Make safety your first order of business

Whether you’re approaching retirement or have settled into your golden years, you may find yourself balancing two important financial goals: maintaining your current lifestyle and preserving wealth for your loved ones. Achieving both can be challenging, particularly when your retirement savings may need to last for several decades. One possible solution is a split annuity strategy. ABCs of annuities An annuity is a contract with an insurance company that provides income, tax-deferred growth or both. Generally, you purchase an annuity with a lump sum or a series of payments. Depending on the contract, the insurer may provide payments for a specified period or for life. Annuities come in several forms. For purposes of the split annuity strategy, we’ll focus on “fixed” annuities, which generally provide a guaranteed minimum rate of return. (Other types of annuities include “variable” and “equity-indexed,” which may offer greater upside potential but also involve greater risk.) Annuities also differ in when payments begin. An immediate annuity typically starts making payments within one year of purchase. A deferred annuity allows funds to accumulate before withdrawals or income payments begin later. From a tax perspective, annuity earnings are tax-deferred — that is, they grow tax-free until they’re paid out or withdrawn. A portion of each payment is subject to ordinary income taxes, and a portion is treated as a tax-free return of principal (premiums). The ability to accumulate earnings on a tax-deferred basis allows deferred annuities to grow more quickly than comparable taxable accounts, which can help offset their usually modest interest rates. Annuities offer some flexibility to withdraw funds or reallocate them if your circumstances change. However, withdrawing money during the early years of an annuity contract may trigger fees imposed by the insurance company, known as surrender charges. Most annuities provide some exceptions to these charges under certain circumstances, such as withdrawals attributable to disability, loss of employment or death of the annuity owner. Withdrawals before age 59½ may also be subject to a 10% federal tax penalty. A split annuity strategy in action A split annuity isn’t a single financial product. Rather, it’s a strategy that divides an investment between two annuities serving different purposes. The first portion purchases an immediate annuity designed to provide regular payments over a predetermined period, such as 10 years. These payments can supplement Social Security benefits, pensions or other retirement income. The remaining funds purchase a deferred annuity that accumulates interest during the same period. Ideally, the deferred annuity grows sufficiently to replace some or all of the original investment. For example, suppose you invest $200,000 in a split annuity strategy. A portion purchases an immediate annuity providing monthly income for 10 years, while the balance funds a deferred annuity. If the deferred annuity earns sufficient interest, its value at the end of the period could approach the original $200,000. At that point, you could begin receiving payments, withdraw funds or continue accumulating earnings. Benefits and drawbacks The primary advantage of a split annuity strategy is its ability to provide predictable income while allowing other assets to grow on a tax-deferred basis. This may reduce the need to sell investments during market downturns and help preserve assets for future needs. Certain deferred annuities also offer death benefits that allow remaining contract values to pass to designated beneficiaries. However, there are limitations. Immediate annuities generally restrict access to the funds used to purchase them, and deferred annuities may impose surrender charges on withdrawals. Fixed payments also lose purchasing power over time because of inflation. Finding the right balance A split annuity strategy may help you generate reliable retirement income while preserving assets for your loved ones. However, it’s important to consider how this approach fits into your overall estate plan, including your wealth transfer goals and potential tax consequences. Contact us to discuss whether a split annuity or other planning strategies can help you maintain financial security throughout retirement while protecting your family’s financial future. © 2026 

Your 2026 tax return isn’t due for months, but actions to reduce your tax liability generally must be taken by December 31. Here are eight tax planning ideas to consider before the calendar turns to 2027. 1. Sell losing investments to offset capital gains Review taxable accounts for investments you could sell at a loss to offset 2026 capital gains you’ve recognized. If losses for the year exceed gains, up to $3,000 can offset ordinary income ($1,500 for separate filers), with the remainder carried forward. But watch out for the wash sale rule: A current loss generally isn’t allowed if you buy substantially identical securities within 30 days before or after the sale. Purchases in your IRA and automatic dividend reinvestments also can also trigger the wash sale rule. Review transactions across accounts before selling an investment with the goal of recognizing a current loss. 2. Increase pretax or tax-deductible retirement contributions Contributing more to a workplace retirement plan, traditional IRA or self-employed retirement plan may reduce your 2026 taxable income. Eligibility and contribution limits vary. Traditional IRA deductions, for example, may be limited based on income if you or your spouse is covered by a workplace plan. Roth contributions don’t reduce current taxable income. Check the deadlines now. To reduce 2026 taxable income, contributions to workplace plans generally must come from 2026 pay (and may need to be elected well before December 31), but 2026 IRA contributions can be made until April 15, 2027. Some self-employed plan contributions can be made as late as your tax return’s extended due date, but earlier plan setup or election deadlines may apply. 3. Consider a partial Roth conversion Converting part of a traditional IRA to a Roth IRA won’t reduce your 2026 taxes, but it may make sense if your current tax rate is lower than the rate you expect to pay when you take distributions. The untaxed portion of the conversion increases your current taxable income, but future qualified Roth withdrawals will be tax-free. Choose the amount carefully to avoid pushing income into a higher bracket or triggering income-based phaseouts that reduce or eliminate certain tax breaks. Calculate the tax cost before converting: A completed conversion can’t be reversed. 4. Bunch deductible expenses If your itemized deductions are close to the standard deduction, consider bunching certain payments into this year and taking the standard deduction the next. For 2026, the basic standard deduction is $16,100 for single and separate filers, $24,150 for heads of household and $32,200 for joint filers. Higher amounts apply if you’re 65 or older or blind. Charitable gifts, qualifying medical expenses and assessed property taxes may be candidates for bunching. But consider deduction limits: The state and local tax deduction cap is $40,400 ($20,200 for married couples filing separately), with reductions at higher income levels. Beginning in 2026, only charitable contributions exceeding 0.5% of adjusted gross income (AGI) are deductible when itemizing. Taxpayers in the 37% bracket also face a new limit on the tax benefit of itemized deductions. 5. Donate appreciated investments instead of cash If you itemize, consider donating publicly traded securities held for more than one year to a public charity. You avoid tax on the appreciation and can base your deduction on the securities’ fair market value, subject to applicable deduction limits. If you don’t itemize, qualifying cash gifts to eligible charities may generate a 2026 deduction of up to $1,000, or $2,000 for joint filers. But securities don’t qualify for this deduction. However, you can still avoid the tax on the appreciation if you donate them. 6. Make charitable gifts directly from your IRA If you’re age 70½ or older, consider a qualified charitable distribution (QCD) from an eligible IRA. For 2026, you generally can transfer up to $111,000 directly to eligible charities without including it in taxable income. A QCD also can satisfy all or part of your required minimum distribution (if applicable). You can’t claim a charitable deduction for the same gift. But excluding the distribution from income may provide a greater benefit than taking a taxable withdrawal and donating the proceeds. Why? It can reduce your AGI and modified AGI (MAGI), which are triggers for various tax break phaseouts and additional taxes. Arrange the transfer early enough to complete it by December 31. 7. Prepay eligible tuition Paying qualified tuition by December 31 for an academic period beginning in January, February or March 2027 may qualify you for a 2026 education credit. The American Opportunity credit is worth up to $2,500 per eligible student; the Lifetime Learning credit is worth up to $2,000 per return. Both credits phase out over MAGI of $80,000 to $90,000 for single and head-of-household filers and $160,000 to $180,000 for married couples filing jointly. Other eligibility requirements apply. Coordinate payments with scholarships and tax-free 529 plan withdrawals: You can’t use the same expenses for multiple tax benefits. 8. Increase withholding if you’re at risk for underpayment penalties Compare your projected 2026 tax liability with your withholding and estimated payments, especially after a large gain, bonus or Roth conversion. If you’re falling short, consider increasing withholding from your remaining paychecks, pension payments or retirement plan distributions. Withholding is treated as paid evenly throughout the year for underpayment-penalty purposes. Increasing it late in the year therefore may help address earlier shortfalls. A larger fourth-quarter estimated payment, by contrast, generally won’t eliminate penalties attributable to earlier quarters. Coordinating year-end tax decisions Before implementing any of these ideas, consider how they work together and whether they could increase your exposure to the alternative minimum tax. The best strategies for 2026 also depend on your expected tax situation in 2027. Contact us to review your specific circumstances while there’s still time to act. We can run projections for various scenarios and compare the alternatives to help identify which strategies are right for you. © 2026 

Whether it’s unauthorized payroll payments, pilfered inventory, stolen equipment or forged checks, theft can be a devastating blow for a small business. Once the fraud is discovered, many business owners focus on stopping the losses and recovering what they can. But there’s another important question to consider: Can the loss be deducted? The answer is often yes, but qualifying for a theft loss deduction isn’t always straightforward. Here’s a closer look at the federal tax rules for claiming theft loss deductions. The basics For purposes of deducting theft losses, the term “theft” is broadly defined to include larceny, embezzlement and robbery. In general, a loss is regarded as arising from theft only if the appropriation of a taxpayer’s property involves a criminal element. You can generally deduct business theft losses sustained during the tax year that aren’t compensated by insurance or other means. A theft loss is treated as sustained in the year you discover the theft, not necessarily the year it actually occurred. However, you must defer any portion of the deduction for which there’s a reasonable prospect of recovery through insurance claims, lawsuits or guarantees. Only the unreimbursed amount is deductible. If you subsequently recover part of a previously deducted theft loss, the recovery is income in the year received, but only up to the amount that produced a prior tax benefit. Loss calculations The deductible theft loss for business or income-producing property is generally the lesser of: 1) the property’s adjusted basis immediately before the theft, or 2) its fair market value (FMV) immediately before the theft. Adjusted basis generally equals its cost minus depreciation. The loss (after reimbursement) must be computed, item by item, for each identifiable stolen asset. Then you must combine the net losses from all your business assets affected by the theft to arrive at the total theft loss for that event. Stolen inventory may instead be accounted for through cost of goods sold. The same loss can’t be deducted twice. Suppose you discovered on November 1, 2026, that an employee stole equipment from your business. You bought the asset for $12,000 in 2024 and had claimed $6,000 in depreciation deductions through the loss date, resulting in an adjusted basis of $6,000 ($12,000 − $6,000). You obtained an appraisal that estimates the equipment was worth $7,000 on the loss date. If your insurance provider reimburses you $2,000 for the stolen asset, and you have no reasonable prospect of further recovery at the end of 2026, your deductible loss would be $4,000 for 2026 ($6,000 − $2,000). If you later recover $1,000 in a lawsuit, you’d report that amount as income in the year you receive it, to the extent the earlier deduction reduced your tax. Reporting rules Business theft losses are computed on Form 4684, “Casualties and Thefts.” Business and investment property losses then typically flow to Form 4797, “Sales of Business Property.” This form is used to complete the appropriate line on your tax return. Where you actually report the loss deduction depends on how your business is structured. C corporations claim theft losses on Form 1120. The rules for “pass-through” entities are as follows: Sole proprietorships and limited liability companies (LLCs) taxed as sole proprietorships claim theft losses on Schedule C of the owner’s personal return. Partnerships and LLCs taxed as partnerships report theft losses on Form 1065, and the partners deduct their shares of the loss on their personal returns. S corporations report theft losses on Form 1120S, and the shareholders deduct their shares of the loss on their personal returns.  Owners’ deductions for their shares of pass‑through theft losses may be subject to applicable loss limitations, including at-risk and excess business loss rules. If theft losses will create a tax loss for your business, contact us to learn whether these limitations apply to your situation. Documentation requirements When claiming a business theft loss, you’ll need to gather records to substantiate your deduction. These records may include: A police report, insurance claim or other credible evidence that a theft occurred under applicable state law and when you discovered it, Invoices, asset registers, depreciation schedules or other business records that identify the stolen property, establish ownership (or contractual liability for leased assets) and support the adjusted basis of each item, Appraisal reports estimating each item’s FMV immediately before the theft, if applicable, and Records indicating the amount of insurance or other reimbursement received or reasonably expected. For employee embezzlement or payroll fraud, supporting documentation may also include payroll records, bank statements and other evidence showing how the funds were misappropriated. Proper documentation is essential. The IRS may deny or limit theft loss deductions if you can’t substantiate the adjusted basis or FMV for the stolen items or can’t clearly prove the theft occurred. We can help If your business is victimized by theft or fraud, you may be able to deduct the loss. But you must comply with the tax rules and keep detailed records in case the IRS questions your deduction. Although a tax deduction won’t make your business whole, it may help offset at least part of the loss. Contact us for guidance on calculating, reporting and substantiating theft loss deductions for your small business. © 2026

For families with significant wealth, lending money to children, grandchildren or other relatives can be an effective way to provide financial assistance while preserving family assets. But informal arrangements can create complications. Without clear expectations, loans between relatives may lead to misunderstandings, strained relationships and unintended tax consequences. One way to avoid these problems is to create a family bank, a formal arrangement designed to manage intrafamily lending in an organized manner. Benefits of intrafamily loans Intrafamily loans can serve various purposes, such as purchasing a home, pursuing higher education, starting a business or addressing temporary financial difficulties. And they offer several advantages. For borrowers, they may provide access to financing that’s difficult to obtain through traditional lenders, often with more flexible repayment terms or lower interest rates. For lenders, they provide an opportunity to help loved ones achieve financial goals without making outright gifts. Assuming the loans are repaid, the funds can eventually be used to assist other family members. Intrafamily loans can also be valuable estate planning tools. For example, if a borrower invests loan proceeds and earns a return that exceeds the interest rate charged, the excess appreciation generally remains with the borrower rather than becoming part of the lender’s estate. However, it’s essential to structure these transactions properly to avoid having loans characterized as taxable gifts. Generally, lenders should document loans with written promissory notes, establish realistic repayment schedules and maintain records of payments. In addition, they should charge interest at least equal to the applicable federal rate (AFR) for the loan’s term. Borrowers also must have a reasonable ability and genuine intention to repay their loans. How a family bank works Although individual intrafamily loans can be effective, managing multiple loans to different relatives can become complicated. Questions may arise about who qualifies for assistance, how much each person can borrow and whether some family members receive preferential treatment. A family bank addresses these concerns by creating a centralized system for making and administering loans. By evaluating requests according to predetermined standards, it can help preserve family wealth, encourage financial responsibility and reduce disputes. Despite its name, a family bank typically isn’t a chartered financial institution. Rather, it’s a family-funded arrangement that operates under established lending policies. Depending on the circumstances, it may be organized as a limited liability company, partnership or another legal structure. Set clear lending policies A family bank’s success depends largely on its governance structure. Clear policies and consistent administration help ensure that lending decisions are made objectively and borrowers understand their obligations. For example, a family bank should define eligibility requirements, maximum loan amounts, acceptable uses of borrowed funds and repayment expectations. It should also specify how loan requests are evaluated and what happens if borrowers encounter financial difficulties. Families may appoint a committee to oversee lending activities and involve independent advisors to provide objectivity. Transparency is also important. Family members should understand the bank’s purpose and lending guidelines, even if individual borrowers’ financial information remains confidential. A strategy worth considering Beyond providing financial support, a family bank can teach younger generations about borrowing, budgeting and responsible money management. It can also help families promote fairness and shared financial values. However, this approach isn’t appropriate for every family. Creating and administering one involves legal, tax and practical considerations. Contact us to discuss whether intrafamily loans or a family bank might fit into your family’s wealth transfer strategy. © 2026 

Rising costs and inefficient operations can leave your business earning less than it should. A thorough review of how you make and spend money can reveal where potential profitability improvements may have the greatest impact. Consider these six tips: Base goals on opportunity. Last year’s sales results may provide useful context, but they shouldn’t be the sole basis for next year’s targets. Examine current customer demand, market conditions, competitive strength and staffing levels. Make those objectives challenging but achievable. And instead of rewarding sales volume alone, consider incentivizing profitable individual sales to discourage sales staff from closing deals through excessive discounts. Clarify why customers choose you. Ask employees what your business does best, then compare their answers with customer feedback. Identify specific strengths that matter to buyers — for example, lower prices, dependable delivery, specialized expertise or responsive service. Once you’ve identified your strongest advantages, communicate them consistently in employee training, sales conversations and marketing materials. Train nonsales staff to recognize needs. Employees outside the sales department often hear about customer needs before anyone else, so teach them how to share that information. Keep the referral process simple, and consider offering a reward when a lead results in a sale. Employees should understand their role is to be helpful and observant, not to pressure customers or make promises they can’t fulfill. Review underperforming products. Examine the profitability of offerings, accounting for the labor, materials, delivery and support each one requires. If an activity consistently consumes resources without providing sufficient revenue, consider dropping it. But before discontinuing anything, decide whether a price increase, process improvement or different way of providing it might improve profitability. Check for earned but unbilled revenue. Audit contracts, completed work and invoices for any omitted charges, unbilled items, and unauthorized discounts. With clear agreements and accurate invoices, you can reduce costly customer disputes. Look closely at recurring expenses. Subscriptions, vendor agreements and other ongoing costs for unused services, duplicate purchases and unfavorable terms could be undermining profits. Consider alternatives and negotiate where appropriate. But weigh potential savings against a possible impact on quality, reliability and customer service. Keep in mind that a profitability review is most valuable when it leads to specific conclusions. You should prioritize changes according to their likely financial benefit. And contact us. We can help you conduct a profitability review and identify ways to strengthen your business’s bottom line. © 2026 

If you’re thinking about making a large gift to charity before year end, options besides an outright gift of cash are worth considering. One alternative is a charitable remainder trust (CRT). Funding one this year will provide a 2026 income tax deduction and other tax and nontax benefits. It may be particularly beneficial if you’d like to tax-efficiently divest a concentrated stock position and create an income stream for yourself. How a CRT works A CRT is an irrevocable trust to which you contribute cash, stock or other assets. If you name yourself as the income beneficiary, the trust pays you income for life or a term of up to 20 years. At the end of the term, it distributes the remaining assets to one or more charities you’ve chosen. (You can instead name someone else as the income beneficiary, but the tax consequences will differ somewhat from what’s discussed here.) When you fund the trust, you qualify for an itemized charitable income tax deduction (subject to applicable limits) equal to the present value of the charitable beneficiaries’ remainder interest. But be aware that, beginning in 2026, charitable contributions generally are deductible only to the extent they exceed 0.5% of your adjusted gross income. There are two types of CRTs, each with its own pros and cons: 1. Charitable remainder annuity trust (CRAT). A CRAT pays a fixed dollar amount, generally determined as a percentage of the trust’s initial value, and doesn’t allow additional contributions once it’s funded. 2. Charitable remainder unitrust (CRUT). A CRUT pays out a fixed percentage of the trust’s value recalculated annually and may allow additional contributions, depending on its terms. CRATs offer the advantage of uniform payouts, regardless of fluctuations in the trust’s value. CRUTs, on the other hand, allow payouts to increase as the trust’s value increases. And, as noted, CRUTs may permit additional contributions. One potential disadvantage of a CRUT is that payouts shrink if the trust’s value declines. To ensure that a CRT is a legitimate charitable giving vehicle, IRS guidelines require the present value of the charitable remainder interest to be at least 10% of the trust assets’ value at the time they’re contributed. The computation of the present value is affected by several factors, including the length of the trust term (or your age if payouts are made for life), the size of annual payouts and an IRS-prescribed Section 7520 rate. Diversifying your portfolio A CRT can help you reduce single-stock exposure and defer taxes if you own highly appreciated shares that would generate a large capital gain if sold. Because a CRT is generally exempt from income tax, it can sell shares transferred to it without paying tax on the gain. The CRT can then invest the proceeds in a variety of stocks and bonds, which helps diversify your overall investment position because of your income interest in the trust. You can also invest the payments you receive in other securities to further diversify. As the income beneficiary, you’ll generally owe some capital gains tax when you receive the payments. But the payments will be spread over time, so much of the liability may be deferred. Plus, a portion of each payment may be considered tax-free return of principal. This can help reduce or avoid your exposure to the top 20% long-term capital gains tax rate or the 3.8% net investment income tax. Be aware that CRT distributions follow tax-ordering rules and may be taxed as capital gain or other income before being treated as a return of principal. The specific results will depend on a variety of factors. Is a CRT a fit? A CRT may be a good fit for you if you can contribute appreciated assets and would like to receive payments over time. But the trust is irrevocable and comes with complex tax rules. We can estimate your potential deduction and assess the overall income tax impact before you decide whether to set up a CRT and make a year-end contribution. © 2026 

Self-employment (SE) tax can be a major expense for small business owners — and many self-employed individuals are surprised by this obligation when they file their first tax return that includes self-employment income. It’s separate from federal and state income tax, so a small business owner may owe both income tax and SE tax on the same earnings. Here’s a closer look at whether this tax applies to your business activities, how it’s calculated and possible ways to reduce it. Affected taxpayers SE tax is the Social Security and Medicare tax paid by individuals who work for themselves. Essentially, it’s the self-employed counterpart to the Federal Insurance Contributions Act (FICA) taxes withheld from employees’ paychecks. The difference is that employees split these taxes with their employers, while self-employed individuals generally pay both portions. SE tax generally applies to people who earn income from a trade or business other than as employees. It may apply to you if you conduct business as: A freelancer, independent contractor or gig worker, A sole proprietor, A partner in a partnership, A member of a single-member limited liability company (LLC) or multi-member LLC that’s treated as a partnership for federal income tax purposes. If your work falls into one of these categories, you must pay the SE tax if you have net self-employment earnings of $400 or more in a tax year. SE tax rules apply regardless of age or whether you’re already receiving Social Security or Medicare benefits. Because taxes generally aren’t withheld from self-employment income, you’ll likely need to make estimated tax payments throughout the year to avoid underpayment penalties. How it works The IRS effectively treats self-employed individuals as both employers and employees. As a result, they must pay 12.4% on net self-employment income up to the annual Social Security wage base, plus 2.9% on all net self-employment income for Medicare. That results in a combined SE tax rate of 15.3%. The Social Security wage base for 2026 is $184,500. So, the maximum amount you’ll owe for the Social Security component of SE tax is $22,878 (12.4% × $184,500). The 2.9% Medicare tax has no limit. Self-employed individuals — like employees — are also liable for an additional 0.9% Medicare tax when their self-employment income (plus FICA wages, if they also work for an employer — more details below) exceeds the applicable threshold based on filing status ($200,000 for single or head-of-household filers, $250,000 for married people who file jointly, and $125,000 for married taxpayers filing separately). There’s no “employer” portion of this tax, so the 0.9% amount is the same regardless of whether it’s applied to self-employment income or wages. For example, Mary is a single taxpayer who operates a sole proprietorship. She generates $210,000 of net self-employment income for 2026. Assuming she doesn’t earn any other applicable income, her SE tax bill will be $29,058 [$22,878 + (2.9% × $210,000 + (0.9% × $10,000)]. Side gigs If you earn wages from an employer and also have self-employment income, you may wonder whether you can ask your employer to stop withholding Social Security tax once your combined wages and net earnings from self-employment reach the annual wage base threshold. Unfortunately, you can’t. The reason is that employers must withhold Social Security taxes from an employee’s wages, even if the combined withholding exceeds the maximum amount for the year. In this situation, any excess Social Security tax is reconciled on your personal income tax return. Your wages are considered first when applying the annual Social Security wage base. If your wages already equal or exceed the wage base, you generally won’t owe the Social Security portion of SE tax on your side-business income. However, you’ll still owe the 2.9% Medicare portion, as well as the 0.9% additional Medicare tax, if applicable. Strategies to reduce SE tax You generally can’t eliminate SE tax liability if your business is profitable, but there are some legitimate tax-planning strategies that can reduce or defer it. (Many will help lower your income tax obligations, too.) The most important way to lower your tax hit is to claim all allowable business deductions. SE tax applies to net earnings from self-employment. For most self-employed individuals, net earnings are calculated by multiplying net profit (gross income minus deductible business expenses) by 92.35% (0.9235). Common business deductions include: Home office expenses, Professional fees, Business insurance, Office supplies, and Technology and software costs. Important: You can also deduct half of your SE tax (the employer-equivalent portion) when calculating adjusted gross income. This deduction doesn’t reduce the SE tax itself, but it can lower income taxes. However, the 0.9% additional Medicare tax, if applicable, isn’t deductible because there’s no employer-equivalent portion. Timing strategies can help defer taxes. For example, many self-employed people use the cash method of accounting. In that case, you might delay billing late-year work until early 2027 or pay certain expenses before December 31 to reduce net self-employment income for the year. But this strategy might not make sense over the long run if you expect to be in a higher tax bracket next year. In addition, as your business grows, an S corporation election may create opportunities to reduce employment taxes in certain situations. However, the strategy comes with additional administrative requirements and must be carefully structured to comply with IRS rules. We can help determine whether the potential savings outweigh the added complexity. Plan ahead for SE tax If you have questions about SE tax, contact us. We can help you calculate your SE tax obligation, identify potential business expense deductions and develop plans to optimize your overall tax position. © 2026 

A new deduction for qualified passenger vehicle loan interest became available in 2025. Now, the IRS has released final regulations for the deduction. They include several important tweaks to the proposed regs issued at the end of 2025. Here’s what you need to know, especially if you hope to claim the deduction on your 2026 federal income tax return. Basics of the deduction The new deduction was created by the One Big Beautiful Bill Act (OBBBA). You don’t have to itemize deductions to claim it — it’s available both to nonitemizers who claim the standard deduction and to itemizers. The OBBBA defines qualified passenger vehicle loan interest as interest paid or accrued during the tax year on debt incurred by a taxpayer after December 31, 2024, for the purchase of a qualifying vehicle for personal use. The debt must be secured by a “first lien,” meaning the lender generally has priority over other creditors’ claims to the vehicle until the loan is paid off. Under the OBBBA, a qualifying vehicle must be a car, minivan, van, sport utility vehicle, pickup truck or motorcycle with a gross vehicle weight rating of less than 14,000 pounds. The original use of the vehicle must begin with the taxpayer; leased or used vehicles don’t qualify. The deduction is also limited to vehicles assembled in the United States, as determined by the final assembly location. Remember that not every vehicle sold by an American manufacturer necessarily has its final assembly in this country. Conversely, some “foreign” vehicles may have their final assembly in the United States. Dollar and income-based limits The deduction is generally limited to $10,000 per year. If the deduction is a primary motivator in purchasing a new vehicle, bear in mind that most taxpayers won’t qualify for the full $10,000. For example, assume you purchase a new vehicle before year end and finance $50,000 of the price at a 6.5% interest rate for five years. The total interest over that time will be approximately $8,700. But your deduction for each eligible tax year would be limited to qualifying interest paid that year. Also, the deduction is available only through 2028, unless lawmakers extend it. So your annual deduction would be only a fraction of the total $8,700 of interest. And you’d be able to deduct the total amount only if the tax break is extended beyond 2028. Your annual deduction could be further reduced based on your income. The deduction begins to phase out when modified adjusted gross income (MAGI) exceeds $100,000, or $200,000 for married couples filing jointly. The otherwise allowable deduction is reduced by $200 for every $1,000 — or fraction of $1,000 — of MAGI above those thresholds. Once MAGI reaches $150,000 or $250,000, respectively, the deduction isn’t available. Depending on how much qualifying interest you pay, your deduction could be fully phased out at a MAGI that’s substantially less than $150,000 (or $250,000 if you’re a joint filer). Finally, keep in mind that deductions reduce your taxable income, not your taxes dollar-for-dollar. So your tax savings will be only a portion of the amount deducted. The final regs Like the proposed regs, the final regs address a range of issues related to the deduction. The following may be the most notable if you might be eligible for it: Qualifying debt. The proposed regs specified that debt qualified only to the extent incurred for a qualifying vehicle purchase. It also qualified for other items or amounts directly related to the purchase and “customarily financed” in the same transaction, including vehicle service plans, extended warranties, sales taxes and vehicle-related fees. In response to comments received on the proposed regs, the final regs identify additional examples of costs that can be included in a qualifying vehicle loan: Guaranteed asset protection coverage, Credit insurance products, Repair plans, Vehicle protection products, Key fob replacement plans, and Certain vehicle accessories. The final regs make clear that whether items or amounts are customarily financed in a qualifying vehicle purchase transaction and are directly related to the purchase of the vehicle is determined on an industry-wide basis and not by reference to the financing terms of a particular lender. Interest on credit card debt related to a vehicle purchase, however, generally doesn’t qualify because the debt usually isn’t secured by the vehicle. Negative equity. So-called negative equity occurs when you trade in a vehicle that still has debt exceeding that vehicle’s value and you roll that excess debt into the financing for a qualifying new vehicle. The proposed regs would have excluded this amount from qualifying debt. Industry commenters cited the administrative burden of tracking the separate loan components when requesting that the entire loan count for purposes of the deduction. The IRS was unmoved, though. Interest attributable to the negative-equity portion of the loan doesn’t qualify for this deduction under the OBBBA. The final regs retain the requirement to allocate interest and principal payments proportionately between qualifying and nonqualifying debt. But any down payment is applied first against negative equity and any other amounts that aren’t incurred for the purchase of the vehicle or directly related to the purchase and customarily financed in such a transaction. Original use and personal use. The final regs recognize that some states require dealers to title or register demonstrator vehicles. Under the proposed regs, this could have resulted in the original use commencing with the dealer and not a subsequent purchaser. The final regs therefore provide that the original use of a vehicle held by a dealer won’t commence with the dealer if the vehicle is held primarily for sale to customers. But original use of a vehicle begins with a purchaser only if the loan documentation treats the vehicle as a new vehicle. The final regs retain the proposed regs’ provision establishing that the personal use requirement applies only when you incur the debt. At that time, you must expect that you, your spouse or certain relatives will use the vehicle for personal purposes more than 50% of the time over your anticipated ownership period. But if it turns out the actual use varies from the expected use at the time you incur the debt, it won’t change the personal use determination. Cover your bases Taxpayers hoping to take advantage of this temporary deduction, especially for 2026, should tread carefully. A single misstep in vehicle choice, documentation requirements or another area could cost you. For example, you must include the vehicle identification number (VIN) on your return for each year you claim the deduction. Contact us to discuss whether you qualify for the deduction and, if so, how to maximize its benefits. © 2026 

Creating an estate plan is an important step toward protecting your assets and providing for your loved ones. But even a carefully designed plan can fall short if you overlook certain details. Whether you’re developing an estate plan for the first time or reviewing an existing one, avoid these five common pitfalls. 1. Overlooking beneficiary designations Your will doesn’t necessarily control how all your assets are distributed. Retirement accounts, life insurance policies, annuities, and certain bank and investment accounts generally pass directly to the beneficiaries named on those accounts, regardless of what your will says. Suppose you named your spouse as the beneficiary of your retirement account years ago but have since divorced and remarried. If you haven’t updated the designation, your former spouse might receive those assets instead of your current spouse or children. The outcome depends on applicable law and the type of account. Review beneficiary designations regularly, particularly after major life events such as marriage, divorce, the birth of a child or the death of a loved one. Also, consider naming contingent beneficiaries in case your primary beneficiaries predecease you. 2. Establishing a trust but neglecting to properly fund it Trusts can serve several purposes, from controlling how assets are distributed to protecting beneficiaries and potentially reducing estate taxes. A revocable living trust, for example, can help your estate avoid probate, maintain privacy and provide for the management of assets if you become incapacitated. However, simply signing trust documents isn’t enough. To accomplish its intended purposes, a trust generally must be properly funded. This means transferring ownership of designated assets to the trust or, when appropriate, arranging for assets to pass to it through beneficiary designations. 3. Failing to consider how assets are titled The way you hold title to property can significantly affect what happens to it after your death. Various forms of ownership carry different legal, tax and estate planning consequences. For instance, property owned jointly with rights of survivorship generally passes automatically to the surviving owner, bypassing probate. By contrast, an interest in property held as tenants in common generally passes according to the deceased owner’s will or applicable intestacy laws. Adding an adult child as a joint owner of a home or financial account might seem like a convenient way to simplify an inheritance. However, doing so can create unintended gift tax consequences, expose the property to the child’s creditors and complicate your estate plan. Review how your real estate, bank accounts and other significant assets are titled. Make sure your ownership arrangements support your estate planning objectives rather than inadvertently overriding them. 4. Not coordinating your estate planning documents and decisions An effective estate plan involves more than a will or trust. It may also include beneficiary designations, powers of attorney, health care directives and other financial arrangements. These components should work together to accomplish your goals. For example, leaving substantial assets to a trust for your children may provide valuable protections. But if your retirement accounts name the children directly as beneficiaries, those assets generally will bypass the trust, potentially defeating your intentions. Tax considerations also play an important role. Traditional IRAs and other tax-deferred retirement accounts can create income for beneficiaries that’s taxed at their ordinary income rates, while appreciated assets held in a taxable account generally receive more favorable tax treatment if sold. Coordinating beneficiary designations, trust provisions, and distribution strategies can help manage taxes and preserve more wealth for your heirs. The key is to evaluate your estate plan as a whole, rather than making decisions about individual assets or documents in isolation. 5. Allowing your estate plan to become outdated Marriage, divorce, births, deaths, changes in family relationships, and significant increases or decreases in wealth can all affect your estate plan. And changes in federal or state tax laws may also create opportunities or require adjustments. Review your estate plan every three to five years — or sooner if you experience a significant life event or there’s a major tax law change. We can help identify potential weaknesses in your estate plan and determine whether revisions are needed to help you achieve your goals. © 2026