Tax Year 2025

Andreana Siu

Agenda

• Welcome/Introduction
• Sites and staffing updates
• What’s new in Federal and Oregon Tax Law this year
• TaxAide & TaxSlayer updates
• Common training questions
• Administrative requests

OrTaxvolunteers.org

• One stop for most of your what you need
• https://ortaxvolunteers.org
• Tool box & How-To’s: contains useful worksheets and references, many are new this year
• Dependent Sharing Spreadsheet NEW
• Medicaid Waiver Payment Tool 2025 NEW
• State INT/DIV Exemption Worksheet NEW
• Kicker Amount Links to most recent kicker. Kickers are only in odd numbered year
• Amending an Oregon Return *New
• Paid Leave Oregon
• AARP specific references & NTTC useful tax prep links (password: Tax3sRu$)
• Under State/District >> TaxAide Resources >> NTTC useful tax prep links (under Training Resources)
• Worksheets for new deductions under OBBB
• Qualified tip deduction worksheet for employees
• Qualified tip deduction worksheet for self-employed
• Qualified overtime deduction worksheet
• Qualified passenger vehicle loan interest deduction worksheet
• Tax Alerts

What’s New in 2025 – Federal�Changes to TCJA & Inflation Reduction Act

• The following temporary provisions under TCJA are made permanent.
• TCJA tax brackets and tax rates (annual indexing)
• Standard deductions (annual indexing)
• OBBB further increased the amount for 2025
• Single: $15,750
• MFJ: $31,500
• Heads of Household: $23,625
• Zero personal exemption amount
• The following under the IRA are terminated:
• New clean vehicle credit – 9/30/25
• Used clean vehicle credit – 9/30/25
• Energy efficient home improvements – 12/31/25

What’s New in 2025 – Federal�Administrative Changes

• IRS processing center closure: Cincinnati was removed as a mail-in address (LCs – please check mailing label address)
• New Forms or Form changes:
• Schedule 1A: used for additional deductions (no tax on tips, no tax on OT, no tax on car loan interest, enhanced deduction for seniors)
• Form 1099-DA for sale of digital assets (out of scope)
• Form 1040: dependent section has expanded to include more basic information
• Form 5695 (energy credit) now requires a PIN
• 1099-K: Revert to old 1099-K reporting threshold
• $20,000 and 200 transactions threshold for 2025 reporting requirements
• Forms can be issued, even if not required

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What’s New in 2025 - Federal�No Paper Check for Refund or Payment

• Refund by direct deposit.
• If TP wants paper check, it will not be immediately issued.
• IRS will send a letter to TP requesting the banking information or if there should be an exception to approve. Make sure that the TP keeps an eye out for the letter and respond.
• The whole process can take at least 60 days or longer for a refund by paper check.
• IRS discourages payment by paper check. In TaxSlayer, TP can use direct debit for taxes owed, or can use Direct Pay on IRS.gov website from either their checking account or add a debit or credit card (3% fee). TP can also set up payment in advance at IRS.gov/payments (e.g. for estimated taxes).
• Note: Oregon will still issue paper check for tax refund.

What’s New in 2025 – Federal�Summary of changes under OBBB

• Enhanced Deduction for Seniors
• No Tax on Overtime
• No Tax on Tips
• No Tax on Car Loan Interest
• Itemized deduction: increase in state and local tax (SALT) limit
• Child Tax Credit, Additional CTC, Credit for Other Dependent
• Energy efficient home improvement
• Trump account
• Premium tax credit

• Educator expense: definition expanded to include interscholastic sports admin and coaches. Qualified expenses also added expenses for supplies for Health and Phys Ed classes.
• 529 Plan: expands qualified education expense for elementary and secondary education, added post-secondary credentialing programs. For distributions after 7/4/2025
• Deductible charitable contribution: expanded to include all Veterans Services Organizations
• New codes for 2025 (more to come for 2026):
• 1099-R code Y for Qualified Charitable Distribution

What’s New in 2025 - Federal�Enhanced Deduction for Seniors (TY 2025-2028)

• $6,000 each for taxpayer and/or spouse who is age 65 or older.
• Must have valid social security number. No MFS.
• Phase out begins at $75,000 ($150,000 MFJ).
• Automatic entry by TS (form 1040 line13b or Schedule 1A)
• Note: All other new deductions (no tax on tip, OT or car loan interest) are manual entry into TS.
• Deduction unrelated to social security, itemized deductions or standard deduction

What’s New in 2025 - Federal�No Tax on Overtime (TY 2025-2028)

• New NTTC worksheet available for TP to fill out. Print and hand out with the intake form.
• Overtime must be FLSA (Fair Labor Standards Act) qualified overtime premium: defined as pay up to ½ the regular rate that exceeds the regular rate of pay.
• Examples: �(1) regular $40/hr., paid time and a half (1-1/2x) for OT, total OT = $60, deduction = $20 (divide total by 3) �(2) regular $40/hr., paid double time (2x) for OT, total OT = $80, deduction = $20 (divide total by 4).
• Overtime pay must be included on W-2, 1099-NEC or 1099-MISC.
• New 2026 W-2 Tax form will have new code in Box 12 for OT. For 2025, employer should furnish some documentation (e.g. listed on W-2 in box 14 or 1099 for the self-employed) or a separate statement to the employee. Paystub with end of year total can also be used if TP can provide total hours of OT, rate of OT & rate of regular hourly pay.
• TP (spouse) must have SSN. Must file MFJ, cannot file MFS.
• Maximum deduction: $12,500 ($25,000 MFJ). Phase out limit $150,000 ($300,000 MFJ).

What’s New in 2025 - Federal�No Tax on Tip (TY 2025-2028)

• New NTTC worksheet available for TP to fill out. Print and hand out with the intake form.
• Qualified tips up to $25,000, must be in a qualified trade and reported on a tax form.
• Must be voluntary tips paid in cash or by check or credit card or through tip sharing.
• Mandatory tip e.g. for large party does not qualify
• Employees: W-2 box 7 or 8, form 4137 (unreported tips), form 4070 (tips report to employer)
• Self-employed: 1099-NEC, 1099-MISC, 1099-K. TP cannot self report tip amount, must have documentation such as receipts, point-of-sale system reports, daily tip logs, third party settlement organization records etc.
• Cash tip not included on one of those forms does not qualify for the deduction but it must be reported as miscellaneous income (we cannot unhear what we have heard).
• Self-employed tip income deduction is limited to net profit from the business. It is not a Sch C expense.
• SSN required for tip earner, cannot file MFS
• MAGI phaseout starts at $150,000 ($300,000 for MFJ)
• Reduces QBI for QBI deduction

Eligible Trades for Tip Deduction

See back of the worksheet for detail.

• 100s – Beverage and food service
• 200s – Entertainment and events
• 300s – Hospitality and guest services
• 400s – Home services
• 500s – Personal services
• 600s – Personal appearance and wellness
• 700s – Recreation and instruction
• 800s – Transportation and delivery

Form 4173

Tip Income for the Self-Employed�QBI Deduction

• No tax on tips reduces the QBI for the QBI deduction.
• Currently TS is not automatically making this adjustment.
• Need to manually make the adjustment on Schedule C as a negative value.
• For the adjustment, use the smaller of:
• The tip amount from 1099-NEC, 1099-MISC or 1099-K
• Net profit of the business

What’s New in 2025 - Federal�No Tax on Car Loan Interest (TY 2025-2028)

• New NTTC worksheet available for TP to fill out. Print and hand out with the intake form.
• New vehicle for personal use or partial business use, with loan after 12/31/2024. Leased vehicle does not qualify. Cannot be loan from a family member. Lender to provide statement of interest paid.
• TP must provide VIN number and vehicle must qualify (final assembly in US). Use VIN decoder to check if vehicle qualifies.
• Valid SSN not required. MFS is also eligible.
• If the new vehicle bought in 2025 is later refinanced, the interest can also be deducted.
• Maximum deduction: $10,000. Phase out limit $100,000 ($200,000 MFJ).

What’s New in 2025 - Federal�SALT Limit Increase

• SALT (state and local taxes) deduction increased from $10,000 to $40,000 for itemized deduction in 2025.
• Indexed for inflation: 1% increase for TY 2026-2029.
• Revert back to $10,000 beginning 2030.
• Phase out starts at $250,000 ($500,000 MFJ).

What’s New in 2025 - Federal�Child Tax Credit & Credit for Other Dependents

• Child Tax Credit
• Taxpayer or spouse must have valid social security number (valid for employment). If MFJ, only one must have SSN.
• All qualifying children must have social security number.
• Permanent credit through TY2028 and indexed for inflation.
• 2025: $2,200 per child, up to $1,700 refundable.
• Credit for other dependents remains the same and is not indexed for inflation. SSN or ITIN is acceptable.

What’s New in 2025 - Federal�Energy Efficient Home Improvement

• Terminates as of 12/31/2025 => Last year for Form 5695
• Just as last year, must be for one main home and only Part II is in scope (doors, windows, skylights, insulation, home audits, central air, heat pumps, circuits to install items)
• New requirement effective 1/17/2025, must be sold by a Qualified Manufacturer (QM) who has entered into an agreement with the IRS.
• Any items placed in service on or after 1/1/2025 must have a 4-digit PIN of the item given by the QM. The PIN must be entered into the tax return to claim the credit. Exception for the PIN include audits and insulation.

What’s New in 2025 - Federal�Trump Account

• Any child under 18 who is a US citizen with a SSN may be eligible. For child born 2025-2028, government will deposit $1,000 in child’s account starting July 4, 2026. Must have SSN by date of election.
• Elected by TP for their child by filing form 4547 (new form), can be e-filed with tax return, e-filed by TP or paper file by the TP. Information will be sent sometime in May 2026 to TP who file this form.
• Parents/guardians can make contribution to the account ($5,000/year) and employer may contribute up to $2,500 per year but that contribution counts towards the $5,000 limit.
• Fund grows tax-free. When the child turns 18, account turns over to the child and it is subject to IRA withdrawal rules. Money cannot be spent before age 18.

Social Security Lump Sum Payment

• Lump sum payments affect 2 groups of recipients:
• People who applied for social security disability and it took longer than one year to get approval. They get retroactive pay. This is not a change.
• Federal employees under the CSRS pension plan do not pay into social security. If they have worked outside the federal government and paid into social security, their social security benefit can be reduced due to the Windfall Elimination Provision (WEP). The WEP provision was repealed in 2025 and those retirees have received back pay for their social security benefit.
• Refer to Publication 4012, page D69 on how to enter these payment. Need one worksheet for each year.

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Self Employment Health Insurance

• Self Employed individuals can deduct their health insurance (medical, dental, vision, drug, long-term care, Medicare premium).
• Include spouse and dependent children under age 27 who are covered under the parent’s plan.
• Even though it is entered under expenses for Schedule C, it is actually carried over to Schedule 1 part II as an adjustment.
• Amount entered under self-employment health insurance cannot be deducted under medical expenses for itemized deduction (Schedule A).

What’s New in 2025 - Oregon

• New subtraction codes for the new deductions
• Tip Income FY Code: 390 PY/N: Code 656
• Overtime Wages FY Code: 391 PY/N: Code 657
• Car Loan Interest FY Code: 392 PY/N: Code 658
• Enhanced Senior Deduction Not allowed
• TY2025 is the kicker year
• 9.863% of line 24 of TY2024 return
• Kicker rebate calculator on the Oregon DOR website. Link also on Ortaxvolunteers.org website under tools.
• Refunds for paper filed returns won’t be mailed or deposited until April.

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Tax-Exempt Interest/Dividend�What Does It Mean for the OR Return?

We now have a calculator from the Colorada Resource Toolbox.�Ortaxvolunteers.org under Tools�OR�https://cotaxaide.org/tools/State%20DIV-INT%20Worksheet.html

Demonstration: Hayashi Case (2025 Proficiency Problem)

Tax-Exempt Interest or Dividends�How to Enter the Oregon Adjustments?

• For interest income, report on the federal 1099-INT form.
• For dividend income, report on the federal 1099-DIV form.

Amending an Oregon Return�Federal Income Tax (FIT) Liability Subtraction

• Amended returns can be e-filed for TY23 and TY24.
• Covered in this year’s deeper dives module.
• Federal Income Tax Liability (FIT liability) – line 10 on form OR-40
• Write down the FIT liability number from the original return.
• After all the changes are entered, write down the FIT liability number from the amended return (this is the corrected FITL).
• “Do you need to use a different federal tax liability for your amended return?”
• If amending an Oregon return before the due date of the original return, answer “No”.
• If amending an Oregon return after the due date of the original return, answer “Yes”.
• Enter the original FIT liability subtraction number into the box labeled “Federal tax liability for amended if different than calculated amount”.
• If no changes were made to the federal return, answer “No” since the FITL will not change.

Amending an Oregon Return�Changes to the following year’s return

• Changes to the following year’s Federal return
• If the amended Oregon return results in additional Oregon tax due- and the taxpayer actually pays it - this amount is itemizable on federal Schedule A for the year it was paid.
• If the amended Oregon return results in an additional refund, then it will be reported on the 1099-G from Oregon. If the client itemized deductions for the amended year, write a note in TaxSlayer that the Carryforward of State and Local Refunds may need to be adjusted.
• Changes to the following year’s Oregon return
• If the original FIT liability subtraction is less than the corrected FIT liability subtraction: claim an Oregon subtraction (code 309 for form OR-40) or Modification (code 602 for form OR-40N or OR-40P) for the difference on the Oregon return for the following year.
• If the original FIT liability subtraction is more than the corrected FIT liability subtraction: enter an Oregon Addition (code 109 for form OR-40) or modification (Code 601 for form OR-40N or OR-40P) for the difference on the Oregon return for the following year.
• If there is a Subtraction, Addition, or Modification for the following year Oregon return, put a note in TaxSlayer that advises of this. Also write a note on the taxpayer’s amended return document envelope.

Local Taxes – Why Are We Addressing It This Year?�Because the Penalty Is Steep

• Multnomah Preschool Tax & Metro Supportive Housing Tax
• 5% of unpaid tax for late filing or late payment if not paid by 4/15. No late filing penalty if an extension is filed. No extension to pay even if an extension is filed.
• An additional penalty of 100% of the unpaid tax of all tax years if the failure to file or failure to pay is for three or more consecutive tax years.
• Tri-Met Transit Tax
• 5% if not paid by 4/15.
• Goes up to 25% if unpaid for more than 3 months after the due date.
• 100% penalty if TP fails to file for 3 consecutive years by the due date of the third year.
• Multnomah/Portland business tax
• 5% penalty if the failure to pay or to file is for a period of less than 4 months.
• Additional 20% penalty (total 25%) if it is 4 or more months past due.
• Additional 100% penalty if delinquent for 3 or more consecutive years.

Oregon Local Self-employment Taxes�Forms Available in TaxSlayer

Form TM – Tri-Met Tax

Metro Housing Tax�https://pro.portland.gov

Metro’s Jurisdiction

• Includes 24 cities and unincorporated portions of Clackamas, Multnomah and Washington counties.
• Stretches from Forest Grove to Troutdale, south to Wilsonville.
• Cities outside the Metro’s jurisdiction: North Plains, Banks, Gaston, Canby, Estacada, Sandy, Corbett and Sauvie Island.
• To determine if address is within the Metro’s jurisdiction:�https://gis.oregonmetro.gov/metro-boundry-lookup/

Intake Booklet: Three Consent Forms

• Either the client facilitator or the counselor should review the consents with the taxpayer.
• The consents are optional.
• Order matters when entering into TaxSlayer

TaxSlayer Notes section

• Should be used to indicate if a return was paper filed and why.
• When a taxpayer is contacted to come back with additional documents so we can complete the return or if they left a document. Also document if they don’t return and if anything is shredded.
• Amended Oregon returns:
• Any changes that need to be made on the Federal return for the following year.
• Any addition, subtraction or modification on the Oregon return for the following year.
• Basically, document everything out of the normal in the notes

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What to do if the Taxpayer forms are on their phone?

• No email, text or mailing to or from us of personal documents
• We can view documents on a Taxpayer’s phone or other device
• The TaxSlayer customer portal can be used to have documents on phones shared with us. To do this:
• Start the return with the basic information
• Invite the taxpayer to the customer portal
• The taxpayer receives the request in their email and can quickly sign up
• Taxpayer can upload the documents from the phone to portal
• We can print the document
• The Taxpayer can get an electronic copy of their return from the portal
• At some sites there may be an outer router that the taxpayer can access to print documents. See your LC

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Reminder Zero $ AGI

• Zero $ AGI
• Do not enter $1 as other income, return will be rejected
• Do enter $1 as interest income
• No EIN is necessary
• Where you would normally enter payer, instead enter “for efile purposes only”
• To e-file, see NTTC 4012 pg. A-6 bullet 12

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Reference/ back up

What’s New in 2025 - Federal�Premium Tax Credit

• Enhanced premium tax credits has expired on 12/31/25 unless Congress extends it.
• Income-based special enrollment periods eliminated – 8/25/25
• DACA individuals are ineligible for marketplace coverage – 8/25/25
• Additional paperwork and verification by marketplace – 8/25/25

Print Sets need to update when available

• OR file copy- this is used for returns that are efiled. Update-called OR client copy
• OR federal paper
• OR federal and state paper
• OR 8879, vouchers prints only 8879 and vouchers
• Do not modify these to reduce the number of pages. Certain pages included some worksheets are required by the IRS. Worksheets not used in the return will not print. The site review will now include a check to ensure sites are printing consent forms, making it a "does not meet standards" if they are not.
• May add cover page if not included.

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Out of Scope Deductions

In the past we may have told taxpayers with out of scope deductions that we could do their return if they didn’t take this deduction. Examples are if they donated a car, bought an electric car or solar panels

This is INCORRECT according to SPEC Manager.

• “As a VITA/TCE provider, tax returns with out-of-scope topics need to be advised the tax return is out-of-scope and VITA/TCE sites may not prepare the return. An out-of-scope tax topic may have more impact on the tax return than a VITA/TCE volunteer would know as out-of-scope topics are not covered within VITA/TCE training and quality products. For example, the Clean Vehicle Credit may impact more than a credit on the tax return if the taxpayer transferred the credit to the dealer at the time of purchase (to reconcile the credit on their return). As this is an out-of-scope topic not being covered during VITA/TCE training, VITA/TCE sites may not be aware of this potential impact.”
• To confirm: if a taxpayer is eligible for a credit or deduction that is out-of-scope, even if the taxpayer decides not to claim the credit or deduction, the return continues to be out-of-scope and the taxpayer should be referred to a paid preparer. This is why I had given the response/guidance I did at the Fall Planning Meeting.

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Federal Estimated Tax

Oregon Estimated Tax

• Publication for TY2025 is available on DOR website.

https://www.oregon.gov/dor/forms/FormsPubs/publication-or-estimate_101-026_2025.pdf

• Page 4 is the worksheet to calculate the estimated tax payment