Business and other mileage rates increase for the second half of 2026
July 21, 2026
The IRS has made a midyear increase in the standard mileage rate for business vehicle use, including for cars, SUVs, vans, pickup trucks and panel trucks. These rates apply to gasoline- and diesel-powered vehicles as well as electric and hybrid ones. But whether the rate increase will impact your business depends on the vehicle expense reporting method you choose. Also rising is the medical and moving mileage rate.
2 business vehicle expense reporting options
If you use a vehicle for business purposes, you generally have the option to deduct the actual expenses attributable to your business use. These include expenses such as gas, oil, tires, insurance, repairs, licenses and vehicle registration fees. In addition, you may claim a depreciation allowance for the vehicle based on the percentage of business use. However, annual write-offs for certain passenger autos are subject to “luxury car” limits that are indexed for inflation annually.
The maximum first-year depreciation deduction allowed for a passenger car subject to the luxury car limits and placed in service in 2026 is generally $20,300 ($12,300 + $8,000 assuming bonus depreciation is claimed). So the maximum first-year deduction for such a vehicle used 90% for business in 2026 would be limited to $18,270 (90% of $20,300). (Heavier SUVs, pickups, vans and panel trucks might be eligible for larger first-year depreciation deductions.)
Keeping track of every vehicle-related expense under the actual expense method can be burdensome, but you may have a simpler option. You potentially can use the IRS standard mileage rate. This shortcut is available to most taxpayers. However, you can’t use the standard mileage rate if you use five or more cars at the same time (such as in a fleet operation).
To use the standard mileage rate for a vehicle you own, you generally must choose it during the first year the vehicle is available for use in your business. In later years, you can choose to use the standard mileage rate or actual expenses. If you switch to actual expenses, however, special depreciation rules apply. For a leased vehicle, taxpayers electing the standard mileage rate must use that method for the entire lease period, including renewals.
With the standard mileage rate, you don’t have to account for all your actual expenses. But for each business trip you must still record the:
- Mileage,
- Dates,
- Destinations,
- Names and relationships of the business parties involved, and
- Business purpose of the travel.
Most employees can’t deduct unreimbursed business mileage on their federal income tax returns. However, employers may use the standard mileage rate to reimburse employees tax-free under an accountable plan, provided applicable substantiation requirements are met.
Business rate adjustment
The IRS generally adjusts the standard mileage rates annually based on a study of vehicle operating costs. However, unusual circumstances may prompt a midyear change. The last time the IRS changed its mileage rates midyear was in 2022.
For 2026, the IRS initially established a standard mileage rate of 72.5 cents per mile for the business use of a vehicle. But recent increases in fuel prices prompted the midyear adjustment. Effective July 1, 2026, the standard rate for business vehicle use increased to 76 cents per mile — up 3.5 cents from the rate for the first half of the year. This rate is scheduled to remain in effect through year end.
Medical and moving rate adjustment
Also effective July 1 through December 31, 2026, the new rate for driving associated with qualifying medical care or moving is 23.5 cents per mile (up from 20.5 cents per mile for the first half of the year). This is significantly lower than the rate for business use because that rate takes into account depreciation, which isn’t an allowable vehicle expense deduction for medical or moving purposes.
You can deduct medical mileage only if you itemize deductions and only to the extent that your total eligible medical expenses for the year exceed 7.5% of your adjusted gross income. Moving expenses such as mileage are deductible only by certain active-duty military personnel and certain members of the intelligence community. But if you qualify, you don’t have to itemize to claim the moving expense deduction.
The 14-cents-per-mile rate for charitable use of a vehicle remains unchanged. It’s set by statute, so it can only be amended by Congress.
Navigating vehicle expense deductions can be tricky
Determining which business vehicle expense reporting option is right for you or whether you can benefit from medical or moving mileage deductions may not be easy. There are many variables involved. And the midyear rate changes further complicate matters. Contact us for help assessing your situation and implementing a tax strategy for the rest of the year.
© 2026
Have you already made contributions to charity this year? Are you considering making more between now and year end? If so, it’s important to be familiar with the tax rules for different types of donations so you can maximize your tax benefit — or at least avoid finding out at tax filing time that your charitable deductions are smaller than you expected. For example, be aware that a new limit goes into effect this year: a 0.5% floor on the charitable deduction for itemizers. This generally means that only charitable donations in excess of 0.5% of your adjusted gross income (AGI) will be deductible if you itemize deductions. So, if your AGI is $100,000, your first $500 of charitable donations for the year won’t be deductible. Let’s take a look at some of the other significant rules, limits and changes affecting different types of donations. Giving cash When you make a cash or cash-equivalent contribution to a qualified charitable organization, if you don’t itemize deductions, you can claim the new charitable deduction for nonitemizers of up to $1,000 ($2,000 for married couples filing jointly). Only cash donations qualify. If you do itemize deductions, you can generally deduct the full amount of cash contributions once you’ve surpassed the new 0.5% floor. But, your annual deduction is generally limited to 60% of your AGI. Any excess may be carried forward for up to five years. Be aware that the IRS imposes strict recordkeeping rules for cash contributions. For instance, for cash donations of $250 or more, you must obtain a contemporaneous written acknowledgment from the charity before filing your income tax return. Donating property Several special rules apply to charitable gifts of property. For starters, property donations are subject to lower annual deduction limits (which we’ll detail shortly). On the plus side, there’s a big tax break if you donate certain appreciated property you’ve held longer than one year that would have qualified for long-term capital gains rates had you sold it instead of donating it. In this case, you can deduct the property’s current fair market value. Thus, any appreciation in value while you owned the property will be untaxed. Examples of eligible property include publicly traded securities and mutual funds. However, your annual deduction for such donations is typically limited to 30% of AGI. For tangible property, how the charity uses the property may affect the amount of your deduction. For example, if you donate a car, unless it’s being used by the charity to further its charitable mission (such as a social services charity using a van to deliver meals to the elderly), you generally may deduct only the amount the charity receives when it sells the vehicle. But a 50% of AGI limit typically applies to deductions for donations where you can’t deduct the fair market value, rather than the 30% limit. These are just a few examples of rules that apply to deductions for property donations. Contact us to find out the rules for specific property you’re considering giving to charity. Making quid pro quo contributions Generally, if you receive a benefit in return for making a donation, your deduction amount is reduced. For such a “quid pro quo contribution,” the charity must provide a good-faith estimate of the goods and services you received. You can deduct the difference between the amount you donated and the value of the benefit you received — nothing more. For example, let’s say you attend a fundraising dinner cruise costing $300. If the charity values the meal and boat ride at $100 per person, your deduction is limited to $200. However, most low-cost items and nominal gifts, like coffee mugs or pens featuring the charity’s logo, don’t have to be subtracted from your deduction. Volunteering You can’t deduct the value of the time you spend helping a charity. But you can write off related out-of-pocket expenses, such as supplies and mileage, if you itemize deductions. The deductible mileage rate for charitable miles driven is 14 cents per mile. Travel and lodging expenses can qualify, such as if you attend a convention as a delegate for the charity. However, travel expenses can’t be deducted if the trip is merely a disguised vacation. Achieving your goals If you itemize deductions, charitable donations can be a powerful tax-saving tool. But, as you can see, there’s much to consider as you plan your giving for the rest of the year. We can answer your questions and help you create a charitable giving strategy for the remainder of 2026 that aligns with your philanthropic and tax goals. © 2026
Offering a broad menu of employee benefits can help your business attract and retain skilled workers. One benefit that’s popular among employees with families is employer-provided child care. Although this option hasn’t been financially feasible for many small businesses, recent tax law changes may give you a reason to reconsider opening (or upgrading) a child care facility, contracting with a child care provider or participating in a jointly operated arrangement. Here’s an overview of the credit and how it’s been enhanced starting in 2026. Recent changes Under Section 45F of the tax code, employers may claim a tax credit for eligible expenses paid or incurred to provide child care to employees. For 2026, the credit has increased from 25% to 40% of an employer’s qualified child care facility expenditures, plus 10% of its qualified child care resource and referral expenditures paid or incurred during the tax year. It’s limited to a total of $500,000 per tax year (up from $150,000 for 2025). Beginning in 2027, the $500,000 limit will be adjusted annually for inflation. The credit has been further enhanced for certain small businesses. If you meet the eligibility requirements, you can claim a credit equal to 50% of qualified child care facility expenses, plus 10% of qualified resource and referral expenditures, up to a maximum of $600,000 for 2026 (annually inflation-adjusted going forward). Eligible small businesses are generally those that had average annual gross receipts for the previous five tax years below an inflation-adjusted threshold. For 2026, the threshold is $32 million. Also, eligible small businesses can now pool their resources to provide child care for their employees and to use third-party intermediaries to facilitate child care services. These options may make the credit more accessible to businesses that can’t justify operating their own facilities. Qualified expenditures Qualified child care facility expenditures are amounts paid or incurred to: Acquire, construct, rehabilitate or expand property that’s 1) to be used as part of your qualified child care facility, 2) depreciable or amortizable, and 3) not part of your principal residence or an employee’s home, Operate your qualified child care facility, including the costs to train and compensate its employees and provide scholarship programs, or Contract with a qualified child care facility to provide eligible services to your employees. It’s important to note that qualified child care expenses exclude amounts that exceed the fair market value of providing such care. A qualified child care facility is one that meets all state and local regulatory requirements. In addition, the facility 1) must be used principally to provide child care (unless it’s also the personal residence of the person who operates it), 2) must be open to all employees during the tax year, and 3) can’t discriminate in favor of highly compensated employees. And, if the facility is your principal trade or business, at least 30% of enrollees must be your employees’ dependents. Additional rules To avoid doubling your tax benefits from the same expenditures, your tax basis in any qualified child care facility is reduced by the amount of the credit attributable to facility-related expenditures. You also can’t claim other deductions or credits based on the same expenses. In addition, if your child care facility ceases to operate as such or undergoes a change in ownership before the tenth tax year after the tax year in which it’s placed in service, you may have to recapture (pay back) some or all of the credit. The percentage of the credit that must be recaptured decreases gradually over the 10-year period. The Sec. 45F credit is part of the general business credit, which is composed of more than 30 separate tax credits that are subject to combined limits based on your tax liability. So the amount you can use in the current year may be limited. However, any unused credit can generally be carried back one year and carried forward for 20 years. The credit is calculated and claimed on Form 8882, “Credit for Employer-Provided Childcare Facilities and Services.” Look before you leap Providing child care for your employees can be a major long-term investment. Although the recent enhancements to the employer-provided child care credit help make this benefit option more feasible, it isn’t right for every employer. You should also consider workforce demographics, operational costs, available providers, and the associated risks and responsibilities. Even when outsourcing, you’ll have to exercise due diligence to select a reputable provider, monitor service quality and make changes as necessary. If you’re interested in pursuing this family-friendly benefit, we can help you evaluate the pros and cons and model the credit’s potential value. Contact us for more information and assistance. © 2026
The Qualified Opportunity Zone (QOZ) program provides tax incentives to invest in designated low-income communities across the United States. Tax law changes enacted last year made the program permanent and altered it, with implications for investors under both the original and renewed programs. With proposed, and eventually final, regulations on the way, the IRS has released some transitional guidance for investors, Qualified Opportunity Funds (QOFs) and Qualified Opportunity Zone businesses (QOZBs). QOZ basics The QOZ program was created by the Tax Cuts and Jobs Act (TCJA). It generally allows taxpayers to defer — and possibly reduce or eliminate — short- or long-term capital gains from the sale of their investments by reinvesting the gains in a QOF within 180 days. QOFs must maintain at least 90% of their assets in QOZ property. Qualifying investments include those in QOZBs and in new or substantially improved commercial buildings in QOZs. Under the TCJA, the tax benefits from investing in a QOF are generous. Taxes on the “rolled over” capital gains are deferred until the earlier of 1) the sale or exchange of the taxpayer’s investment (an “inclusion event”), or 2) December 31, 2026. Investors receive a 10% step-up in basis for the investment after five years, so only 90% of the rollover gain is taxable. After seven years, the step-up increases to 15%. Gains on investments left in a QOF for at least 10 years are fully tax-exempt. The One Big Beautiful Bill Act (OBBBA) established a permanent QOZ program with rolling 10-year QOZs. The first round of newly designated zones eligible for investment will begin January 1, 2027. It’s expected that about 6,500 new zones will be designated. The original QOZ designations generally expire on December 31, 2028. Under the permanent program, rollover gains can still be deferred, with a 10% step-up at year five. At that point, though, the rollover gains must be recognized. And the additional step-up at seven years has been eliminated. But the permanent exclusion of gains on the QOF investment itself after 10 years remains intact, for up to 30 years after investment. The OBBBA also created a new kind of QOZ for rural areas, with a 30% step-up on the rollover gain after five years. What’s in the guidance? The guidance in IRS Notice 2026-40 addresses several issues of concern, including: Treatment of existing QOF investments. Investors who hold a qualifying investment through December 31, 2026, must include the amount of remaining rollover gain from the investment in their income for the tax year that includes that date. Notably, they can’t defer that gain by rolling it into a new QOF. Existing QOF investors can opt to continue to hold those investments. If investors reach the 10-year holding period and satisfy certain requirements, they can elect to adjust the basis at sale or disposition to the investment’s fair market value at that time, thus eliminating taxable gains after the date of the original investment. The treatment of gains on an inclusion event that occurs before December 31, 2026, differs from that of gains where the investment is still held on December 31, 2026. In the former situation, the recognized gains may be eligible for deferral by making a new qualifying investment within 180 days. But the clock on the 10-year step-up in basis will start over and run from the date of the new investment. Tangible property acquired after 2026. Under the OBBBA, property acquired by a QOF or QOZB after December 31, 2026, generally can’t be treated as QOZB property unless it’s acquired for use in a QOZ designated after July 4, 2025. That means tangible property acquired after 2026 generally can’t qualify as QOZB property if it’s in one of the originally designated QOZs. However, the guidance outlines two exceptions that allow tangible property acquired by QOZBs after 2026 in an original QOZ to qualify: Working capital safe harbor. The safe harbor applies if an entity acquires the property under a written working capital plan that was adopted before December 31, 2026. The QOZB also must have received at least 10% of the estimated working capital assets designated by the plan before December 31, 2026, and expended at least 5% by that date. Ordinary course of business exception. This exception applies when a QOF or QOZB acquires tangible property in an existing QOZ, in the ordinary course of its business, to replace existing tangible business property (if other requirements are met). Covered replacements include the replacement or modernization of property necessary for the business. Property acquired to expand a business or transition to a new business doesn’t qualify. QOZBs and QOFs that are active in existing QOZs should ensure they can satisfy one of these requirements before the end of 2026. Seize the opportunities In addition to the above, the IRS guidance provides transitional rules, including safe harbors for how QOFs and QOZBs can continue to treat a location as if it were in a QOZ after an existing designation expires. Questions? We can provide further details on the new QOZ guidance and explain how it can benefit your tax situation. © 2026
You may be familiar with estate planning documents such as an advance health care directive (sometimes referred to as a “living will”) and a health care power of attorney (HCPA), but you may not realize that you can also document your preferences for future psychiatric care with a psychiatric advance directive (PAD). It can play an important role if you ever suffer a mental health crisis. Roles of an advance directive and an HCPA An advance directive expresses your preferences regarding the use of life-sustaining medical procedures — such as artificial feeding and breathing, surgery and invasive diagnostic tests — specifying the situations in which these procedures should be used or withheld. Because a document prepared in advance can’t account for every scenario or contingency, it’s typically paired with an HCPA. In the HCPA, you authorize your spouse or another trusted representative to make medical decisions or consent to medical treatment on your behalf when you’re unable to do so. An HCPA can include specific instructions to your representative, as well as general guidelines or principles to follow when dealing with complex medical decisions or unanticipated circumstances. However, these two documents may not fully address the unique challenges that can arise during a mental health crisis. That’s where a PAD can make a difference. How a PAD is different A PAD is a legal document that allows you to express your preferences for future mental health treatment while you’re capable of making informed decisions. If you later experience a psychiatric crisis that impairs your ability to make or communicate treatment decisions, the directive can guide health care providers and family members. A psychiatric advance directive may address a variety of mental health care issues, including: Preferred hospitals or other providers, Treatment therapies and medications that may be administered, Treatment therapies and medications that may not be administered, and A statement of general values, principles or preferences to follow when making mental health care decisions. Many states also permit individuals to designate a trusted health care agent to make mental health treatment decisions on their behalf if necessary. Should you add a PAD to your estate plan? Many people think estate planning focuses on passing assets to heirs and reducing gift and estate tax liability, but a complete plan also addresses important health care decisions, including those related to mental health. Mental health crises can develop unexpectedly, leaving family members to make difficult decisions with little guidance. A PAD complements traditional planning documents by addressing circumstances that an advance directive or HCPA may not fully cover. Bear in mind that the availability, format and legal requirements of PADs vary by state. Thus, it’s important to work with an experienced estate planning attorney to determine whether one is appropriate and how it should be prepared. © 2026
U.S. Bureau of Labor Statistics data shows that hiring has slowed in recent months. Even so, thousands of people continue to start new jobs, and every new hire represents a significant investment of time and money for organizations. With labor costs remaining a concern for many businesses, it’s more important than ever to help employees become productive members of your workforce as quickly as possible. An effective onboarding process can help you do this. Start before day one Successful onboarding begins before a new hire’s first day on the job. Once a candidate accepts your job offer, explain what to expect before, during and after the first day. A welcome email can provide practical details, such as where to park (for on-site employees), when to arrive and to whom to report. Whenever possible, give new hires digital access to employment forms, benefit information and introductory training materials so they can complete administrative tasks in advance and arrive better prepared. The first day should combine orientation with a personal welcome. Designate a specific person — ideally the employee’s direct supervisor — to guide the new hire through a structured agenda. For on-site positions, ensure the workspace is fully set up with the necessary equipment before arrival. For remote employees, verify that technology and systems access are working properly. In either setting, introduce new employees to teammates and other key colleagues to help them begin building relationships immediately. Investing in career development Supervisors play a central role in helping new employees succeed, but experienced peer mentors can make the transition smoother. A mentor can answer day-to-day questions, explain workplace norms and help new hires navigate your organization’s culture. These informal connections often build confidence and accelerate integration into the team. Training should begin immediately after orientation and continue beyond the first week. Avoid taking a one-size-fits-all approach or assuming employees will simply learn as they go. Instead, develop structured training programs tailored to each role, with clear learning objectives and opportunities for ongoing professional development. Employees who receive meaningful training are generally more confident and productive. Continuous improvement Many organizations assume their onboarding programs are effective until negative feedback reveals otherwise. Like any critical business process, onboarding should be regularly evaluated and refined. Encourage supervisors to check in with new hires throughout the onboarding period, which typically lasts one to two weeks. These discussions should emphasize active listening and honest feedback. If your organization uses peer mentors, ask them to share observations as well. The insights you gather can help you identify weaknesses and improve your onboarding program. Welcome, prepare and support Employees who feel welcomed, prepared and supported from their first day on the job are more likely to become enthusiastic contributors and deliver stronger long-term performance. Contact us for help evaluating your onboarding process, measuring its return on investment and aligning it with your business objectives. © 2026
It’s easy to focus on the excitement of a big win. But federal tax law generally treats lottery prizes, gambling winnings and other awards as taxable income. Knowing the basic rules can help you avoid surprises when you file your 2026 return next year. Lottery prizes Of course, the chances of winning big in the lottery are slim. But many people win smaller, yet not insignificant, amounts that can increase their tax liability — in some cases, substantially. Lottery winnings are taxable for federal purposes. This is the case for both cash prizes and the fair market value of noncash prizes, such as a car or vacation. Depending on the amount won and your other income, the winnings could push you into a federal tax bracket as high as 37%. Your winnings may also be subject to state income tax. You must report lottery winnings as income in the year, or years, you actually receive them. In the case of noncash prizes, this would be the year you receive the prize. With cash, if you take the winnings in annual installments, you report each year’s installment as income for that year. Gambling winnings For federal tax purposes, it doesn’t matter if you win at the casino, a bingo hall or elsewhere. You must report 100% of your gambling winnings as taxable income. They’re reported on an “Other income” line of your 1040 tax return. To measure your winnings on a particular wager, use the net gain. For example, if a $50 bet at the racetrack turns into a $150 win, you’ve won $100, not $150. You must separately keep track of losses. They may be deductible, but only if you itemize deductions. Therefore, if you take the standard deduction, you can’t deduct gambling losses. In addition, you can deduct only 90% of gambling losses, and only up to the amount of gambling winnings. So if your losses exceed your winnings, you might be able use losses to “wipe out” gambling income — but you can’t offset other income with the losses. Maintain good records of your losses during the year. Keep a detailed diary in which you note the date, place, amount and type of loss, as well as the name of anyone who was with you. Save all documentation, such as checks or credit slips. Note: Different rules apply to people who qualify as professional gamblers. Withholding and estimated tax payments If you win more than $5,000 in the lottery or certain types of gambling, 24% must be withheld for federal tax purposes. You’ll receive a Form W-2G from the payer (lottery agency, casino, etc.) showing the amount paid to you and the federal tax withheld. (The payer also sends this information to the IRS.) If state tax is withheld, that amount may also be shown on Form W-2G. Because your federal tax rate can be up to 37%, which is well above the 24% withheld, the withholding may not be enough to cover your federal tax bill. Therefore, you may have to make estimated tax payments to cover the rest of the liability — and you might be assessed a penalty if you fail to do so. Have you won big? Lottery, gambling or other winnings can increase income taxes and create estimated tax obligations. (There might also be state and local tax consequences.) If the winnings are large enough, you may need to revisit your wealth management strategy and revise your estate plan. Please contact us if have questions. We’ll help you understand the tax impact and meet your tax obligations. © 2026
Tax problems can happen to even the most organized small business owners. A cash flow crunch, an unexpected tax notice, a missed filing deadline or a payroll tax oversight can be stressful — especially when penalties and interest begin to add up. Fortunately, businesses can get back on track by addressing tax issues promptly and strategically. What should I do if I receive a tax notice? If you or your business receives a tax notice from the IRS or a state agency, don’t ignore it. Start by reviewing the notice carefully. It may relate to: A balance due, A missing tax return, A proposed tax adjustment, A payroll tax deposit issue, or A request for documentation. Be aware that tax notices typically include response deadlines — and missing them can limit your options and lead to additional penalties and interest. Tax authorities may eventually pursue collection measures (such as liens or levies) on unpaid amounts. A lien is a legal claim against property, which can affect your ability to secure credit or complete financial transactions. A levy allows the tax agency to seize assets to satisfy the debt. Before making a payment or sending a response, confirm that the notice is accurate. We can help you compare the notice with your business records, gather supporting documentation and prepare an appropriate response. How far back can I file unfiled tax returns? If you have unfiled tax returns, it’s important to address them as soon as possible. In many cases, you’ll need to file past-due returns before you can qualify for certain resolution options, such as a payment plan or settlement program. How far back you need to file depends on your circumstances, the type of return involved and the tax agency’s requirements. There generally isn’t a simple time limit that makes an unfiled return “go away.” For federal income taxes, the statute of limitations for the IRS to assess additional tax for a particular tax year generally starts only after a valid return is filed. It’s typically three years, but it’s six years if you understate your gross income by more than 25%. If you fail to file a return (or you file a false or fraudulent return), the IRS has an unlimited amount of time to assess tax for the tax year. So filing past-due returns can help reduce the risk of penalties, interest and collection activity — as well as the risk that the taxing authority could create a “substitute for return” for you. (This is generally undesirable because the return likely will include your income but not all the deductions, credits and other tax breaks you may be eligible for.) If you’re owed a refund, filing promptly is especially important because you may lose the ability to receive an otherwise valid refund if you wait too long. Federal income tax refunds and credits generally must be claimed by the later of three years from the date you filed the return or two years from the date you paid the tax. What are my options if I owe back taxes? Some business owners who owe tax can’t immediately pay the full balance due. If you owe back taxes, you may have several options depending on the amount owed, the type of tax involved and your financial situation. Ways to manage tax debt may include: Making a payment, Asking for a temporary delay in collection due to financial hardship, Participating in a settlement program (see below), and Setting up an installment agreement or payment plan. An installment agreement or payment plan may give qualifying taxpayers extra breathing room to pay the balance over time. However, you must generally stay current with future tax filings and payments. Falling behind again can cause you to default on your payment plan and potentially lead to additional collection actions. Can I settle my tax debt for less than the full amount owed? Some tax agencies offer settlement programs that allow eligible taxpayers to settle tax debt for less than the full amount owed. For federal tax debt, the offer in compromise (OIC) program may be available in limited circumstances. However, an OIC isn’t available to all taxpayers and may not be the best option in every situation. The IRS reviews income, expenses, asset equity and ability to pay when determining whether to approve an OIC request. Before applying, you’ll generally need to have all required tax returns filed. You also must be current with ongoing tax obligations, including estimated tax payments and federal tax deposits. Can tax penalties be reduced or removed? Penalty relief may be available in certain circumstances. Depending on the penalty and the facts involved, you may qualify for administrative relief, such as an automatic exemption from penalty, first-time penalty abatement or relief based on reasonable cause. Reasonable cause may apply when you made a good-faith effort to meet your tax obligations but were unable to do so because of circumstances beyond your control, such as: A serious illness, A death in your immediate family, A natural disaster, or Loss of records. Penalty abatement isn’t automatic. You must follow the instructions in the notice. You might need to call the IRS or submit a written request with a clear explanation and supporting documentation. Even if penalties are reduced, interest may still apply, so it’s advisable to respond as soon as possible. Why are payroll tax-withholding problems so serious? Payroll tax-withholding problems are among the most urgent tax issues small business owners can face. If you have employees on your payroll, you’re responsible for withholding federal income tax, state income tax (if applicable), Social Security tax and Medicare tax from their wages and remitting those amounts to the government. Tax agencies closely monitor these tax remittances because you’re withholding money on behalf of your employees and holding it in trust until you deposit it with the taxing authority. In some cases, business owners or other responsible individuals may be held personally liable for unremitted taxes through the Trust Fund Recovery Penalty. The penalty can apply to individuals who are responsible for collecting, accounting for or depositing the taxes and who willfully fail to do so. If your business falls behind on these tax deposits, professional guidance is critical. How can I avoid future tax problems? For small business owners, preventing future tax issues starts with strong accounting systems, accurate bookkeeping and timely tax filings. You should also engage in proactive tax planning by reviewing financial reports regularly, setting aside funds for taxes, and making estimated income tax payments and depositing withheld taxes by the required deadlines. If you’re facing tax resolution issues, contact us. We can help you understand your options, communicate with tax authorities and create a plan to keep your business moving full speed ahead. © 2026
Section 530A accounts, also known as “Trump accounts,” are available for contributions as of July 4, 2026. Created by last year’s One Big Beautiful Bill Act, they’re custodial, tax-advantaged accounts opened by a parent or guardian for an eligible child under age 18. In late June, the IRS issued Revenue Procedure 2026-25, which, among other things, allows qualifying 530A account contributions to be treated as completed gifts rather than gifts of a future interest. The upside is that your contributions can qualify for the gift tax annual exclusion and you may not have to file a gift tax return (Form 709) — but only if certain requirements are met. How do 530A accounts work? A 530A account can be set up for anyone who’ll be under age 18 at the end of the tax year and who has a Social Security number. Annual contributions of up to $5,000 can be made until the year the beneficiary turns age 18. In addition, U.S. citizen children born from Jan. 1, 2025, through Dec. 31, 2028, can potentially qualify for an initial $1,000 government-funded deposit. 530A account contributions aren’t deductible, but earnings grow tax-deferred as long as they’re in the account. The account generally must be invested in exchange-traded funds or mutual funds that track the return of a qualified index and meet certain other requirements. Withdrawals generally can’t be taken until the child turns age 18, when the account becomes a traditional IRA, subject to traditional IRA rules. Distributions will generally be at least partially taxable, and IRA early withdrawal penalties could also apply. What’s in the IRS guidance? Under safe harbor rules included in the June IRS guidance, 530A account contributions will be eligible for the gift tax annual exclusion and you won’t be required to file a gift tax return if all these requirements are met: Your cash contributions to a 530A account for a beneficiary under age 18 are your only taxable gifts for the calendar year, The total amount of each beneficiary’s gift (including contributions to the 530A account) doesn’t exceed the gift tax annual exclusion amount ($19,000 per recipient for 2026) or your available lifetime gift and estate tax exemption ($15 million for 2026, less any exemption you’ve already used during your life), and A gift tax return for the year isn’t otherwise required to be filed by you. When these conditions are met, the IRS will generally treat the contributions as completed gifts rather than future interests in property. But if just one of the conditions isn’t met, your contributions will be treated as gifts of a future interest, which means they won’t be eligible for the annual exclusion and you must file a gift tax return for every account beneficiary who receives a contribution. The gifts can still be tax-free, but you’ll have to apply your lifetime gift tax exemption — and your generation-skipping transfer (GST) tax exemption if the GST tax also applies (generally when a gift is made to a grandchild or someone else two generations or more below you). Should you file a gift tax return? If you’re planning to contribute to your children’s or grandchildren’s 530A accounts, the new IRS rules can potentially ease the tax-filing burden next year. However, there are situations where it’s advantageous to file a gift tax return even if one isn’t required. And if your 530A account contributions are only part of your overall gifting program, you’ll likely still be required to file a gift tax return — and you’ll need to factor the tax consequences of the contributions into your planning. If you’re unsure whether you must (or should) file a gift tax return, or you need clarification on the recent IRS guidance on 530A accounts, contact us. © 2026
Business owners today face no shortage of uncertainty. Persistent inflation, evolving trade policies, cybersecurity threats and ongoing geopolitical tensions have made planning challenging. Although it’s impossible to predict every disruption, you can better prepare by evaluating how your business would respond under adverse conditions. One proven approach is stress testing, which helps organizations identify vulnerabilities before they become costly problems. Some background Stress testing gained widespread attention in the banking industry following the 2008 financial crisis. Regulators continue to require large financial institutions to evaluate how they’d perform under severe economic scenarios. However, for most businesses, stress testing doesn’t need to be as complex as a bank regulatory model. Approach it as a practical planning exercise that uses realistic financial assumptions to answer questions such as: What would happen to operating cash flow if a major customer left, borrowing costs rose or a key supplier increased prices? By modeling the financial impact of potential disruptions, you can make more informed decisions and improve long-term planning. Identify major risks To launch your own stress-testing initiative, identify your business’s primary risk factors in the following categories: Operational. These affect the day-to-day functioning of your business and may include supply chain disruptions, technology failures, cyberattacks, natural disasters, employee shortages and human error. Financial. Risks related to cash flow, access to capital, interest rate fluctuations, fraud, customer credit issues and changes in borrowing costs all deserve attention. Compliance. Such risks stem from evolving tax laws, industry regulations, data privacy requirements, labor laws and other government mandates. Strategic. These relate to competitive pressures, changing customer preferences, market disruptions, technological innovation and broad economic shifts. As you evaluate each risk category, be specific. The more realistic your assumptions, the more valuable the exercise will likely be. Meet with your team Once you’ve identified the most significant risks, meet with your leadership team and trusted professional advisors to discuss each scenario. Consider not only the likelihood of each event but also its potential financial impact and your business’s ability to respond. The goal is to develop practical strategies to reduce exposure and improve resilience. For example, if your business operates in an area susceptible to natural disasters, a comprehensive disaster recovery and business continuity plan is essential. Other vulnerabilities may be less obvious. If your business depends heavily on a single executive with specialized knowledge, stress testing can highlight the importance of succession planning. Value of continuous improvement Risk management isn’t a one-time exercise. Economic conditions, customer behavior, technology development and regulatory requirements continue to evolve, creating new challenges and opportunities. So review your stress-testing program at least annually and update it whenever significant changes occur within your business, industry or in the broader marketplace. Although stress tests won’t eliminate uncertainty, they can help your business respond more confidently when unexpected events arise. We can help you analyze potential scenarios and develop reliable financial projections. Contact us to discuss how stress testing can strengthen your risk management strategy. © 2026
Summer is a good time to see whether your income, deductions and investment activity are lining up as expected. Let’s take a look at a few areas that commonly provide tax-saving opportunities. Your tax bracket The legislation commonly known as the One Big Beautiful Bill Act (OBBBA), which was signed into law on July 4, 2025, retained federal income tax rates ranging from 10% to 37%. For tax planning purposes, it’s important to look at your marginal rate, which is the rate that will apply to your next dollar of income (generally after any adjustments, deductions and exclusions have been applied). For single filers, the brackets above the 10% rate begin at the following income levels: 12% bracket: $12,401 22% bracket: $50,401 24% bracket: $105,701 32% bracket: $201,776 35% bracket: $256,226 37% bracket: $640,601 For head-of-household filers, the brackets begin at the same income levels as those for singles — except that the first two brackets above the 10% rate begin at the following income levels: 12% bracket: $17,701 22% bracket: $67,451 For married couples filing jointly, the brackets above the 10% rate begin at the following income levels: 12% bracket: $24,801 22% bracket: $100,801 24% bracket: $211,401 32% bracket: $403,551 35% bracket: $512,451 37% bracket: $768,701 For married taxpayers filing separately, the brackets begin at half the amount for joint filers. (They’re the same as those for singles except for the 37% bracket.) If you expect this year’s income to be near the threshold for a higher bracket, consider strategies for reducing your taxable income and staying out of that bracket. For example, you could accelerate some deductible expenses. But carefully consider how the OBBBA will impact your deductions this year. For instance, it kept the standard deduction at high levels, and itemizing deductions saves you taxes only if your total itemized deductions for the year exceed the standard deduction for your tax bracket. For 2026, the standard deduction is $16,100 for singles (and separate filers), $24,150 for heads of household and $32,200 for joint filers. The OBBBA also affects itemized deductions. For example, some deductions now offer greater potential benefits (such as the state and local tax deduction), while others are now more limited (such as the charitable deduction). In addition, the OBBBA created some new deductions that can be claimed whether or not you itemize. These include deductions for qualified tips and overtime, the “senior” deduction for taxpayers age 65 or older, and the deduction for qualified auto loan interest. Medical expenses If you expect to benefit from itemizing on your 2026 return, see whether you can benefit from accelerating deductible medical expenses into this year. You can deduct only medical expenses that exceed 7.5% of your adjusted gross income (AGI). AGI is your income from taxable sources after certain so-called “above-the-line” adjustments but before the standard deduction or itemized deductions and certain other deductions, such as the new OBBBA deductions noted earlier, are applied. Deductible medical expenses may include: Health insurance premiums, Long-term care insurance premiums, Medical and dental services and prescription drugs, and Mileage driven for health care purposes. If it’s looking like your deductible medical expenses will be close to exceeding the 7.5% of AGI floor, you may be able to control the timing of additional medical expenses so you can bunch them into 2026 and exceed the floor. If your expenses already exceed the floor, bunching additional medical expenses into 2026 can maximize your deduction. But if it looks like you won’t be itemizing for 2026 or your medical expenses will be far from exceeding 7.5% of your AGI this year, you may want to take the opposite approach: Bunch medical expenses into 2027. Of course, your and your family’s health is more important than tax savings. So don’t accelerate or delay medical services if it would be harmful health-wise. Also consider how the timing will affect what’s covered by health insurance, especially if you have a high deductible. Investment gains (and losses) The OBBBA didn’t change the long-term capital gains rates, so they remain at 0%, 15% and 20%. The long-term gains rate applies to gains on investments held more than one year. Short-term gains are subject to your ordinary-income tax rate, which will be substantially higher. However, be aware that the top long-term gains rate kicks in before the top ordinary-income tax rate. For singles, the long-term gains brackets above the 0% rate begin at the following income levels: 15% bracket: $49,451 20% bracket: $545,501 For heads of household, the brackets above the 0% rate begin at the following income levels: 15% bracket: $66,201 20% bracket: $579,601 For joint filers, the brackets above the 0% rate begin at the following income levels: 15% bracket: $98,901 20% bracket: $613,701 For separate filers, the brackets begin at half the amount for joint filers. If you’ve realized, or expect to realize, significant capital gains this year, consider selling some depreciated investments to generate losses you can use to offset those gains. It may be possible to repurchase those investments, so long as you wait at least 31 days to avoid the “wash sale” rule. You also may need to plan for the 3.8% net investment income tax (NIIT). It can affect taxpayers with modified AGI (MAGI) over $200,000 for singles and heads of household, and over $250,000 for joint filers (half that for separate filers). You may be able to lower your tax liability by reducing your MAGI, reducing net investment income or both. Don’t wait until year end Planning opportunities often become more limited as the end of the year approaches. Reviewing your tax picture now gives you more time to take steps to reduce or defer taxes. If you’d like help evaluating these or other midyear tax strategies, please contact us. © 2026