Tax season is stressful for many small business owners. Between managing daily operations, serving clients, and growing your business, navigating complex tax laws can feel overwhelming. While handling taxes yourself may seem like a cost-saving solution, it often leads to mistakes, missed deductions, and even audit risks. The good news? Outsourcing your taxes to a professional CPA can save time, reduce stress, and even increase your financial savings.

The Hidden Costs of DIY Taxes

Trying to manage taxes on your own can lead to unexpected and expensive consequences. The most common pitfalls include:

• Costly Mistakes: Tax codes change frequently. Even a small error can result in penalties, fines, or audits.
• Missed Deductions: Without expert guidance, valuable deductions and credits may be overlooked, costing you thousands of dollars.
• Time Drain: Every hour spent on taxes is an hour taken away from growing your business or serving your customers.
• Increased Audit Risk: Poor records and incorrect filings increase your chances of being flagged for an audit—a process that is both time-consuming and stressful.

DIY tax preparation may seem like saving money upfront, but the hidden costs can far outweigh the savings.

By now, you may have heard about updates to the SALT (State and Local Tax) itemized deduction. While most headlines focus on places like New York and California, this change has the potential to affect wherever you live as well—particularly those with higher property taxes or higher incomes.

I want to explain what this really means for you, why it was introduced, and whether you might benefit from it. Spoiler: it won’t apply to everyone, but for certain taxpayers it could mean thousands of dollars in savings.

First Things First: What Is the SALT Deduction?

The SALT deduction allows you to deduct certain taxes you pay to state and local governments from your federal taxable income when you itemize your deductions.

This includes:

• Property taxes on your home or other real estate

• Income taxes to your state and locality

• Certain personal property taxes like vehicle registration fees tied to value

The SALT deduction has been part of the U.S. tax code for a long time, but it became a hot topic after the 2017 Tax Cuts and Jobs Act capped it at $10,000 per year. That cap hit taxpayers in high-tax states especially hard.

The Problem With the Old $10,000 Cap

Most middle-income families weren’t hurt as much by the $10,000 SALT cap because our property taxes and income tax rates aren’t as high as states like New Jersey or New York.

However, the law also benefited you by almost doubling the standard deduction. That meant fewer people itemized their deductions at all, because the standard deduction was higher than their itemized total. For many households, it became simpler and more beneficial to take the standard deduction. For most of you, these changes were really a net benefit.

The 2025 Change: SALT Deduction Temporarily Expanded

Under the new 2025 tax act, the SALT deduction cap has been temporarily increased from $10,000 to $40,000. This applies for tax years 2025 through 2029.

Here’s what that means in practice:

• If your combined state income taxes, property taxes, and certain license fees exceed $10,000, you may now be able to deduct up to $40,000 of them.

• If your total itemized deductions (SALT + mortgage interest + charitable contributions, etc.) exceed the standard deduction, it may make sense to itemize again.

This opens the door—especially those in higher-income brackets or with higher property taxes—to reduce their federal taxable income, though this may be tempered by the phase-outs.

Income Phaseouts to Keep in Mind

There are phaseouts that limit who gets the full benefit.

• Single filers: Phaseout begins above $250,000 MAGI

• Married filing jointly: Phaseout begins above $500,000 MAGI

• The deduction phases out at 30 cents for every $1 of income above these limits until it reverts back to the original $10,000 cap

That means very high-income and property tax households may not be able to realize the full $40,000 benefit. So, you may not be able to realize the entire benefit but some portion may still be on the table for you.

Why This Matters to You

Even though you may not live in a particularly “high tax” state, property taxes here can be substantial, no matter where you live. Home values have increased in many parts of the country, especially in desirable school districts, and with that comes higher property tax bills.

But remember: this isn’t a broad middle-class tax cut. For most households, the standard deduction will still make more sense. The people who benefit most are those already paying higher property taxes and state taxes.

Planning Ahead: Should You Itemize Again?

Here’s what I recommend as a CPA:

1. Gather Your Numbers – Add up your property taxes, state taxes, mortgage interest, and charitable contributions.

2. Compare Against the Standard Deduction – For 2025, the standard deduction will also adjust upward for inflation. We’ll need to compare totals each year.

3. Run the Phaseout Test – If your income is above the $250,000/$500,000 threshold, calculate how much of the $40,000 deduction you actually get.

4. Talk With a CPA (Me!) – Every situation is different, and itemizing only makes sense if it reduces your taxable income more than the standard deduction.

The Bottom Line

For most taxpayers, this change won’t alter much—you’ll still take the standard deduction. But for higher-income families and homeowners with significant property taxes, the expanded SALT deduction may be worth thousands in tax savings between 2025 and 2029.

Since this is temporary, it’s important to take advantage of it while it lasts. Planning now could save you meaningful money over the next few years.

Let’s Talk About Your Situation

I know tax law changes can feel overwhelming, but that’s why I’m here. If you are wondering whether you should itemize under the new SALT rules, let’s run the numbers together. You’ll always work directly with me—no call centers, no hand-offs. Just straightforward tax guidance from someone who knows the tax landscape.
Reach out today either by calling me (248-909-2880), replying to this newsletter,
emailing me directly or through https://persitzcpa.com, and let’s make sure you take advantage of every opportunity available to you.

If you live here in Michigan and you’ve ever put in long hours at work to make ends meet, you know the satisfaction (and exhaustion) of seeing that bigger paycheck after working overtime. You also know the frustration of seeing how much of that extra pay gets eaten up by taxes.

Starting in 2025, there’s some good news: a new federal deduction will allow many workers to deduct part of their overtime pay—meaning you could keep more of what you earn. It’s not a complete elimination of taxes on overtime, but for many people here in Michigan, it’s a meaningful break.

As a CPA working with clients across the state, I want to break this down so you know exactly what it means, who qualifies, and how to plan ahead to take advantage of it.

What Is the Overtime Pay Deduction?

Beginning in the 2025 tax year and lasting through 2028, qualifying workers will be able to deduct the “extra half” of their overtime pay—the portion you earn above your standard hourly rate when you work time-and-a-half.

Here’s an example:

• If your normal wage is $20/hour, overtime pay is $30/hour (time-and-a-half).

• The “extra half” is $10/hour—that’s the part that may be deductible under this new law.

This deduction applies to overtime pay required under the Fair Labor Standards Act (FLSA) and reported on a W-2, 1099, or similar tax document.

How Much Can You Deduct?

The deduction is capped each year at:

• $12,500 for single filers

• $25,000 for married couples filing jointly

This means you can’t deduct unlimited overtime, but for many Michigan workers—especially those in manufacturing, skilled trades, healthcare, and emergency services—this could still be a substantial tax savings.

Who Qualifies in Michigan?

To qualify for this deduction, you need to meet a few requirements:

1. Your overtime must be covered under the FLSA – This covers most hourly employees in Michigan.

2. Your overtime must be properly reported – It must show up on your W-2, 1099, or equivalent form.

3. You must file jointly if married – Married filing separately doesn’t qualify.

4. You must include your Social Security number – This is required on your return.

The good news is you can claim this deduction even if you take the standard deduction—you don’t have to itemize.

Income Limits

This deduction is meant for middle-income earners, so there are income caps:

• $150,000 Modified Adjusted Gross Income (MAGI) for single filers

• $300,000 MAGI for joint filers

Once your income exceeds these thresholds, the deduction phases out.

For many Michigan families—especially in areas like Lansing, Grand Rapids, and Metro Detroit—these limits still leave plenty of room to qualify.

Michigan Jobs That Could Benefit the Most

Here in Michigan, we have a strong mix of industries that regularly rely on overtime. This new deduction could be especially beneficial for:

• Automotive manufacturing workers in Detroit, Dearborn, Flint, and Lansing

• Skilled trades like electricians, plumbers, and machinists

• Healthcare workers including nurses, EMTs, and hospital staff who work extra shifts

• Police officers and firefighters who often log significant overtime hours

• Seasonal workers in tourism, agriculture, and shipping

• Utility workers dealing with power outages and storm response

If you’re in one of these industries, there’s a good chance you could benefit.

How It Will Appear on Your Tax Documents

Your employer (or payor if you’re a contractor) will be responsible for reporting your eligible overtime pay to you and the IRS. This will likely be included as a separate figure on your W-2 or 1099.

That means accurate payroll reporting is critical—if your employer isn’t tracking your overtime correctly, you could lose out on the deduction.

Example: How Much Could You Save?

Let’s look at a real-world example for a Michigan worker:

Maria, a registered nurse in Ann Arbor, earns $40/hour and typically works 10 hours of overtime per week.

• Overtime pay: $60/hour (time-and-a-half)

• Extra half: $20/hour

• 10 hours/week × 52 weeks = 520 hours/year

• Extra half total = $20 × 520 = $10,400

Maria could deduct $10,400 from her taxable income. If she’s in the 22% tax bracket, that’s a $2,288 federal tax savings—plus any additional state tax savings.

Planning Tips for Michigan Workers

Here’s how to make sure you get the full benefit:

1. Track Your Overtime

Don’t rely solely on your employer—keep your own records of overtime worked and pay received.

2. Confirm FLSA Coverage

Most hourly jobs are covered, but if you’re salaried or in a unique role, double-check.

3. Monitor Your Income

If you’re close to the income limits, we can look at strategies to reduce MAGI to stay eligible.

4. Coordinate With Your Spouse

If you’re married and filing jointly, coordinate your overtime and other income to maximize the deduction.

5. Avoid Underreporting

Some workers think underreporting overtime could help—but in this case, you actually want accurate reporting so you can claim the deduction.

Impact on Michigan’s Workforce

Michigan’s economy has always been driven by hard work—and often, long hours. In industries like auto manufacturing and healthcare, overtime is not just common—it’s expected.

This deduction gives something back to the people who keep Michigan moving, whether you’re on the factory floor in Detroit, pulling a double shift in a Traverse City hospital, or restoring power lines after a storm in the Upper Peninsula.

How I Can Help as Your CPA

From my office here in Michigan, I work one-on-one with clients to navigate new tax laws like this one. I can help you:

• Understand if your overtime qualifies

• Calculate your potential savings

• Ensure your employer is reporting your overtime correctly

• Incorporate this deduction into a broader tax strategy

Because I’m a solo CPA, you’ll work directly with me—not get passed around a large firm. My goal is to help Michigan workers keep more of their hard-earned money.

Final Thoughts

The “No Tax on Overtime” deduction is a great opportunity for many Michigan workers—but like all tax laws, the details matter.

By planning ahead, tracking your overtime, and working with a knowledgeable CPA, you can make sure you get the full benefit from 2025 through 2028.

If you’d like to see how much this could save you, I’d be happy to run the numbers and help you prepare.

Mark Persitz, CPA
📍 Serving clients across Michigan
🌐 https://persitzcpa.com
📞 Contact me to schedule your consultation

If you work in a tipped profession—whether you’re serving drinks in downtown Ann Arbor, styling hair in a Brighton salon, or delivering pizza in Lansing—there’s some promising news on the tax front. A brand-new federal deduction is on the way that could significantly reduce your taxable income beginning in 2025.

It’s being widely labeled as the “No Tax on Tips” law—but as a CPA serving hardworking individuals across Michigan, I want to help you understand what this really means. Spoiler: it doesn’t mean all your tips are tax-free. But for many Michiganders who earn a living in tip-heavy industries, it’s a welcome opportunity to lower your tax bill legally.

Let’s dive into the details so you can see how this deduction might benefit you or someone in your household.

What Is the “No Tax on Tips” Deduction?

Starting in tax year 2025, and continuing through 2028, eligible workers in tipped occupations may deduct up to $25,000 in qualified tips per year from their taxable income.

That’s right—tips you receive for doing your job may now reduce your federal tax liability, if they meet certain qualifications.

This new deduction is available to both:

• W-2 employees (like servers, bartenders, stylists)

• Self-employed individuals (like independent massage therapists, mobile groomers, and freelance artists)

For many Michigan residents in the service industry, this could mean thousands of dollars in tax savings every year—but only if you follow the rules and report your tips properly.

What Tips Count as “Qualified”?

Not all tips are treated equally under this new law. For your tips to count toward the deduction, they must be:

1. Voluntary – This means the tip must be given freely by the customer. Automatic gratuities, service charges, or mandatory fees are generally not included.

2. Properly reported – You must have official documentation of the tips, such as:

   • Reported on your W-2 from your employer

   • Received and reported on a 1099 (for self-employed workers)

   • Or another IRS-recognized official statement

Cash tips, card tips, and shared tips (via tip pooling) can all be included—as long as they’re reported correctly and included in your income.

This is an important distinction. If you’re working under the table, or if your tips aren’t being recorded or tracked in your tax filings, you won’t qualify for the deduction. As your CPA, I always recommend full compliance to avoid trouble with the IRS and to take advantage of deductions like this one.

What Kind of Jobs Qualify in Michigan?

The IRS is expected to release a formal list of qualifying occupations by October 2, 2025, but for now, we can safely assume this will include the typical tipped professions we see all over Michigan, including:

• Waitstaff and bartenders

• Hair stylists and barbers

• Nail technicians

• Hotel and hospitality staff (bellhops, valets, housekeeping)

• Delivery drivers and rideshare drivers (Uber, Lyft, DoorDash, etc.)

• Massage therapists and estheticians

• Casino dealers and service attendants

• Golf caddies and course attendants

Whether you’re working in Metro Detroit, Grand Rapids, Traverse City, or any of the many local service economies across the state, if your job customarily involves tips, you’re likely going to be eligible.

The law specifically warns not to expect eligibility if you’re just starting to accept tips to qualify. So if your job never traditionally involved tipping and suddenly you start a “tip jar” in 2025, the IRS is likely to scrutinize that.

Income Limits to Know

The deduction is designed to benefit working-class and middle-income earners, not high earners.

Here are the phaseout limits:

• $150,000 modified adjusted gross income (MAGI) for single filers

• $300,000 MAGI for married joint filers

If your income exceeds those thresholds, the deduction will gradually phase out and eventually disappear. This makes the deduction especially relevant for many Michigan families, where the cost of living is relatively moderate and incomes often fall below those limits.

Special Rules for Self-Employed Workers

If you’re self-employed and earn tips—say you’re an independent mobile barber or own a small cleaning business where clients tip you—there are a couple of key things to remember:

• Your tip deduction cannot exceed your net income from that business.

• In other words, if your business shows a net profit of $20,000, that’s the most you could deduct—even if you received $25,000 in tips.

That said, for many solo business owners, this is still a significant tax benefit and one that can help reduce self-employment taxes as well as federal income taxes.

How Do You Claim the Deduction?

The process will vary slightly depending on whether you’re a W-2 employee or self-employed:

If You’re a W-2 Employee:

• Your employer will report your total tips on your W-2 (Box 1 and Box 7).

• You’ll report the tips as usual on your tax return, then take the new deduction on a separate line (to be released in updated 2025 forms).

• You’ll still owe Social Security and Medicare taxes on your tips, but this deduction will reduce your taxable income for federal income tax purposes.

If You’re Self-Employed:

• You’ll include your tips in your gross income and report them on Schedule C.

• You’ll calculate your net business income after expenses.

• Then, you can claim the tip deduction (up to $25,000 or net income limit) on your 1040.

Regardless of your employment type, you don’t need to itemize to claim this deduction—it’s available even if you take the standard deduction. This is a huge win for many Michigan taxpayers who don’t itemize.

What Employers Need to Know

If you own a restaurant, salon, or any business where employees receive tips, you’ll need to take a more active role in compliance.

Employers must provide employees (and the IRS) with:

• A statement of total cash tips received

• The occupation of the employee

• Proper IRS or SSA reporting

This adds to your payroll and reporting responsibilities starting in 2025. If you’re a small business owner in Michigan and unsure how to adjust your payroll systems, I’d be glad to walk you through the compliance requirements before they go into effect.

What This Means for Michigan Families

Here in Michigan, thousands of workers in the service industry rely on tips to make ends meet. This new deduction can mean more take-home pay, lower tax bills, and greater financial stability.

For example:

• A Detroit bartender who earns $20,000 in tips annually and properly reports them could now deduct that full amount from their taxable income—potentially saving $2,000–$3,000 or more on their federal taxes.

• A Traverse City salon owner who is self-employed and earns $25,000 in tips could deduct it—assuming her net profit meets or exceeds that amount—lowering both income and self-employment tax liability.

• A server in Novi making $40,000 in wages and $15,000 in tips could qualify for the deduction and still fall under the income phaseout threshold—meaning real savings.

Planning Ahead: How I Can Help

As a solo CPA based here in Michigan, I work directly with clients like you—no hand-offs, no call centers, just me. My goal is to keep you informed, prepared, and confident in your tax filings.

To prepare for this deduction and maximize its benefit:

✅ Make sure your tips are being reported correctly
✅ Track your annual income to avoid phaseouts
✅ If you’re self-employed, keep accurate books and records
✅ Ask me to run a deduction scenario for 2025 so you can plan ahead
✅ Don’t rely on TikTok or viral tax trends—this is serious money on the line

Final Thoughts

This isn’t a loophole. It’s a legitimate deduction that can benefit Michigan’s tipped workforce in a big way—but only if you know how to use it.

From servers and stylists to drivers and dealers, if you or someone in your family relies on tips, now is the time to get organized, track your earnings properly, and prepare to take advantage of this opportunity.

If you have questions about whether you qualify, how to report tips correctly, or how this impacts your overall tax strategy, I’m here to help.

Let’s make sure the IRS gives you the credit you deserve.
📞 Contact me today at https://persitzcpa.com to schedule a personal consultation.

Whether you’re in Howell, Lansing, Detroit, or anywhere in between—I’ll help you get the most out of every dollar you earn.

If you’ve been thinking about buying a brand-new car, truck, or SUV, there’s a new tax break you’ll definitely want to know about—especially if you live here in Michigan where driving is a way of life.

Starting in 2025, a new federal tax deduction will allow many taxpayers to write off the interest paid on personal vehicle loans. It’s a temporary opportunity, but a valuable one that could save you up to $10,000 per year through 2028. As a Michigan CPA, I’m here to walk you through what this deduction means, how to qualify, and how to make the most of it.

What’s the New Car Loan Interest Tax Deduction?

The U.S. government is temporarily allowing taxpayers to deduct interest paid on a qualified personal auto loan for brand-new vehicles. This means if you finance your next vehicle purchase, a portion (or all) of the interest you pay each year could reduce your taxable income.

The deduction is:

• Available from 2025 through 2028

• Capped at $10,000 per year

• Phased out for higher incomes

• Only applicable to loans on new, U.S.-assembled vehicles

That’s a big deal—especially when you consider how many families in Michigan depend on reliable transportation and often choose to finance their vehicles.

Why This Deduction Matters for Michigan Residents

Let’s face it—owning a car in Michigan isn’t optional. From the rural roads of Livingston County to the busy suburbs around Detroit and Grand Rapids, we drive year-round through all kinds of weather. And whether you’re commuting to work, hauling the kids to sports practice, or heading north for the weekend, reliable transportation is a necessity—not a luxury.

This deduction gives us a chance to recoup some of the rising costs of car ownership, especially with interest rates still higher than they were a few years ago. If you’re planning to purchase a new car after December 31, 2024, this is something you’ll want to plan for—and I can help you do just that.

Who Qualifies for the Car Loan Interest Deduction?

This deduction is available to both single and joint filers who meet certain income requirements:

• Full deduction available for incomes up to $100,000 (single) or $200,000 (married filing jointly)

• The deduction phases out as income rises above these limits

• It’s not necessary to itemize deductions—you can claim this even if you take the standard deduction

As your CPA, I’ll help you determine if your income qualifies and how much of your auto loan interest is deductible each year. It’s important to track this properly to ensure you’re maximizing your tax benefits.

What Kind of Vehicles and Loans Qualify?

Not every vehicle or loan qualifies, so let’s break this down clearly.

To be eligible, your loan must:

• Be originated after December 31, 2024

• Be secured by the vehicle itself

• Be for a brand-new vehicle only

• Be for personal use only (not business or commercial)

Leases don’t count, and neither do loans on used vehicles. That means this deduction is strictly for new vehicle purchases with a qualifying loan.

Your vehicle must also:

• Be a car, SUV, minivan, van, pickup truck, or motorcycle

• Weigh under 14,000 pounds

• Be assembled in the United States

That last point is key here in Michigan. We’re the heart of the American auto industry. Brands like Ford, GM, and Stellantis (Chrysler) all manufacture vehicles right here in our state. So if you’re considering buying local and supporting Michigan jobs, you’re already one step closer to qualifying.

How to Claim the Deduction

Claiming this deduction is simple, but there are a few steps to get it right:

1. Track your loan interest – Your lender will provide a statement showing the total interest paid each year.

2. Provide your Vehicle Identification Number (VIN) – You’ll need to include this on your tax return, so keep your paperwork handy.

3. Make sure your lender reports to the IRS – Most major lenders already do, but it’s worth confirming.

Even if you normally don’t itemize your deductions, you can still claim this one, which makes it even more valuable for many Michigan families.

What If You Refinance?

If you refinance a qualifying car loan later on, the interest may still be eligible—as long as the refinanced amount doesn’t exceed the original loan and the vehicle still qualifies. This can be a helpful strategy if interest rates drop during the 2025–2028 window.

Need help figuring out if a refinance affects your deduction? Just give me a call—I’m happy to take a look at your loan terms and provide guidance specific to your situation.

Tips for Michigan Taxpayers to Maximize This Deduction

Here are a few things you can do to make sure you’re getting the most out of this opportunity:

1. Time Your Purchase Wisely

Since this deduction only applies to loans originated after December 31, 2024, it might make sense to delay your vehicle purchase until early 2025—especially if your current car can hold out a bit longer.

2. Buy American-Assembled Vehicles

Many Michigan residents already buy vehicles made right here in-state, but double-check that your new car is assembled in the U.S. to ensure eligibility. This is also a great way to support local jobs and our economy.

3. Avoid Leases and Used Cars

While leasing may be attractive for some drivers, this deduction is only for financed purchases of new cars. Used cars—no matter how new they seem—don’t qualify.

4. Keep Detailed Loan Records

Be sure to save your loan paperwork and lender statements that detail how much interest you’ve paid. The IRS may require proof, and proper documentation will make your tax filing smoother.

5. Talk to a CPA (like me!)

This deduction may seem simple on the surface, but depending on your income level, tax situation, or other deductions, there may be nuances. I can help you figure out how this new rule fits into your overall tax strategy—and how to legally reduce your tax liability.

Planning Ahead: 2025–2028 Is a Window of Opportunity

This deduction isn’t permanent. It’s currently available only for tax years 2025 through 2028. That gives you a four-year window to take advantage of this benefit.

If you plan to buy multiple vehicles during that time (say, one in 2025 and another in 2027), you may be able to claim the deduction more than once—up to the $10,000 annual cap per year.

This is a rare opportunity to receive tax relief for something most of us in Michigan need anyway: reliable transportation.

Final Thoughts

Living and working in Michigan, I know how important vehicles are to our daily lives. From navigating snowy backroads to enjoying a summer drive to Lake Michigan, cars are part of our culture and our economy.

This new deduction gives us a chance to ease the financial burden of car ownership—but only if we plan ahead and take advantage of it the right way.

As your local CPA, I’m here to help you do just that.

Let’s talk about your tax strategy, future vehicle purchases, and how to reduce your overall tax bill in the years ahead. I’d be happy to walk through this with you and help you make the best decisions for your family and your finances.

Have questions or want help planning your next big purchase?
📞 Call me at Persitz CPA or head over to https://persitzcpa.com to schedule a consultation.

Let’s make sure your next car works for your life—and your taxes.

Don’t Be Fooled: “No Taxes on Social Security” Doesn’t Mean What You Think

You may have seen headlines recently claiming there’s “No Taxes on Social Security” — but let’s be clear: that doesn’t mean your Social Security benefits are completely tax-free.

At Persitz CPA, I want to break down what’s really changed and what hasn’t—so you can make informed decisions about your retirement income and taxes.

✅ What Hasn’t Changed: Social Security Can Still Be Taxable

Despite some recent media buzz, the way Social Security benefits are taxed has not changed. As it has been for decades, up to 85% of your Social Security income may be taxable depending on your overall income.

The IRS uses a formula based on your modified adjusted gross income (MAGI), which includes things like wages, investment income, pensions, and tax-exempt interest. When your income exceeds certain thresholds, a portion of your benefits becomes taxable.

🆕 What Has Changed: A New Temporary Senior Deduction

Here’s the real update: Congress has introduced a temporary “senior bonus” deduction that can reduce the taxable portion of Social Security benefits from 2025 through 2028.

This new deduction can be worth:

• Up to $6,000 for single filers

• Up to $12,000 for married couples filing jointly

👉 Good news: This deduction applies per individual and can now be claimed even if you itemize deductions.

📉 Income Phase-Out Limits

The senior deduction begins to phase out when your modified adjusted gross income (MAGI) exceeds:

• $75,000 for single filers

• $150,000 for joint filers

The deduction phases out entirely once income reaches:

• $175,000 for single filers

• $250,000 for joint filers

So while not everyone will qualify for the full deduction, many seniors will still benefit from lower taxable income over the next few years.

💡 What This Means for You

If you’re retired or approaching retirement, this could result in a meaningful reduction in the taxes you owe on your Social Security benefits—but it won’t eliminate those taxes entirely.

Every situation is different, so it’s important to consider how this deduction fits into your full retirement income plan. That’s where I can help.

📞 Let’s Talk Tax Planning for Retirement

At Persitz CPA, I specialize in helping individuals and families navigate the complexities of retirement tax planning. Whether you’re already receiving Social Security or you’re planning ahead, I can help you:

• Maximize tax-saving opportunities

• Understand how the new deduction applies to you

• Strategically plan for 2025–2028 and beyond

👉 Don’t rely on viral TikTok advice—trust a real tax professional. Get in touch today to schedule a personalized consultation.

For personalized assistance with your small business tax preparation, strategic bookkeeping, or comprehensive business consulting in Michigan, explore my services or contact Persitz CPA for a consultation.

When tax season rolls around, many people find themselves wondering whether their passion project should be classified as a hobby or a business. While hobbies and businesses might sometimes look similar, the IRS views them very differently—and this distinction can significantly impact your taxes.

Here’s what you need to know to decide whether your activity is a hobby or a business, and how that determination affects your tax situation.

What’s the Difference Between a Hobby and a Business?

Simply put, the key difference lies in intent: a business is operated primarily to make a profit, while a hobby is pursued mainly for enjoyment or personal fulfillment. This intent significantly impacts how the IRS treats your income and expenses at tax time.

Regardless of whether your activity is classified as a hobby or a business, if you receive payments through third-party payment apps (like Venmo, PayPal, or Square), you might receive IRS Form 1099-K. Any income reported on this form must be included in your federal tax return.

Key Factors to Determine if You’re Running a Business or a Hobby

While the IRS doesn’t rely on a single factor to decide between hobby and business, here are several key questions you should consider carefully:

• Intent for profit: Do you genuinely intend to make a profit, even if you’re not currently profitable?
  
  
• Profitability: Has your activity actually generated profit? If so, how substantial is it?
  
  
• Asset appreciation: Are you expecting your assets related to the activity to appreciate, generating future profit?
  
  
• Dependence on the income: Is this activity your primary source of income, or do you depend on it significantly for your livelihood?
  
  
• Loss analysis: Are any losses a result of circumstances beyond your control (such as unforeseen market shifts), or are they typical startup losses?
  
  
• Operational adjustments: Have you made consistent efforts to improve profitability by adjusting operations?
  
  
• Business-like management: Do you keep accurate and complete financial records as you would with any legitimate business?
  
  
• Expertise and knowledge: Do you and your advisors have the necessary expertise to run your activity successfully?
  
  

The more of these questions you answer affirmatively, the more likely the IRS will consider your project a legitimate business.

Why Does This Matter?

The classification of your activity impacts the deductions you can claim:

• Businesses: If your activity is considered a business, you can generally deduct ordinary and necessary expenses related to operating it. This could substantially reduce your taxable income.
  
  
• Hobbies: If your activity is deemed a hobby, your income is still taxable, but deductions for expenses are severely limited. You typically can’t deduct expenses in excess of your hobby income, resulting in potentially higher taxes.
  
  

The Importance of Good Recordkeeping

Regardless of whether you’re running a hobby or a business, meticulous recordkeeping throughout the year is crucial. Keeping clear, accurate records of your income and expenses will simplify your tax filing process and support your claims if the IRS ever questions your classification.

Need More Guidance?

Determining whether your activity is a hobby or a business can be nuanced. At Persitz CPA, I am here to help you make informed decisions about your taxes, maximize your deductions, and ensure compliance.

Reach out today for a personalized consultation and take the guesswork out of tax season!

For personalized assistance with your small business tax preparation, strategic bookkeeping, or comprehensive business consulting in Michigan, explore our services or contact Persitz CPA for a consultation.