxpayers are already exempt from taxation on their Social Security benefits.' No, If You're Concerned About Social Security Lasting Trust funds will deplete by 2034, a year sooner than anticipated, according to the SSA. Understandably, some retirees or near-retirees may feel nervous about possible insolvency. The OBBB may worsen the situation. Bobby Kogan, senior director of federal budget policy at the Center for American Progress, said to CBS News that we're already facing an issue with insufficient funds being contributed to the trust fund. And this bill would result in even less money being added to it. The Committee for a Responsible Budget (CRFB) confirmed this concern. 'OBBBA would impact Social Security and Medicare indirectly, mainly by reducing the revenue collected from the income taxation of Social Security benefits, which is deposited into the Social Security and Medicare trust funds,' said the CRFB. This reality may make it necessary for politicians to do something many don't want to see: slashing benefits. This is a key reason why anxious Americans view the changes with apprehension. The OBBB provides some benefits to Americans on Social Security, but they're largely temporary. While the SSA excitedly announced the changes, due diligence is essential to see if it's good for you. Editor's note on political coverage: GOBankingRates is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. You can find more coverage of this topic on More From GOBankingRates Mark Cuban Warns of 'Red Rural Recession' -- 4 States That Could Get Hit Hard I'm a Retired Boomer: 6 Bills I Canceled This Year That Were a Waste of Money 10 Used Cars That Will Last Longer Than an Average New Vehicle This article originally appeared on Why the Social Security Administration Loves Trump's 'Big Beautiful Bill' — Should You? Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
