What families need to know about the new tax law
July 22, 2025
The One, Big, Beautiful Bill Act (OBBBA) has introduced significant tax changes that could affect families across the country. While many of the provisions aim to provide financial relief, the new rules can be complex. Below is an overview of the key changes.
Adoption credit enhanced
Parents who adopt may be eligible for more generous tax relief. Under current law, a tax credit of up to $17,280 is available for the costs of adoption in 2025. The credit begins to phase out in 2025 for taxpayers with modified adjusted gross income (MAGI) of $259,190 and is eliminated for those with MAGI of $299,190 or more.
If you qualify, the adoption credit can reduce your tax liability on a dollar-for-dollar basis. This is much more valuable than a deduction, which only reduces the amount of income subject to tax.
What changed? Beginning in 2025, the OBBBA makes the adoption tax credit partially refundable up to $5,000. This means that eligible families can receive this portion as a refund even if they owe no federal income tax. Previously, the credit was entirely nonrefundable, limiting its benefit to families with sufficient tax liability. The refundable amount is indexed for inflation but can’t be carried forward to future tax years.
Child Tax Credit increased, and new rules imposed
Beginning in 2025, the OBBBA permanently increases the Child Tax Credit (CTC) to $2,200 for each qualifying child under the age of 17. (This is up from $2,000 before the law was enacted). The credit is subject to income-based phaseouts and will be adjusted annually for inflation after 2025.
The refundable portion of the CTC is made permanent. The refundable amount is $1,700 for 2025, with annual inflation adjustments starting in 2026.
The MAGI phaseout thresholds of $200,000 and $400,000 for married joint-filing couples are also made permanent. (However, these thresholds won’t be adjusted annually for inflation.)
Important: Starting in 2025, no CTC will be allowed unless you report Social Security numbers for the child and the taxpayer claiming the credit on the return. For married couples filing jointly, a Social Security number for at least one spouse must be reported on the return.
Introduction of Trump Accounts
We’re still in the early stages of learning about this new type of tax-advantaged account but here’s what we know. Starting in 2026, Trump Accounts will offer some families a way to save for the future. An account can be set up for anyone under age 18 at the end of the tax year who has a Social Security number.
Annual contributions of up to $5,000 (adjusted annually for inflation after 2027) can be made until the year the child turns 18. In addition, U.S. citizen children born after December 31, 2024, and before January 1, 2029, with at least one U.S. citizen parent, may potentially qualify for an initial $1,000 government-funded deposit.
Contributions aren’t deductible, but earnings grow tax deferred as long as they’re in the account. The account generally must be invested in exchange-traded funds or mutual funds that track the return of a qualified index and meet certain other requirements. Employers may make contributions to Trump accounts on behalf of employees’ dependents. Withdrawals generally can’t be taken until the child turns age 18.
Even more changes
Here are three more family-related changes:
The child and dependent care credit. This credit provides parents a tax break to offset the cost of child care when they work or look for work. Beginning in 2026, there will be changes to the way the credit is calculated and the amount of income that parents can have before the credit phases out. This will result in more parents becoming eligible for the credit or seeing an increased tax benefit.
Qualified expenses for 529 plans. If you have a 529 plan for your child’s education, or you’re considering starting a plan, there will soon be more opportunities to make tax-exempt withdrawals. Beginning in 2026, you can withdraw up to $20,000 for K-12 tuition expenses, as well as take money out of a plan for qualified expenses such as books, online education materials and tutoring. These withdrawals can be made if the 529 plan beneficiary attends a public, private or religious school.
Sending money to family members in other countries. One of the lesser-known provisions in the OBBBA is that the money an individual sends to another country may be subject to tax, beginning in 2026. The 1% excise tax applies to transfers of cash or cash equivalents from a sender in the United States to a foreign recipient via a remittance transfer provider. The transfer provider will collect the tax as part of the transfer fee and then remit it quarterly to the U.S. Treasury. Transfers made through a financial institution (such as a bank) or with a debit or credit card are excluded from the tax.
What to do next
These and other changes in the OBBBA may offer substantial opportunities for families — but they also bring new rules, limits and planning considerations. The sooner you start planning, the better positioned you’ll be. Contact us to discuss how these changes might affect your family’s tax strategy.
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
If a customer with outstanding bills files for Chapter 11 bankruptcy, an ordinary receivable could become an urgent financial problem. Although a customer’s filing doesn’t necessarily mean your business will go unpaid, recovery depends on the debtor’s resources — as well as your claim’s status and the bankruptcy case’s outcome. To protect your business’s rights and prevent possible financial losses, act immediately. Legal procedures When you hear about a customer’s bankruptcy, contact your attorney. Then gather contracts, invoices, delivery confirmations and payment records. You or your legal counsel will want to find out the customer’s filing date and track court notices and deadlines. Bankruptcy generally triggers an “automatic stay,” which prohibits most collection efforts for debts arising before the filing. So you shouldn’t make collection calls, pursue litigation or repossess property without legal guidance. However, if you’re a secured creditor, you may ask the court for permission to enforce your collateral rights. Determine how the debtor lists your business’s debt in its bankruptcy schedules. If your claim is omitted or listed as disputed, contingent or unliquidated, you generally must file a proof of claim to participate in any financial distributions. Also, review any payments you received from the customer during the 90 days before they filed. Certain payments may be recoverable by the debtor as “preferences,” but repayment isn’t automatic. You may have legal grounds to keep a payment even if the bankruptcy trustee asks you to return it. Preserve supporting records and have counsel evaluate any repayment demand. Special protections Your business should always track order delivery dates because the priority of your claim can depend on when a customer received an order. An order might fall into one of two categories that allow for special protections: 1. Administrative expense claims. These are goods the customer received within 20 days before filing for bankruptcy. The goods may qualify for administrative expense priority if they were sold in the ordinary course of the customer’s business. This priority generally places the claim ahead of general unsecured claims. It only concerns the receipt of goods, not services. 2. Reclamation demands. You may have a right to reclaim goods received by an insolvent debtor within 45 days before their Chapter 11 filing. You usually must make a written demand within 45 days after delivery. If that period expires after the customer’s bankruptcy filing, you’re allowed to make a demand within 20 days after filing. Prior secured interests can limit your recovery. Note that neither of these protections guarantees that your customer will make a full or immediate payment. Unsecured creditor committees In some Chapter 11 cases, unsecured creditors form a committee to investigate the debtor’s affairs and help develop a repayment plan. Membership often includes creditors holding the largest unsecured claims and must be appointed by the trustee. If your business is appointed to a committee, know that it doesn’t give your claim special priority. Committee members represent all unsecured creditors collectively. Protecting your financial position A customer’s bankruptcy is a good excuse to review your business’s cash flow, customer concentration and credit extension practices. If warranted, implement new policies that will help prevent future losses. Also be sure to weigh your likely financial recovery against the expense of pursuing it. Legal matters call for an attorney’s advice. But we can help you adjust financial projections, update controls and make loss remediation plans. © 2026
If you’re in the process of buying a home, or you bought one earlier this year, you probably know that you may be able to claim the property tax deduction and the mortgage interest deduction when you file your next income tax return. But you might not be so sure about mortgage points paid. The good news is that qualifying points may be deductible on your 2026 return, subject to various rules and limits. You might also be able to deduct points if you took out a loan to build a new home or purchase a second home — and in a few other circumstances. When are points deductible? Points are upfront fees charged by a mortgage lender, expressed as a percentage of the loan principal. Points that a buyer pays in conjunction with a loan that’s eligible for the home mortgage interest deduction are generally deductible as mortgage interest. However, to claim the deduction, the buyer must itemize deductions rather than take the standard deduction. For an immediate deduction, points generally must meet IRS requirements for a loan to buy or build your main home. If you don’t meet the requirements for an immediate deduction, deductible points generally are deducted over the life of the loan. What additional rules apply? There are some additional limitations on the rule allowing a deduction for points: No deduction is available for points allocable to the part of a mortgage above the debt limit for the mortgage interest deduction: $750,000 ($375,000 for married taxpayers filing separately) for debt incurred after December 15, 2017. (Higher limits apply to debt incurred earlier.) Points on a loan used to substantially improve your main home may be deducted in the year paid if applicable IRS tests are met. Points on a loan used to buy a second home generally are deducted over the life of the loan. Points paid on a refinancing generally are deducted over the loan’s term, though an exception may apply to proceeds used for a substantial improvement to your main home. Points paid on a home equity loan or line of credit may be deductible if proceeds are used to substantially improve the home securing the loan. Points charged instead of separately stated fees for services, such as appraisal or title fees, aren’t deductible as mortgage interest. What if the seller pays the points? Points are usually the buyer’s obligation. However, a seller sometimes sweetens a deal by agreeing to pay the points on the buyer’s mortgage loan. And seller-paid points may also be deductible. Suppose, for example, that you bought a home in 2026 for $600,000. In connection with a $500,000 mortgage loan, your bank charged two points, or $10,000. The seller agreed to pay the points to close the sale. If the points meet the requirements for an immediate deduction, you may deduct the $10,000 on your 2026 federal income tax return, provided you itemize and the mortgage debt limit doesn’t restrict the deduction. The seller-paid points reduce your tax basis to $590,000, which will mean more gain if you sell the home for more than that amount. But that may not happen until many years later, and the gain may not be taxable anyway. You may qualify for an exclusion of up to $250,000 ($500,000 for a married couple filing jointly) of gain on the sale of a principal residence. Review the details Your settlement statement and loan terms can help determine when the points may be deducted and whether mortgage limits affect the amount. If you paid or expect to pay points this year (or a seller has paid or will pay points on your behalf), we can review the details with you to help assess your potential tax savings. © 2026
If your small business has employees, you may need to budget for higher payroll costs next year, especially if you employ many high earners. The Social Security Administration recently announced that the wage base for computing Social Security tax will increase to $192,300 for 2027 (up from $184,500 for 2026). Wages and self-employment income above this amount aren’t subject to Social Security tax. What’s the Social Security wage base? The Federal Insurance Contributions Act (FICA) imposes two taxes on employers and employees. One is for Old Age, Survivors and Disability Insurance, commonly known as the Social Security tax, and the other is for Hospital Insurance, commonly known as the Medicare tax. The Social Security wage base is the maximum amount of compensation subject to Social Security tax, but there’s no maximum for Medicare tax. For 2027, the FICA tax rate for employers will be 7.65%. This includes 6.2% for Social Security and 1.45% for Medicare (the same as in 2026). Employers generally must withhold income tax and employees’ share of Social Security and Medicare taxes (which equals the employer’s share noted above) from wages and 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. (By contrast, self-employed individuals generally pay Social Security and Medicare taxes through the self-employment tax rather than through payroll withholding and must pay both the employer’s and employee’s shares.) Additional rules apply to the 0.9% additional Medicare tax, federal unemployment tax, and various state and local taxes. Nowadays, the Social Security wage base is adjusted annually, but it hasn’t always been. When the federal government introduced the Social Security payroll tax 90 years ago in 1937, the wage base was only $3,000. It remained that amount through 1950. As the U.S. economy grew and wages rose, the wage base needed to be adjusted to maintain Social Security funding. By 1980, it had risen to $25,900, and by 2020, it was $137,700. Inflation and wage growth were key factors in these adjustments. How much will it increase next year? For 2027, an employee will pay: 6.2% Social Security tax on the first $192,300 of wages, for a maximum tax of $11,922.60 (6.2% × $192,300), plus 1.45% Medicare tax on all covered wages, plus 0.9% additional Medicare tax on all wages in excess of $200,000 ($250,000 for married taxpayers filing joint returns, $125,000 for married taxpayers filing separate returns). Employers must match the 6.2% Social Security taxes on wages up to the annual wage base and 1.45% Medicare tax on all covered wages. There’s no employer match for the additional Medicare tax, but the employer must withhold it when an employee’s compensation exceeds $200,000, regardless of the employee’s filing status. For 2027, the self-employment tax imposed on self-employed people will be: 12.4% Social Security tax on the first $192,300 of net earnings from self-employment, for a maximum tax of $23,845.20 (12.4% × $192,300), plus 2.9% Medicare tax on all net earnings from self-employment, plus 0.9% additional Medicare tax on net earnings from self-employment in excess of $200,000 ($250,000 of combined self-employment income on a joint return, $125,000 for separate filers). Can you modify withholding for employees with more than one employer? If you have employees who work for your business and have second jobs, those workers may have payroll taxes withheld by two different employers. However, you can’t stop withholding Social Security tax once their combined wages reach the wage base threshold. Each employer must withhold Social Security taxes from an employee’s wages, up to the annual wage base for wages that employer pays, even if the combined withholding exceeds the maximum amount that can be imposed for the year. Fortunately, an employee can generally claim a tax credit on his or her return for any excess Social Security tax withheld by multiple employers. For more information Do you have additional questions about your payroll tax obligations? Contact us. We’ll help you comply with all applicable reporting and withholding requirements. © 2026
Helping your children, grandchildren or other loved ones obtain a quality education can be one of the most meaningful ways to pass on your wealth. A tax-advantaged 529 plan is one effective tool for funding tuition and other educational expenses. But when the plan’s owner (typically a parent or grandparent) dies, the next owner might not continue to use it to fulfill the original owner’s goals. A family education trust may be the answer. Creating the trust A family education trust is an estate planning arrangement designed to support the educational needs of designated beneficiaries, potentially across multiple generations. You establish an irrevocable trust, fund it with assets and appoint a trustee to manage it. The trust document specifies who can receive distributions and which expenses qualify. These might include private K–12 school tuition, college expenses, graduate school and vocational training. Unlike an outright bequest, a trust lets you decide how funds will be used. For example, you might authorize distributions based on each beneficiary’s educational needs rather than requiring equal distributions. A one-two punch A family education trust can be used in conjunction with 529 plans. Although 529 plan contributions aren’t federally tax-deductible, investments grow tax-deferred, and withdrawals are tax-free when used for qualified educational expenses. Some states also offer tax incentives for contributions. Qualified expenses generally include college tuition, required fees, books, supplies and certain room-and-board costs. Recently, the definition of qualified expenses has expanded to include certain K–12 expenses, eligible apprenticeship programs and qualifying postsecondary credentialing expenses, subject to applicable limits. A family education trust can own one or more 529 accounts, provided the particular 529 plan program permits trust ownership. Each account generally has one designated beneficiary, so a trust supporting several grandchildren might own separate 529 accounts for each child. This arrangement offers several potential benefits. It allows you to: Establish guidelines identifying eligible beneficiaries, Specify how trust assets should be used, Fund the 529 plans as well as directly fund education expenses, and Appoint trustees and successor trustees to oversee the funds. It may also preserve educational savings for future generations, subject to applicable rules. Unlike a 529 account, which generally accepts only cash contributions and offers limited investment choices, a family education trust can hold a broader range of assets. These assets can supplement 529 savings and cover expenses that don’t qualify for tax-free 529 distributions. Flexibility for changing circumstances Suppose you establish a family education trust that benefits your three grandchildren. One attends college, another pursues vocational training and the third receives a scholarship. The trustee may be able to adjust distributions to accommodate their needs. If a beneficiary doesn’t use all the money in a 529 account, the beneficiary generally can be changed to another qualifying family member without federal income tax consequences. However, gift and generation-skipping transfer tax consequences may arise in certain circumstances. Estate planning considerations In addition to benefiting your family, an irrevocable family education trust may provide estate tax benefits. If properly structured, assets you transfer to the trust, along with their future appreciation, generally can be excluded from your taxable estate. This can be particularly valuable for families with substantial wealth or assets expected to increase significantly in value. However, contributions to the trust may be subject to federal gift tax reporting requirements and could be subject to gift tax. Also, gifts benefiting grandchildren may trigger generation-skipping transfer (GST) tax. Create a lasting legacy A family education trust can help preserve wealth while creating educational opportunities for future generations. Incorporating 529 plans may enhance these benefits through tax-advantaged savings. We can help you determine whether this strategy is right for your family. © 2026
The accounting cycle is used to record, organize and summarize financial activity for a specific period. Also known as the bookkeeping cycle, it’s designed to produce accurate data that will help business owners understand performance, manage cash flow and plan for the future. Properly prepared financial records can alert owners to operational issues before they become serious problems. Let’s take a look. Follow multiple steps Although the level of detail can vary by business, you’ll generally need to follow multiple steps to complete the accounting cycle. First, gather source documents, including receipts, invoices, bills, contracts, bank and credit card statements, and payroll reports. Keep documentation complete and organized to support accuracy. Next, post transactions to your business’s general ledger. Financial transactions from your source documents are recorded using journal entries or automated feeds. Categorize each transaction correctly and post it to the appropriate accounts in your general ledger. Proper posting ensures income, expenses, assets and liabilities are reflected accurately. Then, generate a trial balance. This summarizes all ledger accounts and confirms that debits equal credits. This step enables you to identify data entry errors or missing transactions. After that, you may need to adjust the general ledger for items such as accrued expenses, depreciation, inventory and prepaid costs. These entries ensure that revenue earned in the accounting period matches the expenses incurred to generate it. Next, prepare financial statements. These enable you, your managers and other stakeholders to evaluate financial performance and make informed business decisions. They typically include: A balance sheet, which lists your business’s assets and liabilities as of the financial statement date, An income statement, which shows revenue earned and expenses incurred during the accounting period, and A statement of cash flows, which summarizes cash inflows and outflows from operating, financing and investing activities. Financial statements reviewed or audited by external accountants also may include supplemental footnote disclosures. Finally, close the books. At the end of each accounting period, close temporary accounts to retained earnings and finalize the books. This step provides a fresh start for the next accounting period. Best practices Whether you’re new to running a business or are a seasoned owner, following standard accounting procedures helps ensure accurate transaction records, balanced books and reliable financial statements. Be sure to clearly document in writing who in your organization (or, if you outsource any accounting work, which contractor) is responsible for each accounting task and when it should be completed. Contact us to develop an easy-to-follow accounting cycle for your business. We can also help you address cash flow, tax compliance and other financial issues. © 2026
Even though tax filing season is still several months away, the decisions you make before January 1, 2027, could have a significant impact on your 2026 federal income tax liability. Year-end tax planning is especially important this year because some new changes under 2025’s One Big Beautiful Bill Act (OBBBA) are taking effect. Plus, you may still be getting familiar with OBBBA changes that went into effect last year. Here are several tax-planning areas to consider before the calendar turns to 2027. Standard deduction vs. itemizing Taxpayers can choose to itemize certain deductions on Schedule A or take the standard deduction based on their filing status instead. Itemizing deductions when the total exceeds the standard deduction saves tax, but it makes filing more complicated. For 2026, the standard deduction is: $16,100 for single filers (and married couples filing separately), $24,150 for heads of household, and $32,200 for married couples filing jointly. Taxpayers who are age 65 or older or blind can claim an additional standard deduction of $2,050 ($1,650 per spouse if married). For taxpayers both over 65 and blind, the additional deduction is doubled. With such large standard deduction amounts, you may not give much thought to itemizing. However, certain temporary OBBBA provisions (see below) could make itemizing more beneficial for some taxpayers this year. But high earners should note that the OBBBA’s new limit on itemized deductions kicks in for the 2026 tax year. The limit effectively caps itemized deductions for taxpayers in the highest tax bracket (37%) at 35 cents per dollar (down from 37 cents per dollar). The senior deduction Through the 2028 tax year, taxpayers age 65 or older by the end of the tax year may qualify for an additional $6,000 “senior” deduction ($12,000 for joint filers if both spouses qualify). Eligible taxpayers can take this tax break whether they itemize or claim the standard deduction, and it’s in addition to the existing extra standard deduction for seniors. However, the new deduction begins to phase out when modified adjusted gross income (MAGI) exceeds $75,000 for single filers or $150,000 for joint filers. The deduction is reduced by 6% of MAGI exceeding these thresholds. Married taxpayers must file jointly to qualify, and each eligible individual must have a valid Social Security number. If your MAGI might exceed the applicable phaseout threshold, you may be able to take steps before year end to reduce it and maximize your senior deduction. For example, if your budget allows and you’ve already taken your required minimum distribution for the year (if applicable), consider cutting back on taxable retirement plan distributions for the rest of the year. If you’re still working, increasing your retirement plan contributions for 2026 can reduce your MAGI. Whether you’re retired or still working, loss harvesting (see below) and other investment-related strategies can also reduce your MAGI. Changes to charitable giving deductions Before the OBBBA, taxpayers who didn’t itemize generally couldn’t deduct their charitable contributions. Beginning in 2026, however, nonitemizers can deduct up to $1,000 in qualifying cash donations ($2,000 for joint filers). The deduction generally applies to cash contributions made directly to qualifying public charities. Donations to donor-advised funds and most private foundations, as well as noncash contributions, aren’t eligible. Cash donations include not just actual cash but gifts made by check, debit or credit card, payment app, or payroll deduction. If you might be eligible for this new deduction, be sure to properly substantiate your cash donations. To be deductible, they must be: Supported by a bank record, receipt or written communication from the charity if they’re under $250, or Substantiated by the charity if they’re $250 or more. The OBBBA also introduced a new limitation on charitable deductions for taxpayers who itemize. Beginning in 2026, only contributions exceeding 0.5% of adjusted gross income (AGI) are deductible. For example, if your 2026 AGI is $100,000, you can’t deduct the first $500 of your charitable contributions. Amounts disallowed by this floor generally can’t be carried forward unless the taxpayer also has contributions exceeding the applicable percentage-of-AGI deduction limits. (For instance, deductions for cash gifts to public charities generally can’t exceed 60% of your AGI.) These changes make the strategy of “bunching” charitable contributions into a single tax year worth considering. Traditionally, taxpayers have used this approach to accumulate enough itemized deductions to exceed the standard deduction in alternating years. Now, concentrating donations in one year may also help reduce the impact of the new 0.5%-of-AGI floor. However, the potential benefits depend on your income, other itemized deductions and the timing of your contributions. Increase in the SALT cap The OBBBA temporarily increased the limit on state and local tax deductions (the SALT cap) through the 2029 tax year. For 2026, taxpayers who itemize can deduct up to $40,400 ($20,200 for married couples filing separately). Deductible expenses include: State and local real estate taxes, Qualifying personal property taxes, and Either state and local income taxes or general sales taxes, but not both. The SALT cap is scheduled to return to $10,000 ($5,000 for separate filers) in 2030. The higher limit may provide substantial tax savings, depending on your SALT expenses and MAGI. For 2026, the deduction cap is reduced by 30% of MAGI exceeding $505,000 ($252,500 for separate filers), but it can’t fall below $10,000 ($5,000 for separate filers). Both the higher cap and the income threshold are scheduled to increase by 1% annually through 2029. If your 2026 SALT expenses are below the applicable cap, consider whether accelerating certain tax payments into 2026 could increase your deduction. For example, you may benefit from paying property taxes before year end, provided they’ve already been assessed, or making eligible state estimated income tax payments. Tax loss harvesting Although economic conditions have been mixed in 2026, the stock market generally has performed well. If you have underperforming investments in your taxable portfolio, consider selling them before year end to harvest capital losses that can offset taxable capital gains you’ve already recognized. If your capital losses exceed your gains, you generally can deduct up to $3,000 of the excess against ordinary income ($1,500 for separate filers), with unused losses carried forward to future tax years. Harvesting losses also may help reduce or eliminate your exposure to the 3.8% net investment income tax (NIIT). It applies to some or all net investment income when MAGI exceeds $200,000 per year ($250,000 for joint filers and $125,000 for separate filers). The NIIT thresholds aren’t annually indexed for inflation, so more taxpayers are being hit by this tax. Be mindful of the wash-sale rule, however. It generally disallows a loss deduction if you purchase substantially identical securities within 30 days before or after the sale. The rule can also apply to purchases made by your spouse or through an IRA. In most cases, a disallowed loss is added to the tax basis of the replacement securities, deferring the tax benefit rather than eliminating it. Don’t delay With the end of 2026 fast approaching, now is the time to take action to minimize your tax liability. Changes under the OBBBA, combined with longstanding tax-saving tactics, create both opportunities and challenges. The most effective approach depends on your income, investments, deductions and overall financial situation. Contact us to discuss your circumstances and develop a year-end tax strategy. © 2026