Regarding tip income:
The Big Beautiful Bill that was recently passed, will allow tipped workers, like waiters and bartenders, who earn less than $150,000 per year, or $300,000 if married filing joint, to deduct up to $25,000 of their tips, from federal taxable income in tax years starting in 2025 thru 2028.
You are doing a great job lowering your taxable income by contributing 20% of your pre-tax earnings to your 401(k) and $2,300 to your HSA. This is not only preparing you for the future but also giving you tax breaks right now by reducing what’s considered taxable income. . Your long-term capital gains of $24,480.74 will be taxed at 0%, 15%, or 20%, depending on your adjusted income, which is already lowered due to your contributions. Also, once your student loans start accruing interest, you might qualify to take the deduction of up to $2,500 for student loan interest.
Some potential options for lowering capital gains for this year are:
- Put More Into Your 401(k):
In 2025, the maximum amount you can contribute to a 401(k) plan is $23,500. If you are age 50 or older, you can make an additional catch-up contribution of $7,500, bringing your total potential contribution to $31,000. For those aged 60-63, there is a special catch-up provision allowing for a $11,250 contribution on top of the base limit, potentially reaching a total of $34,750Adding more can lower your adjusted income, which might reduce the tax rate on your capital gains.
- Sell Investments With Losses:
If you own investments that have dropped in value, selling them can offset your capital gains directly. It’s called tax-loss harvesting, and it’s a great way to reduce what you owe.
For more information see these additional resources:
Please feel free to reach backout with any additional questions or concerns you might have!
Thank you for joining us today and have an amazing rest of your day!
**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer.”
Terri Lynn
