At Around the Tax World, you can find out all about what’s going on in the wonderful, worldwide world of tax. Every month, we’ll feature a few mini-articles on what’s been going on in the world when it comes to tax, and fully available for viewing even if you don’t have a subscription.
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In The Headlines
- Could your caffeine consumption take a hit with the increased tariffs on Brazil? Coffee drinkers can expect to see an uptick in their price per cup starting on August 1st when the U.S. will begin levying a 50% tariff on Brazil. Traders have been rushing to import as much coffee as possible before this deadline hits. Coffee prices have already risen in past months as a result of tariffs—in June, the average price spiked by 2.2%. Last year, coffee shortages resulted in a 70% price increase in the U.S. Brazil currently produces a third of all coffee used in the U.S. and composes a third of the blends sold by Dunkin Donuts and Tim Hortons. Starbucks also uses a significant amount of Brazilian coffee. By comparison, the U.S. only produces 1% of its own coffee, though it consumes the most coffee worldwide.
- AI chip manufacturer Nvidia says “goodbye-hello” to the Chinese market. The company had previously announced it would no longer be selling its products to China, but recently, Nvidia changed its tune and is applying to restart the sale of its H20 AI chip in the Chinese market. Like other companies in its industry, Nvidia has been caught in the trade debates between the U.S. and China. A major sticking point in this debate is the sourcing of rare-earth elements, such as lanthanum and cerium, from China. These elements are used in the manufacturing of many advanced technologies including AI chips. Some are speculating that Nvidia’s new stance is related to the trade of rare-earth elements. Nvidia and similar companies may have to prepare themselves for roadblocks, though. The Trump administration has not yet provided clear rules around exporting chips to China, but further restrictions are expected in the coming months.
- Trump vs. the Federal Reserve: Will the bank cave to the president’s request for lower interest rates? As inflation rose to 2.7% halfway through July, President Trump continued to push for the Fed to decrease interest rates by 3 points. While the current inflation rate is not considered particularly high by experts, numbers are rising at a speed that makes many uncomfortable. The tariffs have been pegged as one of the reasons for higher inflation, since consumers are now scurrying to buy imported products before levies go up. Investors reacted to rising inflation numbers by selling U.S. stocks, resulting in a 0.4% dip for the S&P 500. The direction of inflation is making it less probable that the Fed will consider cutting rates. In order to curb inflation, the Federal Reserve typically raises interest rates, making borrowing more expensive and decreasing demand.
What's New In The Tax World?
Will the newly-passed tax and spending plan help or hinder Republicans in 2026?
Now that Trump’s “Big, Beautiful Bill” has become law, the conversation is turning to how its policies could sway the midterm elections. The GOP has been working on an official name for the act, such as the “Working Family Tax Cuts Act,” which underscores how they hope voters will view the bill. Meanwhile, Democrats have been asserting that the cuts to Medicaid and SNAP will cause extensive harm to lower income Americans and that the tax breaks will only benefit the wealthy. Both parts are ramping up their efforts to influence voters’ perspectives with the 2026 elections in mind. In November, 35 Senate seats (including two special elections) and all 435 House seats will be up for election, meaning control of Congress could shift.
The soon-to-be-titled bill narrowly made Trump’s July 4th deadline: the Senate passed a revised version of the bill on July 1st, and the House approved the new version on July 3rd. Among its primary initiatives are a slew of tax breaks and larger budgets for national defense, border enforcement, and deportation. Recent polls, such as one conducted by Economist/YouGov survey after the bill was signed, found that only 35% of voters supported the new act, whereas 53% opposed it. The same poll found that opposition had risen 10 points since April. Democrats have named Medicaid cuts and ongoing inflation due to tariffs as key reasons for this opposition.
What are the more talked-about provisions that appear in this bill? Tax-related changes include reupping the tax rates and brackets introduced during Trump’s first term, a new tax deduction for tips, overtime pay, and automotive loans, a raised child tax credit of $2,200, and a raised $40,000 cap on state and local tax (SALT) deductions. The bill also includes business tax breaks such as the ability to deduct 100% of the cost of equipment and research expenses. These are among the talking points Republicans hope will gain the favor of the public.
Tax cuts eliminated by the bill include clean energy incentives introduced by the Biden administration. The bill also reduces funds for Medicaid and food assistance for people below the poverty line. These and other provisions are the foundation of Democrats’ argument that the bill is regressive and the legislators who backed it should be replaced.
State-By-State Updates
- Georgia makes moves toward eliminating the state income tax. Lieutenant Governor Burt Jones recently announced that the state will be creating a new Senate committee who will weigh the possibility of axing this tax. The committee will include eight Republicans and three Democrats and is scheduled to convene later this summer. Jones plans to run for governor next year and is making the removal of Georgia’s income tax part of his platform. Part of the goal is to help Georgia compete with neighboring states for jobs and to draw in new businesses. In the Southeast region of the U.S., Georgia has the second-highest income tax rate, following South Carolina. Earlier this year, a bill passed to reduce the tax from 5.39% to 5.19%.
- Missouri tackles its property tax problems headfirst with state hearings. A House committee has begun the process of listening to taxpayer concerns and ideas for revamping its property tax system. As home values increase across the state, taxpayers are protesting their rising property tax bills. Lawmakers have also pointed to the possibility that the state will face lawsuits if they don’t resolve this problem. This has happened in the past when homeowners found that their new homes were paying much more tax than older properties because there had not been a general reassessment for several decades. According to a court ruling, assessments must be based on current real estate values, which should mean that every county is valuing property at 90% to 110% of its market price. However, many are not following this rule, partly due to pressure to raise revenue for local government operations—these are primarily funded by Missouri property taxes.
- New York state has pulled in a surprising $3.3 billion in tax revenue. Within the first quarter of 2025, New York has exceeded its projected revenue by about $581 million. In a statement, the state comptroller attributed this to high personal income tax collections, which came in at $19.2 billion. However, as employment slows in coming months, revenue may dip. This is expected as tariffs and other new federal policies could cause shifts in economic growth. At the moment, the state has $2.7 billion more in its general fund than expected. Meanwhile, in New York City, taxes are a hot topic in the upcoming mayoral race. Democratic candidate Zohran Mamdani has proposed a new millionaire tax, which some believe could trigger the exodus of New York’s wealthiest from the city. This would amount to an additional 2% tax on those earning over $1 million a year on top of the city’s top tax rate of 3.876%. Combined with the state tax, this puts the top income bracket’s rate at 16.776%—the highest in the country.
- Ohio ramps up its effort to pass new cryptocurrency tax legislation. Lawmakers are working on a new tax framework for digital assets with the goal of providing clarity for investors and marking the state as innovation-friendly. Three new bills are currently in the works, including one that would introduce a “de minimis standard” that exempts small cryptocurrency transactions from taxation. Legislators are also hoping to clarify how crypto mining and staking are taxed. Mining is a process where crypto users can earn rewards by solving mathematical problems to validate blockchain transactions. Staking is where users pledge their cryptocurrency to help validate transactions. These updates to state law could help taxpayers to gain new tax benefits, such as the ability to take short-term losses on cryptocurrency that could lower their tax bills. Other updates could change how digital assets are taxed when they are donated as charitable contributions, used in loans, or contributed to qualified retirement plans.
Tax Planning Tips
How could the new tax exemption for tips and overtime pay affect employers? With the passage of Trump’s tax and spending bill, hourly employees may be able to avoid paying taxes on overtime and tips for the 2025 tax year. Service jobs, like bartenders, restaurant servers, and valets, often allow employees to earn tips. Overtime pay applies to hourly positions and may affect government employees. An important fact to note is that employees will see this benefit when they file their taxes next spring—not on their next paycheck, as some might expect. Employers will need to prepare for this change by updating their software systems so they can track this information for their hourly employees. Both employers and employees should also note that this tax deduction is subject to limits. Taxpayers who are eligible can deduct up to $12,500 (or $25,000 for married couples filing jointly) in overtime pay per year. For tips, the limit is a $25,000 deduction per year.
Car buyers may qualify for a tax break under the new Trump bill. The new deduction will apply to loans for car purchases made in 2025 and onward. Taxpayers can now deduct up to $10,000 in vehicle loan interest each year. Unlike the mortgage interest deduction for home buyers, car buyers can itemize their interest even if they take the standard deduction. Only new cars qualify. This also applies to minivans, motorcycles, pickup trucks, SUVs, and vans weighing less than 14,000 pounds. Importantly, the vehicle must also be manufactured in the U.S. and be purchased for personal (versus business) use to qualify. Buyers must also meet the income requirements to claim the benefit. The deduction begins to phase out for taxpayers with more than $100,000 in modified adjusted gross income—or $200,000 for married couples. This tax break will expire in 2028. At the same time, the new bill eliminates the previous tax credit for electric vehicles, which is set to expire on September 30th of this year.
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