IRS releases guidance on changes to R&E expensing

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Disability insurance is a valuable benefit provided by many employers. It replaces a portion of the insured person’s income — typically 45% to 65% of pre-disability earnings — after a specified waiting period that starts when the person becomes disabled (as defined by the policy’s terms). Whether you’re just beginning to receive disability benefits or you’re evaluating your long-term financial security, it’s important to understand the tax implications of these benefits. Payment of premiums Taxability of disability insurance benefits usually hinges on who paid the premiums. If your employer paid the premiums, then payouts from the policy generally will be taxed to you just as if the income were paid directly to you by your employer. If you paid the premiums, the payments you receive generally won’t be taxable. Even if your employer arranges for the coverage (in other words, it’s a policy made available to you at work), as long as you pay the premiums, the benefits generally won’t be taxable. For these purposes, if the premiums are paid by your employer but the amount paid is included in your taxable income from work, the premiums will be treated as paid by you. The rules in action Let’s say your salary is $1,500 a week ($78,000 a year). Under a disability insurance arrangement made available to you by your employer, $20 a week ($1,040 annually) is paid on your behalf by your employer to an insurance company. Your Form W-2 reports $79,040 in income as your wages for the year ($78,000 paid to you plus $1,040 in disability insurance premiums). Under these circumstances, the insurance is treated as paid for by you. If you become disabled and receive benefits under the policy, the benefits won’t be taxable income to you. Now assume that only $78,000 is reported on your W-2 as your wages for the year because your employer treats the amount paid for the insurance coverage as excludable under the rules for employer-provided health and accident plans or because the coverage is paid through a cafeteria plan. In this case, the insurance is treated as paid for by your employer. If you become disabled and receive benefits under the policy, the benefits will be taxable income to you. Special rules apply if there’s a permanent loss (or loss of the use) of a part or function of the body or a permanent disfigurement. Other disability benefits If disability income is paid directly to you by your employer, rather than by an insurance company, it’s generally taxable to you just as your ordinary pay would be. Taxable benefits are also subject to federal income tax withholding. However, depending on your employer’s disability plan, these benefits might not be subject to Social Security tax. Different rules apply to the tax treatment of Social Security Disability Insurance (SSDI) benefits. SSDI benefits are taxed under the same rules that apply to Social Security benefits. Depending on your income and filing status, some of your SSDI benefits may be taxable. More considerations The tax treatment of disability benefits can have a major impact on what you’ll end up with in your pocket. So it’s important to consider taxes when determining how much disability coverage you need. Keep in mind that state tax treatment of disability benefits varies. If you’re paying the premiums, you have to replace only your “after tax” (take-home) income because your benefits won’t be taxed. But if your employer is paying the premiums, you’ll lose a percentage of your benefits to taxes and may need more coverage. We can help you assess how much disability coverage you need depending on the tax consequences and other factors. © 2026 

Many small businesses start out as sole proprietorships. This structure is simple and inexpensive to establish and maintain — and it gives the owner direct access to profits without having to take formal distributions. But it also makes your taxes more complicated than when you were a W-2 employee. Here are some federal tax issues to consider if your business operates as a sole proprietorship. Reporting income and expenses You’ll report income and expenses from your business activities on Schedule C of your personal return (Form 1040). The net income will be taxable to you regardless of whether you withdraw cash from the business. Your business expenses are deductible against gross income, not as itemized deductions. If you have losses, they’ll generally be deductible against your other income, subject to special rules related to hobby losses, “excess” business losses incurred by noncorporate taxpayers, passive activity losses and losses from activities in which you weren’t “at risk.” Sole proprietors may be eligible for certain deductions that generally aren’t available to other individual taxpayers. For instance, you may qualify for an above-the-line self-employed health insurance deduction for premiums paid for medical, dental and qualifying long-term care coverage, subject to certain limitations. This means your deduction for medical insurance won’t be subject to the rule that limits itemized deductions for medical expenses. In addition, you may be entitled to deduct home office expenses if: A home office is your principal place of business (including when you perform management or administrative tasks there and have no other fixed place to perform them), You use your home as a place to meet or deal with customers, clients or patients in the normal course of business, or You store inventory or product samples at home. In general, to qualify, the area must be used regularly and exclusively for business purposes. The home office deduction may include an allocable part of mortgage interest or rent, insurance, utilities, repairs, maintenance and, if you own the home, depreciation. Alternatively, you can use a simplified method based on the square footage of the qualifying space. You may also be able to deduct travel expenses from your home office to another work location. Be sure to keep complete records of your income and expenses. Proper documentation is needed to claim all the tax breaks to which you’re entitled. Certain expenses, such as automobile, travel, meals, and home office expenses, require extra attention because they’re subject to special recordkeeping rules or deductibility limits. Claiming the QBI deduction Another special tax break that you might qualify for as a sole proprietor is the Section 199A qualified business income (QBI) deduction. It generally equals 20% of QBI, not to exceed 20% of taxable income. QBI generally is defined as the net amount of qualified items of income, gain, deduction and loss that are effectively connected with the conduct of a U.S. business. QBI doesn’t include certain investment items or reasonable compensation paid to an owner for services rendered to the business. This deduction is taken “below the line,” meaning it reduces taxable income, rather than being taken “above the line” against your gross income. However, you can take the QBI deduction even if you don’t itemize deductions and instead claim the standard deduction. One word of caution: The QBI deduction is subject to additional limits at higher income levels. For 2026, these limitations generally begin to apply when taxable income (calculated before any QBI deduction) exceeds $201,750 ($403,500 for married couples filing jointly). For 2026, these limitations are fully phased in once taxable income exceeds $276,750 ($553,500 for joint filers). Contact us to learn more about the limitations that apply to your situation. The One Big Beautiful Bill Act (OBBBA) made the QBI deduction permanent. Starting in 2026, the OBBBA also expands the income ranges over which the limitations phase in, potentially allowing larger deductions for some taxpayers. And it 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. Paying self-employment taxes One downside of owning your own business is that you must pay self-employment taxes. These taxes are the equivalent of federal payroll taxes for employees, but self-employed people must pay both the employer’s and employee’s share of them. They’re imposed in addition to income tax, but you can deduct half of your self-employment tax as an adjustment to income. For 2026, you must pay self-employment tax (Social Security and Medicare) at a 15.3% rate on your net earnings from self-employment up to $184,500, and Medicare tax only at a 2.9% rate on the excess. An additional 0.9% Medicare tax is imposed on self-employment income in excess of $250,000 for joint filers, $125,000 for married taxpayers filing separate returns and $200,000 in all other cases. The additional Medicare tax threshold isn’t adjusted for inflation. Establishing a tax-advantaged retirement plan You might also want to consider setting up a qualified retirement plan. The advantages are that amounts contributed to it are deductible at the time of the contributions and aren’t subject to income tax until they’re withdrawn. One option is a Simplified Employee Pension (SEP) plan, which requires minimal paperwork. You generally can set up a SEP and make deductible contributions for the tax year as late as the due date of your income tax return for the year, including extensions. The contribution amounts are discretionary, and the annual limits are high. But, if you have employees, they generally must be included in the plan, provided they work enough hours and meet other qualification requirements. If you don’t establish a qualified retirement plan, you may still be able to contribute to a traditional IRA. But your annual contribution limit will generally be significantly lower. Making quarterly estimated payments The U.S. tax system is considered “pay as you go.” So, you’ll probably have to make estimated tax payments each quarter. Estimates should include both federal income tax and self-employment taxes. Estimated payments are generally calculated using Form 1040-ES. Quarterly payments are generally due on April 15, June 15 and September 15 of the current year and January 15 of the following year. If a due date falls on a weekend or legal holiday, the deadline generally moves to the next business day. Paying enough by each deadline is critical; if you fall behind, you’ll likely owe interest and penalties. Applying for an EIN Sole proprietors don’t automatically need an employer identification number (EIN). You can generally use your Social Security number for federal tax purposes — unless you hire employees. You might also need an EIN if your business: Owes employment or excise taxes, Withholds certain taxes on payments to a nonresident alien, Establishes certain retirement plans, or Changes its legal structure, such as incorporating or forming a partnership. Additionally, you might consider obtaining an EIN voluntarily for banking or administrative purposes. An EIN is available at no cost through the IRS website. To apply, you’ll need to provide identifying information, including a valid Social Security number or other taxpayer identification number, and details about the business. Eligible U.S. applicants generally receive the EIN immediately after completing the online application. You can also submit Form SS-4 by fax or mail. We can help Even though your business may be small, tax compliance and planning are a big deal. These are just highlights of federal income tax issues sole proprietors face. State and local income, sales, payroll, and other tax requirements may also apply. Contact us if you’d like additional information regarding the tax aspects of your business, or if you have questions about the reporting or recordkeeping requirements. © 2026 

As property values continue to rise, homeowners with large estates may be looking for ways to preserve family wealth while minimizing future estate tax exposure. One strategy that may help accomplish these goals is a qualified personal residence trust (QPRT). QPRT specifics A QPRT is an irrevocable trust that allows you to transfer ownership of your primary residence or a secondary residence (such as a vacation home) to it while retaining the right to live in (or personally use) the home for a specified number of years. At the end of that term, ownership of the home typically transfers to the QPRT beneficiaries. When you transfer a home to a QPRT, it’s generally removed from your taxable estate. But the transfer of the remainder interest going to the beneficiaries is a taxable gift. The IRS Section 7520 rate, which is updated monthly, is used to calculate the value of the gift for gift tax purposes. The lower the Sec. 7520 rate, the smaller the remainder interest and the lower the gift tax liability. If the appreciation on the home during the term outperforms the Sec. 7520 rate and you survive the term, the excess value will be transferred to the beneficiaries gift- and estate-tax-free. For August 2026, the rate is 5.2%. You can apply a portion of your available lifetime gift and estate tax exemption to the transfer. For 2026, the exemption is $15 million, reduced by any exemption you already have used during your life. You must appoint a trustee to manage the QPRT. Commonly, the trust grantor (which would be you) will act as the trustee. Alternatively, you can name another family member, friend or professional advisor. While you live in the home, you must continue to pay the monthly bills, such as property taxes, maintenance and repair costs, and insurance. Because the QPRT is a grantor trust, as the grantor, you’re entitled to deduct qualified expenses on your income tax return, within the usual limits. What if you want to sell the home during the term? You generally can do so as long as you reinvest the proceeds in another home that will be owned by the QPRT and subject to the same trust provisions. Be aware of the risks A QPRT isn’t without drawbacks. Because the trust is irrevocable, you can’t simply change your mind and reclaim ownership of the home after the transfer. However, you can continue to live in the home after the term ends if the beneficiaries agree and you pay fair-market rent to them. In addition, the strategy works best if you survive the term. If you die before the term expires, the home is generally included in your taxable estate, largely eliminating the intended estate tax benefits. The longer the trust term, the smaller the value of the remainder interest for tax purposes. But it’s generally better to choose a term that’s shorter than your life expectancy. Doing so will reduce the chance that you’ll die before the end of the term, causing the home to be included in your taxable estate. There are also income tax considerations. Unlike property inherited at death, a home transferred through a QPRT generally doesn’t receive a step-up in basis when the trust term successfully ends. As a result, the beneficiaries could face larger (in some cases, much larger) capital gains taxes if they later sell the home than they would have had they inherited it. So it’s important to weigh potential estate tax savings against potential future income tax liability. Is a QPRT right for your estate? If you have a home that’s appreciating rapidly and a large enough estate that estate taxes are a concern, a QPRT is worth a look. However, because it involves complex tax rules, strict IRS requirements and long-term commitments, a QPRT should be executed only after a thorough review of your financial circumstances and estate planning objectives. We can help you determine if this type of trust is right for you. © 2026 

Are you selling your business, soliciting new investors, updating a buy-sell agreement, pursuing litigation or drafting an estate plan? An accurate business valuation prepared by a valuation professional is critical to the success of these and many other activities. Knowing some fundamentals about the process can help you understand your valuator’s conclusions, what drives business value and where to invest resources. Here are some basic concepts you should know. Fair market and fair value Although they sound similar, these two terms can have different meanings. Fair market value is the valuation standard used for tax, transaction and planning purposes. It represents the price at which a business or ownership interest would change hands between a hypothetical willing buyer and a hypothetical willing seller. It assumes that both parties are acting independently, have reasonable knowledge of the relevant facts and are under no pressure to complete the transaction. Fair value, on the other hand, is a legal standard that generally depends on state law and court precedent. It’s commonly used in shareholder disputes, divorce proceedings and certain litigation. Fair market value can serve as a starting point for an appraisal, but fair value generally requires adjustments to reach an equitable outcome. For example, when minority shareholders are forced out of a business through a merger, courts often rely on the fair value standard because those shareholders are neither hypothetical nor willing participants. Going concerns Another essential concept is going concern value. This refers to the value of a business that’s expected to continue operating into the foreseeable future. A going concern is typically worth more than the sum of its individual assets because it includes valuable intangible assets. These might include an experienced workforce, established customer relationships, proprietary processes, operating systems, licenses and a proven ability to generate earnings. In today’s economy, such intangible assets often account for a significant portion of a business’s value. Premiums and discounts Valuations aren’t simply based on the numbers contained in a business’s financial statements. Professional valuators also usually consider the ownership interests being appraised. For instance, a business may be more valuable because the owner can independently direct management decisions and influence the organization’s future. This additional value is known as a valuation premium (in this case, for control reasons). Conversely, a valuation professional may apply a valuation discount when circumstances reduce the appeal of an ownership interest. One of the most common examples is a discount for lack of marketability. This reflects the difficulty of quickly selling an interest in a privately held business. Depending on the facts, other discounts, such as those related to minority ownership, may also be considered when appropriate. Risks and opportunities Even if you aren’t facing litigation or don’t plan to sell your business soon, consider obtaining a valuation. Professional valuations often review historical and projected financial performance, economic conditions, key-person risk, competitive position, and other qualitative and quantitative factors. Periodic valuations may alert you to potential threats and measure progress toward long-term goals. Contact us for help determining what your business is worth and identifying practical steps to enhance its value. © 2026 

A higher education is expensive, and many parents spend years saving up. Others haven’t had the financial bandwidth to save or have hit unexpected financial roadblocks along the way. Regardless of your situation, current tax breaks may be available to you (or to your children or even their grandparents) once your child begins attending college or other post-secondary school. Here are some tax tips. Claim tax credits If you have one or more children in college — or graduate school — you might be eligible for valuable tax credits. Remember, credits reduce your tax liability dollar-for-dollar, so they’re more valuable than deductions of the same amount, which only reduce the amount of income subject to tax. So it’s important to see if you’re eligible for one or both of these credits: American Opportunity Tax Credit (AOTC). You may be able to take this credit of up to $2,500 for the first four years of postsecondary education in pursuit of a degree or recognized credential — a 100% credit for the first $2,000 in tuition, fees and books, and a 25% credit for the second $2,000. The AOTC is 40% refundable, meaning you can get a refund if the credit amount is greater than your tax liability. The credit is available on a per-student basis. For example, if you have a child who’s a freshman and another who’s a fourth-year senior, you can claim a credit of up to $2,500 for each child — as long as you otherwise qualify. Lifetime Learning Credit (LLC). If your child is beyond the first four years of college or in graduate school, you may be able to take the LLC. It can be up to $2,000 for every additional year of college or graduate school — a 20% credit for up to $10,000 in tuition and fees. However, only one LLC is available per tax return. If, say, you have one child in the fifth year of college finishing up his or her bachelor’s degree and another child in grad school, you can claim only one LLC of up to $2,000. But if the first child instead is in his or her first four years of college, you can potentially claim the AOTC for that child and the LLC for your child in graduate school, as long as you otherwise qualify for both credits. Speaking of qualifying, both credits are phased out for married couples filing jointly with modified adjusted gross income (MAGI) between $160,000 and $180,000, and for singles and heads of household with MAGI between $80,000 and $90,000. (Married taxpayers filing separately can’t claim either credit.) If your income is too high for you to qualify, your child might be able to qualify on his or her own tax return. Finally, only one education credit can be claimed for the same student in any given tax year. For instance, if your child graduated from college (in four years) in May of 2026 and starts graduate school in September of 2026, you can’t claim both the AOTC for the last semester of your child’s undergraduate education and the LLC for his or her first semester of graduate education. Other rules also apply to these credits. Take advantage of tax-free 529 plan and ESA distributions Does your child have a tax-advantaged education account, such as a Section 529 plan or Coverdell Education Savings Account (ESA)? Tax-free withdrawals can be taken to pay qualified expenses. Section 529 plan distributions used to pay most postsecondary school expenses are income-tax-free for federal purposes and potentially for state purposes as well. Qualified expenses include tuition, mandatory fees, books, supplies, computer equipment, software, internet, and, for students enrolled at least half-time, room and board. The postsecondary expenses that qualify for tax-free 529 plan distributions generally also qualify for tax-free ESA distributions. However, you can’t take tax-free distributions from both accounts for the same expenses. Also, expenses paid with tax-free distributions from a 529 plan or ESA can’t be used to claim education credits. (If you have younger children and are deciding whether to contribute to a 529 plan or an ESA, keep in mind that there are other important differences to consider, such as the rules for using the funds for K-12 expenses, age-related limits for beneficiaries, and contribution limits — including income-based limits. Contact us to learn more.) Think twice before tapping your retirement accounts You can take money out of your traditional IRA or Roth IRA to pay college costs without incurring the 10% early withdrawal penalty that usually applies to distributions before age 59½. However, the distributions are subject to tax to the extent otherwise applicable. You also may be able to borrow against your employer retirement plan, such as a 401(k) plan, or take withdrawals from it to pay for college. But before you do so, make sure you understand the tax implications, including any penalties you may incur. And any time you make a withdrawal or take a loan from a retirement account, you’re sacrificing the tax-deferred (or tax-free in the case of a Roth account) potential growth on that money. So first think carefully about the future impact on your retirement security. Be aware of scholarship tax treatment Has your child been awarded a scholarship? Congratulations! But it’s also important to understand the tax impact. Scholarships are exempt from income tax if certain conditions are satisfied. The three most significant are that, generally, the scholarship: Must be for a student who is a degree candidate at an eligible educational institution, Can’t be compensation for services, and Must be used for tuition, fees, books and supplies (not for room and board). Also, a tax-free scholarship reduces the amount of expenses that may be taken into account in computing the AOTC and LLC and may reduce or eliminate those credits. Advise grandparents and others to pay tuition directly If someone gives you or your child money to pay some or all of your child’s college expenses, it’s generally treated as a taxable gift to the extent the payments exceed the gift tax annual exclusion of $19,000 per recipient for 2026. Married couples who split gifts may exclude gifts of up to $38,000 for 2026. (Gift tax generally applies to the giver, not the recipient.) However, if the person (say, a grandparent) pays your child’s tuition directly to an educational institution, it won’t be treated as a taxable gift regardless of the amount. This applies only to payments of direct tuition costs (not room and board, books, supplies, etc.). Consider your specific situation Additional rules apply to many of these tax breaks, and there are other tax consequences to consider when it comes to your children and their post-secondary education. Contact us for more information about these breaks and to discuss your specific situation. We can help you take advantage of all the breaks available to you and your family and avoid tax pitfalls. © 2026 

Businesses in economically distressed communities often have difficulty obtaining capital for expansion, equipment, facilities and other investments. The New Markets Tax Credit (NMTC) encourages private investment in these underserved areas by offering federal income tax credits to qualifying investors. This credit was previously scheduled to expire on December 31, 2025. However, the One Big Beautiful Bill Act made it permanent. Let’s take a closer look at how this tax break could benefit your small business. Potential tax and financing benefits The NMTC is generally available to individuals and businesses that make qualified equity investments in community development entities (CDEs). A CDE is generally a domestic corporation or partnership whose primary mission is to serve low-income communities or provide investment capital to them. To participate in the program, a CDE must be certified by the U.S. Department of the Treasury’s Community Development Financial Institutions Fund. The CDE then raises funds from investors to use for qualifying loans, equity investments or other approved activities in low-income communities. Your benefits depend on your role in the transaction. If your business invests in a CDE, you may be able to claim the tax credit. If your business receives financing from a CDE, you may benefit indirectly by gaining access to capital or financing terms that might not otherwise be available. For many small business owners, these financing opportunities may be the more relevant aspect of the NMTC program. Credit amount and filing requirements for investors The NMTC equals 39% of the investor’s qualified equity investment in the CDE. The credit is claimed over seven years as follows: 5% of the investment in each of the first three years, and 6% in each of the next four years. So, a qualifying $1 million investment could generate $390,000 in federal tax credits over seven years, subject to applicable limitations. To claim the credit, you must make a cash investment that the CDE designates as a qualified equity investment. The CDE must use “substantially all” of the funds for qualified low-income community investments (QLICIs). In general, a CDE satisfies this threshold if it invests at least 85% of its aggregate gross assets in QLICIs (reduced to 75% in the seventh year). The credit is calculated using Form 8874, “New Markets Credit,” and reported as part of the general business credit on Form 3800. Claiming the NMTC reduces your tax basis in the investment, which may affect the tax consequences of a later sale. In addition, previously claimed credits may be recaptured (with interest) if the CDE fails to meet program requirements or redeems your investment during the seven-year credit period. Financing benefits for qualifying businesses By encouraging investment in CDEs, the NMTC may expand access to financing for qualifying businesses and nonprofit organizations in low-income communities. Examples of businesses and projects that may receive NMTC-supported financing are: Real estate developments, Manufacturers, Retailers, Health care providers, Child care centers and schools, Hotels, and Community centers. For example, suppose you own a grocery store in a qualifying community and need funds to renovate the building. A CDE could use capital raised from investors to provide your business with a loan or equity financing for this project. In this scenario, qualified investors would receive the federal tax credit, and your business would benefit from access to financing that might otherwise be difficult to obtain through conventional sources. Simply operating in a low-income area doesn’t automatically qualify a business or project for NMTC-supported financing. The CDE must determine whether the business, location and planned use of the financing satisfy the program’s requirements. Exploring NMTC opportunities The now-permanent NMTC may offer a valuable tax break for qualified investors and provide an important source of financing for qualifying businesses and community development projects. However, the rules are complex. Contact us to learn more. We can help you estimate the potential tax or financing benefits and address the applicable compliance requirements. © 2026 

According to a 2026 Worldmetrics report, there are between 14.5 and 15 million single-parent households in the United States. If your family falls into this category, it’s critical that your estate plan: Appoints a guardian. Your plan must designate a suitable, willing guardian to care for your children if the other parent is unavailable to take custody of them in the event you become incapacitated or die suddenly. Choose the best person for the job and designate an alternate if that person can’t fulfill the duties. Frequently, a single parent will name a married couple who are relatives or close friends. If you take this approach, ensure that both spouses have legal authority to act on the child’s behalf. Also, select someone who has the necessary time and resources for this immense responsibility. Establishes a trust. Trust planning is one of the most effective ways to provide for your children. Trust assets are managed by a trusted individual or corporate trustee for the benefit of your children. If your trust will provide for your children into adulthood, consider an incentive trust. By linking asset distribution to specific goals or behaviors, it can encourage your heirs to live responsibly while ensuring your estate is managed according to your wishes. An incentive trust can promote financial responsibility, encourage education or career development, discourage harmful behaviors and support charitable values. Addresses incapacity. It’s important for your estate plan to include documents that specify your health care preferences if you become incapacitated and designate someone to make medical decisions on your behalf. You should also have a revocable living trust or durable power of attorney to manage your finances if you’re unable to do so. Implements a gifting strategy. If your estate is large enough that gift and estate taxes are an issue, it’s important to begin tax planning as early as possible. As a single parent, you won’t enjoy the benefit of the unlimited marital estate tax deduction, so you’ll need to rely more heavily on other tax-reduction strategies. For example, you might take advantage of the $19,000 per recipient (for 2026) gift tax annual exclusion to regularly make tax-free gifts to your children or to a trust for their benefit. By using the gift tax annual exclusion judiciously, you can transfer assets to your children and other family members and reduce the size of your taxable estate without eroding your federal gift and estate tax exemption. Be aware that each year you need to use your annual exclusion by December 31. The exclusion doesn’t carry over from year to year. Creating a comprehensive estate plan is one of the most important steps you can take as a single parent to protect your young children. Unlike households with two parents, there may be no automatic backup decision-maker, financial provider or caregiver if the unexpected happens. If you have questions regarding your estate plan, don’t hesitate to contact us. We’d be pleased to review your plan and help make any necessary updates. © 2026 

Business negotiations aren’t about squeezing every possible concession from the other side. Both parties should leave the table believing they’ve protected their interests and gained something of value. This approach not only supports the current transaction, but also lays the groundwork for future deals. The reason is simple: Business owners with a reputation for fairness tend to attract more opportunities. Before the conversation begins Every successful negotiation starts before anyone sits down to talk. First, define what success looks like for your business and identify the point at which a deal no longer makes financial or operational sense. Establishing your minimum acceptable terms ahead of time helps prevent emotion-based decisions. Price often dominates business negotiations. But bear in mind that other factors may matter just as much, including delivery schedules, payment terms, warranties, service levels and future opportunities. Occasionally, something with little value to your organization may be highly valuable to the other party. For example, discounted excess inventory could help solve a customer’s problem while reducing your carrying costs. When appropriate, establish basic ground rules before negotiations begin. This can be especially helpful when dealing with language barriers, cultural differences or potentially contentious situations where expectations need to be clearly defined. Making strategic concessions Once negotiations begin, don’t immediately agree when a concession is requested and try to avoid making the first one. Taking time to consider requests demonstrates that what you’re giving up has real value. The concessions you do make should be relatively small and deliberate. Large early compromises may signal that your original position wasn’t realistic and encourage the other side to push for more. Also remember that several small concessions can add up, so monitor the cumulative impact throughout the discussion. Perhaps the most important principle is to never concede something without receiving something in return. Effective negotiations rely on balanced exchanges rather than one-sided compromises. Instead of responding with a simple “yes,” consider saying, “I’d be willing to do this if you can help us by…” This approach keeps negotiations collaborative while protecting your interests. Protect the relationship After receiving a concession, resist the temptation to immediately ask for more on the same issue. Overreaching can quickly erode trust and jeopardize an otherwise favorable agreement. Also, be careful about stating potentially unreasonable demands or ultimatums. Maintain a positive tone by focusing on what you can do for the other party instead of simply rejecting proposals. If negotiations seem to be deteriorating, be prepared to walk away. Assuming you want to preserve the relationship, suggest returning to the discussion another day. Stronger future deals Whether you’re negotiating with customers, suppliers, lenders or strategic partners, a positive outcome depends on preparing well before the meeting and keeping a cool head during it. Remember that negotiations should establish trust, credibility and a foundation for future business. We can help you get ready for negotiations by identifying reasonable financial parameters and integrating them into your negotiating strategies. © 2026