As this year comes to a close, business owners seeking to reduce their taxes for 2025 have a variety of opportunities. Here’s a look at two tax-saving tools: bonus depreciation and retirement plan contributions.
First-year bonus depreciation has been given new life under the legislation commonly known as the “One Big Beautiful Bill Act" (OBBBA). It had been scheduled to be only 40% for 2025 (60% for certain long-production assets) and to vanish after 2026. The OBBBA permanently reinstates 100% bonus depreciation for eligible assets acquired and placed in service after January 19, 2025. Acquiring eligible assets and placing them in service by Dec. 31, 2025, could significantly reduce your 2025 tax liability.
Eligible assets include most depreciable personal property, such as:
Also eligible is qualified improvement property (QIP), defined as improvements to the interior of a nonresidential building that was already placed in service. QIP doesn’t include costs to change the building’s internal structural framework (such as enlargement). These costs must generally be depreciated over 39 years.
Unlike Section 179 expensing, which is limited to $2.5 million for 2025 (up from $1.25 million before the OBBBA) and subject to a phaseout, the amount of bonus depreciation a taxpayer can claim is generally unlimited. But there are other tax consequences to consider.
Individual taxpayers who have losses as a sole proprietor or as an owner of a pass-through entity (partnerships, S corporations and, generally, limited liability companies) may inadvertently trigger the excess business loss rule when they claim bonus depreciation. The excess business loss rule allows business losses to offset income from other sources (such as salary, self-employment income, interest, dividends and capital gains) only up to an annual limit. Amounts above that limit are excess business losses. For 2025, this is the excess of aggregate business losses over $313,000 ($626,000 for married couples filing jointly).
Excess business losses can’t be deducted in the current year and must be carried forward to the following tax year. Such losses can then be deducted under the rules for net operation loss carryforwards. As a result, an individual taxpayer’s 100% first-year bonus depreciation deduction can effectively be limited by the excess business loss rule.
Tax-favored retirement plans can provide significant savings for small business owners, both by building retirement security and by reducing taxes. Contributions are tax-deductible (or pre-tax, if you’re contributing as an employee).
One of the simplest options is a Simplified Employee Pension (SEP) IRA. If you’re self-employed, you can contribute up to 20% of your net income to a SEP IRA, with a cap of $70,000 for the 2025 tax year. If your own corporation employs you, the contribution limit is 25% of your salary, also capped at $70,000. The tax savings can be substantial.
Other options include 401(k)s, SIMPLE IRAs and defined benefit plans. Depending on your age and income, some of these options might allow you to make even larger contributions. Ask your tax advisor for details.
The permanent restoration of 100% first-year bonus depreciation creates tax-saving opportunities for taxpayers while they expand their business potential. And a tax-favored retirement plan is beneficial for you, your business and your employees. Every business is different, so it’s essential to consult a tax professional. Contact the office for help tailoring your tax strategies for 2025 and beyond.
Even during the last two months of the year, you can take steps to reduce your 2025 tax liability. Here are five practical strategies to consider.
If your itemized deductions are close to the standard deduction, consider a “bunching" strategy. This means timing certain payments (such as mortgage interest, state and local taxes, charitable gifts and medical expenses) so that they push you above the standard deduction in one year. The following year, you can take the standard deduction and, to the extent possible, defer paying deductible expenses to the following year. This alternating approach helps you capture deductions that might otherwise be lost.
If you have investments in taxable accounts, keep an eye on both realized and unrealized gains and losses. Selling appreciated securities held for more than a year ensures they’re taxed at your lower long-term capital gains rate (typically 15% or 20%, plus the 3.8% net investment income tax at higher income levels), rather than your higher, ordinary-income rate (which may be as much as 37%). But selling investments at a loss can offset gains. If losses exceed gains, up to $3,000 can offset ordinary income, with the remainder carried forward. This flexibility can reduce taxes this year and in future years.
If you want to support family members while cutting your tax bill, consider giving appreciated investments to adult children or other relatives in lower tax brackets. They can sell the assets at a lower capital gains rate, possibly even 0%. Just be cautious about the “kiddie tax," which generally applies to children under age 19 (24 if they’re full-time students), and potential gift tax implications.
Instead of donating cash, consider giving highly appreciated stock or mutual fund shares that you’ve held more than one year. You avoid the capital gains tax you’d owe if you sold the shares, and you can deduct the full fair market value if you itemize. Alternatively, selling investments at a loss and donating the proceeds allows you to claim both the capital loss and the charitable deduction. With some tax rules set to tighten in 2026, making larger gifts before year-end could be especially advantageous. (But if you don’t itemize, you can look forward to the limited charitable deduction that will be available to nonitemizers beginning in 2026.)
For those age 70½ or older, making charitable donations directly from an IRA, called “qualified charitable distributions" (QCDs), offers unique advantages. You can donate up to $108,000 in 2025 directly to qualified charities, keeping those amounts out of your taxable income. This strategy reduces adjusted gross income, which may help preserve eligibility for other tax breaks.
The best tax strategies depend on your personal situation. Timing, income level and future expectations all matter. Before taking action, contact the office to tailor these approaches to your needs.
The holiday season is here once again, and for some workplaces, that means holiday parties. Although the rules for deducting business entertainment expenses changed several years ago, you may still qualify for some holiday party write-offs for this year, possibly even the entire cost. As you plan, understand the rules so you can avoid potentially costly missteps.
Before the Tax Cuts and Jobs Act (TCJA), businesses could deduct 50% of certain entertainment costs, such as tickets for clients after contract negotiations. Although the TCJA permanently eliminated deductions for entertainment expenses starting in 2018, a key exception remains: If your business holds a company-wide party for employees, you may be able to deduct 100% of the cost. Some examples of potentially eligible expenses are:
However, for such expenses to be deductible, the party must not be “lavish and extravagant,” and the entire staff must be invited, not just management. Also, if your staff consists only of family members, your party costs aren’t deductible. Under family attribution rules, the IRS views this as an event for owners or officers rather than employees.
Inviting friends, family, clients or business associates complicates matters. Here’s an example:
In December 2025, a company invites 60 employees and their partners to a holiday party. Forty employees and their plus-ones attend. In addition, the owner invites five friends, three business associates, and two independent contractors, who all attend with their plus-ones. The total party tab is $10,000, or $100 per person, for 100 guests.
On its 2025 corporate return, the company may deduct $8,000 (the $100 cost for each of the 40 employees and their 40 plus-ones). The $2,000 cost for the other 20 guests is considered personal and not deductible. Independent contractors are treated as nonemployees for this purpose, even if they perform similar work.
The takeaway is that the more nonemployees you invite, the less you can deduct.
As always, keep detailed receipts and records. If the IRS questions your deductions, it may request documentation. Reduce audit risk by keeping expenses reasonable relative to company size and limiting personal guests.
Finally, contact the office with your questions. By seeking professional guidance in advance, you can show your workforce your holiday appreciation while maximizing your deductions and staying compliant with current tax law.
Charities obviously benefit when you donate to them. But you can also benefit by securing a tax deduction on your 2025 income tax return if you donate by Dec. 31, itemize deductions and comply with the tax rules. Here are a few rules to keep in mind:
Contact the office with any questions about the charitable deduction rules.
As the year winds down, you may be hoping to combine smart estate tax planning with tax savings using the annual gift tax exclusion. For 2025 and 2026, this exclusion is $19,000, which you may give in cash or property to any number of family members or friends, without gift tax implications. Married couples may be able to give up to $38,000 to any recipient.
Generally, married taxpayers can also gift an unlimited amount to their spouse without gift tax implications. However, if the spouse isn’t a U.S. citizen, the 2025 gift exclusion is limited to $190,000 (rising to $194,000 for 2026). Gifts exceeding that amount may require filing a federal gift tax return.
Each year you need to use your annual exclusions by Dec. 31. They don’t carry over from year to year. For example, if you don’t make an annual exclusion gift to your granddaughter this year, you can’t add this year’s unused exclusion to next year’s exclusion to make a $38,000 tax-free gift to her in 2026. Contact the office with questions.
A pesky reporting burden for businesses will be eased by legislation signed into law on July 4. Currently, businesses must issue a Form 1099-MISC to any payee (and to the IRS) when transactions reach $600 in a calendar year. And businesses that pay $600 or more for services rendered by an independent contractor must issue a Form 1099-NEC (Nonemployee Compensation).
Beginning with payments made in 2026, the threshold rises from $600 to $2,000 and will be adjusted for inflation in subsequent years. This change simplifies compliance and reduces the risk of penalties for missed 1099 filings. However, businesses must continue to maintain accurate records of all payments.
Employers: Deposit Social Security, Medicare and withheld income taxes for October if the monthly deposit rule applies.
Employers: Deposit nonpayroll withheld income tax for October if the monthly deposit rule applies.
Calendar-year exempt organizations: File a 2024 information return (Form 990, Form 990-EZ or Form 990-PF) if a six-month extension was filed. Pay any tax, interest and penalties due.
Individuals: Report November tip income of $20 or more to employers (Form 4070).
Copyright © 2025 All materials contained in this document are protected by U.S. and international copyright laws. All other trade names, trademarks, registeredtrademarks and service marks are the property of their respective owners.
October 2025Feature Articles
Tax Tips |
The One Big Beautiful Bill Act (OBBBA), enacted on July 4, will allow more taxpayers to fully deduct their state and local tax (SALT) expenses (including property tax). Here are the details.
Under the Tax Cuts and Jobs Act, the itemized deduction for SALT was limited to $10,000 ($5,000 for married individuals who file separately) beginning in 2018.
This limitation negatively affected taxpayers living in locations with high state income tax rates and those who pay high property taxes because:
Under the OBBBA, for 2025 through 2029, the SALT deduction limit increases from $10,000 to $40,000 (or $20,000 for separate filers) with 1% annual inflation adjustments. So, for 2026, the cap will be $40,400 ($20,200 for separate filers).
But unless Congress takes further action, the SALT deduction limit is scheduled to revert to the prior-law limit of $10,000 ($5,000 for separate filers) in 2030.
Note: Several states have established SALT deduction workarounds for pass-through entities. These workarounds aren’t addressed or limited by the OBBBA.
Under the OBBBA, for 2025, the higher SALT limit begins to be reduced for taxpayers with modified adjusted gross income (MAGI) over $500,000 ($250,000 for separate filers). These thresholds will also be increased by 1% annually for 2026 through 2029.
When a taxpayer’s MAGI exceeds the applicable threshold, the otherwise allowable SALT deduction limitation is reduced by 30% of MAGI above the threshold, but not below $10,000 ($5,000 for separate filers). Here’s an example: Greg and Tina are a married couple who file jointly and live in a high-tax state. For 2025, their combined SALT expenses are $60,000. Their MAGI is $550,000 for 2025, which is $50,000 above the applicable threshold. Therefore, their SALT deduction for 2025 is limited to $25,000 [$40,000 minus (30% times $50,000)].
Because of the 30% reduction, the expanded SALT deduction doesn’t benefit taxpayers with MAGI at or above $600,000 ($300,000 for separate filers).
The SALT deduction continues to be available for property taxes plus the total state and local income taxes or the total of all sales taxes. Choosing to deduct sales taxes is a helpful option if you owe little or nothing for state and local income taxes or you made a major purchase that causes your sales tax to exceed your state and local income tax.
If you opt to deduct sales tax, you don’t have to save all of your receipts for the year and manually calculate your sales tax; you can use the IRS Sales Tax Calculator on the IRS website to determine the amount of sales tax you can claim. (It includes the ability to add actual sales tax paid on certain big-ticket items, such as a car.)
If you have high SALT expenses, to get the maximum benefit from the increased deduction limit, you need to plan carefully between now and year end. For example, you may want to take steps to keep your MAGI under the reduction threshold. Or you might want to accelerate property tax payments into 2025. Contact the office for help determining the right strategy for your specific situation.
The One Big Beautiful Bill Act (OBBBA) introduces a range of tax changes that will impact businesses. Many provisions set to expire this year are now being extended or made permanent. Below is a snapshot of two important changes to help you with tax planning in the fourth quarter of 2025 and going forward.
Under the Tax Cuts and Jobs Act (TCJA), businesses had to amortize deductions for Section 174 research and experimentation (R&E) costs over five years for expenses incurred in the United States or 15 years for those incurred abroad. This provision used a mid-year rule that effectively stretched write-offs over six years. The OBBBA changes that by permanently allowing full, immediate deductions for domestic R&E expenses starting in the 2025 tax year. Foreign R&E expenses will still be amortized over 15 years.
In addition, the OBBBA lets “small businesses” (in 2025, those with average annual gross receipts of $31 million or less for the past three years) claim R&E deductions retroactively to 2022. A business of any size with domestic R&E costs from 2022 to 2024 can choose to speed up the remaining deductions for those years over a one- or two-year period.
Generally, the TCJA limited business interest deductions to 30% of the taxpayer’s adjusted taxable income (ATI) for the year. Before the OBBBA, ATI generally referred to earnings before interest and taxes. For tax years beginning after December 31, 2024, the OBBBA increases the cap on the business interest deduction by excluding depreciation, amortization and depletion when calculating ATI. This change typically increases ATI, allowing taxpayers to deduct more business interest expense.
But it’s important to note that, in 2025, taxpayers with average annual gross receipts for the last three years that don’t exceed $31 million are exempt from the interest deduction limitation.
For business owners, the OBBBA helps resolve tax planning uncertainty. Keep in mind, these are just two of the key changes for businesses in this tax legislation.
Contact the office to discuss the full range of tax provisions covered by the new law. We can help you optimize any extended or new provisions that are relevant to your situation and reduce your tax obligations for 2025 and beyond.
Depending on your situation, you may be able to claim certain medical expenses as deductions on your tax return. However, you must itemize deductions, and having enough expenses to qualify can be challenging. Here are five tips to keep in mind:
1. Consider “bunching” expenses. You can only deduct unreimbursed medical costs that exceed 7.5% of your adjusted gross income (AGI). If your 2025 itemized deductions will be higher than your standard deduction, consider moving or “bunching” nonurgent medical procedures and other controllable expenses into the same year. This strategy may help you surpass the 7.5% threshold and maximize your deduction.
2. Include insurance premiums. Premiums can add up to thousands of dollars annually, even if you pay only part of the cost yourself. (But first check that they aren’t already coming out of your paycheck pretax.) Long-term care insurance premiums also qualify, subject to age-based limits.
3. Claim travel costs for medical care. For 2025, you can deduct travel expenses for medical treatment, including taxi fares, public transit, or 21 cents per mile (plus tolls and parking) if driving. Be sure to carefully document your mileage.
4. Time certain medical purchases strategically. Qualifying expenses that you may be able to time include eyeglasses, hearing aids, specific dental work, and prescription drugs (including insulin). However, over-the-counter items, such as aspirin and vitamins and federally illegal treatments (for example, medical marijuana) aren’t deductible, even if allowed by state law.
5. Don’t overlook smoking-cessation and weight-loss programs. You can deduct costs for smoking-cessation programs and prescribed medications to reduce nicotine withdrawal, but not over-the-counter gum or patches. Weight-loss programs qualify if prescribed to treat a physician-diagnosed disease. Deductible costs include program fees and meeting charges, but not the cost of diet food.
If you still have questions, see IRS Publication 502 for complete details, or contact the office for personalized guidance.
Employers who hire new workers may qualify for a tax benefit, but they shouldn’t wait too long. The Work Opportunity Tax Credit (WOTC) is a valuable federal tax credit that incentivizes employers to hire from certain targeted groups that face employment barriers. But it will expire after 2025 unless Congress acts to extend it.
Targeted groups include qualified veterans, recipients of certain aid programs, ex-felons and qualified long-term unemployment recipients. Employers must file a form with their state workforce agency to prescreen and certify individuals they wish to hire.
Beginning Sept. 30, 2025, the federal government will generally no longer issue paper checks, including those for tax refunds, Social Security benefits and more. Also, certain federal agencies, such as the IRS and the Dept. of Labor (DOL), will generally stop accepting payments by paper check. This is part of a program to modernize payments, improve efficiency in processing payments and reduce administrative burdens. Historically, the government stated that checks issued by the Dept. of the Treasury are more likely to be lost, stolen or subject to other forms of fraud.
The IRS will publish detailed guidance for 2025 tax returns before the 2026 filing season begins. Until further notice, taxpayers should continue using existing forms and procedures, including those filing their 2024 returns on extension of a due date prior to Dec. 31, 2025. Contact the office with questions.
Employers seeking to offer family-friendly benefits may want to consider flexible spending accounts (FSAs) for dependent care. These FSAs let employees make pre-tax contributions through payroll withholding to help cover eligible expenses. Because of the major tax bill enacted on July 4, 2025, the annual contribution limit, currently $5,000, will rise to $7,500 in 2026.
FSA contributions reduce employees’ income tax and payroll tax and employers’ payroll tax. Withdrawals used to pay qualified expenses are tax-free. These include expenses for care for a child under age 13 or another dependent unable to care for themselves due to physical or mental limitations. Contact the office with questions.
Individuals: File a 2024 income tax return (Form 1040 or Form 1040-SR) if an automatic six-month extension was filed (or if an automatic four-month extension was filed by a taxpayer living outside the United States and Puerto Rico). Pay any tax, interest and penalties due.
Individuals: Make contributions for 2024 to certain existing retirement plans or establish and contribute to a SEP for 2024 if an automatic six-month extension was filed.
Individuals: File a 2024 gift tax return (Form 709) and pay any tax, interest and penalties due if an automatic six-month extension was filed.
Calendar-year bankruptcy estates: File a 2024 income tax return (Form 1041) if an automatic six-month extension was filed. Pay any tax, interest and penalties due.
Calendar-year C corporations: File a 2024 income tax return (Form 1120) if an automatic six-month extension was filed. Pay any tax, interest and penalties due.
Calendar-year C corporations: Make contributions for 2024 to certain employer-sponsored retirement plans if an automatic six-month extension was filed.
Employers: Deposit Social Security, Medicare and withheld income taxes for September if the monthly deposit rule applies.
Employers: Deposit nonpayroll withheld income tax for September if the monthly deposit rule applies.
Employers: Report Social Security and Medicare taxes and income tax withholding for third quarter 2025 (Form 941) and pay any tax due if all of the associated taxes due weren’t deposited on time and in full.
Individuals: Report October tip income of $20 or more to employers (Form 4070).
Employers: Report Social Security and Medicare taxes and income tax withholding for third quarter 2025 (Form 941) if all of the associated taxes due were deposited on time and in full.
Copyright © 2025 All materials contained in this document are protected by U.S. and international copyright laws. All other trade names, trademarks, registeredtrademarks and service marks are the property of their respective owners.
September 2025Feature Articles
Tax Tips |
If you’re a small business owner or you’re self-employed, there’s good news on the tax front. The Section 199A qualified business income (QBI) deduction, a powerful tax-saving opportunity since 2018, was initially set to expire in 2025. But thanks to the recent enactment of the One Big Beautiful Bill Act (OBBBA), it’s not only here to stay, it’s also improved.
This tax break allows eligible business owners to deduct up to 20% of their QBI from their taxable income. It applies to owners of pass-through entities, including S corporations, partnerships and, usually, LLCs, as well as sole proprietors.
QBI typically includes net business income but excludes investment capital gains and losses, dividends, interest income, owner wages, and guaranteed payments to partners or LLC members. And, you don’t need to itemize deductions to claim this deduction.
While the full 20% deduction is available to many, it’s subject to certain limits that phase in based on taxable income and other factors. Your tax advisor can help with this.
If your business is a specified service trade or business (SSTB), your deduction reduces gradually as your income increases beyond the threshold, $197,300 ($394,600 if you’re married filing jointly) for 2025. If your income exceeds the top of the income range, $247,300 ($494,600 if you’re filing jointly) for 2025, you lose the deduction entirely.
SSTBs include professions like law, medicine, accounting, financial planning and consulting, but not engineering or architecture.
Non-SSTBs face other limitations. If their income exceeds the top of the range, their deduction can’t exceed the greater of their share of:
If their income falls within the range, these limits apply only partially. If the rules and thresholds seem daunting, lean on us.
Here’s what pass-through business owners can look forward to:
As a result of these changes, more business owners will be eligible for the deduction in 2026 and beyond, and some owners’ deductions will increase.
The QBI deduction can significantly reduce your tax bill. With the deduction now made permanent and set to improve in 2026, it’s worth revisiting your tax strategy with the help of a qualified advisor. Contact the office to ensure you’re making the most of this valuable opportunity.
The One, Big, Beautiful Bill Act (OBBBA) brings a wide range of tax changes, with several key updates designed to support families. Among the many provisions, here are three with the potential to lower your tax bill.
Beginning in 2025, the Child Tax Credit (CTC) increases to $2,200 per qualifying child under age 17 (up from $2,000). It will be adjusted annually for inflation starting in 2026. The refundable portion (the part you can receive even if you owe no tax) is locked in at $1,700 for 2025 and will also adjust for inflation moving forward.
The modified adjusted gross income (MAGI) thresholds for the phaseout of the CTC remain unchanged and permanent at:
Beginning in 2025, you must include valid Social Security numbers (SSNs) for both the child and the taxpayer claiming the credit. For joint filers, at least one spouse must have an SSN to qualify.
Previously set to expire after 2025, the $500 Credit for Other Dependents (COD) is now permanent. The nonrefundable COD applies to dependents who don’t qualify for the child tax credit, such as college-aged children or elderly parents. The dependent must be a U.S. citizen, national or resident alien and must have a valid Social Security number or Individual Taxpayer Identification number.
The income-based phaseouts are the same as those for the CTC.
For 2025, the maximum credit is $17,280 per adoption. But the credit phases out at higher MAGI levels than the CTC and COD:
These amounts apply to all filing statuses.
Under the OBBBA, up to $5,000 of the credit is now refundable, offering more immediate financial help to some adoptive parents. The nonrefundable portion can be carried forward; the refundable portion cannot.
Your tax advisor can offer more information about the tax side of adoption.
These are just three highlights from the OBBBA’s roughly 870 pages of tax updates. Some families stand to benefit, but as always, contact the office to make the most of what’s available to you.
It’s hurricane season, which is just one of several weather emergencies and other natural disasters companies may face, depending on location. Tornadoes, floods and wildfires also pose serious threats. According to the Federal Emergency Management Agency (FEMA), about 25% of businesses never reopen after a major disaster. And many that do reopen struggle to recover.
To lower the risk of closure and improve your chances of a strong recovery, establish a comprehensive emergency plan before disaster strikes. FEMA recommends the following multi-step approach to help safeguard your business.
Start by carefully defining the goals of your disaster plan and identifying who’ll create, manage and execute it. Your priorities will likely include:
For legal and financial risk management, consider including an attorney and an insurance professional to your disaster planning team.
Begin by identifying and prioritizing the risks your business may face. These will likely include physical injuries to employees or customers. Also important to consider are business interruption, revenue loss and damage to property, equipment, inventory or vital records.
Your plan should address:
Employee roles. Assign responsibilities to staff with relevant skills for different emergencies.
Evacuation procedures. Develop clear evacuation routes and protocols.
Safety equipment. Define needs for items such as first aid kits, fire extinguishers and sprinkler systems.
Data protection. Secure vital records and documents by means such as remote backups and physical copies.
Communication strategy. Establish how you’ll keep employees and customers updated as to status and recovery timeline.
Inventory and supplier list. Keep a current list of critical equipment and replacement suppliers.
Operational continuity. Create contingency plans to run essential functions remotely with a minimal team.
HR and payroll policies. Set guidelines for compensating nonexempt employees who can’t work during downtime.
Keep your plan thorough but manageable to ensure it’s practical, updatable and easy to follow.
To implement your plan, inform employees of their roles, assign responsibilities and provide any necessary training. Ensure that all essential emergency equipment is readily available and that your insurance coverage is sufficient to meet your needs.
Identify possible infrastructure gaps and address them promptly to ensure safety. An example would be inadequate emergency exits.
Regular practice strengthens preparedness. Conduct drills to ensure safe evacuation procedures are clear and compelling. Verify that safety equipment, data backups and other safeguards function as intended.
Be proactive. Don’t wait for a real emergency to discover weaknesses.
With a solid plan in place, relax, but not too much. Review and update your plan at least annually to reflect changes in staff, operations or layout.
Incorporate feedback from various sources, such as test results, employee input and new risks you’ve discovered or lessons learned. Adapting and refining your plan regularly will maintain its effectiveness and help keep your assets, especially your human assets, safe over time.
Your business may never be directly impacted by a severe weather event or other natural disaster. But having a solid emergency preparedness plan can still offer tangible benefits, such as lowering certain business insurance costs. More importantly, it brings peace of mind that allows you to stay focused on running and growing your business, rather than worrying about the possibilities. Contact the office for guidance tailored to your situation.
For 2025 through 2028, individuals age 65 and older may be able to claim a new senior deduction of up to $6,000, subject to income-based phaseouts. This deduction is available whether or not the taxpayer itemizes. It begins to phase out when modified adjusted gross income (MAGI) exceeds $75,000 ($150,000 for married couples filing jointly).
Does this new deduction replace the existing extra standard deduction for those age 65 and up? No. For 2025, single qualifying seniors can take the additional $2,000 standard deduction. Married couples who file jointly can take an extra standard deduction of $1,600 per qualifying spouse. Contact the office with questions.
If a couple gets separated or divorced, it affects tax obligations. The IRS considers couples married for tax purposes until a final decree is issued. After separating or divorcing, update your Form W-4 with your employer and check withholding using the IRS estimator.
Generally, alimony payments and child support payments aren’t deductible by the paying spouse or included in the taxable income of the recipient spouse. (Tax treatment of alimony payments is different if they’re being made under agreements entered into on or before December 31, 2018.) Property transfers due to divorce typically aren’t taxed but may require a gift tax return. Also, be aware that only one parent can claim a child as a dependent.
Employers seeking to offer low-cost, family-friendly benefits may want to consider flexible spending accounts (FSAs) for dependent care. These FSAs let employees make pre-tax contributions through payroll withholding to help cover eligible expenses. Thanks to the recently passed One Big Beautiful Bill Act, the annual contribution limit, currently $5,000, will rise to $7,500 in 2026.
Employee’s FSA contributions reduce their income and payroll taxes and their employers’ payroll tax. Withdrawals used to pay qualified expenses are tax-free. These include expenses for care for a child under age 13 or another dependent unable to care for themselves due to physical or mental limitations.
Individuals: Pay the third installment of 2025 estimated taxes (Form 1040-ES), if not paying income tax through withholding or not paying sufficient income tax through withholding.
Calendar-year corporations: Pay the third installment of 2025 estimated income taxes, completing Form 1120-W for the corporation’s records.
Calendar-year S corporations: File a 2024 income tax return (Form 1120-S) and provide each shareholder with a copy of Schedule K-1 (Form 1120S) or a substitute Schedule K-1 if an automatic six-month extension was filed. Pay any tax, interest and penalties due.
Calendar-year S corporations: Make contributions for 2024 to certain employer-sponsored retirement plans if an automatic six-month extension was filed.
Calendar-year partnerships: File a 2024 income tax return (Form 1065 or Form 1065-B) and provide each partner with a copy of Schedule K1 (Form 1065) or a substitute Schedule K1 if an automatic six-month extension was filed.
Employers: Deposit Social Security, Medicare and withheld income taxes for August if the monthly deposit rule applies.
Employers: Deposit nonpayroll withheld income tax for August if the monthly deposit rule applies.
Calendar-year trusts and estates: File a 2024 income tax return (Form 1041) if an
automatic five-and-a-half-month extension was filed. Pay any tax, interest and penalties due.
Individuals: Report September tip income of $20 or more to employers (Form 4070).
Copyright © 2025 All materials contained in this document are protected by U.S. and international copyright laws. All other trade names, trademarks, registeredtrademarks and service marks are the property of their respective owners.
August 2025Feature Articles
Tax Tips |
If you’ve been pondering the purchase of a new or used electric vehicle for yourself or your business, you may want to buy sooner rather than later to take advantage of available tax credits. Under the One, Big, Beautiful Bill Act (OBBBA), these credits won’t be available for purchases made after September.
The Clean Vehicle Credit (Sec. 30D) was scheduled to expire after 2032. Under the OBBBA, the credit is available only through September 30, 2025. In 2022, the Inflation Reduction Act (IRA) significantly expanded the credit for qualifying clean vehicles placed in service after April 17, 2023. For eligible taxpayers, it extended the credit to any “clean vehicle,” including electric vehicles, hydrogen fuel cell cars and plug-in hybrids.
The maximum credit for new vehicles is $7,500, based on meeting certain sourcing requirements for 1) critical minerals and 2) battery components. Clean vehicles that satisfy only one of the two requirements can qualify for a $3,750 credit.
Vans, pickup trucks and SUVs with a manufacturer’s suggested retail price (MSRP) of more than $80,000 don’t qualify for the credit, nor do automobiles with an MSRP higher than $55,000. Qualified vehicles also must undergo final assembly in North America.
The IRA also created a new credit, Sec. 25E, for eligible taxpayers who buy used clean vehicles from dealers. The credit equals the lesser of $4,000 or 30% of the sale price. But the credit can’t be claimed at all if the sale price is over $25,000. The OBBBA also ends this credit after September 30, 2025.
These credits are unavailable to taxpayers with incomes exceeding certain amounts, and additional rules and limits apply.
The OBBBA also eliminates the tax incentive for a business’s use of clean vehicles. The Qualified Commercial Clean Vehicle Credit (Sec. 45W) had been scheduled to expire after 2032. It’s now available only for vehicles acquired on or before September 30, 2025. Depending on vehicle weight, the maximum credit is up to $7,500 or $40,000.
Additional rules and limits also apply to this credit.
While these credits can be valuable, don’t rush to purchase a clean vehicle without doing your due diligence. Check whether the vehicle you want to buy is qualified and that you would indeed be eligible to claim the credit. If you have questions regarding any of these clean vehicle credits (or other tax breaks related to purchasing a vehicle) please don’t hesitate to contact the office.
If your federal tax withholding isn’t enough to cover your total tax liability, you may need to make estimated tax payments. This typically applies if you have income from sources such as interest, dividends, capital gains or self-employment. The following rules explain how to make these payments without incurring an underpayment penalty.
Individuals subject to estimated tax requirements generally must pay 25% of a “required annual payment” by April 15, June 15 and September 15 of the tax year and January 15 of the following year to avoid an underpayment penalty. If one of those dates falls on a weekend or holiday, the payment is due on the next business day.
So the third installment for 2025 is due on Monday, September 15. Payments are made using Form 1040-ES and may be made electronically or on paper.
The general rule is that you may have to pay estimated tax for 2025 if both of these conditions apply:
1. You expect to owe at least $1,000 for 2025, after subtracting your withholding and tax credits, and
2. You expect your withholding and tax credits to be less than the smaller of:
90% of your 2025 tax liability or 100% of your 2024 tax liability (110% if your 2024 adjusted gross income was more than $150,000, or $75,000 if you’re married filing separately in 2025).
If you do have to pay estimated taxes, calculating them requires projecting total income, deductions, credits and withholding for the year. After determining the required annual payment, divide that number by four and make four equal payments by the due dates.
But you may be able to use the annualized income method to make smaller payments during part of the year. This method is helpful to people whose income flow isn’t uniform over the year, perhaps because the business is seasonal.
For example, suppose your income comes exclusively from a business operated in a resort area during June, July and August. In that case, you may not have to make an estimated payment, or as large a payment, for the first two installments, and then you’ll need to “catch-up” when you make the third installment payment.
If you have questions about the estimated tax rules and how they apply to you, contact the office.
When it comes to taxation, partners in a business may find the math a bit puzzling. You may discover that the amount of partnership income you’re taxed on is more than the amount that was distributed to you. That’s a quirk of taxation that lies in the way partnerships and partners are taxed.
Partnerships aren’t subject to income tax at the entity level. Instead, each partner is taxed on the earnings of the partnership, even if the profits aren’t distributed.
Similarly, if a partnership incurs a loss, it’s passed through to the partners. (However, various rules may prevent partners from currently using their shares of the partnership’s losses to offset other income.)
A partnership must file an information return, IRS Form 1065, “U.S. Return of Partnership Income.” On this form, the partnership separately identifies income, deductions, credits and other items.
This allows partners to properly treat items that are subject to limits or other rules that could affect their treatment at the partner level. Examples of items that may require special treatment include capital gains and losses, interest expense on investment debts, and charitable contributions. Each partner receives a Schedule K-1, showing their share of partnership items for the tax year.
Basis and distribution rules ensure that partners aren’t taxed twice. A partner’s initial basis in his or her partnership interest (which varies depending on how the interest was acquired) is increased by his or her share of partnership taxable income. When that income is paid out to partners in cash, they aren’t taxed on the money if they have sufficient basis. Instead, partners reduce their basis by the amount of the distribution. If a cash distribution exceeds a partner’s basis, then the excess is taxed to the partner as a gain.
Understanding the ins and outs of partnership taxation can help you avoid surprises come tax time. If you’re unsure how these rules apply to your specific situation, especially with complex items such as losses or special allocations, don’t hesitate to reach out. Contact the office for help with the math and whatever other questions you may have.
Now might be a good time for some taxpayers to convert their traditional IRA to a Roth IRA. Traditional IRA withdrawals are taxed and, if taken early, may be subject to penalties. Also, required minimum distributions (RMDs) must be taken starting at age 73 (or 75 if you won’t turn 73 until after 2032). But qualified Roth IRA withdrawals are tax-free, you can access Roth contributions anytime tax- and penalty-free, and there are no RMDs for Roth accounts.
Converting a traditional IRA to a Roth can allow you to turn tax-deferred future growth into tax-free growth and take advantage of a Roth IRA’s other benefits. But, taxes are due on the converted amount. If your traditional IRA’s value has dropped due to market volatility or you’re in a lower-than-usual tax bracket this year, your tax bill on a conversion will be lower.
Ideally, pay taxes with non-IRA funds to preserve future tax-free growth potential. Conversions work best if you don’t need the money soon, giving it time to grow. You can even spread conversions across multiple years to reduce the tax impact. A Roth conversion can be a smart move, but it’s not for everyone. Contact the office to explore your options.
If you requested an extension to file your tax return after the April 15, 2025, due date, the extended deadline is Wednesday, Oct. 15. If you have the information you need, consider filing now. There’s no advantage to waiting, and last-minute filing may lead to stress and worry.
If you’re concerned about paying any tax owed, the IRS offers short- and long-term payment plans, as well as installment agreements, to taxpayers who qualify. It’s important to act quickly if you owe because any amount that was due April 15 accrues interest until the balance is paid. So, as soon as possible, gather your 2024 tax year records and contact the office for a tax preparation appointment or to ask questions you may have.
First-year bonus depreciation had been phasing down 20 percentage points annually since 2023 and was set to drop to 0% in 2027. Businesses have been eager to learn the fate of this popular depreciation-related tax break. The good news is that the One, Big, Beautiful Bill Act makes permanent 100% first-year bonus depreciation for the cost of qualified new and used assets acquired and placed in service after Jan.19, 2025.
If you’d been holding off on investing in qualified assets such as office furniture, equipment and off-the-shelf computer software because 2025 bonus depreciation had been only 40%, you may want to move ahead now. Remember, assets must not just be acquired but also be placed in service by Dec. 31 for you to claim 100% bonus depreciation on your 2025 calendar year tax return. Contact the office to learn about these and other business-related tax provisions in the law.
Employers: Deposit nonpayroll withheld income tax for July if the monthly deposit rule applies.
Employers: Deposit Social Security, Medicare and withheld income tax for July if the monthly deposit rule applies.
Individuals: Report August tip income of $20 or more to employers (Form 4070).
Copyright © 2025 All materials contained in this document are protected by U.S. and international copyright laws. All other trade names, trademarks, registeredtrademarks and service marks are the property of their respective owners.
