Newsletters

New Tax Glitter in Golden Years

Special tax deduction for seniors 

The massive new tax law passed in 2025—the One Big Beautiful Bill Act (OBBBA)—shows respect for our elders. Under the OBBBA, senior citizens may claim a special new tax deduction in addition to tax breaks already on the books. The new senior citizen deduction is available on 2025 federal income tax returns that must filed by April 15, 2026.

But do not think that the new law eliminates tax on Social Security retirement benefits. Despite some confusion, benefits remain taxable for 2025 and thereafter.

Background: When you file your personal tax return, you must choose between the standard deduction or itemizing deductions. Generally, you simply use the method that will provide the biggest tax benefit, but you get zero tax benefit from the other. For instance, if you claim the standard deduction, you cannot take any deductions for state and local tax (SALT) payments for that year.

Due to numerous tax changes for individuals included in the Tax Cuts and Jobs Act (TCJA), generally effective for 2018 through 2025, more taxpayers have been opting for the standard deduction in recent years. Prior to the OBBBA, the standard deduction for 2025 returns was scheduled to increase to $15,000 for single filers and $30,000 for joint filers.

In addition, individuals who are age 65 or older can claim an “extra” standard deduction in 2025 of $2,000 for single filers and $1,600 for each qualified spouse filing a joint return. (These amounts are indexed for inflation.) Therefore, if both spouses filing a joint return are age 65 or older, they can claim a $3,200 deduction plus the regular standard deduction.

Under the OBBBA, the standard deduction amounts are bumped up to $15,750 and $31,500, respectively, for 2025 returns. Even better: The OBBBA creates a brand-new “bonus” deduction for senior citizens. This deduction is $6,000 for each qualified individual whether you claim the standard deduction or itemize. Accordingly, if both you are your spouse are 65 or over, you can add a $12,000 deduction to the two existing standard deductions for a grand total of $46,700 ($31,500 + $3,200 + $12,000). A couple with $40,000 in itemized deductions may be entitled to $52,000 ($40,000 + $12,000) in deductions.

To qualify, you must have turned age 65 before January 1, 2026. Thus, the new bonus deduction is available to those born before 1961.

Caution: On the downside, the senior citizen deduction is phased out based on modified adjusted gross income (MAGI). The phase-out begins at $75,000 of MAGI for single filers and $150,000 for joint filers. Then the deduction is reduced by six cents for every dollar above the threshold. The phase-out is complete at $175,000 of MAGI for single filers and $250,000 for joint filers.

Finally, be aware that the senior citizen deduction is scheduled to expire after 2028. So, this new tax break may be short-lived.

Practical advice: If you have questions relating to your personal situation, contact your professional advisor before your 2025 return is filed.

Can You Start an ABLE Account?

New law enhances tax breaks

In the not-so-distant past, Congress authorized the use of tax-free savings accounts for disabled individuals under the Achieving a Better Life Experience Act (ABLE) Act. Now the new One Big Beautiful Bill Act (OBBBA) creates additional tax benefits for families.

Background: ABLE accounts resemble Section 529 accounts used for higher education. As with 529 plans, contributions to the plan are made to an account designated for a qualified individual. And, like a 529 plan, the earnings inside the account and distributions for “qualified expenses” are completely tax-free. Qualified expenses must be related to the beneficiary’s needs, including housing; education; transportation; employment training and support; technology used for assistance; personal support services; health care expenses; and financial management and administrative services.

But the rules for eligibility are strict. To be able to use an ABLE account, an individual must be either blind or have experienced another severe disability before a specified age. Previously, the age limit was only 26, thereby eliminating this option for individuals in their late twenties or older, including veterans with disabilities. But recent legislation added two decades to the threshold, to age 46, beginning in 2026.

Who can contribute to an ABLE account? It is available to anyone including parents, grandparents and non-relatives. The annual limit on contributions is the same as the limit for the gift tax exclusion. Accordingly, you may contribute up to $19,000 to an ABLE account for a designated beneficiary in 2026. In addition, ABLE account contributions are subject to the state-imposed limit on Section 529 plans, but these limits are generally quite generous.

Finally, prior law allowed rollovers from Section 529 accounts to ABLE accounts for a qualified disabled individual without any tax implications. This tax break was initially scheduled to expire after 2025.

New law update: The OBBBA contains the following provisions that may be favorable to families with ABLE accounts.

• Qualified individuals with disabilities may contribute more than the annual gift tax exclusion (up to the federal poverty level or their earnings for the year) if they do not participate in an employer retirement plan, such as a 401(k) plan.

• Certain low-to-moderate income individuals may qualify for the retirement saver’s credit for contributing to ABLE accounts. This credit is subject to future increases, beginning in 2027.

• The ability to roll over funds from a Section 529 plan to an ABLE account is preserved past the initial 2026 expiration date.

Key question: Does an ABLE account make sense for a family with a disabled individual under the updated laws of the land? Rely on your professional advisors to help assess the situation.

Outline of the New FAFSA Form

Law changes streamline process 

If your child expects to attend college during the 2026-2027 school year, they must submit the “Free Application for Federal Student Aid” (FAFSA) form to obtain various types of federal financial aid. The deadline is June 30, 2027, but the form is currently available and should be filed as soon as possible. This applies to all students—not just incoming freshmen.

Thanks to recent legislative changes, including revisions under the one BIG Beautiful Bill Act (OBBBA), the FAFSA has been streamlined and been made more favorable to certain applicants.

Background: The FAFSA can be completed and filed online, which is generally preferred, or it can be submitted on paper. Both students and parents may be required to provide information.In the past, the FAFSA form included 108 questions, but the maximum number has been whittled down to no more than 46 questions, Nevertheless, completing it can be a daunting task involving several key aspects.

Notably, the “expected family contribution” (EFC) affecting financial aid eligibility has been replaced by the Student Aid Index (SAI). Although the SAI is comparable to the EFC—including factors based on family income and expenses— there are some significant differences. The SAI accounts for the following income items received by parents:

• Wages, salaries, commissions and tips;
• Self-employment income;
• Taxable interest;
• Dividends and capital gain;
• IRA and 401(k) distributions;
• Pensions and annuities;
• Rental income; and
• Alimony income.

Note: For these purposes, it is the “base year”—the year before the child enters school—that counts. Most income items may be transferred directly from the parents’ federal tax return.

The rules were recently amended to exclude certain income items on the FAFSA such as gifts from grandparents and other relatives and other sources like housing and living allowances paid to military service members. Also, security measures have been improved and a FAFSA may be used to send information to up to 20 schools instead of just ten. But there is no longer any benefit from having multiple children in school at the same time.

Under the OBBBA, families may also benefit from three new exclusions from the SAI computation.

1. If a family owned a small business with 100 or fewer full-time (or full-time equivalent) employees, you no longer have to report the assets of the business.
2. If your family operates a farm where it resides, you no longer have to report the net worth of the farm.
3. If your family owns and operates a commercial fishing business, you no longer have to report the assets of the business.

Remember that the three new exclusions only apply to the value of assets. The family still must report annual income from these business activities.

Final words: Substantial financial aid dollars may be at stake. Do not hesitate to seek professional assistance when needed.

Collecting Tax Deductions for Tips

New law creates tax break 

Do you or someone in your family work at a job where “tips” represent a sizeable portion of the annual compensation? The new One Big Beautiful Bill Act (OBBBA) carves out a new deduction for tipped workers, beginning in 2025 and lasting though 2028. Thus, you may be able to deduct tips received last year on your 2025 tax return.

Background: As opposed to regular wages, tips are usually discretionary or optional payments determined by a customer or client. Generally, tips received by employees or independent contractors ae fully taxable on both the federal and state income tax levels. This includes the following:

• Cash tips received directly from customers.
• Tips from customers who leave a tip through electronic settlement or payment through a credit card, debit card, gift card or any other electronic payment method.
• The value of any noncash tips like tickets to an event or other items of value.
• Tip amounts received from other employees paid out through tip pools, tip splitting, or other formal or informal tip-sharing arrangements.

Of course, tips are also subject to federal payroll taxes. Both employees and employers must meet substantial reporting requirements relating to the payment and receipt of tips. And the IRS may dispute claims if it suspects that tips are being underreported or not reported at all.

New law update: Comparable to new rules for overtime (OT) pay, the OBBBA creates a new deduction of up to $25,000 for qualified tips received, whether you claim the standard deduction or itemize on your return. Plus, like the OT pay deduction, this tax break is phased out for tips received by single filers with a modified adjusted gross income (MAGI) above $150,000 or $300,000 for joint filers. The tips deduction is reduced by $100 for each $1,000 above the threshold.

However, the deduction is only available for tips received in industries where the practice is commonplace. Thus, it may be available for tips paid to waiters and waitresses, hair stylists and delivery people, but not those in a specified service trade or business (SSTB) like the health and law fields. The IRS recently published a list of approved occupations that can be found at https://home.treasury.gov/system/files/136/Tipped-Occupations-Detailed-8-27-2025.pdf..

As mentioned above, the new deduction may be claimed by self-employed individuals who are tipped in the normal course of their business activities, like many workers in the “gig economy.” Caveat: The deduction for these workers is limited to the extent that their business income (including tips) exceeds their otherwise allowable deductions.

Note that the OBBBA also expands a special employer credit for federal payroll taxes paid on tips. Currently, the credit applies only to tips received by workers in the food and beverage industries, but the new law extends it to tips paid to workers providing services like hair and nail care and spa treatments. Expect the IRS to provide more guidance on this aspect soon.

Reminder: Absent further legislation by Congress, the tip deduction will expire after 2028. If you are eligible, pocket this new tax break while you still can.

Beware the Ides of March!

An important tax deadline is looming. A calendar-year corporation has until 2½ months after the close of the prior tax year to elect S corporation status for the current year. Normally, this due date falls on March 15—the “ides of March” in Julius Caesar’s time—but it is postponed until March 16 this year because the 15^th is a Sunday. Frequently, electing to operate as an S corporation makes sense from a tax perspective if the business owner will significantly benefit from partnership-type taxation. But this decision is not automatic. It requires careful analysis taking numerous factors into account.

Practical advice: Do not turn your back. Enlist the services of a trusted tax professional for your protection.

Facts and Figures

Timely points of particular interest

Open and Shut—Now that the longest government shutdown in American history has ended, IRS staffers are back to the business of preparing for the 2026 tax return season. But remember that the IRS is still operating on a reduced budget and must make additional accommodations for the One Big Beautiful Bill Act (OBBBA) provisions. What’s more, another government shutdown may occur on January 31. We will keep you posted on any key developments relating to tax filings.

Standard Mileage Rates—The IRS has just announced that the standard mileage rate for business driving in 2026 is 72.5 cents per business mile, up 2.5 cents from 2025. This rate is often used in lieu of deducting actual expenses requiring more detailed records. Similarly, the IRS has announced the rate for medical purposes and moving expenses of active-duty military personnel drops a half penny to 20.5 cents per mile, while charitable driving remains at 14 cents per mile. Related tolls and parking fees may be added on.

How to Rebrand a Business

Six suggestions for success

What is your company’s “brand”? Essentially, it is the sum of the attributes of the business that are readily identifiable by consumers, based on their perception of the company’s vision, marketing and quality. Although a brand has no definitive value per se, it still is a valuable asset.

But your perceived brand may not be attracting or retaining customers or clients like it has in the past. It may be in the company’s best interests to “rebrand” the business.

Initial approach: Unfortunately, there is no foolproof method of rebranding a small business. Frequently, it can take some trial and error, but temporary setbacks may be well worth it in the long run. Consider the following benefits of rebranding.

• Increase brand awareness. The public may quickly pick up on your rebranding efforts. This can lead to increased traffic or more sales at websites and other locations.

• Position your firm competitively. A rebrand can help your company stand out in a crowded field of competitors. It may strengthen your market position and build loyalty through tough economic times.

• Restore relationships: By rebranding your company, you may bring back customers or clients who bought your products or used your services years ago. It can reignite a connection for the future.

• Spur innovation. Some customers or clients may ignore your firm because it is “outdated.” A rebranding may trigger innovations or improvements that can drive interest and generate more revenue for your firm.

Of course, there are potential downsides to rebranding. This approach could backfire if the changes alienate your existing client base. With that in mind, here are six practical suggestions.

1. Know your audience. What has attracted customers in the past and kept them coming back? How can you best expand? Surveys can be a critical tool for learning what has been working and what needs to change.

2. Inform and train your employees. It is also important for your staff to “buy into” the rebranding. Make sure they are on board and ready to communicate effectively with the public. Address any disconnects within the organization.

3. Find strategic allies. Usually, a rebranding requires some outside assistance from consultants and other professionals. Do an extensive search before settling on reputable partners. Make sure that you are all “on the same page” before you go too far.

4. Use the proper tools. It is not enough to develop as comprehensive rebranding. Your firm must be able to convey the message to the target audience. That may involve investing in digital management systems and other technological advances that broaden the scope of your messaging. Do not adopt a fresh new look with an outmoded system.

5. Tailor your brand to your business. Developing a rebrand is no easy task. It should account for your current circumstances while providing a clear path for the future. Set realistic goals for determining if the rebrand is successful and continue to monitor the results.

6. Understand the risks. Be aware that former customers might not recognize your new brand and could stray to competitors. Or they may choose other options if it does not meet their comfort level or satisfaction. Look carefully before you leap. 

Final words: Rely on your business advisors for guidance when it is needed. A family-owned business will probably only do this once in a generation, so do it right!

Learn the Tax Angles to Alimony

Tax Law Restraints on Deductions

The One Big Beautiful Bill Act (OBBBA) extends many tax provisions for individuals in the Tax Cuts and Jobs Act (TCJA) that were scheduled to expire after 2025. This includes, for example, a higher standard deduction, elimination of personal exemptions and crackdowns or modifications of various tax deductions. But not all individual tax provisions in the TCJA were temporary. Consider the tax rules for alimony deductions.

Background: Prior to the TCJA, payors could deduct alimony paid to recipients “above the line” on their federal income tax returns. The alimony payments constituted taxable income to recipients. Conversely, no deduction was allowed to payors of child support, while child support was not treated as taxable income to recipients.

To qualify as deductible alimony, the following requirements had to be met:

• The spouses do not file a joint return with each other.

• The payment is in cash. This includes monetary instruments like checks.

• The payment is made to or for a spouse or a former spouse under a divorce or separation instrument.

• The divorce or separation instrument does not designate the payment as not being alimony.

• The spouses are not members of the same household when the payment is made. (This requirement applies only if the spouses are legally separated under a decree of divorce or of separate maintenance.)

• There is no liability to make the payment after the death of the recipient spouse.

• The payment is not treated as child support or a property settlement.

But the TCJA permanently eliminated the alimony deduction for payors, and the corresponding income tax liability for recipients, for divorces and separation agreements executed (i.e., coming into legal existence under a court order) after 2018. That has not changed under the OBBBA. Therefore, payors cannot deduct either alimony or child support payments required by new divorce or separation agreements.

Special exception: The TCJA changes do not apply to existing divorce and separation agreements executed before 2019. Furthermore, if a prior agreement is modified after 2018, deductions are still available unless the modified agreement expressly states that the TCJA changes are applicable.

Accordingly, the tax treatment of these expenses may become a bargaining chip in divorce proceedings. For example, alimony and child support obligations may be increased or decreased due to tax factors, depending on your point of view. The specific language of an agreement should reflect the intent of the parties. In addition, these issues may be further complicated by state law.

Practical approach: This is clearly not a do-it-yourself proposition. Coordinate the tax issues with your professional advisory team, including your attorney.

Last Shot at Targeted Jobs Credit?

WOTC scheduled to expire in 2026  

Do you need to expand your staff during the busy holiday season? If certain requirements are met, your company may be able to claim a generous tax credit for hiring certain disadvantaged workers. But this credit, which has expired and been reinstated multiple times in the past, is scheduled to go off the books for good after December 31, 2025.

Background: The “Work Opportunity Tax Credit” (WOTC) is currently available to employers that hire workers from designated “target groups” of individuals. Generally, the credit equals 40% of the first $6,000 of the employee’s first-year wages, for a maximum credit of $2,400 per worker. However, for a veteran with a service-connected disability, the credit may be claimed on the first $24,000 of wages, for a maximum of $9,600 per worker.

There is no overall limit on the employer’s credit amount. For instance, if your firm hires five qualified workers during the year, the maximum total credit on its 2025 return is generally $12,000, a dollar-for-dollar reduction of the firm’s tax bill.

On its website, the IRS identifies the following target groups for purposes of eligibility for the WOTC:

• The formerly incarcerated or those previously convicted of a felony;
• Recipients of state assistance under part A of title IV of the Social Security Act (SSA);

• Veterans;
• Residents in areas designated as empowerment zones or rural renewal counties;
• Individuals referred to an employer following completion of a rehabilitation plan or program;
• Individuals whose families are recipients of supplemental nutrition assistance under the Food and Nutrition Act of 2008;
• Recipients of supplemental security income benefits under title XVI of the SSA;
• Individuals whose families are recipients of state assistance under part A of title IV of the SSA; and
• Individuals experiencing long-term unemployment.

Also, be aware that your business may qualify for a special summertime credit if it employed youths aged 16 or 17 residing in an empowerment zone or enterprise community. This credit is 40% for the first $3,000 of wages paid between May 1 and September 15, up to a maximum of $1,200 per qualified worker.

The credit has been extended numerous times in what has been a near annual ritual. However, the new law passed in 2025—the One Big Beautiful Bill Act (OBBBA)—does not restore this credit and it does not appear that any further extension is likely. In fact, there is a good chance that this is the last opportunity to secure the WOTC.  

Caution: The WOTC requires a complex certification process with lots of paperwork. The favorable tax treatment is not automatic. Obtain expert professional guidance to ensure your business receives the maximum credit for its situation.

Locking Into Automatic Enrollment Plans

SECURE 2.0 requires employer action

Typically, if an employer chooses to add an automatic enrollment feature to a 401(k) plan, it will increase participation by employees, especially younger ones, while helping to meet nondiscrimination requirements. But some employers may not have a choice. Under the “SECURE 2.0” law enacted in 2022, automatic enrollment may now be mandatory for your firm.

The basics: With a 401(k) plan, employees can defer part of their salary on a pre-tax basis to their personal accounts, subject to generous limits. Also, the employer can make “matching contributions” up to a stated percentage of compensation. Amounts contributed to the plan compound without current tax until withdrawals are made—usually in retirement, when they are taxed at ordinary income rates.

For 2025, the deferral limit is $23,500 for most employees ($24,500 for 2026). If an employee is age 50 or older, they can add a “catch-up contribution” of $7,500 ($8,000 for 2026), for a maximum total of $31,000 ($32,500 for 2026). Furthermore, under SECURE 2.0, employees age 60 through 63 may benefit from a “super catch-up contribution” of $11,250 (the same in 2026) for a grand total of $34,750 ($35,750 in 2026).

However, highly-compensated employees (HCEs) may be penalized if the plan does not meet strict nondiscrimination requirements. Automatic enrollment makes it easier to pass the tests. Reason: Lower-paid employees are automatically enrolled in the plan unless they proactively opt out. Usually, employees tend to simply go with the flow.

New rules: SECURE 2.0 requires many companies to implement automatic enrollment—like it or not. Here are some of the highlights.

• If an employer establishes a new 401(k) plan on or after December 29, 2022, it must provide automatic enrollment and meet certain “escalator” requirements, starting with plan years beginning after 2024. Therefore, if your company starts a new plan in 2026, it must provide automatic enrollment.

• The new plan must include an automatic enrollment feature with a uniform automatic enrollment percentage equal to at least 3%, but no more than 10%, for an employee’s first year of plan participation.

• The plan must also include an automatic escalator feature increasing the contribution percentage automatically by 1% each year until the contribution reaches at least 10%, but no more than 15%.

• The plan must permit employees to opt out of the plan and withdraw amounts, plus earnings, that were automatically contributed to the plan within the first 90 days after contributions begin. These withdrawals are not subject to the 10% penalty tax on withdrawals prior to age 59½.

Note: The automatic enrollment and escalation provisions do not apply to Roth 401(k) plans that are based on after-tax contributions to the accounts of employees.

In any event, the new SECURE 2.0 requirements do not apply to all employers. For instance, your plan is “grandfathered in” if it was adopted before December 29, 2022. In addition, small businesses with ten or fewer employees or those in existence for three years or less are exempt from the requirements.

It may be your call: Nevertheless, your business may opt for automatic enrollment even if it is not legally obligated to do so. Contact your professional advisors for further insights.

Higher Retirement Plan Limits for 2026

The IRS just announced the annual cost-of-living adjustments (COLAs) for qualified retirement plans. Here is a comparison of 2025 and 2026.

*Beginning in 2025, a “super catch-up contribution” limit applies to employees age 60-63. The limit for 2026 is $11,250 (the same as 2025) plus the regular contribution.

** Beginning in 2025, a “super catch-up contribution” limit applies to employees age 60-63. The limit for 2026 is $5,250 (the same as 2025) plus the regular contribution.

Note: The annual limit for contributions to traditional and Roth IRAs increases from $7,000 to $7,500 for the 2026 tax year (from $8,000 to $8,600 if age 50 or over). The phase-out levels for IRA and Roth contributions have also been adjusted upward.

Facts and Figures

Timely points of particular interest

Gift Tax Exclusion—The annual gift tax exclusion for 2026 is $19,000 per recipient, the same as it was in 2025. (It is indexed annually but only in $1,000 increments.) Thus, a single grandparent might give up to $19,000 to each of their five grandchildren in 2025 for a total of $95,000, without paying any gift tax. Then the grandparent can gift the same recipients another $95,000 free of gift tax in early 2026. Finally, the maximum limit of $190,000 over two years is doubled to $380,000 for “joint gifts” made by a married couple.

Social Security News—The Social Security Administration (SSA) has announced the new “wage base” for the Social Security tax portion of federal employment tax. For 2026, the 6.2% OASDI portion of employment tax applies to the first $184,500 of wages, up from $176,100 in 2025. The 1.45% HI portion of the tax continues to apply to all wages paid by employers to employees. Both employees and employers must comply with this federal employment tax obligation.

Happy Holidays—Our firm would like to wish you and your family a happy holiday season and a happy, healthy and prosperous new year.

Seven Year-End Personal Tax Tips

Tax strategies available under new law

Year-end tax planning was already complicated before this year. But the new tax law—the One Big Beautiful Bill Act (OBBBA)— adds a few extra twists and turns. Taking that into account, following are seven common tax strategies for individual taxpayers.

1.  Charitable donations: If you itemize deductions, you can boost your charitable write-off by donating to qualified charitable organizations at year-end. For 2025, the current deduction for monetary gifts is limited to 60% of your adjusted gross income (AGI). New rules: Under the OBBBA, you must first clear a floor of 0.5% of adjusted gross income (AGI), beginning in 2026. But the new law also authorizes a deduction in 2026 of up to $1,000 for single filers who do not itemize and $2,000 for joint filers. Plan accordingly.
2. Capital gains and losses: Frequently, investors are able to use capital gains and losses to offset each other. For example, you might realize capital gains late in the year from sales of securities to absorb capital losses from earlier in the year or realize losses to offset capital gains plus up to $3,000 of ordinary income in 2025. Note: The maximum tax rate on long-term capital gain for assets held longer than a year is 15% (20% for certain high-income taxpayers).
3. Auto loan interest: Personal interest, like interest paid on most credit card debt, is nondeductible. But the OBBBA creates a brand-new deduction for some car buyers. For 2025 through 2028, you can deduct up to $10,000 of annual interest paid on auto loans. This tax break is retroactive to January 1, 2025, and is available whether or not you itemize. Caveat: The deduction of auto loan interest begins to phase out for single filers with a modified adjusted gross income (MAGI) above $100,000 and $200,000 of MAGI for joint filers.
4. Home energy credits: Recent legislation expanded two residential energy credits. Generally, you may qualify for a 30% “residential clean energy credit” for installing solar panels or other equipment to harness renewable energy this year. Also, a 30% “energy efficient home improvement credit” of up to $1,200 is available for the cost of qualified energy-efficient improvements, subject to certain dollar caps. Warning: The OBBBA eliminates these credits after 2025—act now or never!
5. Alternative minimum tax: Taxpayers may have to pay the “alternative minimum tax” (AMT) instead of their regular tax liability. The AMT calculation involves certain “tax preference” items, tax adjustments and an exemption amount subject to a phase-out. Now the OBBBA permanently establishes favorable exemption amounts of $500,000 for single filers and $1 million for joint filers for 2026 and thereafter, with future indexing, but phases out the exemption twice as fast as before. Have your AMT exposure assessed to determine the best moves for your situation.
6. Medical expenses: An itemizer can deduct unreimbursed medical expenses above an annual threshold of 7.5% of AGI. Thus, if you are close to or are already over this threshold for 2025, you might accelerate non-emergency expenses, such as medical check-ups or dental cleanings, from 2026 into 2025. Note that qualified expenses paid on behalf a dependent relative may count toward the 7.5%-of-AGI threshold.
7. Required minimum distributions: Under current law, if you have reached age 73 (increasing to age 75 in 2033) you must take annual required minimum distributions (RMDs) from traditional IRAs and qualified plans like a 401(k). Otherwise, you may be hit with a 25% tax penalty in addition to regular income tax liability (10% if corrected promptly). Be aware that other special rules apply to non-spouse IRA and qualified plan beneficiaries.

Of course, these are just seven potential ideas to consider as the year draws to a close. Contact your professional advisor regarding your personal situation.

Seven Year-End Business Tax Tips

Tax strategies available under new law

The new One Big Beautiful Bill Act (OBBBA) also has a significant impact on year-end tax planning for businesses. Following are seven ideas to consider in the wake of the new law.

1. Business property: Under Section 179 of the tax code, a business may “expense” the cost of qualified business property (e.g., equipment or computers) placed in service during the year, up to an annual limit but subject to a phase-out. The OBBBA permanently increases the limit to $2.5 million, with a $4 million phase-out threshold, in 2025. These figures will be indexed for inflation in the future. The new law also restores 100% first-year bonus depreciation for qualified property placed in service after January 19, 2025. This deduction was being gradually phased out over five years.
2. Start-up costs: Did you launch a new business venture in 2025? Normally, start-up costs must be amortized over 180 months, but you can currently deduct up to $5,000 of qualified expenses. This includes costs normally deductible by an active business. Make sure you are legitimately “open for business” before 2026 to qualify for this tax break on your 2025 return. Note that the special deduction is phased out for costs above $50,000.
3. Work Opportunity Tax Credit: If your business plans to expand its staff this upcoming holiday season, it may claim the Work Opportunity Tax Credit (WOTC) by hiring workers from designated “target” groups. Generally, the WOTC equals 40% of the first-year wages of up to $6,000 per employee, for a maximum of $2,400 per worker. The credit has expired and been reinstated multiple times in the past but the OBBBA does not touch it. The upshot: This may be your last chance to qualify for this credit.
4. Qualified small business stock: If you acquire “qualified small business stock” (QSBS) from your company, you can exclude from tax up to 100% of a gain on a sale after five years if certain requirements are met. For QSBS issued after July 4, 2025, the OBBBA:

• Allows a partial exclusion of 50% for stock held at least three years and 75% for four years;
• Enables the company to issue stock valued as much as $15 million, up from $10 million; and
• Increases the threshold for small business status from $50 million in assets to $75 million.

Note that other sales of QSBS held longer than one year may still qualify for favorable capital gain treatment.

5. SALT workarounds: Under rules imposed by the Tax Cuts and Jobs Act (TCJA) and extended and modified by the OBBBA, an individual’s deduction for state and local tax (SALT) payments is subject to an annual cap. However, the owner of a pass-through entity may arrange to have the business entity make the SALT payments. The tax benefits are then passed through to the owners on their personal tax returns. See a tax professional for more details.
6. Research and experimental expenses: In the past, a business could currently deduct research and experimental (R&E) expenses, but recent legislation required costs incurred after 2021 to be capitalized and amortized over 60 months. The OBBBA generally reinstates the prior rules retroactive to January 1, 2025. Alternatively, a business can elect 60-month amortization of R&E expenses. When appropriate, amended returns may be filed for 2022 through 2024 under transitional rules.
7. Holiday party: Generous tax deductions for business entertainment expenses are generally a thing of the past. But there is a narrow exception for holiday parties thrown by your small business. If the cost is reasonable and all employees are invited—not just the C suite—you can deduct 100% of the cost. The deduction for other qualified meal and beverage expenses is limited to 50% of the cost.

Reminder: Other tax benefits may be available at year-end. Discuss your situation with your professional tax advisors.

What’s Your Retirement Saving Stage?

Planning based on your current age

When is the best time to start saving for retirement? Once you begin working full-time! Although that is not always possible for those coming straight out of school or in the first few years of their careers, the sooner you “get going,” the better.

Keeping that in mind, following are brief guidelines for saving diligently for retirement, based on your current stage of life. This does not necessarily apply to all people, but it is common approach.

Stage #1: Early years: For most people, their first starting salary does not provide much room for saving. But it is still important to develop good savings habits. For instance, if your company provides matching contributions to 401(k) accounts, be sure to take advantage of the company match. Otherwise, you are leaving money on the table that may provide valuable income in retirement. Plus, you might be surprised to find out how much of an impact tax-deferred compounding can have over a long period of time.

Stage #2: Middle years: When you are midway through your career, other obligations—such as buying a home, raising your children and building up funds to help pay for their college education—often take priority. Nevertheless, do not take your eye off the ball. To the extent possible, continue utilizing company retirement plans, IRAs and other savings vehicles. Note that qualified distributions from a Roth IRA or 401(k) (e.g., those received after age 59½) are exempt from tax after five years If you are rewarded with a raise, try to allocate at least part of it to your retirement savings plan.

Stage #3: Later years: This time of life may provide more opportunity for saving if the house is paid off and the kids are out of school. Also, you may benefit from seniority and career advancement, so your earnings could be higher than ever or near their peak. If you have not been as dedicated as you would have liked, it is still possible to build a sizeable nest egg for retirement. The basic principles of using retirement plans and IRAs for tax-deferred growth remain in place.

Also, note that recent legislation, including the SECURE 2.0 law, encourages more retirement saving by older workers. For 2025, the regular 401(k) deferral limit is $23,500, but employees age 50 or older can add a “catch-up contribution” of $7,500, or $31,000 for the year. Even better: Employees age 60 through 63 may benefit from a “super catch-up contribution” of $11,250 for a maximum total of $34,750. These figures will continue to increase.

Finally, do not think that saving for retirement ends once you call it quits. Before that occurs, you should consider all aspects and assess both your expected income and expenses. One major decision is when to take Social Security benefits so you are able to maximize the payouts. If you can afford to, you may start collecting reduced benefits at age 62. The longer you wait, however, the bigger the monthly benefit will be until the maximum is reached at age 70.

Reminder: Due to longer life expectancies, you may need more retirement income than you initially thought. There is no time like the present to bulk up your savings accounts.

Silver Tax Lining for Casualty Losses

New law expands deduction rules

The Tax Cuts and Jobs Act (TCJA) suspended deductions for casualty losses but with a major exception. Now the new law passed earlier this year—the One Big Beautiful Bill Act (OBBBA)—provides even more leeway for certain taxpayers.

Background: Under prior law, casualty and theft losses were available for personal property damage caused by an event that was “sudden, unusual or unexpected,” including natural disasters, fires, vandalism and even auto collisions. However, the deductible amount was limited to the excess above 10% of adjusted gross income (AGI), after subtracting $100 per event. (Congress has periodically tinkered with these limits but they are currently in effect.)

Say that a married couple had an AGI of $100,000 in a previous year. A fire caused extensive damage to their home, valued at a loss of $15,000 after insurance reimbursements were made. Based on the 10%-of-AGI/$100 floor rules, their deduction was limited to $4,900 ($15,000 – 10% of AGI – $100). The loss generally had to be claimed on the tax return for the tax year in which the damage occurred.

Due to the TCJA suspension of most casualty loss deductions from 2018 through 2025, victims of destructive events may not have derived any tax benefits from personal casualty losses in recent years. But some taxpayers still have a way out. A loss is deductible, subject to the limits, if it is attributable to damage in a federally-designated disaster area.

New law changes: The OBBBA permanently extends the crackdown on casualty loss deductions past 2025 but continues to allow deductions for losses in federal disaster areas. What’s more, the new law authorizes deductions for losses in state-declared disaster areas, under the same limits. This change takes effect in 2026.

To top things off, you may be able to take advantage of a—

Special rule: Thanks to a unique provision in the tax code, a taxpayer may claim a casualty loss suffered in a designated disaster area on the tax return for the year preceding the year in which the casualty actually occurred. This might provide a desperately needed quick tax refund in a pinch. For instance, suppose your home is destroyed by a severe storm in a disaster area next month. Instead of waiting to claim the loss on your 2025 return, you may obtain faster relief by filing an amended 2024 return.

Similarly, if you incur a disaster-area loss in January, you may claim the deduction on the 2025 return you file early next year instead of waiting until you file your 2026 return—in 2027.

Finally, be aware that deductions are curtailed only for losses to personal property. There are no such restraints or dollar limits—including the 10%-of-AGI threshold and the $100 reduction per event—for business property losses. As was the case under prior law, these losses remain fully deductible. Contact your professional tax advisor for assistance relating to any personal or business losses.

New Floor for Corporate Donations

The new One Big Beautiful Bill Act (OBBBA) imposes new tax restrictions on charitable donations made by individuals. But your small business may also face a new tax hurdle.

New law update: The OBBBA imposes a “floor” of 1% of taxable income on deductions for donations made by corporations. This new corporate deduction floor, which has not received as much attention as the 0.5% floor for individuals, takes effect in 2026.

Be aware that other special rules may apply to corporate donations. We will have more details in the future.

Facts and Figures

Timely points of particular interest

Strategy Sessions—When planning new business strategies, it is important to define the current strategies for the main functional areas, as well as the entire business. This includes finance, marketing, sales, management, operations, etc. Establish a series of short strategic statements for each and then examine them thoroughly. Finally, ask if the strategies promote growth or just hedge against possible failure.

Fake Text —Watch out for this new tax scam making the rounds. A text is sent to the target purporting to be from a federal government unit. It states that you only have a few more days to provide information needed to receive a tax refund. Of course, the message is bogus because the IRS would not contact you initially by text and usually allows 30 days or more to respond to a legitimate inquiry. Your first notice from the IRS would come via snail mail. Stay vigilant.

New Twists to Charitable Gift-Giving

Wrapping up the OBBBA changes

In the past, donors to charitable causes who itemized on their returns could generally realize tax benefits for their generosity, within certain limits. But there was no “floor” on deductions like there is for medical expenses. Under the new One Big Beautiful Bill Act (OBBBA), for the first time ever, donors face an opening tax hurdle.

On the other hand, the new law provides more leeway to non-itemizers. If you take the standard deduction, you still may be eligible for a four-figure write-off.

Background: Prior to the OBBBA, itemizers could deduct the full amount of their charitable contributions to qualified organizations, subject to limits based on their adjusted gross income (AGI), but those taking the standard deduction received no tax benefit. As a result, you might “bunch” your charitable donations in a year in which you expect to itemize.

For instance, if you definitely will be itemizing deductions in 2025, it often makes sense to step up contributions late in the year. Conversely, if you are absolutely certain you will not be itemizing this year, you might postpone large donations to 2026. Under the OBBBA, the deduction limit for monetary gifts of 60% of your adjusted gross income (AGI) remains in effect after 2025. This limit was scheduled to revert to 50% of AGI in 2026.

However, deductions are not automatic. You must provide a bank record or written communication from a qualified charitable organization, showing the following:

• The amount of the contribution;
• The date the contribution was made; and
• The name of the charitable organization receiving the contribution.

As a result, you probably cannot deduct the spare change you donate to a sidewalk collector around the holidays. Conversely, large donations may be substantiated by bank or credit card statements. Furthermore, you must secure a written acknowledgment from the charity for monetary gifts of $250 or more.

For donations of appreciated property, deductions are limited to a lower threshold of 30% of AGI.  However, if you donate property that would have produced a long-term capital gain had you sold it instead—in other words, you have owned it more than one year—you can write off the property’s fair market value on the donation date. Otherwise, the deduction is limited to your original cost in the property.

New rules: Beginning in 2026, the OBBBA imposes a floor of 0.5% of your AGI on your charitable donation. For instance, if your AGI is $100,000 and you donate $5,000 this year, your deduction is reduced to $4,500. You get no tax benefit from the first $500 of donations. The disallowed portion may be carried forward to the next year, subject to the annual floor.

However, the new law also authorizes a new deduction of up to $1,000 for charitable gifts made by non-itemizers, beginning in 2026. (A temporary deduction with a $300 cap previously expired.) This limit is doubled to $2,000 for joint filers if each spouse separately qualifies. Key point: Unlike the charitable deduction for itemizers, there is no floor on deductions for non-itemizers.

Year-end decisions: Undoubtedly, these changes in the OBBBA, as well as other related provisions, may complicate your year-end charitable giving strategies. Discuss your personal situation with your professional tax advisors.

Sprinkle in New SALT Deductions

New law revamps tax rules

One of the key provisions in the massive tax law passed during President Trump’s first term—the Tax Cuts and Jobs Act (TCJA)—capped the annual deduction for state and local tax (SALT) payments. Now the One Big Beautiful Bill Act (OBBBA) extends the limit with certain modifications that are generally favorable to itemizers.

The tax benefits of the SALT changes are phased out for high-income individuals, but some business owners may be able to use a “workaround” to avoid tax perils.

For starters, SALT payments are deductible only by itemizers. The deduction is comprised of the following three state and local portions:

• Property taxes: Typically, this includes taxes on the principal residence where you reside and any property taxes for a second home, such as a vacation home.
• Income taxes: These are income taxes you must pay to the applicable state and local tax authorities.
• Sales taxes: Frequently, you owe state and local sales taxes on goods or services you purchase in your state, unless an exception applies.

However, the SALT deduction combines state and local property taxes with either state and local income taxes or state and local sales taxes. Thus, you must choose between income and sales taxes. You cannot have it both ways.

Previously, SALT deductions were usually one of the biggest line entries on personal tax returns of high-income taxpayers. Then along came the TCJA. This law capped the annual deduction at $10,000 for 2018 through 2025. It was scheduled to revert to prior law in 2026.

As a result of the SALT cap and several other TCJA provisions, many individuals who had itemized in the past have opted to claim the standard deduction the last few years.

Update: The OBBBA modifies the rules again. On the plus side, it raises the cap to $40,000—four times the prior level—beginning in 2025. For 2026 through 2029, the $40,000 cap is increased by 1% each year, until it reverts to $10,000 in 2030. These rules apply to both single and joint filers.

On the minus side, the new law includes a phase-out provision that reduces the deduction limit by 30% of the amount by which modified adjusted gross income (MAGI) exceeds $500,000 until it reaches $10,000. This phase-out threshold, like the initial cap, increases by 1% annually through 2029. In the end, some high-income individuals may pay more tax overall, even if they itemize deductions.

Potential solution: In more than half the states—including California, New York, and Ohio, to name three of the biggest—owners of pass-through entities like S corporations, partnerships and some limited liability companies (LLCs) may arrange for the entity to make SALT payments. Then the owner is entitled to a credit or deduction that is passed through to their personal return, effectively reducing tax liability. These rules vary state to state. Consult with your professional tax advisors about the details.

It is noteworthy that a proposed crackdown on SALT workarounds did not make it into the final version of the new law. But that may not be the last word on this issue. We will keep you posted on any significant developments.

Meet Your Family’s Long-Term Needs

Planning now for future obligations

According to the latest projections, the current life expectancy of the average U.S. citizen is 79.4 years, inching toward the age 80 mark. It is an increase from the previous figure of 78.4 years provided by the Centers for Disease Control and Prevention (CDCP).

Of course, the fact that people are living longer is good news. Nevertheless, an elderly relative who needs expensive long-term care could cause financial and emotional problems for the rest of the family.

Background: Because the risk of needing long-term care increases with age, it is important to plan ahead, both for yourself and other family members. For most people, the best time to take steps to address your family’s needs are when you are relatively young and in reasonably good health.

Long-term care is the type of help people need when they are unable to perform “activities of daily living” (ADLs), such as eating, bathing and dressing. Typically, the ADLs do not have to be provided by doctors or by skilled nursing professionals.

Frequently, it is assumed that long-term care means care in a nursing home. While some people do require such specialized care, the type of long-term care may vary widely. Family members, adult day care centers and assisted-living facilities (ALFs) are among the most common care providers. Long-term care is not defined by the setting in which it takes place, but by the type of care that is needed.

The family dynamic today resembles little of those even a generation ago. Frequently, children live half a country or even half a world away— or at least in another U.S. state—and single-parent homes are more common. So are dual-income couples with one or both spouses also pursuing side hustles. The types of “safety nets” that many of the elderly felt they could rely in the past, such as in-home assistance from a relative living nearby or by someone living in the same home, may no longer be available to those requiring care.

Remember that long-term care has an impact on the entire family, not just the person who needs care. For instance, a family member—usually, a middle-aged adult with children of their own—might assume the role of unpaid caregiver for an aging parent or spouse. These caregivers typically must make adjustments at work and in their careers, such as taking unexpected leaves of absence or having to turn down promotions, to provide the needed care for an ailing relative. Being a caregiver may also have an impact on their own family life (possibly even leading to divorce) and overall personal health.

Final thoughts: Do not stick your head in the sand and pretend that you will not be affected.  With advance planning that address your personal circumstances, you can help protect the family’s assets and current lifestyle. Meet this challenge head-on before it is too late.

How to Deduct Part of Your OT Pay

New law carves out special tax break

Of course, wages paid by your employer are subject to federal income tax and must be reported on your 2025 tax return. But you cannot deduct any part of the amount you earn…right? Wrong. Under the new One Big Beautiful Bill Act (OBBBA), certain employees may be in line for a brand-new deduction on a portion of their “overtime (OT) pay,” beginning in 2025.

However, the new OT deduction is reduced or eliminated for higher-income taxpayers. Plus, this tax break will not last forever. It is currently scheduled to be available for just four years.

Background: If a non-exempt employee works more than 40 hours during a week, they. must be paid “time-and-a-half” their regularly hourly rate, according to the long-standing Fair Labor Standards Act (FLSA). For example, if an employee is paid $50 an hour and works 60 hours in a week, their overtime pay is $1,500 ($75 x 20 hours), before any payroll deductions are subtracted.

Conversely, employees who are “exempt” employees under the FLSA cannot receive any overtime pay This generally includes employees earning amounts over an established weekly threshold with jobs in executive, administrative or professional capacities. Typically, someone who serves as a company’s president, CEO or other high-ranking position is salaried and classified as being exempt. Thus, many small business owners do not benefit from the FLSA overtime rules.

Similarly, workers who are classified as independent contractors are not entitled to overtime pay. This arrangement is often preferable to employers because they do not have to offer fringe benefits to the workers or pay the employer’s share of payroll taxes on their compensation.

In any event, wages paid to employees—including OT amounts under the FLSA—are fully taxable, no questions asked.

New rules: Beginning in 2025, single filers can deduct up to $12,500 of OT pay and $25,000 for joint filers. This change is retroactive to wages earned on or after January 1, 2025. Caveat: The deduction is only available for the “premium” portion of overtime pay that is attributable to the time-and-a-half rate. Thus, in our previous example, the employee may deduct $500 ($25 premium x 20 hours) for the one week of overtime.

This deduction is phased out based on your modified adjusted gross income (MAGI).  The phase-out begins at $150,000 of MAGI for single filers and $300,000 of MAGI for joint filers. Once you exceed the threshold, the deduction is reduced by $100 for each $1,000 above the threshold. So high-income employees may receive little or no tax benefit from this new rule. Note: These thresholds are not indexed for inflation.

What’s more, the tax deduction for overtime pay is scheduled to expire after 2028, unless Congress extends it.

Significant impact: What does this all mean? For employers, it requires adjustments to payroll procedures reflecting the new rules and may trigger a thorough examination of the classification of independent contractors. For employees, it could result in an effective “raise” on their current pay. Do not hesitate to ask any questions about your situation.

New Threshold for Form 1099-NEC

Currently, an employer must file Form 1099-NEC when it pays an independent contractor $600 or more during the year. Both the recipient and the IRS receive copies. This requirement has been on the books for more than 70 years without any change in the threshold or indexing.

Update: The One Big Beautiful Bill Act (OBBBA) lifts the threshold to $2,000, beginning in 2026.Thereafter, it will be indexed for inflation in succeeding years. This may result in less “paperwork” for certain employers.

We will have more on the 1099-NEC changes and related provisions in the OBBBA in an upcoming issue.

Facts and FiguresTimely points of particular interest

IRS Audit Guides—Do you want to know what the IRS is looking for in an audit? The nation’s tax collection agency has published dozens of “Audit Technique Guides” (ATGs) that provide insights into the main issues that interest auditors. Typically, the ATG is geared to a specific industry or tax issue, but taxpayers may also find general information that is helpful. Visit https://www.irs.gov/businesses/small-businesses-self-employed/audit-techniques-guides-atgs for more details.

Paper Chase—The U.S. Treasury Department recently announced that it will stop issuing paper checks for most federal payments on September 30, 2025. This includes payments for Social Security benefits, Veterans benefits and other federal benefits. If you have been receiving paper checks and have not yet done so, arrange to receive digital payments. You can access direct deposit by enrolling online at www.GoDirect.gov or by pursuing one of several other electronic-based options.

Seven Tax Traps in the New Law

New individual tax pitfalls to avoid

The new One Big Beautiful Bill Act (OBBBA), a follow-up to the Tax Cuts and Jobs Act (TCJA) passed during President Trump’s first term, contains numerous tax breaks for individuals. But the massive new law also poses several potential tax “traps” for the unwary. Consider the following.

1. Itemized deductions: Among a slew of other changes for individuals, the TCJA suspended several itemized deductions, including the following:

• Miscellaneous expenses;
• Casualty and theft losses (except for qualified disaster-area losses);
• Mortgage interest paid on up to $100,000 of home equity debt; and
• Job-related moving expenses (except for active-duty military personnel).

The OBBBA extends these changes and makes them permanent. It also extends and modifies other itemized deduction rules (e.g., retaining the $750,000 threshold for deducting mortgage interest on acquisition debt).

2. Personal exemptions: Previously, you could claim a personal exemption for yourself, your spouse and each of your dependents. The TCJA suspended personal exemptions from 2018 through 2025 in conjunction with various other changes for individuals. Under the OBBBA, personal exemptions are permanently eliminated.
3. Charitable deduction floor: For the first time ever, the new law imposes a “floor” of 0.5% of adjusted gross income (AGI) on charitable donations. This operates like the 7.5%-of-AGI floor for medical deductions. For instance, if your AGI is $100,000 and you donate $10,000, your deduction is limited to $9,500. (The law also imposes a 1% floor on corporate donation deductions.)
4. SALT payments: The TCJA capped the annual deduction for state and local tax (SALT) payments at $10,000 for 2018 through 2025. Although the new law increases the cap to $40,000, beginning in 2025, and adds 1% each succeeding year, the higher threshold is phased out for high-income taxpayers for 2025 through 2029. The OBBBA reduces the cap by 30% of the amount by which modified adjusted gross income (MAGI) exceeds $500,000, with an annual 1% increase in the threshold. The rules revert to prior law in 2030. Note: We will have more on SALT “workarounds” in the next issue.
5. Pease rule: The “Pease rule” required certain high-income taxpayers to reduce certain itemized deductions—including those for charitable donations—by 3% for every dollar of taxable income above an annual threshold, up to a total reduction of no more than 80%. This rule was suspended from 2018 through 2025. Now the OBBBA revives a modified version reducing deductions for taxpayers in the top 37% tax bracket, beginning in 2026.
6. EV credits: Currently, you can claim a credit of up to $7,500 for acquiring a new electric vehicle (EV) or plug-in hybrid that meets certain consumption requirements. The maximum credit for a used vehicle is $4,000. But the OBBBA ends the EV credits once and for all for vehicles acquired after September 30, 2025. You must move fast if you intend to beat this deadline.
7. Home energy credits: Similar to EV credits for car buyers, homeowners may qualify for one or two home energy credits for qualified installations. Both the energy efficient home improvement credit and the residential clean energy credit are available for up to 30% of qualified expenses, subject to certain limitations. The OBBBA repeals both credits in 2026.

Finally, the new law also cracks down on losses from gambling activities (see related article), among other adverse provisions hidden in the fine print. The upshot: Be aware of all the OBBBA pros and cons for taxpayers as we head into the end of the year.

How to Bridge a Retirement Shortfall

Practical ideas for closing the gap

People are living longer than they did “back in the day.” Of course, that is good news, but it also means you may have to build up a bigger cushion in retirement than you had initially intended. Furthermore, uncertainty over future Social Security benefits adds to the concerns. As a result, you could face a personal shortfall, especially if you incur unforeseen expenses from a health-related issue or some other emergency.

First step: Do not panic. Even if retirement is imminent, you may be able to make up lost ground quickly or take other steps to protect yourself. Here are several practical ideas to review.

• Ramp up your retirement savings. For example, if you participate in a 401(k) plan at work, you can generally defer up to $23,500 to your account in 2025. This figure is increased to $31,000 for those age 50 or over. Special rule: If you are age 60 through 63, you can tack on a “super catch-up contribution” for a grand total of $34,750. Just a few years of contributions at or near the maximum level can significantly bolster your account.
• Work on the budget. Now that you are aware of a potential portfolio, you might want to dial down your expectations. Make realistic estimates about the income you expect to be coming in and the expenses going out. Although you will likely be paying less for housing and other items like life insurance—especially if your children are already adults—consider the impact of potential increases in some expenses like travel expenditures.
• Move to a smaller home. For most people, housing is the largest overall cost, representing on average more than one-third of overall spending. If your kids have flown the coop but you’re still living in the large home where you raised them, it may be time to downsize. In addition, you might want to move to a state with a different climate, taking state income taxes into account. Of course, various other factors—such as proximity to family and personal preferences—will come into play.
• Refinance your current home. If you decide to stay put, you should probably refinance an existing mortgage if you are paying a rate higher than the current rates. Depending on your situation, you may be able to save tens of thousands of dollars over time by refinancing. Note that your interest payments will generally continue to be tax-deductible under the latest rules.
• Do not quit for good. Just because you’ve reached retirement age does not mean you have to stop working completely. If needed, you could pursue part-time employment, preferably in a line of work you enjoy. For some individuals, working full-time a little longer is also a viable option.

Reminder: Everyone’s situation is different. Therefore, maybe none of these ideas or only some of these ideas are right for you. The most important thing to do is to assess your financial status and go from there.

Passing Grade for Educator Deduction

New law rewrites the rules 

Although the new One Big Beautiful Bill Act (OBBBA) extends the tax law crackdown on miscellaneous expenses, including unreimbursed employee business expenses, it provides

a new tax avenue for other taxpayers. For the first time ever, qualified educators can deduct all their out-of-pocket expenses without any dollar cap.

On the other hand, some educators who previously were able to claim a limited above-the-line deduction may get zero tax benefit.

Background: Prior to the Tax Cuts and Jobs Act (TCJA), you could deduct qualified miscellaneous expenses in excess of 2% of your adjusted gross income (AGI). This included various investment and tax-related expenses as well as unreimbursed employee business expenses. For instance, if you had an AGI of $100,000 and personally spent $3,000 on office supplies for your business, you could deduct $1,000, but only if you itemized deductions.

However, the TCJA suspended the miscellaneous expense deduction from 2018 from 2025. It was scheduled to be reinstated in 2026, but now the OBBBA eliminates it permanently.

Separate and apart from the miscellaneous deduction, educators can deduct up to $300 a year for their unreimbursed classroom expenses (recently raised from $250), whether they itemize or not. This deduction is still available on 2025 returns.

Who is eligible for the deduction? Teachers, of course, but the list of qualified educators goes further. The deduction may be claimed by someone employed as a principal, instructor, counselor or aide for students in kindergarten through senior year in high school. For instance, a guidance counselor who provides college prep materials to students may qualify for the write-off.

Note that the deduction is not available, however, to preschool and day care teachers, camp counselors, college professors and other higher education instructors, self-employed tutors and part-time school aides. It is also off-limits to parents who homeschool their kids.

Qualified expenses include more than just crayons and glitter. Specifically, the costs of the following expenses are allowed.

• Books;
• School supplies;
• Computer equipment and software;
• Athletic equipment for physical education,
• Professional development courses or conferences related to course curriculum; and
• Any other item that is appropriate for and helpful to the students and classroom.

Reminder: Out-of-pocket classroom expenses are not deductible if you are reimbursed by the school, a teacher’s union, a parent-teacher association or some other person or entity.

Now the OBBBA flips the page. Beginning in 2026, it revises the rules for the educator expense deduction. Notably, the new law eliminates the $300 cap, but the deduction is limited to itemizers. For instance, if you itemize and pay $1,500 in classroom expenses out of your pocket, you can deduct the entire $1,500. However, if you claim the standard deduction, there is no tax reward for your generosity.

Lesson to be learned: You may have a decision to make at the end of the year. If you expect to itemize deductions next year, you might postpone deductible expenses until 2026. Conversely, you may pay out of-pocket educator expenses in 2025 to salvage a $300 deduction ($600 for joint filers if each spouse qualifies). Go to the head of the tax class!

Don’t Be Scared By Zombie Debt

Scavengers are on the lookout

It has nothing to do with the walking dead, but “zombie debt” from years ago can come back to haunt you in the present day. It helps to review your financial records to portray an accurate picture of any liabilities.

Background: The term “zombie debt” is used to describe debt that was purchased from the original creditor or collection agency at a miniscule price. Then the new debt holders stalk the consumers to get them to pay the debt.

This type of scam has been ramping up in recent years. The scavengers may range from Wall Street bigwigs to fly-by-night hustlers. The older the debt, the more likely it is that zombie debt collectors can scoop it up for pennies on the dollar.

What kind of debt is included in zombie debt? It can vary, but these three types of debts are frequently involved.

1. Expired debt: If the statute of limitations has run out on the debt—the length of time it can be legally collected—it is no longer viable. The time allowed differs from one jurisdiction to the next. In any event, the con artists may try to trick you into paying off expired debt.
2. Other people’s debt: Zombie debt might not even be yours. Maybe it is debt of a person who has a name similar to you—for example, an “s” is added to or subtracted from your last name—or it could stem from an inaccurate data entry. Plus, someone might come after you for debt that has already been paid off in full.
3. Bankruptcy debt: It is not unusual for scavengers to seek payment for debt that has been discharged in bankruptcy.

How do zombie tax collectors get you to pay? Not surprisingly, they often frighten you into paying debt that you are not legally obligated to address. This can take several forms including the following common scare tactics.

• Accept payment for a portion of the debt. The scavenger may claim they are willing to let you off the hook if you make a partial payment. Unfortunately, this only resets the statute of limitations, so the tax collector can subsequently come after you for the rest.
• Offer to “fix” your credit report. Debt can remain on your credit report for seven years plus 180 days from the date of the delinquency. A scam artist may convince that they can have the debt removed earlier or they can add debt after the 7½-year period has ended.
• Threaten to sue you or garnish wages. Despite having no legal standing, a scavenger may sue you, or more likely threaten to sue you, for unpaid debt. Or they may threaten to have amounts withheld from wages by employers.
• Engage in abuse and harassment. Zombie debt collectors may try to intimidate you into paying by being verbally abusive or hounding you relentlessly. Or a couple could team up against you by playing “good cop, bad cop” roles.
• Pretend to be an attorney. The scavenger may represent themselves as an attorney or another member of a law firm. This often accompanies the threat of legal action. The idea is to scare you into paying a debt you do not owe.

If you are contacted by a zombie debt collector, do not panic. Contact an attorney before you make any moves—especially payments.

Raw Deal for Gambling Losses

Generally, you can deduct the amount of your gambling losses, but only up to the amount of your winnings for the year, if you itemize on your return. The amount of the annual loss includes certain expenses like travel expenditures.

Busted! The new law just changed the tax odds in the IRS’ favor. Under the One Big Beautiful Bill Act (OBBBA), the deduction is reduced to 90% of the losses, on top of the other limit. For example, if you have $10,000 in winnings and $8,000 in loses, your deduction is reduced to $7,200 (90% of $8,000).

This change is scheduled to take effect in 2026 but has already met with strong resistance. Proposed legislation would restore prior law. We will keep you posted.

Facts and Figures

Timely points of particular interest

Business Car Warranty—Suppose you buy an extended warranty on a vehicle used for business purposes. Can you deduct the full amount in the year of the purchase? No. Instead you can only deduct the portion of the warranty expense attributable to the months the car is used. For example, if you buy a car on September 1, 2025, and add the warranty, the cost of the warranty attributable to four months is deductible on your 2025 return. Note: If the vehicle is also used personally, the deduction is further reduced based on the applicable business percentage.

The OBBBA 2.0—Just because the One Big Beautiful Bill Act (OBBBA) has been signed into law does not mean that Congress will take a break from passing new tax legislation. The drums have already started beating for another reconciliation bill to wend its way through Congress this fall. The proposed legislation could revive provisions proposed in either the House or Senate that fell by the wayside in the final version of the OBBBA. At the very least, expect a “technical corrections act” to clean up unintended results and errors.