Tax News 2025
By: Tax Hotline
Fall 2025 (Vol. 43, No. 3)
Q: Are there any circumstances where the rent paid to an Assisted Living Facility can be deducted?
A: Generally, rent paid to an assisted living facility is not deductible like mortgage interest or property taxes. However, if certain conditions are met, you can deduct payments to an assisted living facility as medical expenses. If you itemize, you can deduct expenses that exceed 7.5% of your adjusted gross income (AGI).
According to the IRS, long-term care services, including assistance with daily activities, can be deductible as medical expenses if they are primarily for medical care rather than just housing or convenience. The following must apply:
A doctor (or licensed health care practitioner) certifies that the resident is “chronically ill”, meaning: They can’t perform at least two activities of daily living (ADLs) without help (such as eating, bathing, dressing, toileting, transferring, or continence), or they require substantial supervision due to cognitive impairment (e.g., dementia). and the services must be provided according to a plan of care prescribed by a licensed health care professional.
If the above conditions are not met, only the medical portion of the fees (e.g., nursing care, assistance with ADLs) is deductible, not room and board. Many assisted living facilities can provide an itemized statement showing what percentage of monthly fees qualifies as medical care.
Q: My doctor recommended I stop smoking and lose weight for health reasons. Can I deduct the cost of the programs and therapy?
A: You can deduct costs for smoking-cessation programs and prescribed medications to reduce nicotine withdrawal, but not over-the-counter gum or patches. Weight-loss programs qualify if prescribed to treat a physician- diagnosed disease. Deductible costs include program fees and meeting charges, but not the cost of diet food.
Q: Has the limit on how much I can deduct in property and sales taxes changed for 2025?
A: Yes. The One Big Beautiful Bill Act (OBBBA) allows more taxpayers to fully deduct their state and local tax (SALT) expenses (including property tax). Here are the details. Under the Tax Cuts and Jobs Act (TCJA), the itemized deduction for SALT was limited to $10,000 ($5,000 for married individuals who file separately) beginning in 2018.
This limitation negatively affected taxpayers living in locations with high state income tax rates and those who pay high property taxes because they live in a high- property-tax jurisdiction, own an expensive home, or they own both a primary residence and one or more vacation homes.
Under the OBBBA, for 2025 through 2029, the SALT deduction limit increases from $10,000 to $40,000 (or $20,000 for separate filers) with 1% annual inflation adjustments. So, for 2026, the cap will be $40,400 ($20,200 for separate filers). Note: Several states have established SALT deduction workarounds for pass-through entities. These workarounds aren’t addressed or limited by the OBBBA.
The higher SALT limit begins to be reduced for taxpayers with modified adjusted gross income (MAGI) over $500,000 ($250,000 for separate filers) and doesn’t benefit taxpayers with MAGI at or above $600,000 ($300,000 for separate filers).
The SALT deduction continues to be available for property taxes plus the total state and local income taxes or the total of all sales taxes. Choosing to deduct sales taxes is a helpful option if you owe little or nothing for state and local income taxes or you made a major purchase that causes your sales tax to exceed your state and local income tax.
If you opt to deduct sales tax, you don’t have to save all your receipts for the year and manually calculate your sales tax; you can use the IRS Sales Tax Calculator on the IRS website to determine the amount of sales tax you can claim. (It includes the ability to add actual sales tax paid on certain big-ticket items, such as a car.)
If you have high SALT expenses, to get the maximum benefit from the increased deduction limit, you need to plan carefully between now and year end. For example, you may want to take steps to keep your MAGI under the reduction threshold. Or you might want to accelerate property tax payments into 2025.
Q: Is the IRS no longer accepting paper checks?
A: Not exactly, but changes are coming. Officially, as of Sept. 30, 2025, the federal government stopped issuing paper checks, including those for tax refunds, Social Security benefits and more but the reality is more of a push towards prioritizing electronic payments. Also, certain federal agencies, such as the IRS and the Dept. of Labor (DOL), will generally stop accepting payments by paper check. This is part of a program to modernize payments, improve efficiency in processing payments and reduce administrative burdens. Historically, the government stated that checks issued by the Dept. of the Treasury are more likely to be lost, stolen or subject to other forms of fraud. The IRS will publish detailed guidance for 2025 tax returns before the 2026 filing season begins. There will be options available for those who do not have bank accounts and until further notice, taxpayers should continue using existing forms and procedures.
Q: How has the deduction for Research and Development (R&E) expenses changed for 2025?
A: Under the Tax Cuts and Jobs Act (TCJA), businesses had to amortize deductions for Section 174 (R&E) costs over five years for expenses incurred in the United States or 15 years for those incurred abroad. This provision used a mid-year rule that effectively stretched write-offs over six years. The OBBBA changes that by permanently allowing full, immediate deductions for domestic R&E expenses starting in the 2025 tax year. Foreign R&E expenses will still be amortized over 15 years.
In addition, the OBBBA lets “small businesses” (in 2025, those with average annual gross receipts of $31 million or less for the past three years) claim R&E deductions retroactively to 2022. A business of any size with domestic R&E costs from 2022 to 2024 can choose to speed up the remaining deductions for those years over a one- or two- year period.
Q: Is there a higher cap for deducting business interest?
A: Yes. Generally, the TCJA limited business interest deductions to 30% of the taxpayer’s adjusted taxable income (ATI) for the year. Before the OBBBA, ATI generally referred to earnings before interest and taxes. For tax years beginning after December 31, 2024, the OBBBA increases the cap on the business interest deduction by excluding depreciation, amortization and depletion when calculating ATI. This change typically increases ATI, allowing taxpayers to deduct more business interest expense.
But it’s important to note that, in 2025, taxpayers with average annual gross receipts for the last three years that don’t exceed $31 million are exempt from the interest deduction limitation.
Q: Can Your Business Benefit from the Work Opportunity Tax Credit (WOTC)?
A: Employers who hire new workers may qualify for a tax benefit, but they shouldn’t wait too long. is a valuable federal tax credit that incentivizes employers to hire from certain targeted groups that face employment barriers. But it will expire after 2025 unless Congress acts to extend it.
Targeted groups include qualified veterans, recipients of certain aid programs, ex-felons, and qualified long-term unemployment recipients. Employers must file a form with their state workforce agency to prescreen and certify individuals they wish to hire.
Q: Are Dependent Care Flexible Spending Accounts right for My Business?
A: Employers seeking to offer family-friendly benefits may want to consider flexible spending accounts (FSAs) for dependent care. These FSAs let employees make pre- tax contributions through payroll withholding to help cover eligible expenses. The annual contribution limit, currently $5,000, will rise to $7,500 in 2026.
FSA contributions reduce employees’ income tax and payroll tax and employers’ payroll tax. Withdrawals used to pay qualified expenses are tax-free. These include expenses for care for a child under age 13 or other dependent unable to care for themselves due to physical or mental limitations.
How do I report income from platforms like Etsy, Uber and Fiverr on my 1040?
A: Income is reported on IRS Form 1040 using Schedule C and Schedule SE. You must report all earnings, even if you didn’t receive 1099. Use Schedule C (Form 1040) to report income from self-employment on Line 1, You will use Lines 8-27 to list and deduct eligible expenses such as mileage, supplies or software. Follow directions to get your net profit or loss on Line 31. This number will then flow to Form 1040. If your net earnings equal $400 or more, you must file Schedule SE (Form 1040) to calculate your self-employment tax (Social Security and Medicare).