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

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.