Tax Law Change Client Letter Template (2025 and 2026) | HelloBooks Two ready-to-edit client letters explaining the 2025 and 2026 federal changes: one for individuals, one for business owners. Figures from IRS.gov.
Clients have heard about no tax on tips and a bigger SALT cap from the news. These two letters explain what actually changes on their return and what to send you, in language a client will read to the end.
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Letter 1: individual clients
Dear [CLIENT NAME], The federal law signed on July 4, 2025 changed several things on your personal return, starting with tax year 2025. Here is what may affect you, and what we will need from you. New deductions you can claim even without itemizing (2025 through 2028): - Tips: up to $25,000, for workers in jobs that customarily receive tips. - Overtime: the premium part of overtime pay, up to $12,500 ($25,000 on a joint return). - Car loan interest: up to $10,000 a year on a loan for a new US-assembled personal vehicle taken out after 2024. - Age 65 and over: an extra $6,000 per person. Each of these shrinks at higher incomes, and the tips, overtime and senior deductions require a joint return if you are married. Other changes: - The cap on state and local taxes you can deduct rose from $10,000 to $40,000 for 2025, and $40,400 for 2026, with a reduction at high incomes. - The child tax credit is $2,200 per child. - The standard deduction for 2026 is $16,100 single, $32,200 married filing jointly and $24,150 head of household. What to send us: your final pay stub of the year if you were paid overtime, details of any tips, and the loan statement and vehicle VIN if you bought a car with a loan. We will confirm which of these apply when we prepare your return. If you would like to talk it through before then, reply to this letter or call [PHONE]. Kind regards, [PREPARER NAME], [FIRM NAME]
Letter 2: business owners
Dear [CLIENT NAME], Several federal changes affect your business from 2025 and 2026. This note sets out the ones most likely to matter to you. - Equipment: property acquired after January 19, 2025 can again be written off in full in the year it goes into service. The Section 179 limit is $2,500,000 for 2025 and $2,560,000 for 2026. - Research: US research and development costs can be deducted in the year you pay them, for tax years beginning after 2024. - Contractors: from payments made in 2026, you only need to issue Form 1099-NEC when you pay someone $2,000 or more in the year (it was $600). The first forms affected go out in early 2027. - Payroll: if you have tipped staff or pay overtime, your payroll should now track tips and the overtime premium separately. - Owners: the qualified business income deduction continues, with a new minimum for owners with smaller amounts of business income from 2026. Before year end, please send us a list of any large purchases you plan, and make sure you hold a Form W-9 for every contractor you pay. We are happy to review the plan with you. Reply to this letter or book a time at [BOOKING LINK]. Best regards, [PREPARER NAME], [FIRM NAME]
Cut the bullets that do not apply to the client group. A retiree does not need the overtime paragraph, and a client with no contractors does not need the 1099 note. Short letters get read.
Every amount in these letters comes from IRS.gov and is listed with its source on the tax return changes tracker. If the IRS revises guidance, update the letter before the next mailing.
Templates are starting points for your firm to adapt. They are not legal or tax advice.
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