The Dougherty Dispatch- The One Big Beautiful Whoops.
August 2025
The One Big Beautiful Whoops
Before you go out having babies and buying cars, we have a few corrections to make to this dispatch. Goes to show just how “simplified” our tax code is at the moment.
Car Loan Interest Deduction
Starting in 2025, you can deduct interest on a personal car loan — up to $5,000 per year for individuals, or $10,000 for married couples — as long as the car is brand new, assembled in the United States, and for personal use.
$1,000 “Baby Accounts”
- Tax treatment: Contributions are not tax-deductible, but the account grows tax-deferred and is taxed only when the money is withdrawn.
- Distribution rules: Funds can be used tax-free for higher education expenses at any age, or up to $10,000 toward the purchase of a first home after the child turns 18, along with certain emergency expenses. Otherwise, distributions are subject to income tax and a 10% penalty if withdrawn before age 59 ½.
Baby Account vs. UGMA (Uniform Gifts to Minors Account)
- Both types of accounts are likely to be considered for college financial aid purposes as assets owned, so the new baby account provides no advantage.
In Conclusion
If you would indeed like a simpler tax code, and thus fewer corrected dispatches, we recommend writing to your congressmen—or The White House!
It is our pleasure to serve you,
The Dougherty Team
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