As the end of the year approaches, tax professionals say there are still steps Arkansans can take now and changes they should prepare for under new federal tax provisions often referred to as the “One Big Beautiful Bill.”
Marshella Norell with H&R Block in Mountain Home says one of the biggest clarifications affects overtime pay.
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Another key change involves tips. For certain industries where tipping is customary, tips may no longer be taxable to the employee, up to a capped amount and subject to income limits. Norell says taxpayers won’t know their exact benefit until their return is prepared under the new guidelines.
For seniors, the new law replaces the idea of eliminating taxes on Social Security with a new senior deduction. Taxpayers age 65 and older can claim a $6,000 deduction per individual, or $12,000 for married couples filing jointly. The deduction is temporary and includes a sunset clause.
Because of that extra deduction, Norell says some retirees may want to consider recognizing additional income now, such as taking extra IRA withdrawals or realizing capital gains, while they have more room to offset taxes.
One strategy still available before the end of the year is the Qualified Charitable Distribution, or QCD. This allows taxpayers to donate directly from their IRA to a qualified charity. The funds must go straight from the IRA to the charity either mailed directly or handed over as a check made out to the organization and can exceed the required minimum distribution amount.
Looking ahead to 2026, Norell says buyers considering a new vehicle should know that interest on new car loans will once again be deductible as an above-the-line deduction, not an itemized one.
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Another major upcoming change is the creation of “Trump accounts,” a new type of investment account for children. Parents must make an election on their 2025 tax return to establish the account. If they do, the federal government is expected to deposit $1,000 directly into the account.
Beginning in 2026, parents can contribute up to $5,000 annually after taxes, and employers may also contribute on behalf of employees’ children. The accounts are designed to grow until the child turns 18, at which point they convert into an individual retirement account governed by IRA rules.
While many of these changes apply at the federal level, Norell emphasized that Arkansas does not automatically adopt federal tax laws. Unless state lawmakers act, the new provisions will not impact Arkansas state tax returns.
For now, tax professionals encourage Arkansans to plan carefully, stay informed, and consult a professional to understand how the changes apply to their individual situation.
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