ALBANY — Taxes should go down for the average Long Islander under the new federal megabill, tax analysts told Newsday, with the biggest benefits going to people with high incomes and large mortgages.
The sweeping bill that President Donald Trump signed into law on July 4 extends and builds on a number of changes put in place during his first term under the 2017 Tax Cuts and Jobs Act. It keeps lower tax rates, boosts the child tax break for families and increases the standard deduction, making it easier for taxpayers to file their taxes without having to itemize.
The measure includes deductions and credits aimed at everything from assisting seniors through a new tax break to promoting American-assembled cars by allowing filers to deduct car loan interest. It cuts taxes on tips and overtime, potentially helping Long Island taxpayers from landscapers to waitstaff, police officers to construction workers.
On average, households are estimated to see a roughly $2,860 cut as a result of the megabill, according to an analysis by the Urban-Brookings Tax Policy Center, a nonpartisan think tank based in Washington, D.C.
WHAT NEWSDAY FOUND
- Taxes should go down for the average Long Islander under the new federal megabill, tax analysts told Newsday, with the biggest benefits going to people with high incomes and large mortgages.
- The sweeping bill President Donald Trump signed into law on July 4 extends and builds on a number of changes put in place during his first term under the 2017 Tax Cuts and Jobs Act. It keeps lower tax rates, boosts the child tax break for families and increases the standard deduction, making it easier for taxpayers to file their taxes without having to itemize.
- The measure includes deductions and credits aimed at everything from assisting seniors through a new tax break to promoting American-assembled cars by allowing filers to deduct car loan interest. It cuts taxes on tips and overtime, potentially helping Long Island taxpayers from landscapers to waitstaff, police officers to construction workers.
“But there’s a huge difference depending on how much income you make,” Howard Gleckman, a senior fellow at the center, told Newsday. “The tax cuts themselves helped all income groups on average but were quite regressive in that they made the higher-income families relatively better off than lower-income and middle-income taxpayers.”
For example, the lowest income groups are expected to save $150, while the highest earners are expected to see a $12,540 cut, according to the center’s estimates. Middle-income households earning between $66,800 and $119,200 are expected to save $1,780 on average, while upper-middle-income taxpayers earning between $217,100 and $460,800 could save $3,460 on average, according to the center.
Those who benefit the most from the tax bill are those earning between $460,000 and $1.1 million, due largely to the extension of the 2017 tax cuts among other provisions, Gleckman said.
“The biggest change in the bill that almost no American will notice is that the 2017 tax cuts have been made permanent,” said Andrew Lautz, associate director of economic policy for the Bipartisan Policy Center, a D.C.-based think tank. “If Congress had done nothing, tax cuts, tax rates all would have expired and taxes would have gone up for a majority of Americans.”
Taxpayers will notice one of the most controversial changes: increasing the cap on state and local tax deductions, known as SALT, from $10,000 to $40,000, he said. The measure helps largely middle- and upper-middle-class taxpayers with incomes between $200,000 and $500,000 in high cost-of-living areas, such as Long Island — which has some of the highest property taxes in the nation — allowing them to deduct more on their federal taxes if they itemize, Lautz said.
Other changes in the bill, including cuts to Medicaid and the Supplemental Nutrition Assistance Program, or SNAP, could hurt many people, said Steve Wamhoff, federal policy director for the Institute on Taxation and Economic Policy, a D.C.-based nonpartisan tax policy think tank. “These other changes will harm people in a bunch of ways that will in many cases offset the benefits that they get.”
And though the previous law made filing taxes easier for the majority of filers who took advantage of the standard deduction, that may not be the case under the new bill depending on what deductions and breaks taxpayers try to take advantage of, tax analysts said.
“This is going to make your life more complicated,” Gleckman said. “You’re going to have all these rules you’re going to have to comply with.”
Here’s what to know:
Deductions
The standard deduction was increased by $750 for single filers and $1,500 for joint filers and is tied to inflation, so it will increase annually.
That means individual taxpayers won’t owe taxes on the first $15,750 of their income and those married filing jointly won’t owe on the first $31,500 of their income for the 2025 tax year.
The vast majority of Long Islanders take the standard deduction and will likely continue to do so, said Joseph Perry, a national tax leader in the Melville office of CBIZ, a national adviser of tax, accounting and other services.
A married couple, for example, making $50,000 with no children would see a $150 tax cut from the bill because of the larger standard deduction, according to Bipartisan Policy Center estimates.
Because of the increased deduction, however, many won’t need to take the additional deductions in the megabill, and fewer may choose to itemize, tax analysts said. This applies in particular to low- to middle-income taxpayers.
For those who do itemize, the megabill increases the cap on state and local taxes to $40,000 for those with an income of $500,000 or less and raises it by 1% annually — a win for high-tax blue states like New York and especially on Long Island.
The SALT deduction is one of the five main categories of itemized deductions, along with mortgage interest, medical or dental expenses, charitable contributions and casualty, disaster and theft loss.
The cap remains at $10,000 for those earning $600,000 or more, and reverts back to $10,000 for everyone in 2030.
Those benefiting the most from the increased cap are single, empty nesters with high incomes and homes with high assessment values, E.J. McMahon, adjunct fellow at the Manhattan Institute for Policy Research told Newsday. The beneficiaries are “overwhelmingly concentrated” on Long Island and in the suburbs of Westchester and lower Rockland Counties, he said, largely because of the higher median incomes.
A married couple, for example, making $300,000 with no children, $30,000 in SALT deductions and $10,000 in other itemized deductions would see a $2,400 tax cut, according to Bipartisan Policy Center estimates.
With home prices on the rise, the cap may also benefit those earning in the upper $100,000s to lower $200,000s with homes with high assessments, McMahon said. “They’re going to be able to deduct more.”
The income cap, however, limits the number of high earners who can take advantage of the change, unless they’re able to take advantage of workarounds for business owners, tax analysts said.
And those benefiting may be fewer still as the standard deduction increases annually, tax analysts told Newsday.
“The vast majority of people, even on Long Island … don’t have itemized deductions exceeding $32,000,” McMahon said.
Senior, child breaks
Seniors age 65 and older will be able to claim an additional $6,000 tax deduction starting in the 2025 tax year through 2029, when the deduction expires. Married couples where both spouses qualify could deduct $12,000 total.
The deduction phases out starting at $75,000 for individual filers and $150,000 for joint filers based on their income. Single filers with incomes of $175,000 or more and married filers with incomes of $250,000 or more will not benefit.
Those who will see the largest tax cut are seniors with incomes between $80,000 and $130,000, roughly $1,110 on average, according to the Tax Policy Center.
The deduction can be used on top of the standard deduction and in addition to a senior deduction already in place, which for the 2025 tax year is $2,000 for single filers and $1,600 per qualifying individual for married couples, or $3,200 if both qualify.
So a senior married couple filing jointly, taking advantage of the standard deduction and both senior deductions, wouldn’t owe taxes on the first $46,700 of their income.
It largely helps upper-middle class seniors who collect Social Security and have other incomes such as a pension or who continue to work, tax analysts said.
Most low-income seniors already are taking the standard deduction, so they wouldn’t see a benefit, Lautz said.
The megabill also extends and increases the child tax credit by $200 and tied it to inflation, allowing families to receive a credit of up to $2,200 per child under 17 years old starting in 2025. The credit phases in, so families must earn at least $2,500 per year, and it phases out for individuals with incomes of $200,000 and $400,000 for joint filers.
Similar to the senior deduction, those with lower income levels who are already paying little to nothing in federal income taxes won’t see as much of a benefit, tax analysts said. But the child tax credit is partially refundable and tied to inflation, so families could receive up to $1,700 per child as a refund in 2025.
A married couple making $150,000 with two children, taking the standard deduction, could see a $730 tax cut as a result of the larger standard deduction and larger child tax credit, according to Bipartisan Policy Center estimates.
Tips, overtime
Several of Trump’s campaign promises were part of the final megabill, including proposals to eliminate taxes on tips and overtime.
Filers starting in the 2025 tax year through 2028 will be able to deduct up to $25,000 of their tips. They must work in an occupation that “customarily and regularly” received tips on or before Dec. 31, 2024. The Internal Revenue Service is required to release further guidance on which occupations qualify.
And qualified single filers will be able to deduct up to $12,500 of their overtime compensation and married filers to deduct up to $25,000. The deduction similarly starts in 2025 and expires at the end of 2028. Tax analysts say they expect to see federal guidance on which occupations qualify for the overtime deduction as well.
Both the overtime and tip deductions phase out for taxpayers with an income of over $150,000 for single filers and $300,000 for joint filers.
Those benefiting most from the tip deduction are people in high-tip jobs in high-income, high-volume tourist areas, such as Las Vegas casino dealers, McMahon said. You’re meant to think of the single mother waiting tables, but she’s taxed at a very low rate, he said.
And the larger standard deduction would likely reduce the benefit for lower- and middle-income workers, tax analysts said.
A single person with no children who earns $50,000 and $5,000 in tips income would see a $690 tax cut from the bill due to the increased standard deduction and tips deduction, according to Bipartisan Policy Center estimates.
Those benefiting the most from the overtime proposal are unionized, uniformed workers, McMahon said, such as police officers and building workers on public projects who earn overtime, McMahon said.
Overall, both proposals could benefit individuals in different industries throughout the Island including landscaping and restaurant services, Perry said. “I think there’s a huge impact to Long Island because many are in the service business.”
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