New provisions for 2026 may affect your tax planning

March 10, 2026

The many tax-related provisions that went into effect last year after the One Big Beautiful Bill Act (OBBBA) was signed into law are affecting 2025 federal income tax returns being filed now. However, some OBBBA provisions aren’t taking effect until this year. Plus, some changes under previous legislation are also taking effect in 2026. Here’s an overview of new tax provisions that individuals and businesses need to consider when conducting their 2026 tax planning.


Tax provisions affecting individual taxpayers


Changes going into effect for individual taxpayers this year include:


New charitable contribution deduction for nonitemizers. For 2026 and future years, the OBBBA reinstates the COVID-era deduction for cash donations to qualified charities by taxpayers who claim the standard deduction, subject to an increased annual limit of $1,000, or $2,000 for joint filers. (The limits were $300 and $600, respectively, for 2021 when this nonitemizer deduction was last available.)


The definition of “cash donation” may be broader than you think. It includes gifts made by debit or credit card, check, electronic bank transfer, online payment platform, and payroll deduction. If you make such gifts in 2026, be sure to retain proper substantiation so you can deduct them when you file your return next year.


New floor on charitable deduction for itemizers. Under the OBBBA, if you itemize deductions rather than claiming the standard deduction, your otherwise allowable charitable deductions are limited to the amount that, in aggregate, exceeds 0.5% of your adjusted gross income (AGI). Put another way, your 2026 charitable deduction is limited to the amount that exceeds 0.5% of your 2026 AGI.


If you’ll be affected, you may want to “bunch” donations into alternating years to minimize the negative impact of the new floor. (If you won’t itemize deductions in the nonbunching years, consider making cash donations up to the nonitemizer charitable deduction limit in those years.)


New limit on itemized deductions for taxpayers in the 37% tax bracket. Generally, this OBBBA limitation for 2026 and subsequent years means that the tax benefit from itemized deductions for taxpayers in the 37% bracket will be treated as if they were in the 35% bracket. For 2026, the 37% bracket starts when taxable income exceeds $640,600 for singles and heads of households, $768,700 for married couples filing jointly, and $384,350 for married couples filing separately.


If you may be affected, factor this into your 2026 tax planning so you don’t overestimate the tax savings your itemized deductions will provide.


Alternative minimum tax (AMT) exemption changes. You must pay the AMT if your AMT liability exceeds your regular tax liability. The top AMT rate is 28%, compared to the top regular ordinary-income tax rate of 37%. But the AMT rate typically applies to a higher taxable income base. An AMT exemption is available, but it phases out when AMT income exceeds certain levels.


Under the OBBBA, those thresholds revert to their 2018 levels for 2026 (i.e., removing the inflation adjustments made for 2019–2025), and they’ll be adjusted annually for inflation in subsequent years. Also, the OBBBA effectively phases out the exemption twice as fast beginning in 2026. The 2026 phaseout ranges are $500,000–$680,200 for singles and heads of households and $1,000,000–$1,280,400 for joint filers (half those amounts for separate filers), compared to the 2025 ranges of $626,350–$978,750 and $1,252,700–$1,800,700, respectively. Both changes mean more taxpayers could be subject to the AMT in 2026.


If it’s looking like you’ll be subject to the AMT this year, consider accelerating income and short-term capital gains into 2026. This may allow you to benefit from the lower maximum AMT rate. Also consider deferring expenses you can’t deduct for AMT purposes until next year, such as state and local taxes (SALT). You may be able to preserve those deductions — but watch out for the annual limit on the SALT deduction. Additionally, if you defer expenses you can deduct for AMT purposes to next year, such as charitable donations, the deductions may become more valuable because of the higher maximum regular tax rate.


New tax-advantaged Trump Accounts. Created under the OBBBA, these accounts are available to U.S. citizens under 18. Contributions to a properly established account can begin on July 4, 2026. Generally, up to $5,000 per year can be contributed. Although contributions aren’t tax deductible, the account can grow tax-deferred until the child is 18, when it converts into a traditional IRA.


Eligible children born between January 1, 2025, and December 31, 2028, whose parents have elected to participate in a pilot program, will receive a one-time, tax-free $1,000 federal contribution to their accounts. The $1,000 government contribution doesn’t count against the annual limit. So, if your child (or grandchild) is born this year, up to $5,000 could be contributed to his or her Trump Account in 2026 on top of the $1,000 from the government.


Increase in tax-free 529 plan withdrawal limit for qualified elementary and secondary school expenses. Distributions used to pay qualified expenses are income-tax-free for federal purposes and potentially also for state purposes, making the tax deferral a permanent savings. In recent years, certain elementary and secondary school expenses of up to $10,000 per year per beneficiary have been considered qualified and thus eligible for tax-free treatment.


Only tuition qualified through July 4, 2025. Under the OBBBA, various additional expenses after July 4, such as books, instructional materials and certain fees, also qualify. Beginning in 2026, the annual limit increases to $20,000 per year per beneficiary.


So, you may be able to take advantage of more tax-free funds from your child’s 529 plan to pay his or her elementary and secondary school expenses in 2026. And you may want to increase your contributions to your child’s (or grandchild’s) 529 plan so that funds are available in the account to take advantage of the increased limit in the future.


New Roth requirement for higher-income taxpayers’ catch-up contributions. Beginning in 2026, new rules under the SECURE 2.0 Act (signed into law in 2022) require higher-income participants in 401(k), 403(b) and 457(b) retirement plans to make any catch-up contributions as after-tax Roth contributions. For 2026, this requirement applies to participants with 2025 Social Security wages exceeding $150,000. That threshold will be annually adjusted for inflation.


If you’re subject to this limit, no longer being able to make pretax catch-up contributions could increase your 2026 taxable income. This, in turn, could push you into a higher tax bracket and impact your eligibility for various tax breaks. You may want to consider other steps for reducing your income in 2026, such as minimizing sales of stock or other investments that would generate capital gains income (or offsetting gains by selling other investments at a loss).


Elimination of certain energy-efficiency credits for homeowners. The OBBBA repealed two credits for taxpayers who take steps to make their homes more energy efficient, such as installing energy-efficient windows or adding solar panels: 1) the Energy Efficient Home Improvement Credit for qualified improvements to an existing home and 2) the Residential Clean Energy Credit for both existing and newly constructed homes. The credits aren’t available for any property placed in service after December 31, 2025.


Tax provisions affecting businesses and their owners


Business-related changes going into effect this year include:


Expansion of the income ranges over which the Section 199A qualified business income (QBI) deduction limitations phase in. Under the OBBBA, for 2026 and beyond, 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’s $75,000, or, for joint filers, $150,000. This will allow larger deductions for some taxpayers.


For 2026, the ranges are $201,750–$276,750 (up from $197,300–$247,300 for 2025), double those amounts for married couples filing jointly. The threshold amounts will continue to be annually adjusted for inflation.


Consider the potential impact of the limit phase-ins on your 2026 QBI deduction. There may be steps you can take to make the most of the significantly expanded phase-in ranges.


Reduction of the threshold for the excess business loss limitation. The deductions for current-year business losses incurred by noncorporate taxpayers generally can offset income from other sources, such as salary, self-employment income, interest, dividends and capital gains, only up to the annual limit. “Excess” losses are carried forward to later tax years and can then be deducted under the net operating loss rules.


The OBBBA makes the limit permanent and reduces the threshold at which the limitation goes into effect. For 2026, the threshold is $256,000 (down from $313,000 for 2025), double that amount for joint filers. The threshold will be adjusted for inflation annually going forward.


If you’ll be affected by this change, you may want to adjust your individual tax planning strategies to help make up for a reduced loss deduction. You also might consider making changes to your business strategy to avoid generating losses that would be suspended until later years because of the lower excess business loss limitation threshold.


New option for claiming the family and medical leave credit. The OBBBA permanently extended the employer tax credit for paid family and medical leave, which was scheduled to expire on December 31, 2025. For 2025, the credit amount ranged from 12.5% to 25% of eligible wages paid to qualifying employees for up to 12 weeks of paid leave.


Beginning in 2026, the OBBBA allows employers to claim the credit for the same percentage of insurance premiums paid or incurred during the tax year for active family and medical leave coverage. You can’t claim the credit for both wages and premiums, however.


If you don’t currently offer paid family and medical leave, consider whether funding it with insurance premiums eligible for the credit would make doing so feasible while helping to achieve other business goals, such as increasing employee retention. If you do offer paid family and medical leave, you’ll need to look at whether claiming the credit for actual wages paid to employees on leave or for insurance premiums will save you more tax. (If you offer paid leave but don’t fund it with insurance, you may want to revisit whether insurance would make sense for your business now that premiums are eligible for the credit.)


Elimination of certain clean energy incentives. The Section 179D deduction for energy-efficient commercial buildings allows owners of new or existing commercial buildings to immediately deduct the cost of certain energy-efficient improvements rather than depreciate them over the 39-year period that typically applies. The base deduction is calculated using a sliding scale, ranging for 2026 from $0.59 per square foot to $5.94 per square foot, depending on energy savings and whether specific prevailing wage and apprenticeship requirements have been met. The OBBBA eliminates the deduction for property that begins construction after June 30, 2026.


The Section 30C alternative fuel vehicle refueling property credit is for property that stores or dispenses clean-burning fuel or recharges electric vehicles. The credit is worth up to $100,000 per item (each charging port, fuel dispenser or storage property). The OBBBA eliminates the credit for property placed in service after June 30, 2026.


If you’re considering one of these clean energy investments, you may want to act soon so you can be eligible for the associated tax break before it’s eliminated.


Begin planning now


All the tax law changes can be overwhelming. If you need help understanding how these provisions might affect your tax strategies, contact us. We can help you develop a plan to reduce your tax liability so you can keep more of your hard-earned income while staying compliant.


© 2026 

When your will needs an update, follow the formalities

September 10, 2026
Laws governing the execution of a valid will vary by state, but they generally require certain formalities. For example, a will typically must be signed by the person making it — known as the testator — and witnessed according to state law. Some estate planning documents may also require or benefit from notarization. Following these requirements is critical. If a will isn’t properly executed, a court could later determine that all or part of it is invalid. But what happens if your will has been executed and you later need to make a change? Perhaps you’ve welcomed a new child or grandchild, experienced a marriage or divorce, acquired significant property, or simply changed your mind about how your assets should be distributed. Handwritten revisions can cause trouble It may seem easy to pull your will out of the file cabinet, cross out an outdated provision, write in the desired change and add your initials. But altering an executed will by hand is generally a bad idea. For one thing, handwritten revisions may raise questions about when and why you made them. Beneficiaries or other interested parties might challenge the changes, alleging that you lacked testamentary capacity or were subject to undue influence. Even if the revisions accurately reflect your wishes, resolving such disputes can consume time and money and potentially damage family relationships. More important, a handwritten change may not be legally valid. The requirements depend heavily on your state’s laws. Holographic wills add another wrinkle Some states recognize “holographic” wills, which are wills written primarily or entirely in the testator’s handwriting. Depending on state law, these wills may be valid without the witnesses normally required for a typewritten will, provided they satisfy certain requirements. But the fact that your state recognizes holographic wills doesn’t necessarily mean you can safely make handwritten changes to an existing typewritten will. State laws differ significantly regarding whether such modifications are enforceable and what formalities must be followed. Attempting a do-it-yourself revision can therefore create ambiguity. In some cases, the original provision might remain effective despite your handwritten change. In others, an alteration could complicate the will’s interpretation or validity. Use a codicil or consider a new will A safer approach is to work with your attorney. For a relatively minor change, an attorney may recommend a codicil — a separate legal document that amends specific provisions of an existing will. A codicil generally must be executed with the same formalities required for a will. For more extensive changes, creating and properly executing a new will may be preferable. This can reduce confusion by putting your current wishes in one document rather than requiring your executor and beneficiaries to reconcile multiple amendments. Make changes the right way Your will is intended to distribute your property according to your wishes. Don’t jeopardize the execution of those wishes for the sake of convenience. If circumstances have changed since you executed your will, contact your estate planning attorney to help ensure that any necessary revisions comply with applicable law. © 2026 

Maintaining customer relationships after an acquisition

September 9, 2026
When a business is acquired, its customers don’t necessarily transfer their loyalty to the buyer. Customers may worry about future pricing, service, product quality and whether the business’s new owner understands what they value. If their concerns go unanswered, competitors may see and exploit an opening. If you’re anticipating making an acquisition, plan how you’ll protect new customer relationships. Why they may leave Some customers have strong ties to a former owner, salesperson or service representative and may not immediately trust your team. The acquisition process can also strain relationships. Employees may leave, systems may change, and ordering, billing or fulfillment processes may temporarily struggle. Silence and conflicting messages only create more uncertainty. In fact, customers generally handle M&A-related change better when you clearly tell them what to expect. As soon as feasible, communicate information about new customer contacts, contract terms, products or services, technology, and prices. Make retention a central goal You probably won’t retain every customer, but a plan that identifies integration retention risks and assigns specific individuals to address them is critical. Prioritize customers based on revenue, profitability, growth potential, strategic importance and likelihood of departure. When appropriate, ask your acquisition’s owner or the business’s account representatives to introduce customers to your team. Once you can publicly disclose your pending transaction, communicate with customers. They’re likely to care less about the deal’s financial rationale than about how it affects them. Be ready to address questions such as: What’s going to change? How will it benefit us? Do we need to transfer our current account or establish a new one? Who’s our service contact during and after the acquisition? Avoid making promises you aren’t sure you can deliver. After your transaction closes, monitor complaints, declining orders, slower renewals and other signs that relationships may be at risk. Early intervention can help prevent customers from leaving. Retaining trust Customer and employee retention go hand in hand. If key salespeople, account managers or service employees leave after an acquisition, customer relationships and institutional knowledge may go with them. Identify your acquisition’s essential employees before the deal closes and offer incentives for them to remain. Compensation and retention bonuses can help, but employees also typically value career opportunities and stability. Explain as early — and clearly — as possible how the transaction could affect their jobs, supervisors, benefits and workplaces. You may also want to use confidentiality, nonsolicitation and noncompete agreements to preserve employee relationships and proprietary information. Note, however, that enforceability of such contracts varies significantly by state, so you’ll need to work with your legal counsel. Protect what you paid for To keep customers on board, plan acquisition integration as early as possible. Assess your acquisition’s customer concentration, retention risks and any potential financial impact of customer losses. We can help crunch the numbers and isolate threats so you’re better equipped to preserve transaction synergies and realize your return on investment. © 2026 

Remote work can complicate your state taxes

September 8, 2026
Working remotely may broaden your job options and make daily life easier. But working from a different state than your employer — or spending part of the year working from a second home in a different state than where you normally reside — can create state tax issues. Because the rules vary by state, work arrangements that cross state lines warrant a closer look. Convenience-of-the-employer rule If your employer is located in a state that applies a convenience-of-the-employer rule and you work remotely from a different state, you may need to file income tax returns in more than one state. Under such a rule, days worked from another state for your own convenience (rather than for the convenience of your employer) may be treated as days worked in your employer’s state. This might occur if, say, you choose to work from home across the state border from the city where your employer has an office. Your employer doesn’t require you to work remotely, but you prefer to do so to save yourself the time and cost of commuting. So your employer allows you to work from home for your convenience. A state with an income tax generally can tax all income of its residents and income earned within its borders by nonresidents. So if your employer’s state considers your days worked remotely to be days worked in that state because of the convenience-of-the-employer rule, you could be subject to taxes and filing requirements in both your employer’s state and your own. Domicile and residency Your state tax obligations can also be affected if you spend enough time working in two states that both consider you to be a resident. Residency rules vary, but many states consider your domicile, the days you spend in the state and whether you maintain a home there. Your domicile is generally your “true, fixed, permanent home” — the place you intend to return to. Some states also will treat you as a resident if you maintain a home and spend a specified number of days there. It’s possible to be domiciled in one state and be a resident of another. For example, let’s say you have a permanent home in one state where your job is located and a vacation home in another state. Your employer allows employees to work remotely, so now you spend more than 200 days per year living and working at your vacation home. The state where your permanent home is located considers you to be domiciled there, but the state where your vacation home is located might view you as a resident. So if both states have an income tax, you may be subject to taxes on the same income in both states. A credit for taxes paid to another state may reduce or eliminate double taxation, depending on the states’ rules. But your tax bill may still increase if, for example, the vacation home state’s income tax rate is higher than your permanent home state’s rate. Employer obligations From an employer’s perspective, allowing employees to work remotely may create obligations to withhold and remit income and payroll taxes in multiple states. (These requirements can also affect how much state income tax is withheld from an employee’s pay.) Plus, having employees in other states may be sufficient to establish “nexus” with those states, potentially triggering liability for their income, franchise, gross receipts or sales and use tax. In addition to the expense of tax reporting in multiple states, this may increase an employer’s overall tax liability. There are other complications as well. As a result, some employers may not allow remote employees to work for extended periods from other states. They also might prohibit remote employees from moving to a state where the employer doesn’t already have employees or nexus. Review your arrangement If you’re a remote employee, before changing where you work, check with your employer to make sure it will allow you to work from that state. Also find out how a move or extended stay could affect your state taxes and withholding. If you’ve already worked from more than one state during 2026, consider addressing the potential tax consequences before year end. Contact us to review your work arrangement and determine whether you may have tax obligations in more than one state. © 2026 

Repair or improvement: Does the distinction matter under current tax law?

September 8, 2026
Ordinary repair and maintenance costs are generally deductible in the year they’re paid or incurred, depending on your accounting method. Costs that improve property must be capitalized. However, under current tax law, capitalization doesn’t necessarily mean waiting years to recover the cost. The One Big Beautiful Bill Act (OBBBA) permanently restored 100% bonus depreciation for eligible property and increased the Section 179 expensing limit and phaseout threshold. Still, these provisions don’t cover every improvement. And even when an improvement qualifies for one of these breaks, repair treatment may offer certain advantages. Here’s a closer look at why distinguishing repairs from improvements remains important — and why you should consider all available deduction options. Improvement tests Generally, repairs keep property in ordinarily efficient operating condition without adding significant value or substantially extending its useful life. Examples might include fixing a leak, replacing a small number of damaged roof shingles or servicing machinery. An expenditure generally must be treated as an improvement and, therefore, be capitalized if it results in a betterment, restoration or adaptation of the unit of property: Under the “betterment test,” you generally must capitalize amounts paid for work that’s reasonably expected to materially increase the productivity, efficiency, strength, quality or output of a unit of property or that’s a material addition to a unit of property. Under the “restoration test,” you generally must capitalize amounts paid to replace a part (or combination of parts) that’s a major component or a significant portion of the physical structure of a unit of property. Under the “adaptation test,” you generally must capitalize amounts paid to adapt a unit of property to a new or different use — one that isn’t consistent with your ordinary use of the unit of property at the time you originally placed it in service. For a building, these tests generally apply separately to the building structure and designated systems, such as plumbing, electrical, HVAC, elevators, fire protection and security. Consequently, replacing an entire building system may be an improvement even if the work affects only a portion of the building. Tangible property safe harbors Several safe harbors may allow expenditures that might otherwise be capitalized to be deducted currently: Routine maintenance safe harbor. Recurring work performed to keep property in ordinarily efficient operating condition may be deductible. At the time the property was placed in service, you must have reasonably expected to perform the activity more than once during a 10-year period for buildings or during the applicable class life (such as three years or seven years) for other property. Safe harbor for small businesses. Businesses with average annual gross receipts of $10 million or less during the three preceding tax years may qualify for an annual election to currently deduct the cost of work on an eligible building with an unadjusted basis of $1 million or less. The total amount paid for repairs, maintenance and improvements during the year must be no more than the lesser of $10,000 or 2% of the building’s unadjusted basis. De minimis safe harbor. Subject to accounting-policy and recordkeeping requirements, a business may elect to deduct qualifying expenditures up to $2,500 per invoice or item. The threshold is $5,000 for a business with an applicable financial statement, such as a qualifying audited financial statement. These safe harbors have specific requirements, and some elections must be made annually on a timely filed tax return. 100% first-year deductions for capitalized costs If an expenditure must be capitalized, you may still be able to deduct its full cost in the year the improvement is placed in service. The OBBBA permanently restored 100% bonus depreciation for eligible property acquired and placed in service after January 19, 2025. Qualifying property generally includes machinery, equipment and real estate qualified improvement property (QIP). QIP generally consists of improvements made to the interior of an existing nonresidential building. However, expenditures attributable to enlarging a building, elevators or escalators, or the internal structural framework of a building don’t count as QIP and are usually depreciated over 39 years. Sec. 179 may also cover machinery, equipment and QIP, as well as certain improvements to nonresidential real property, including roofs, HVAC systems, fire protection and alarm systems, and security systems. The OBBBA doubled the expensing limit for 2025 and also increased the phaseout threshold, but less significantly. These amounts are annually indexed for inflation. For 2026, businesses may deduct up to $2.56 million of eligible costs. The deduction begins to phase out when qualifying purchases in 2026 exceed $4.09 million and is limited by taxable income from the active conduct of a business. Remember, eligible property generally must be placed in service — that is, ready and available for its intended use — by year end to qualify for bonus depreciation or a Sec. 179 expensing election for 2026. Merely purchasing, ordering or paying for property isn’t enough. Benefits of repair treatment Even when a capital improvement qualifies for a full first-year deduction, repair treatment isn’t interchangeable with bonus depreciation or Sec. 179 treatment. When an expenditure meets the requirements for repair treatment, properly classifying it as a deductible repair (rather than grouping it with capital improvements) may be advantageous for several reasons: Repair costs don’t have to meet the eligibility or placed-in-service requirements for bonus depreciation. Repair deductions aren’t subject to the Sec. 179 limits. Repair treatment generally avoids depreciation elections, related basis tracking and potential depreciation recapture consequences when the property is sold. In addition, some states don’t fully conform to the federal bonus depreciation or Sec. 179 rules. So, when applicable, repair treatment may provide an earlier state tax deduction. If an improvement qualifies for neither bonus depreciation nor Sec. 179, you may have to depreciate its cost over the applicable recovery period, which could be as long as 39 years. Year-end planning Now is a good time to review your property-related expenditures in 2026 to determine whether they’ve been classified correctly and whether any safe harbors or immediate deduction provisions apply. You may also be considering additional purchases or improvements to reduce your current-year taxable income. Contact us for help classifying your 2026 expenditures and evaluating the potential tax benefits of planned purchases or improvements before year end. © 2026 

Inter vivos and testamentary trusts can help you achieve different estate planning goals

September 3, 2026
Trusts can serve many purposes in an estate plan, from managing assets during your lifetime to controlling how property passes to beneficiaries after your death. Two broad categories are inter vivos trusts and testamentary trusts. Although both can help manage assets, they differ in when they’re funded and take effect and how they’re used in estate planning. Inter vivos trusts operate during your lifetime An inter vivos trust is created while you’re alive. You transfer assets to the trust, and a trustee manages them according to the trust agreement. Inter vivos trusts can be either revocable or irrevocable. With a revocable trust, you generally retain the ability to change or terminate the trust during your lifetime. You may also serve as trustee, allowing you to continue managing assets after you’ve transferred them to the trust. One of the biggest benefits is that, if you become incapacitated, a successor trustee can step in and manage the assets on your behalf. A properly funded revocable living trust can also help assets avoid probate after your death. Instead of the assets going through probate and being distributed according to your will, the successor trustee distributes the assets or continues managing them according to the trust’s terms. This can potentially save time, increase privacy and simplify administration, particularly if you own real estate in more than one state. Irrevocable inter vivos trusts serve different purposes. Depending on their design, they may be used for gift and estate tax planning, asset protection, charitable giving, life insurance planning, or other objectives. Because transferring property to an irrevocable trust can have significant tax and legal consequences, careful planning is essential. Testamentary trusts begin after death A testamentary trust, by contrast, is established through your will and generally comes into existence after you die and the will is admitted to probate. Your will specifies which assets you want to fund the trust, identifies the trustee and establishes the terms governing distributions. Testamentary trusts can be especially useful when beneficiaries shouldn’t receive an inheritance outright. For example, a testamentary trust might hold assets for minor children until they reach specified ages. It can also provide a trustee with discretion to make distributions for education, health care and other needs. Testamentary trusts may also be useful when beneficiaries have difficulty managing money or when you want to provide longer-term oversight of inherited wealth. However, because the trust is created under a will, the assets used to fund it generally must pass through probate first. Different tools for different goals Because of the differences between inter vivos and testamentary trusts, both types may have a place in your estate plan. Your assets, family circumstances and goals are key considerations. Trust provisions can also have important income, gift and estate tax consequences. We can help you evaluate the tax considerations and work with your estate planning attorney to determine what best fits your situation. © 2026 

Which products really drive your business’s profits?

September 2, 2026
Robust sales don’t always translate into strong profits. A popular product could produce disappointing returns when you account for discounts, shipping, returns and support costs. At the same time, a lower-volume product could quietly generate an attractive profit margin. How can you tell what’s working? The solution may be product-level analysis that shows where you’re generating profit and where strong revenue might be masking weak performance. This holds true whether your business manufactures, distributes or sells products through sales reps, online channels or brick-and-mortar stores. Calculating the full cost Start by identifying each of your product’s direct costs, such as materials, inventory purchases, production labor and packaging. Then consider expenses that might be easier to overlook, including: Freight, warehousing and inventory carrying costs, Sales commissions, Payment-processing charges, Promotions and discounts, Returns, spoilage and shrinkage, and Customer service and technical support. Overhead expenses — including rent, insurance, technology and administrative salaries — also affect product profitability. However, allocating them solely by sales volume can distort results. A product that requires, for example, customized packaging or extensive customer support should receive a greater share of those costs. Activity-based costing can provide a more realistic view by assigning expenses according to the activities that generate them. Beyond gross margin No single measurement tells the whole story. Gross margin shows how much revenue remains after covering cost of goods sold. Meanwhile, contribution margin subtracts variable costs from revenue. A positive contribution margin generally means a product helps cover fixed expenses and generate profit. So if a product appears unprofitable after allocated overhead, don’t automatically discontinue it. Because many fixed costs will remain, eliminating the product could reduce your business’s overall profit. Instead, consider whether the product attracts new customers or supports sales of more profitable items. Also evaluate product profitability by sales channel and customer segment. The same item may be profitable in a store but lose money through an online marketplace because of commissions, fulfillment expenses and returns. In a similar vein, a large customer’s discounts could erase the benefit of high sales volume. Turn findings into action Reliable product data can support better pricing, purchasing, marketing and inventory decisions. It can also help you negotiate supplier terms, adjust sales and distribution channels, and evaluate new products. Product-level analysis shouldn’t be a one-time exercise. Market and economic conditions often change, so you should review margins regularly and investigate major variances. Also contact us. We can help you develop a practical approach to turning product data into profitable decisions. © 2026 

Tax planning for real estate investors

September 1, 2026
Many individuals invest in real estate to help diversify their portfolio, create an income stream for themselves from rental income and build net worth over time. Often, this is a side activity to a career in another field or running another type of business — not the individual’s primary source of income. Holdings might range from a condo or small house you rent out to a multifamily residential building or even a commercial property. Whatever type of property you own, investment real estate comes with special tax considerations you need to be aware of. With proper planning, you can maximize your after-tax returns. Rental activity rules One important consideration is the tax treatment of income and losses from rental properties. They’re considered passive by definition — unless you’re a real estate professional. Even then, you generally must “materially participate” in a rental activity for it to be treated as nonpassive. Why is this important? Passive income may be subject to the 3.8% net investment income tax (NIIT) on top of any income tax otherwise due, and passive losses are deductible only against passive income, with the excess being carried forward. For investors who have another primary occupation, qualifying as a real estate professional can be difficult. To qualify, you must annually perform: More than 50% of your personal services in real property trades or businesses in which you materially participate, and More than 750 hours of service in these businesses during the year. Each year stands on its own, and there are other nuances to keep in mind. To materially participate in an activity, generally you must participate more than 500 hours during the year or demonstrate that your involvement constitutes substantially all of the participation in the activity. But there are other ways to meet the material participation test. Carefully track the time you spend on your real estate activities. If you own rental properties in addition to working in another business or profession, also carefully track the time spent on those non-real-estate activities, so you can see if you spend a small enough portion of your time on them vs. real-estate activities that you can pass the first real estate professional test. Although your spouse’s hours can’t be counted toward the tests for qualifying as a real estate professional, special rules for spouses may help you meet the material participation test: Generally, your spouse’s participation can be counted when determining whether you materially participate. Depreciation breaks Buying an investment property may be only the beginning of your expenditures. If you renovate or improve a property, the tax treatment of those costs can vary depending on the type of property and improvement. Generally, residential real estate, including improvements, must be depreciated over 27.5 years and commercial real estate over 39 years. But three valuable depreciation-related breaks may be available to real estate investors: 1. Qualified improvement property (QIP) deduction. QIP is defined as an improvement to an interior portion of a nonresidential building placed in service after the building was initially put into use. So these rules can apply to qualifying improvements to commercial real estate, but not to improvements to a residential rental property. QIP has a 15-year Modified Accelerated Cost Recovery System (MACRS) recovery period and qualifies for bonus depreciation and Section 179 expensing. However, expenditures attributable to the enlargement of a building, elevators or escalators, or the internal structural framework of a building don’t count as QIP. They usually must be depreciated over 39 years. 2. Bonus depreciation. This additional first-year depreciation allowance is available for qualified assets, including QIP. Bonus depreciation is 100% for eligible assets acquired and placed in service after January 19, 2025. 3. Section 179 expensing election. This allows you to currently deduct qualified property, subject to certain limits. This includes QIP, certain depreciable tangible personal property used predominantly to furnish lodging and for the following improvements to nonresidential real property: roofs, HVAC equipment, fire protection and alarm systems, and security systems For 2026, the maximum Sec. 179 deduction is $2.56 million. The deduction begins to phase out if the cost of qualifying property placed in service during the year exceeds $4.09 million. Deferring gains Eventually, you may decide to sell an appreciated rental or other investment property. You might be able to structure the transaction to defer some or all of the taxable gain. Such strategies may even help you keep your income low enough to avoid triggering the 3.8% NIIT and the 20% long-term capital gains rate. One example is an installment sale. It allows you to defer gains by spreading them over several years as you receive the proceeds. But ordinary gain from certain depreciation recapture is recognized in the year of sale, even if you receive no cash. Another option is a Section 1031 exchange. Also known as a “like-kind” exchange, this technique allows you to exchange one real estate investment property for another and defer paying tax on any gain until you sell the replacement property. If you receive cash or other non-like-kind property as part of the exchange, however, you generally must recognize gain to that extent. These tax deferral strategies aren’t without risks. For example, if tax rates go up, you could ultimately end up paying more in taxes. They also have detailed requirements, so it’s important to consider the tax consequences before completing a sale or exchange. Tax-smart decisions Taxes can affect the economics of an investment property from the time you buy it through the time you sell it. Decisions about your involvement in rental activities, improvements to the property, and the timing and structure of a sale can all have tax consequences. Contact us to discuss tax planning related to your investment real estate. We can help you identify potential tax-saving opportunities and avoid tax pitfalls. © 2026 

How to avoid and correct common payroll tax mistakes

August 31, 2026
Payroll administration can be challenging for small business owners — and mistakes can create problems for both employers and employees. Incorrect paychecks can frustrate employees and require time and resources to fix. Errors involving tax withholding, deposits or reporting can also expose your business to interest and penalties. Mistakes can happen even with payroll software or an outside payroll provider. Here are some steps you can take to reduce your risk. Withhold and deposit taxes properly Employers generally must withhold income tax and employees’ share of Social Security and Medicare taxes from their wages, as well as pay the employer’s share of Social Security and Medicare taxes. You’re also responsible for depositing these amounts with the IRS and reporting them on the appropriate payroll tax returns. Additional rules may apply to the 0.9% additional Medicare tax, federal unemployment tax, and various state and local taxes. Errors when entering information from an employee’s Form W-4, “Employee’s Withholding Certificate,” can result in incorrect federal income tax withholding. Changes to an employee’s name, address or visa status can create problems, too. Perhaps the most dangerous mistake is failing to deposit withheld federal income tax, Social Security and Medicare taxes and the employer’s share of Social Security and Medicare taxes on time. IRS penalties accrue quickly because they increase with the length of the delay. That is: If a deposit is one to five calendar days late, the penalty is 2% of the unpaid deposit, If a deposit is six to 15 calendar days late, the penalty is 5% of the unpaid deposit, and If a deposit is more than 15 calendar days late, the penalty is 10% of the unpaid deposit. The penalty rate may increase to 15% if more than 10 calendar days elapse after the date of the first notice or letter from the IRS. Alternatively, a 15% penalty may apply on the day a notice or letter for immediate payment is received. If the IRS can make the case that a failure to deposit withheld taxes (income tax and the employee’s share of Social Security and Medicare taxes) was willful, a 100% penalty may apply. Such penalties can also be levied personally against all responsible individuals in an organization. To reduce the risk of withholding and deposit errors, establish procedures for reviewing employee withholding information and monitoring deposit deadlines. Even if you use an outside payroll provider, your business generally remains responsible for making sure federal taxes are deposited and paid — and payroll tax returns are filed — on time. Regularly reconcile your payroll records with amounts reported and deposited, and promptly investigate any discrepancies. Report all forms of taxable compensation Remember, salaries or wages aren’t the only items that must be included in employees’ taxable income. You must also include the value of bonuses, awards and certain fringe benefits. Failing to withhold sufficient amounts from employees’ total reportable income can also result in noncompliance with IRS rules. In turn, this could lead to penalties for failing to properly withhold or deposit payroll taxes. What’s more, the employer could be subject to information return penalties for incorrect Forms W-2, “Wage and Tax Statement.” To minimize your exposure, review the tax treatment of bonuses, awards and fringe benefits before processing them through payroll. This is particularly important when adding a new benefit or revising a compensation arrangement because the rules for federal income tax withholding, Social Security and Medicare taxes aren’t always the same. Correct mistakes promptly Despite your best efforts, mistakes can happen. When you discover one, first determine: What went wrong, Which employees and payroll periods are affected, and Whether the error involves taxable wages, withholding, deposits or information reporting. Then determine the appropriate correction. It’s important to act promptly because available correction procedures may vary based on when you discovered the error. Depending on the mistake, you may need to adjust an employee’s pay, correct your payroll records, make an additional tax deposit or correct a previously filed employment tax return. For example, certain errors reported on Form 941, “Employer’s Quarterly Federal Tax Return,” may need to be corrected using Form 941-X, “Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund.” An incorrect Form W-2 may require Form W-2c, “Corrected Wage and Tax Statement.” Keep records explaining the error and the steps taken to correct it. If employees’ pay or tax information is affected, communicate with them promptly so they understand what happened and what, if anything, they need to do. Keep your payroll on track Payroll mistakes can be costly, but strong review procedures can reduce the likelihood that they’ll occur — and prompt action can limit the damage when they do. If you discover a payroll error or have questions about your payroll tax obligations, contact us. We can help you understand the applicable rules and refine your payroll practices to stay in compliance. © 2026 

How should life insurance fit into your estate plan?

August 27, 2026
Life insurance can provide critical financial protection for the people who depend on you or help you achieve other estate planning goals. But to serve its intended purpose, the coverage amount, policy type, ownership structure and beneficiary designations must all be carefully considered. Determine how much coverage you need There’s no universal formula for calculating the appropriate amount of life insurance. Your needs depend on your income, debts, family responsibilities, assets and long-term objectives. Begin by estimating the financial obligations that might remain after your death. These may include: Funeral and other final expenses, Mortgage balances and other debts, Income replacement for a surviving spouse or partner, Child care and education costs, Support for a dependent with special needs, and A desired inheritance or charitable gift. Next, subtract resources available to meet those obligations, such as savings, investments, retirement benefits and existing insurance policies. The difference can provide a starting point for determining how much additional coverage you need. Warning: Don’t assume employer-provided insurance is sufficient. Group coverage is often limited to a multiple of salary and may end when you leave your job. Select coverage that matches your objectives Term life insurance generally provides coverage for a specified period and may be appropriate for temporary needs, such as replacing income during your working years or paying off a mortgage. It typically costs less initially than permanent coverage. Permanent insurance, such as whole life and universal life, is designed to remain in force for life as long as the required premiums are paid. It may also accumulate cash value. This type of policy can be useful when the need for coverage is expected to continue indefinitely, such as providing estate liquidity, supporting a lifelong dependent or funding a legacy. Affordability matters. A policy offers little protection if rising premiums or changing circumstances may make it difficult to keep the coverage in force. Review policy guarantees, projected values, fees and premium requirements carefully before you buy. Coordinate life insurance with your estate plan Life insurance can replace income, equalize assets among children active and inactive in a family business, provide cash to pay estate tax, or serve as a vehicle for passing leveraged funds free of estate tax. Policy proceeds generally aren’t subject to income tax. But if you own the policy, the proceeds will be included in your taxable estate. If your estate is large enough that estate taxes are a concern, some or all of the proceeds could be subject to estate tax. Ownership depends on several factors, including who has the right to name the beneficiaries of the proceeds. Generally, to reap maximum tax benefits, you must sacrifice some control and flexibility as well as some ease and cost of administration. Determining who should own the life insurance policy is a complex task because there are many possible owners, including you or your spouse, your children, your business, or an irrevocable life insurance trust (ILIT). An ILIT can own one or more policies on your life, and it manages and distributes policy proceeds according to the terms you establish when you set up the trust. The trust keeps insurance proceeds, which could otherwise be subject to estate tax, out of your estate (and possibly your spouse’s). You can’t retain any powers over the policy, such as the right to change the beneficiary. The trust can be designed to make a loan to your estate to meet liquidity needs, such as paying estate tax. To choose the best owner, consider why you want the insurance, such as to replace income, to provide liquidity or to transfer wealth to your heirs. You must also determine the importance of tax implications, control, flexibility, and ease and cost of administration. Review your coverage Life insurance shouldn’t be a “set it and forget it” decision. Many factors affect your need for life insurance, and these factors change over time. To make sure you’re not over- or underinsured, review your insurance needs periodically — especially when your life circumstances change. We can help you assess whether you have sufficient life insurance coverage for your needs and goals. © 2026 

Worker misclassification can carry serious consequences

August 26, 2026
Hiring independent contractors provides your business with valuable flexibility, particularly when you require specialized expertise or help with a short-term project. But calling someone an independent contractor doesn’t automatically make them one. Worker status depends on your actual working relationship. And getting it wrong can expose your business to tax liabilities and other consequences. What’s in a name? Businesses generally must withhold federal income, Social Security and Medicare taxes for employees and pay the employer’s share of Social Security and Medicare taxes, as well as federal unemployment tax. These obligations typically don’t apply when you engage an independent contractor. So if you misclassify an employee as an independent contractor, your business could become responsible for unpaid employment taxes, penalties and interest. Depending on the circumstances, you may also be liable for unpaid payroll taxes. Consequences can extend beyond taxes. Misclassified employees may be able to claim unpaid minimum wages, overtime pay and other workplace protections. State laws could impose additional requirements involving unemployment and workers’ compensation insurance, paid time off, and other benefits. All of these could lead to legal costs and other unplanned expenditures. Working relationship For federal employment tax purposes, the IRS looks at the entire relationship between a business and worker. No single factor determines classification. Instead, relevant facts generally fall into three categories. The first is behavioral control, which concerns whether your business can direct what a worker does and how the work is performed. Instructions about when, where and how to work, as well as training your business provides, may point to the worker being an employee. Second is financial control. This focuses on the business aspects of the relationship. Relevant considerations include: How you pay the worker, Whether you reimburse the individual’s expenses, Which party supplies tools and equipment, Whether the person offers services to other businesses, and The worker’s opportunity for profit or risk of loss. Finally, the type of relationship matters. Employee status may be supported if you provide certain benefits to the worker or the person handles ongoing responsibilities that are central to your operations. A written agreement identifying someone as an independent contractor can be relevant, but it doesn’t override the facts of the relationship. Remote work doesn’t change these basic principles. Someone who works from home or another location other than your business’s primary workplace isn’t automatically an independent contractor. The question remains how much control and independence exist in the actual working arrangement. Different laws, different tests Worker classification has become an especially important area to monitor because different laws can apply different tests. The IRS uses a common-law framework for federal employment taxes. Meanwhile, the U.S. Department of Labor proposed new independent-contractor regulations in February 2026 for federal wage-and-hour law purposes. The proposal would replace the agency’s 2024 rule with a streamlined “economic reality” test. As of this writing, the proposal hasn’t been finalized. State tax, wage-and-hour and employment laws may apply their own standards as well. As a result, a classification that seems appropriate under one law may not be so under another. But this doesn’t mean you should wait for an audit, complaint or tax notice before reviewing your worker classifications. Before problems arise We can help you evaluate worker relationships under current rules and determine whether you need to reclassify anyone working for you. Addressing questions early can be far less costly than correcting them after a government agency or worker raises the issue. © 2026