If you live in New Jersey, you already know taxes are a big part of the financial conversation.

Between property taxes, state income taxes, and saving for retirement or college, many families feel like they’re constantly trying to keep up with changing rules.

Well, in 2025, Congress passed the One Big Beautiful Bill Act (OBBBA), which made many of the 2017 tax cuts permanent while introducing several new deductions and planning changes that begin affecting taxpayers in 2026.

The headlines around these new tax laws can be confusing. But what really matters is how these changes affect your paycheck, your savings, and your long‑term financial plan.

Here are five tax updates worth understanding this year -- especially for families in high‑tax states like New Jersey.

1. “No Tax on Tips” Isn’t Exactly True

You may have seen headlines suggesting that tips are now tax‑free. That’s not quite what happened.

The new law allows eligible workers to deduct up to $25,000 of qualified tip income from federal taxable income. This is considered an above‑the‑line deduction, meaning you can claim it even if you don’t itemize deductions.

However:

• All tips still must be reported as income

• Social Security and Medicare taxes still apply

• The deduction phases out at higher income levels

For example, someone deducting $10,000 of tip income in the 22% tax bracket could save roughly $2,200 in federal income taxes.

Helpful? Yes. But it’s not the same thing as tax‑free income.

2. Overtime Pay May Now Come With a Deduction

Another provision allows workers to deduct up to $12,500 of overtime income from their federal taxable income.

This deduction reduces federal income taxes only -- it does not reduce payroll taxes. Workers still pay Social Security and Medicare taxes on the full amount of overtime earned.

Like the tip deduction, this benefit also phases out at higher income levels -- roughly $150,000 for single filers and $300,000 for married couples.

If your income is near those thresholds, a raise, bonus, or side income could affect whether you qualify.

3. The SALT Deduction Matters Again in New Jersey

For many New Jersey families, this may be the most meaningful change.

The federal tax deduction for state and local taxes (known as SALT) includes property taxes and state income taxes.

As you remember, the Tax Cuts and Jobs Act capped that deduction at $10,000 beginning in 2018.

That cap hit homeowners in high‑tax states particularly hard. In Bergen County, property taxes alone can often exceed that amount.

The OBBBA raises the SALT deduction limit for many households, though the benefit begins to phase out for higher‑income taxpayers.

For New Jersey homeowners, that could mean:

• A larger itemized deduction

• More of your property taxes being deductible again

• Lower federal taxable income

It doesn’t change what you pay locally -- but it may reduce the federal tax impact of living in a high‑tax state.

4. A Change to 401(k) Contributions for Higher Earners Over 50

Beginning in 2026, workers age 50 and older who earned more than $150,000 in the prior year must make their 401(k) catch‑up contributions into a Roth account instead of a traditional pre‑tax account.

That means:

• No tax deduction today

• Tax‑free growth

• Tax‑free withdrawals later

In the short term, your paycheck may feel slightly smaller because you lose the current tax deduction. But over time, this creates tax‑free retirement income, which can be extremely valuable.

5. New Investment Accounts for Babies

Another provision creates new savings accounts for children born between 2025 and 2028.

Each eligible child receives a $1,000 federal deposit, and families can contribute up to $5,000 per year after tax.

At age 18, the account converts into a traditional IRA.

Big note: This is not a replacement for a 529 college savings plan. You actually can’t use the money in these savings account for college without penalties.  Instead, the goal is to jump‑start the child’s retirement savings early.

The idea is simple: when money has many years to grow before it’s even touched, the power of compounding can be significant.

The Bigger Picture

The biggest shift in the new tax law isn’t any single deduction -- it’s predictability.

Many tax provisions that were scheduled to expire are now permanent, giving families more stability when planning ahead.

But stability doesn’t mean simplicity. Income thresholds, phase‑outs, and new rules mean it’s still important to ask the right questions before filing your return.

Consider asking your tax professional:

• Do I qualify for any new deductions this year?

• Am I close to a phase‑out range?

• Should I adjust my withholding?

• Did my retirement contribution strategy change?

• What should I be planning now for next year?

Because tax preparation looks backward. Tax planning looks forward.

And when you understand how the rules affect your life, you can make calmer -- and often smarter -- financial decisions.

Please feel free to reach out to me at tbyrnes@lebenthal.com with any questions or if there are specific topics you’d like to discuss.

Tracy Byrnes is a CDFA® and Vice President, Women and Investing, at Lebenthal Global Advisors. She is the author of Deduct Everything: What You Need to Know About Trump’s Tax Cuts & The One Big Beautiful Bill  and she hosts the podcast Women, Wealth & What Matters: 5 Things with Tracy Byrnes.  Her mission is to empower women financially so they can pursue their goals and confidently plan for the future. Tracy holds an M.B.A. in Accounting from Rutgers University and a B.A. in Economics from Lehigh University. She is also a financial expert who has been featured in multiple national networks and media outlets.