Child Tax Credits, Tips, and Overtime: New Tax Breaks?

Money Explainers

Big changes are coming to the Child Tax Credit! Find out if you'll see more money in your pocket and how immigration status could play a role. No taxes on tips and overtime? Not quite. Learn about the new proposed deductions and how they could benefit workers in various industries. What are "Trump accounts" and how could they benefit children born in the coming years? We break down this unique provision in the new bill.  #ChildTaxCreditUpdate.  #TipsAndOvertimeTax. #TrumpAccounts.

Transcript

00:00President Trump's one big, beautiful bill aims to deliver on some key campaign promises,

00:06offering new tax breaks that could impact families, gig workers, and those earning tips and overtime.

00:14One significant area is the child tax credit.

00:17Currently at $2,000, it would shrink to $1,000 if the 2017 tax cuts expire.

00:24However, both the House and Senate bills propose increases, though with differences.

00:30The House bill would raise it to $2,500 from 2025 to 2028, with inflation indexing thereafter,

00:38while the Senate version permanently increases it to $2,200 and links it to inflation from the start.

00:46The debate over the child tax credit also touches on immigration.

00:50While children already need Social Security numbers for eligibility,

00:55the House bill requires all parents on the return to have one.

00:58The Senate text is slightly less stringent, requiring the taxpayer and at least one spouse in a married couple to have a Social Security number.

01:08For those earning tips and overtime, the bill introduces new deductions, fulfilling a major Trump campaign pledge.

01:16These are deductions, not outright exemptions.

01:19The House version offers a deduction equal to the full amount of tips or overtime,

01:25while the Senate caps the tip deduction at $12,500 per individual or $25,000 for married couples.

01:34Both versions include income limitations to prevent wealthier taxpayers from claiming the deductions,

01:40with thresholds varying between the House and Senate.

01:43These provisions, despite some ongoing flux, appear largely destined to become law,

01:50offering a tangible financial benefit to millions of workers, money explainers.

01:54Explaners.

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