How will the One, Big, Beautiful Bill Act affect individual taxpayers?

July 17, 2025

The One, Big, Beautiful Bill Act (OBBBA) includes, among many other things, numerous provisions that can affect an individual’s taxes. The new law makes some changes to existing tax breaks that will be significant to many, but not all, taxpayers. It also creates new breaks that, again, will be significant to certain taxpayers. Finally, it makes permanent the tax rate reductions and most of the changes to deductions and credits made by the Tax Cuts and Jobs Act (TCJA), with occasional tweaks.


State and local tax deduction


The OBBBA increases the limit on the state and local tax (SALT) deduction through 2029. Beginning in 2025, eligible taxpayers can deduct up to $40,000 ($20,000 for married couples filing separately) of SALT, including property tax and either income tax or sales tax, with a 1% annual increase thereafter. However, in 2030, the previous limit of $10,000 ($5,000 for separate filers) will resume.


When modified adjusted gross income (MAGI) exceeds $500,000 ($250,000 for separate filers), the cap is reduced by 30% of the amount by which MAGI exceeds the threshold — but not below $10,000 ($5,000 for separate filers). If you expect to be near or over the threshold, taking steps to reduce your MAGI (for example, increasing retirement plan contributions or making IRA qualified charitable distributions) could help you secure the full SALT deduction.


Child Tax Credit


The $2,000 Child Tax Credit (CTC) for children under age 17 was slated to return to $1,000 per child after 2025, with the income phaseout levels subject to lower thresholds. Also, the $500 Credit for Other Dependents (COD) was scheduled to expire at that time. The COD is available for each qualifying dependent other than a qualifying child (such as a dependent child over the age limit or a dependent elderly parent).


The OBBBA makes the doubled CTC permanent, with an increase to $2,200 starting this year and annual inflation adjustments to follow. It also makes permanent the $1,400 refundable portion of the CTC, adjusted for inflation ($1,700 in 2025), and the $500 nonrefundable COD. And it makes permanent the income phaseout thresholds of $200,000, or $400,000 for joint filers.


Education-related breaks


The OBBBA expands the definition of qualified expenses that can be paid for with tax-free distributions from Section 529 plans. For example, tax-free distributions can now cover qualified post-secondary credentialing expenses. In addition, tax-free elementary and secondary school distributions are no longer limited to paying tuition; they can also pay for books and other instructional materials, online educational materials, tutoring or educational classes outside the home, and certain testing fees.


The OBBBA also increases the annual limit on tax-free distributions for qualified elementary and secondary school expenses from $10,000 to $20,000 beginning in 2026.


In addition, the law creates a tax credit of up to $1,700 for contributions to organizations that provide scholarships to elementary and secondary school students. Students who benefit from the scholarships must be part of a household with an income that doesn’t exceed 300% of the area’s median gross income and be eligible to enroll in a public elementary or secondary school.


The OBBBA also makes some tax law changes related to student loans:


Employer-paid student loan debt. If your employer pays some of your student loan debt, you may be eligible to exclude up to $5,250 from income. The OBBBA makes this break permanent, and the limit will be annually adjusted for inflation after 2026.


Forgiven student loan debt. Forgiven debt is typically treated as taxable income, but tax-free treatment is available for student loan debt forgiven after December 31, 2020, and before January 1, 2026. Under the OBBBA, beginning in 2026, only student loan debt that’s forgiven due to the death or total and permanent disability of the student will be excluded from income, but this exclusion is permanent. Warning: Some states may tax forgiven debt that’s excluded for federal tax purposes.


Charitable deductions


Generally, donations to qualified charities are fully deductible up to certain adjusted gross income (AGI)-based limits if you itemize deductions. The OBBBA creates a nonitemized charitable deduction of up to $1,000, or $2,000 for joint filers, which goes into effect in 2026.


Also beginning in 2026, a 0.5% floor will apply to itemized charitable deductions. This generally means that only charitable donations in excess of 0.5% of your 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.


Qualified small business stock


Generally, taxpayers selling qualified small business (QSB) stock are allowed to exclude up to 100% of their gain if they’ve held the stock for more than five years. (The exclusion is less for stock acquired before September 28, 2010.) Under pre-OBBBA law, to be a QSB, a business must be engaged in an active trade or business and must not have assets that exceed $50 million, among other requirements.


The OBBBA provides new, but smaller exclusions for QSB stock held for shorter periods. Specifically, it provides a 75% exclusion for QSB stock held for four years and a 50% exclusion for QSB stock held for three years. These exclusions go into effect for QSB stock acquired after July 4, 2025. The law also increases the asset ceiling for QSBs to $75 million (adjusted for inflation after 2026) for stock issued after July 4, 2025.


Affordable Care Act’s Premium Tax Credits


The OBBBA imposes new requirements for Premium Tax Credit (PTC) recipients. For example, beginning in 2028, eligible individuals must annually verify information such as household income, immigration status and place of residence. Previously, many insureds were allowed to automatically re-enroll annually.

Beginning in 2026, individuals who receive excess advanced PTCs based on estimated annual income must return the entire excess unless actual income is less than 100% of the federal poverty limit. Currently, individuals with incomes below 400% of the limit are required to make only partial repayments.


Temporary tax deductions


On the campaign trail in 2024, President Trump promised to eliminate taxes on tips, overtime and Social Security benefits and to make auto loan interest deductible. The OBBBA makes a dent in these promises but doesn’t completely fulfill them. Instead, it creates partial deductions that apply for 2025 through 2028. They’re available to both itemizers and nonitemizers:


Tips. Employees and independent contractors generally can claim a deduction of up to $25,000 for qualified tips received if they’re in an occupation that customarily and regularly received tips before 2025. (The eligible occupations will be determined by the IRS and are expected to be released by October 2, 2025.) The tips must be reported on a Form W-2, Form 1099 or other specified statement furnished to the individual or reported directly by the individual on Form 4137. The deduction begins to phase out when a taxpayer’s MAGI exceeds $150,000, or $300,000 for joint filers.


Overtime. Qualified overtime pay generally is deductible up to $12,500, or $25,000 for joint filers. It includes only the excess over the regular pay rate. For example, if a taxpayer is normally paid $20 per hour and is paid “time and a half” for overtime, only the extra $10 per hour for overtime counts as qualified overtime pay. The overtime pay must be reported separately on a taxpayer’s W-2 form, Form 1099 or other specified statement furnished to the individual. This deduction also starts phasing out when MAGI exceeds $150,000, or $300,000 for joint filers.


Deductible tips and overtime pay remain subject to federal payroll taxes and any applicable state income and payroll taxes.


Auto loan interest. Interest on qualified passenger vehicle loans originated after December 31, 2024, generally is deductible up to $10,000, though few vehicles come with that much annual interest. Qualified vehicles include cars, minivans, vans, SUVs, pickup trucks and motorcycles with gross vehicle weight ratings of less than 14,000 pounds that undergo final assembly in the United States. The deduction begins to phase out when MAGI exceeds $100,000, or $200,000 for joint filers.


“Senior” deduction. While the OBBBA doesn’t eliminate taxes on Social Security benefits, it does include a new deduction of $6,000 for taxpayers age 65 or older by December 31 of the tax year — regardless of whether they’re receiving Social Security benefits. The deduction begins phasing out when MAGI exceeds $75,000, or $150,000 for joint filers. Social Security benefits, however, are still taxable to the extent that they were before the OBBBA.


Finally, be aware that additional rules and limits apply to these new tax breaks. In many cases, the IRS will be publishing additional guidance and will provide transition relief for 2025 to eligible taxpayers and those subject to information reporting requirements.


Trump Accounts


Beginning in 2026, Trump Accounts will provide families with a new way to build savings for children. An account can be set up for anyone under age 18 at the end of the tax year 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 after December 31, 2024, and before January 1, 2029, with at least one U.S. citizen parent can potentially qualify for an initial $1,000 government-funded deposit.


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.


TCJA provisions


The OBBBA also makes permanent many TCJA provisions that were scheduled to expire after 2025, including:


  • Reduced individual income tax rates of 10%, 12%, 22%, 24%, 32%, 35% and 37%,
  • Higher standard deduction (for 2025, the OBBBA also slightly raises the deduction to $15,570 for singles, $23,625 for heads of households and $31,500 for joint filers),
  • The elimination of personal exemptions,
  • Higher alternative minimum tax exemptions,
  • The reduction of the limit on the mortgage debt deduction to the first $750,000 ($375,000 for separate filers) — but the law makes certain mortgage insurance premiums eligible for the deduction after 2025,
  • The elimination of the home equity interest deduction for debt that wouldn’t qualify for the home mortgage interest deduction, such as home equity debt used to pay off credit card debt,
  • The limit of the personal casualty deduction to losses resulting from federally declared disasters — but the OBBBA expands the limit to include certain state-declared disasters,
  • The elimination of miscellaneous itemized deductions (except for eligible unreimbursed educator expenses), and
  • The elimination of the moving expense deduction (except for members of the military and their families in certain circumstances and, beginning in 2026, certain employees or new appointees of the intelligence community).


The permanency of these provisions should provide some helpful clarity for tax planning. However, keep in mind that “permanent” simply means that the provisions have no expiration date. It’s still possible that lawmakers could make changes to them in the future.


Time to reassess


We’ve covered many of the most significant provisions affecting individual taxpayers, but there are other changes that also might affect you. For example, the OBBBA adds a new limitation on itemized deductions for taxpayers in the 37% tax bracket beginning in 2026. It also imposes a new limit on the deduction for gambling losses beginning next year. And sole proprietors and owners of pass-through businesses will also be directly affected by OBBBA tax law changes affecting businesses.


Given all of these and other tax law changes, now is a good time to review your tax situation and update your tax planning strategies. Turn to us to help you take full advantage of the new — or newly permanent — tax breaks.


© 2025 

Should a living trust be part of your estate plan?

August 7, 2025
As its name suggests, a living trust (also known as a revocable trust) is in effect while you’re alive. It’s a legal entity into which you title assets to be managed during your lifetime and after your death. As the trust’s grantor, you typically serve as the trustee and retain control over the assets during your lifetime. Thus, you can modify or revoke the trust at any time, allowing for adjustments as circumstances or intentions change. Let’s take a closer look at why you should consider including one in your estate plan. Setting up a living trust To create a living trust, engage an estate planning attorney to draw up the trust agreement. Then, title the assets you want to transfer to the trust. Assets can include real estate, financial accounts, and personal items such as art and jewelry. You’ll also need to appoint a successor trustee, or multiple successor trustees. The trustee can be a family member or a friend, or an entity such as a bank’s trust department. In the event of incapacity, a successor trustee can seamlessly take over management of the trust without the need for court-appointed guardianship or conservatorship, preserving financial stability and decision-making continuity. Avoiding probate A primary advantage of a living trust is its ability to minimize the need for trust assets to be subject to probate. Probate is the process of paying off the debts and distributing the property of a deceased individual. It’s overseen by a court. For some estates, the probate process can drag on. By avoiding it, assets in a living trust can typically be distributed more quickly while still in accordance with your instructions. In addition, probate can be a public process. Living trusts generally can be administered privately. And if you become incapacitated, the trust document can allow another trustee to manage the assets in the living trust even while you’re alive. Knowing the pros and cons Living trusts have both benefits and drawbacks. If you name yourself as trustee, you can maintain control over and continue to use the trust assets while you’re alive. This includes adding or selling trust assets, as well as terminating the trust. However, after your death, the trust typically can’t be changed. At that point, the successor trustee you’ve named will distribute the assets according to your instructions. On the flip side, a living trust can require more work to prepare and maintain than a will. And you’ll probably still need a will for property you don’t want to move into the trust. Often, this includes assets of lesser value, such as personal checking accounts. In addition, if you have minor children, you’ll need to name their guardian(s) in a will. Who can help? Creating a living trust typically requires some upfront effort and legal guidance. Even so, the long-term peace of mind and control it can provide may make it a worthwhile consideration. We can help you determine how a living trust fits within your broader estate planning goals. Contact an estate planning attorney to draft a living trust. © 2025 

Is your business ready for digital documents and e-signatures?

August 6, 2025
Whether signing a vendor agreement, approving a repair estimate or applying for a loan, chances are you’ve signed something digitally in recent months. In 2025, digital documents and e-signatures are no longer just a convenience — they’re fast becoming the standard. Businesses of all types and sizes are embracing digital workflows to improve efficiency, reduce turnaround times and meet customer expectations. If your company is still relying on paper documents and manual signatures, now may be the time to take a fresh look at what you might be missing. Potential advantages For small to midsize businesses, there are generally three reasons to use digital documents with e-signatures. First, of course, it’s faster. When you can review and sign a business document electronically, it can be transmitted instantly and approved much more quickly. And this works both ways: your customers can sign contracts or submit orders for your products or services, and you can sign similar documents with vendors, partners or consultants. What used to take days or even weeks, as delivery services carried out their duties or paper envelopes crisscrossed in the mail, can now occur in a matter of hours. Second, it’s a strong safeguard against disaster, theft and mishandling. Paper is all too easily destroyed, damaged, lost or stolen. That’s not to say digital documents are impervious to thievery, corruption and deletion. However, a trusted provider should be able to outfit you with software that not only allows you to use digital documents with e-signatures, but also keeps those files encrypted and safe. Third, as mentioned, more and more customers want it. In fact, this may be the most important reason to incorporate digital documents and e-signatures into your business. Younger generations have come of age using digitized business services. They expect this functionality and may prefer a company that offers it to one that still requires them to put pen to paper. Valid concerns Many business owners continue to have valid concerns about digital documents and e-signatures. For example, you may worry about how legally binding a digitized contract or other important document may be. However, e-signatures are now widely used and generally considered lawful under two statutes: 1) the Electronic Signatures in Global and National Commerce Act of 2000, a federal law, and 2) the Uniform Electronic Transactions Act, which governs each state unless a comparable law is in place. Indeed, every state has legislation in place legalizing e-signatures. There may be some limited exceptions in certain cases, so check with your attorney for specifics if you decide to transition to using the technology. Another concern you might have is cybersecurity. And there’s no doubt that data breaches are now so common that business owners must expect hacking attempts rather than hope they never happen. As mentioned, a reputable provider of digital document technology should be able to equip your company with the necessary tools to defend itself. But don’t stop there. If you haven’t already, establish a sound, regularly updated cybersecurity strategy that encompasses every aspect of your business — including when and how digital documents and e-signatures are used. Strategic move Implementing this increasingly used technology is a strategic move. As such, it will likely involve costs related to vetting software providers, training your team, and updating internal assets and processes. But it also may be a wise investment in faster transactions, improved security and a better customer experience. Plus, you’ll pay less in express delivery fees. We can help you evaluate the idea, forecast your return on investment, and, if appropriate, build a smooth transition plan that fits your budget and goals. © 2025 

Act soon: The OBBBA ends clean energy tax breaks

August 5, 2025
The newly enacted One, Big, Beautiful Bill Act (OBBBA) represents a major move by President Trump and congressional Republicans to roll back a number of clean energy tax incentives originally introduced or expanded under the Inflation Reduction Act (IRA). Below is a summary of the key individual tax credits that will soon be scaled back or eliminated. Clean vehicle tax credits If you’re planning to buy a clean vehicle, consider acting soon to take advantage of expiring tax benefits: New clean vehicle credit. This credit offers up to $7,500 for qualifying new electric and fuel cell vehicles, depending on how the battery components and critical minerals are sourced. Vehicles that meet only one of the sourcing criteria may be eligible for a reduced $3,750 credit. Originally set to expire in 2032, this credit now ends on September 30, 2025. The maximum manufacturer’s suggested retail price is $55,000 for cars and $80,000 for SUVs, trucks and vans. To qualify, your adjusted gross income (AGI) must not exceed $150,000 ($300,000 for married couples filing jointly and $225,000 for heads of households). Used clean vehicle credit. Buyers of eligible used EVs or fuel cell vehicles may claim up to $4,000, or 30% of the purchase price — whichever is lower — if bought from a dealer. This credit also expires on September 30, 2025. The maximum price of the vehicle is $25,000. To be eligible for the credit, your AGI must not exceed $75,000 for single taxpayers ($150,000 for married joint filers and $112,500 for heads of households). Alternative fuel refueling property credit Homeowners who install equipment to recharge EVs or dispense clean fuel may qualify for the alternative fuel vehicle refueling property credit. The IRA had extended and expanded this benefit. For property placed in service at a primary residence after 2023, the credit equals 30% of the installation cost, up to $1,000 per item (charging port, fuel dispenser, or storage property). Equipment must be placed in service by June 30, 2026, instead of the previous end-of-2032 deadline. Home energy tax credits The OBBBA shortens the lifespan of several tax credits available to individual homeowners. Those planning home upgrades may want to act swiftly to make the most of these two opportunities. Energy efficient home improvement credit. This tax break provides a 30% nonrefundable credit for qualified expenses such as energy-efficient doors, windows, skylights, insulation, heat pumps and home energy audits. The maximum credit you can claim this year is $1,200. There are no income restrictions, but credit caps vary by item. In 2025, credit limits include: $250 per exterior door ($500 total), $600 for windows, central A/C, panels, and select equipment, $150 for energy audits, and $2,000 for heat pumps, water heaters, and biomass systems (superseding the usual $1,200 limit). This credit was previously scheduled to end after 2032. The expiration has been moved up to December 31, 2025. Residential clean energy credit. This tax break provides a 30% nonrefundable credit for renewable energy systems like solar, wind, geothermal, and biomass installations. There are no income limits. Under prior law, this credit was set to expire after 2034. The OBBBA makes the new expiration date December 31, 2025. Secure savings now Given the shortened timelines and reduced availability of green tax benefits under the OBBBA, proactive planning is key. If you’re interested, you should make the most of these incentives while they last. Contact us with any questions about your situation. © 2025 

The new law includes a game-changer for business payment reporting

August 4, 2025
The One, Big Beautiful Bill Act (OBBBA) contains a major overhaul to an outdated IRS requirement. Beginning with payments made in 2026, the new law raises the threshold for information reporting on certain business payments from $600 to $2,000. Beginning in 2027, the threshold amount will be adjusted for inflation. The current requirement: $600 threshold For decades, the IRS has required that businesses file Form 1099-NEC (previously 1099-MISC) for payments made to independent contractors that exceed $600 in a calendar year. This threshold amount has remained unchanged since the 1950s! The same $600 threshold is in place for Forms 1099-MISC, which businesses file for several types of payments, including prizes, rents and payments to attorneys. Certain deadlines must be met. A Form 1099-NEC must be filed with the IRS by January 31 of the year following the year in which a payment was made. A copy must be sent to the recipient by the same January 31 deadline. A Form 1099-MISC must also be provided to a recipient by January 31 of the year following a payment, but unlike Form 1099-NEC, the 1099-MISC deadline for the IRS depends on how it’s submitted. If a business is filing the form on paper, the deadline is February 28. If the form is being submitted electronically, the deadline is March 31. The new rules raise the bar to $2,000 Under the OBBBA, the threshold increases to $2,000, meaning: Fewer 1099s will need to be issued and filed. There will be reduced paperwork and administrative overhead for small businesses. There will be better alignment with inflation and modern economic realities. For example, let’s say your business engaged a freelance graphic designer and pays the individual $650 this year. You’ll need to send a 1099-NEC to the designer for calendar year 2025. But if you hire the same individual in 2026, you won’t be required to send a 1099 to the graphic designer or the IRS in 2027 unless the designer earns more than $2,000. The money is still taxable income Even if an independent contractor doesn’t receive a 1099-NEC because the amount paid was below the threshold amount, the payment(s) are still considered part of the individual’s gross income. The contractor must report all business income received on his or her tax return, unless an exclusion applies. In addition, businesses must continue to maintain accurate records of all payments. There are changes to Form 1099-K, too The OBBBA also reinstates a higher threshold for Forms 1099-K, used by third-party payment processors. The reporting threshold returns to $20,000 and 200 transactions, rolling back the phased-in lower thresholds that had dropped toward $600 by 2026. This rollback undoes changes from the 2021 American Rescue Plan Act and earlier IRS delay plans. Simplicity and relief Raising the threshold will ease the filing burden for millions of businesses, especially small operations that rely on contractors. There will also be less risk that an IRS penalty will be imposed for failing to file a Form 1099 when required. Contact us with any questions about the new rules or your filing requirements. © 2025 

Income taxes can negatively impact your estate plan

July 31, 2025
As the federal gift and estate tax exemption increases, the number of families affected by gift and estate tax liability decreases. With the passage of the One, Big, Beautiful Bill Act (OBBBA), wealthy families now have greater certainty that the exemption amount will remain high and continue to increase in the future. The exemption had been scheduled to return to an inflation-adjusted $5 million in 2026. But the OBBBA permanently increases it to $15 million for 2026. The amount will be adjusted annually for inflation. (For 2025, the exemption amount is $13.99 million.) Now, because many estates won’t be subject to estate tax, more planning can be devoted to easing the income tax bite for heirs. Why income taxes matter If you gift an asset to your child or other loved one during your life, your tax basis in the asset carries over to the recipient. If the asset has appreciated significantly in value, the sale of the asset will result in a capital gain. For example, say you bought a piece of real estate 20 years ago for $200,000 and its value has grown to $1 million. If you give the property to your child, who decides to sell it, he or she will be liable for as much as $160,000 in long-term capital gains tax (20% of the $800,000 gain). In contrast, when an asset is transferred at death — that is, via “bequest, devise or inheritance” — the recipient’s basis is “stepped-up” to the asset’s date-of-death fair market value. The recipient can turn around and sell the asset tax-free (apart from any tax on post-death gains). Thus, from purely an income tax perspective, it’s advantageous to hold on to appreciating assets rather than gift them during your life. If you don’t expect that your estate will exceed the gift and estate tax exemption, retaining these assets until death can minimize the impact of income tax on your heirs. However, if your estate is large enough that estate tax liability is a concern, the possibility of income tax savings may be outweighed by the potential estate tax bill. In that case, a better strategy may be to remove assets from your estate — through outright gifts, irrevocable trusts or other vehicles. Doing so will shield future appreciation in their value from the estate tax.  Crunch the numbers To determine the right strategy for you and your family, you need to do some forecasting. By estimating the potential income and estate tax liabilities associated with various options, you can get an idea of whether you should focus your planning efforts on income tax or estate tax. Of course, if there’s little chance your estate will exceed the exemption, it makes sense to adopt strategies that minimize income tax. But for some families, it may be a closer call. Contact us with questions.

Businesses can still choose to address sustainability

July 30, 2025
For many years, businesses of all shapes and sizes have at least considered sustainability when running their operations. Many people — including customers, investors, employees and job candidates — care about how a company impacts the environment. And reducing energy use, water consumption and waste generally lowers operational costs. However, the current “environment regarding the environment,” has changed. With the passage of the One, Big, Beautiful Bill Act (OBBBA), the federal government has disincentivized businesses from taking certain green measures. So, you may be reevaluating your company’s stance on sustainability. Apparent interest According to one survey, a serious interest in sustainability remains present among many businesses. In February, management consultancy Kearney, in association with climate action media platform We Don’t Have Time, released the results of a survey of more than 500 finance executives from companies in the United States, United Kingdom, United Arab Emirates and India. Of those respondents, 93% said they saw a clear business case for sustainability. Meanwhile, 92% expected to invest more in sustainability this year — with 62% of respondents saying they planned to allocate more than 2.1% of revenue to sustainability in 2025. Now whether and how fully these investments come to fruition this year is hard to say. However, the fact remains that sustainability has been and will likely continue to be a strategically significant factor in many industries. Vanishing tax breaks As mentioned, the OBBBA has thrown a wrench into tax relief related to certain sustainable measures. For example, the Section 179D Energy Efficient Commercial Buildings Deduction has been around since 2006. It got a big boost from the Inflation Reduction Act (IRA) of 2022, which increased the potential size of the deduction and expanded the pool of eligible taxpayers. However, the OBBBA permanently eliminates this tax break for buildings or systems on which construction begins after June 30, 2026. The OBBBA also nixes an incentive for the business use of “clean” vehicles. The Qualified Commercial Clean Vehicle Credit, under Sec. 45W of the tax code, hadn’t been previously scheduled to expire until after 2032. However, 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. Has your company installed an electric vehicle charger or another qualified dispenser of or storage facility for clean-burning fuel? If so, you may be able to claim the Alternative Fuel Vehicle Refueling Property Credit under Sec. 30C of the tax code. The IRA had scheduled the credit — which is worth up to $100,000 per item — to sunset after 2032. But under the OBBBA, eligible property must be placed in service on or before June 30, 2026, to qualify. Tailored strategy Where does all this leave your business? Well, naturally, it’s up to you and your leadership team whether you want to address sustainability and, if you decide to do so, precisely how. Typically, when devising or revising a strategy in this area, your company should: Conduct an up-to-date baseline assessment of energy use, water consumption, waste generation and your business’s overall carbon footprint, Set clear goals and metrics based on reliable data and the input of professional advisors, Address the impact of logistics, your supply chain and employee transportation, and Communicate effectively with staff to gather feedback and build buy-in. And don’t necessarily give up on tax incentives. Although some federal tax breaks may be going away in the near future, state and local ones might exist that could benefit your business.  Your call Again, as a business owner, you get to make the call regarding your company’s philosophy and approach to sustainability. If it’s something you intend to prioritize, we can help you review your operations and identify cost-effective and possibly tax-saving ways to make a positive environmental impact.

What taxpayers need to know about the IRS ending paper checks

July 29, 2025
The federal government has announced a major change that will affect how numerous Americans receive their tax refunds and federal benefit payments. The U.S. Treasury Department, the IRS and the Social Security Administration (SSA) will soon stop issuing paper checks. This transition is designed to increase efficiency, reduce fraud and lower administrative costs — but it also means that taxpayers must prepare for an all-electronic system.  Background information Many taxpayers still receive paper checks for tax refunds. This is also the case with some Social Security benefits and other federal payments. Under an executive order (EO) signed by President Trump, paper checks will no longer be an option, effective September 30, 2025. Direct deposit will become the default (and only) method of payment, unless the government extends the deadline or provides exceptions. In the EO, President Trump cites several reasons for eliminating paper checks. One is to reduce the risk of fraud. “Historically, Department of the Treasury checks are 16 times more likely to be reported lost or stolen, returned undeliverable, or altered than an electronic funds transfer,” the EO states. Taxpayers without bank accounts One significant challenge to making the transition away from paper checks is the “unbanked” population. These are people who don’t have traditional bank accounts. According to the FDIC, millions of Americans remain unbanked for various reasons, including lack of access, mistrust of banks or high fees. The government may solve this challenge by issuing refunds on debit cards or encouraging financial institutions to offer free or low-fee accounts for affected taxpayers. Taxpayers without bank accounts should take steps now to open them to avoid delays in receiving their refunds. Key implications Some people may opt to request paper refund checks when filing their tax returns for reasons other than not having bank accounts. In some cases, they may have security or privacy concerns about providing account information to the IRS. Or perhaps they don’t know where they want to deposit their refunds when their tax returns are being prepared. Here are three ways you may be affected after the federal government completes the transition from paper checks to an all-electronic system: A bank account will be required. Taxpayers must have U.S.-based bank accounts or credit union accounts to receive their refunds. There will be no more delays due to the mail. Direct deposit is faster than mailing paper checks, resulting in reduced wait times. The risk of lost or stolen checks will be eliminated. Electronic transfers will eliminate fraud and identity theft associated with paper checks. Special considerations for U.S. citizens abroad Americans living overseas may encounter problems receiving electronic refunds. The IRS typically requires a U.S. bank account for direct deposit. Foreign accounts generally don’t work with the IRS refund system. To address this issue, the government may offer exceptions or alternative payment methods for individuals outside the United States, but the details are still unclear. Expats should stay informed and plan ahead. The elimination of paper checks could necessitate setting up a U.S.-based bank account or using financial services that provide U.S. banking solutions. Impact on other taxpayers The American Institute of CPAs (AICPA) has provided feedback to the Treasury Department about the change. While the AICPA is generally in favor of eliminating paper checks, it raised some issues about taxpayers who may encounter problems with the change. For example, executors and trustees must fill out forms that currently don’t have a place on them to enter direct deposit information. In addition, the name on an estate checking account won’t match the name on a deceased person’s final tax return. This violates an electronic refund requirement that the name on a tax return must match the name on a bank account into which a refund is to be deposited. For these and other situations, the AICPA has recommended that the government provide exceptions or extensions of the deadline for certain taxpayers. The group would also like the IRS to provide more guidance on how to proceed in specific situations. Social Security beneficiaries The SSA reports that fewer than 1% of beneficiaries currently receive paper checks. If you’re one of them, visit the SSA to change your payment information to include a bank account or enroll in an option to receive your benefits with a Direct Express® prepaid debit card. Bottom line The elimination of paper checks is a significant shift in how federal payments are made. While this move will likely result in faster and more secure transactions, it also means taxpayers need to be prepared well before the September 30 deadline. The IRS and SSA will likely release additional guidance and outreach campaigns in the coming months. If you have questions about how this change will affect filing your tax returns, contact us.

What you still need to know about the alternative minimum tax after the new law

July 29, 2025
The alternative minimum tax (AMT) is a separate federal income tax system that bears some resemblance to the regular federal income tax system. The difference is that the individual AMT system taxes certain types of income that are tax-free under the regular system. It also disallows some deductions that are allowed under the regular system. If the AMT exceeds your regular tax bill, you owe the larger AMT amount. Tax law changes The Tax Cuts and Jobs Act (TCJA) made the individual alternative minimum tax (AMT) rules more taxpayer-friendly for 2018-2025 and significantly reduced the odds that you’ll owe the AMT for those years. But the new One Big Beautiful Bill Act (OBBBA) contains mixed news about your AMT exposure. AMT rates The maximum AMT rate is “only” 28% versus the 37% maximum regular federal income tax rate. At first glance, it may seem counterintuitive that anyone would worry about paying AMT. However, while the top AMT rate is lower, it applies to a much larger taxable base with fewer deductions and credits. That’s why people in certain situations still need to worry about it. For 2025, the maximum 28% AMT rate kicks in when your taxable income, calculated under the AMT rules, exceeds an inflation-adjusted threshold of $239,100 for married joint-filing couples or $119,550 for other taxpayers. Below these thresholds, the AMT rate is 26%. AMT exemptions Under the AMT rules, you’re allowed an inflation-adjusted AMT exemption — effectively a deduction — in calculating your alternative minimum taxable income. The TCJA significantly increased the exemption amounts for 2018-2025. The OBBBA made the TCJA increased exemption amounts permanent, with annual inflation adjustments. For 2025, the exemption amounts are $88,100 for unmarried individuals, $137,000 married joint-filing couples, and $68,500 for married individuals who file separate returns. Exemption phase-out rule At high levels of alternative minimum taxable income, your AMT exemption is phased out, which increases the odds that you’ll owe the tax. The TCJA dramatically increased the phase-out thresholds to levels where most taxpayers are unaffected by the phase-out rule. For 2025, the exemption begins to be phased out when alternative minimum taxable income exceeds $626,350 or $1,252,700 for a married joint-filing couple. For 2018-2025, the applicable exemption is reduced by 25% of the excess of your alternative minimum taxable income over the applicable phase-out threshold. Mixed news in the OBBBA Starting in 2026, the OBBBA makes the $500,000 and $1 million exemption phase-out threshold permanent. That’s the good news. The bad news: Starting in 2026, the new law resets the exemption phase-out thresholds to $500,000 and $1 million with annual inflation adjustments for 2026 and beyond. So for 2026, these phase-out thresholds will be lower than the higher thresholds that apply for 2025. More bad news: Starting in 2026, the OBBBA increases the exemption phase-out percentage from 25% to 50%. Bottom line: For 2026 and beyond, AMT exemptions for higher-income taxpayers can be phased out faster. That means more taxpayers may owe the AMT for 2026 and beyond. AMT risk factors Various interacting factors make it difficult to pinpoint exactly who’ll be hit by the AMT and who’ll dodge it. Here are five implications and risk factors. Substantial income from capital gains or other sources. When you have high income, from whatever sources, it can cause your AMT exemption to be partially or completely phased out. That increases the odds that you’ll owe the AMT. Itemized state and local tax (SALT) deductions. You can’t deduct SALT expenses under the AMT rules. This can hurt those living in high-tax states. Exercise of incentive stock options (ISOs). When you exercise an ISO, the bargain element (the difference between the market value of the shares on the exercise date and your ISO exercise price) doesn’t count as income under the regular tax rules, but it counts as income under the AMT rules. Standard deductions. Standard deductions are disallowed under the AMT rules. Private activity bond interest income. This category of interest income is tax-free for regular tax purposes but taxable under the AMT rules.  Determine your status The TCJA significantly reduced the odds that you’ll owe the AMT. But the OBBBA increases the odds for some taxpayers, thanks to unfavorable changes to the AMT exemption rules that will take effect in 2026. Don’t assume you’re exempt from AMT — especially if you have some of the risk factors outlined above. Contact us to determine your current status after the OBBBA changes take effect.

The QBI deduction and what’s new in the One, Big, Beautiful Bill Act

July 28, 2025
The qualified business income (QBI) deduction, which became effective in 2018, is a significant tax benefit for many business owners. It allows eligible taxpayers to deduct up to 20% of QBI, not to exceed 20% of taxable income. It can also be claimed for up to 20% of income from qualified real estate investment trust dividends.  With recent changes under the One, Big, Beautiful Bill Act (OBBBA), this powerful deduction is becoming more accessible and beneficial. Most important, the OBBBA makes the QBI deduction permanent. It had been scheduled to end on December 31, 2025. A closer look QBI is generally defined as the net amount of qualified income, gain, deduction and loss from a qualified U.S. trade or business. Taxpayers eligible for the deduction include sole proprietors and owners of pass-through entities, such as partnerships, S corporations and limited liability companies that are treated as sole proprietorships, partnerships or S corporations for tax purposes. C corporations aren’t eligible. Additional limits on the deduction gradually phase in if 2025 taxable income exceeds the applicable threshold — $197,300 or $394,600 for married couples filing joint tax returns. The limits fully apply when 2025 taxable income exceeds $247,300 and $494,600, respectively. For example, if a taxpayer’s income exceeds the applicable threshold, the deduction starts to become limited to: 50% of the amount of W-2 wages paid to employees by the qualified business during the tax year, or The sum of 25% of W-2 wages plus 2.5% of the cost (not reduced by depreciation taken) of qualified property, which is the depreciable tangible property (including real estate) owned by a qualified business as of year end and used by the business at any point during the tax year to produce QBI. Also, if a taxpayer’s income exceeds the applicable threshold and the QBI is from a “specified service business,” the deduction will be reduced and eventually eliminated. Examples of specified service businesses are those involving investment-type services and most professional practices, including law, health, consulting, performing arts and athletics (but not engineering and architecture). Even better next year Under the OBBBA, beginning in 2026, the income ranges over which the wage/property and specified service business limits phase in will widen, potentially allowing larger deductions for some taxpayers. Instead of the distance from the bottom of the range (the threshold) to the top (the amount at which the limit fully applies) being $50,000, or, for joint filers, $100,000, it will be $75,000, or, for joint filers, $150,000. The threshold amounts will continue to be annually adjusted for inflation. The OBBBA also provides a new minimum deduction of $400 for taxpayers who materially participate in an active trade or business if they have at least $1,000 of QBI from it. The minimum deduction will be annually adjusted for inflation after 2026. Action steps With the QBI changes, it may be time to revisit your tax strategies. Certain tax planning moves may increase or decrease your allowable QBI deduction. Contact us to develop strategies that maximize your benefits under the new law. © 2025

Create an estate planning road map using a letter of instruction

July 24, 2025
Including a letter of instruction in your estate plan is a simple yet powerful way to communicate your personal wishes to your family and executor outside of formal legal documents. While not legally binding, the letter can serve as a road map to help those managing your estate carry out your wishes with fewer questions or disputes.  Contents of your letter What your letter addresses largely depends on your personal circumstances. However, an effective letter of instruction must cover the following: Documents and assets. State the location of your will and other important estate planning documents, such as powers of attorney, trusts, living wills and health care directives. Also, provide the location of critical documents such as your birth certificate, marriage license, divorce documents and military paperwork. Next, create an inventory — a spreadsheet may be ideal for this purpose — of all your assets, their locations, account numbers and relevant contacts. These may include, but aren’t necessarily limited to: Checking and savings accounts, Retirement plans and IRAs, Health and accident insurance plans, Business insurance, Life and disability income insurance, and Stocks, bonds, mutual funds and other investment accounts. Don’t forget about liabilities. Provide information on mortgages, debts and other loans your family should know about. Digital assets. At this point, most or all of your financial accounts may be available through digital means, including bank accounts, securities and retirement plans. It’s critical for your letter of instruction to inform your loved ones on how to access your digital accounts. Accordingly, the letter should compile usernames and passwords for digital financial accounts as well as social media accounts, key websites and links of significance. Funeral and burial arrangements. Usually, a letter of instruction will also include particulars about funeral and burial arrangements. If you’ve already made funeral and burial plans, spell out the details in your letter. This can be helpful to grieving family members. You may want to mention particulars like the person (or people) you’d like to give your eulogy, the setting and even musical selections. If you prefer cremation to burial, make that abundantly clear. Provide a list of people you want to be contacted when you pass away and their relevant information. Typically, this will include the names, phone numbers, addresses and emails of the professionals handling your finances, such as an attorney, CPA, financial planner, life insurance agent and stockbroker. Finally, write down your wishes for any special charitable donations to be made in your memory. Express your personal thoughts Your letter of instruction complements the legal rigor of your estate planning documents with practical and personal guidance. Indeed, one of the most valuable functions of a letter is to offer personal context or emotional guidance. You can use it to explain the reasoning behind decisions in your will, share messages with loved ones, or express values and hopes for the future. Contact us if you’d like additional information. © 2025