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5 potential tax breaks to know before moving a parent into a nursing home

Estate & Wealth Transfer Planning|December 9, 2025

Approximately 1.3 million Americans live in nursing homes, according to the National Center for Health Statistics. If you have a parent moving into one, taxes are probably not on your mind. But there may be tax implications. Here are five possible tax breaks.

1. Long-term medical care

The costs of qualified long-term care, including nursing home care, are deductible as medical expenses to the extent they, along with other medical expenses, exceed 7.5% of adjusted gross income (AGI).

Qualified long-term care services are necessary diagnostic, preventive, therapeutic, curing, treating, mitigating and rehabilitative services, and maintenance or personal-care services required by a chronically ill individual that are provided by a licensed healthcare practitioner.

To qualify as chronically ill, a physician or other licensed healthcare practitioner must certify an individual as unable to perform at least two activities of daily living (eating, toileting, transferring, bathing, dressing and continence) for at least 90 days due to a loss of functional capacity or severe cognitive impairment.

2. Nursing home payments

Amounts paid to a nursing home are deductible as medical expenses if a person is staying at the facility principally for medical, rather than custodial care. If a person isn’t in the nursing home principally to receive medical care, only the portion of the fee that’s allocable to actual medical care qualifies as a deductible expense. But if the individual is chronically ill, all qualified long-term care services, including maintenance or personal care services, are deductible.

If your parent qualifies as your dependent, you can include any medical expenses you incur for your parent along with your own when determining your medical deduction.

3. Long-term care insurance

Premiums paid for a qualified long-term care insurance contract are deductible as medical expenses (subject to limitations explained below) to the extent they, along with other medical expenses, exceed the percentage-of-AGI threshold. A qualified long-term care insurance contract covers only qualified long-term care services, doesn’t pay costs covered by Medicare, is guaranteed renewable and doesn’t have a cash surrender value.

Qualified long-term care premiums are includible as medical expenses up to certain amounts. For individuals over 60 but not over 70 years old, the 2025 limit on deductible long-term care insurance premiums is $4,810, and for those over 70, the 2025 limit is $6,020.

4. The sale of your parent’s home

If your parent sells his or her home, up to $250,000 of the gain from the sale may be tax-free. To qualify for the $250,000 exclusion ($500,000 if married), the seller must generally have owned and used the home for at least two years out of the five years before the sale. However, there’s an exception to the two-out-of-five-year use test if the seller becomes physically or mentally unable to care for him- or herself during the five-year period.

5. Head-of-household filing status

If you aren’t married and your parent meets certain dependency tests, you may qualify for head-of-household filing status, which has a higher standard deduction and, in some cases, lower tax rates than single filing status. You might be eligible to file as head of household even if the parent for whom you claim an exemption doesn’t live with you.

These are only some of the tax issues you may have to contend with when your parent moves into a nursing home. Contact us if you need more information or assistance.

The tax traps of personally guaranteeing a loan to your corporation

Management Advisory Services & Business Consulting|December 4, 2025

If you’re considering guaranteeing, or are asked to guarantee, a loan to your closely held corporation, it’s important to understand the potential tax consequences. Acting as a guarantor, endorser or indemnitor means that if the corporation defaults, you could be responsible for repaying the loan. Without planning ahead, you may face unexpected tax implications.

A business bad debt

If you’re compelled to make good on the obligation, the payment of principal or interest in discharge of the obligation generally results in a bad debt deduction. This may be either a business or a nonbusiness bad debt deduction. If it’s a business bad debt, it’s deductible against ordinary income. A business bad debt can be either totally or partly worthless. If it’s a nonbusiness bad debt, it’s deductible as a short-term capital loss, which is subject to certain limitations. A nonbusiness bad debt is deductible only if it’s totally worthless.

To be treated as a business bad debt, the guarantee must be closely related to your trade or business. If the reason for guaranteeing the corporation loan is to protect your job, the guarantee is considered closely related to your trade or business as an employee. But employment must be the dominant motive. If your annual salary exceeds your investment in the corporation, this generally shows that the dominant motive for the guarantee is to protect your job. On the other hand, if your investment in the corporation substantially exceeds your annual salary, that’s evidence that the guarantee is primarily to protect your investment rather than your job.

Proving the relationship

Except in the case of job guarantees, it may be difficult to show the guarantee is closely related to your trade or business. You have to show that the guarantee is related to your business as a promoter, or that the guarantee is related to some other trade or business separately carried on by you.

If the reason for guaranteeing your corporation’s loan isn’t closely related to your trade or business and you’re required to pay off the loan, you can take a nonbusiness bad debt deduction if you show that your reason for the guarantee was to protect your investment, or you entered the guarantee transaction with a profit motive.

Note: The IRS and courts will scrutinize the dominant motive carefully. Reasonable compensation doesn’t always mean money. It can include protecting employment or business interests.

Additional requirements

In addition to satisfying the above requirements, a business or nonbusiness bad debt is deductible only if you meet these three conditions:

You have a legal duty to make the guaranty payment (although there’s no requirement that a legal action be brought against you).
The guaranty agreement is entered into before the debt becomes worthless.
You receive reasonable consideration (not necessarily cash or property) for entering into the guaranty agreement.

Any payment you make on a loan you guaranteed is deductible as a bad debt in the year you make it, unless the agreement (or local law) provides for a right of subrogation against the corporation. If you have this right, or some other right to demand payment from the corporation, you can’t take a bad debt deduction until the rights become partly or totally worthless.

These are only some of the possible tax consequences of guaranteeing a loan to your closely held corporation. Consult with us to learn all the implications and to help ensure the best tax results.

Making the most of the new deduction for seniors

Tax Prep, Planning & Strategy|November 27, 2025

For 2025 through 2028, individuals age 65 or older generally can claim a new “senior” deduction of up to $6,000 under the One Big Beautiful Bill Act (OBBBA). But an income-based phaseout could reduce or eliminate your deduction. Fortunately, if your income is high enough that the phaseout is a risk, there are steps you can take before year end to help preserve the deduction.

Senior deduction basics

You don’t have to be receiving Social Security benefits to claim the senior deduction. If you’re age 65 or older on December 31 of the tax year, you’re potentially eligible.

If both spouses of a married couple filing jointly are age 65 or older, each spouse is potentially eligible for the $6,000 deduction, for a combined total of up to $12,000. But you must file a joint return; married couples filing separately aren’t eligible.

Combining the senior and standard deductions

Taxpayers age 65 or older already are eligible for an additional standard deduction on top of the basic standard deduction. The following examples illustrate how large the three deductions can be on a combined basis for 2025:

Single filer. An unmarried individual age 65 or older can potentially deduct a total of up to $23,750: $15,750 for the basic standard deduction plus $2,000 for the additional standard deduction for a senior single filer plus $6,000 for the new senior deduction.

Joint filer. If both members of a married couple are age 65 or older, they can potentially deduct a total of up to $46,700: $31,500 for the joint filer basic standard deductions plus two times $1,600 for the additional standard deductions for senior joint-filers plus two times $6,000 for the new senior deduction.

How the phaseout works

The senior 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 eliminated when MAGI exceeds $175,000 or $250,000, respectively. Specifically, the deduction is phased out by 6% of the excess of your MAGI over the applicable phaseout threshold. For this purpose, MAGI means your “regular” AGI increased by certain tax-exempt offshore income (which most taxpayers don’t have).

Here are two examples:

Example 1. For 2025, you’re a single individual age 65 or older. Your MAGI for the year is $130,000. Under the phaseout, your senior deduction is reduced by $3,300 [6% × ($130,000 − $75,000)]. So your senior deduction is $2,700 ($6,000 − $3,300).

Example 2. For 2025, you and your spouse file jointly. You’re both age 65 or older. Your MAGI for the year is $220,000. Under the phaseout rule, your two senior deductions are reduced by $4,200 each [6% × ($220,000 − $150,000)]. So your senior deduction is $1,800 each ($6,000 − $4,200), or $3,600 on a combined basis.

Year-end planning tips

If you’re concerned your 2025 MAGI could exceed the applicable phaseout threshold — or that your senior deduction could be completely phased out — there are moves you can make by December 31 to help maximize your deduction. Specifically, take steps to reduce your MAGI. Here are some potential ways to do it:

Harvest capital losses in taxable brokerage accounts to offset capital gains that would otherwise increase your MAGI.
Defer selling appreciated securities held in taxable brokerage accounts to avoid increasing your MAGI by the capital gains you’d recognize if you sold them.
If you’re still working, maximize salary-reduction contributions to tax-deferred retirement accounts, like your traditional 401(k), which will reduce your MAGI.
Defer or spread out Roth IRA conversions over several years, because your MAGI will be increased by taxable income triggered by the conversions.
If you’re age 73 or older and thus subject to required minimum distributions (RMDs) on your traditional IRA(s), consider making IRA qualified charitable distributions (QCDs). Done properly, the QCDs will count toward your RMD and will be excluded from your taxable income and your MAGI.

Depending on your situation, there may be other moves you can make that will reduce your MAGI.

A valuable tax saver

The new senior deduction can be a valuable tax saver for eligible taxpayers. Please contact us with any questions you have. We can help you determine the best year-end tax planning strategies for your particular situation.

There’s still time for businesses to benefit from clean energy tax breaks

Accounting & Assurance|November 25, 2025

The One Big Beautiful Bill Act (OBBBA), signed into law July 4, 2025, extends or enhances many tax breaks for businesses. But the legislation terminates several business-related clean energy tax incentives earlier than scheduled. For example, the Qualified Commercial Clean Vehicle Credit (Section 45W) had been scheduled to expire after 2032. Under the OBBBA, it’s available only for vehicles that were acquired on or before September 30, 2025. For other clean energy breaks, businesses can still take advantage of them if they act soon.

Deduction for energy-efficient building improvements

The Section 179D deduction allows owners of new or existing commercial buildings to immediately deduct the cost of certain energy-efficient improvements rather than depreciate them over the 39-year period that typically applies. The OBBBA terminates the Sec. 179D deduction for property beginning construction after June 30, 2026.

Besides commercial building owners, eligible taxpayers include:

Tenants and real estate investment trusts (REITs) that make qualifying improvements, and
Certain designers — such as architects and engineers — of government-owned buildings and buildings owned by nonprofit organizations, religious organizations, tribal organizations, and nonprofit schools or universities.

The Sec. 179D deduction is available for new construction as well as additions to or renovations of commercial buildings of any size. (Multifamily residential rental buildings that are at least four stories above grade also qualify.) Eligible improvements include depreciable property installed as part of a building’s interior lighting system, HVAC and hot water systems, or the building envelope.

To be eligible, an improvement must be part of a plan designed to reduce annual energy and power costs by at least 25% relative to applicable industry standards, as certified by an independent contractor or licensed engineer. The base deduction is calculated using a sliding scale, ranging from 50 cents per square foot for improvements that achieve 25% energy savings to $1 per square foot for improvements that achieve 50% energy savings.

Projects that meet specific prevailing wage and apprenticeship requirements are eligible for bonus deductions. Such deductions range from $2.50 per square foot for improvements that achieve 25% energy savings to $5 per square foot for improvements that achieve 50% energy savings.

Other clean energy tax breaks for businesses

Here are some additional clean energy breaks affected by the OBBBA:

Alternative Fuel Vehicle Refueling Property Credit (Section 30C). The OBBBA eliminates the credit for property placed in service after June 30, 2026. (The credit had been scheduled to sunset after 2032.) Property that stores or dispenses clean-burning fuel or recharges electric vehicles is eligible. The credit is worth up to $100,000 per item (each charging port, fuel dispenser or storage property).

Clean Electricity Investment Credit (Section 48E) and Clean Electricity Production Credit (Section 45Y). The OBBBA eliminates these tax credits for wind and solar facilities placed in service after 2027, unless construction begins on or before July 4, 2026. Wind and solar projects begun after that date must be put in service by the end of 2027.

Advanced Manufacturing Production Credit (Section 45X). Under the OBBBA, wind energy components won’t qualify for the credit after 2027. The legislation also modifies the credit in other ways. For example, it adds “metallurgical coal” suitable for the production of steel to the list of critical minerals. And, for critical materials other than metallurgical coal, the credit will now phase out from 2031 through 2033. The credit for metallurgical coal expires after 2029.

Act soon

Many of these clean energy breaks are disappearing years earlier than originally scheduled, leaving limited time for businesses to act. If your business has been exploring clean energy investments, now is the time to consider moving forward. We can help you evaluate eligibility, maximize available tax breaks and structure projects to meet applicable requirements before time runs out. Contact us today to discuss what steps you can take to capture tax benefits while they’re available.

Ready to grow your nest egg? The IRS releases 2026 retirement plan contribution limits

Tax Prep, Planning & Strategy|November 24, 2025

With Notice 2025–67, the IRS has issued its 2026 inflation-adjusted retirement plan contribution limits. Although the changes are more modest than in recent years, most retirement-plan-related limits will still increase for 2026. Depending on your plan, these adjustments may provide extra room to boost your retirement savings.

Type of limitation	2025 limit	2026 limit
Elective deferrals to 401(k), 403(b) and 457 plans	$23,500	$24,500
Annual benefit limit for defined benefit plans	$280,000	$290,000
Contributions to defined contribution plans	$70,000	$72,000
Contributions to SIMPLEs	$16,500	$17,000
Contributions to traditional and Roth IRAs	$7,000	$7,500
Catch-up contributions to 401(k), 403(b) and 457 plans for those age 50 or older*	$7,500	$8,000
Catch-up contributions to 401(k), 403(b) and 457 plans for those age 60, 61, 62 or 63*	$11,250	$11,250
Catch-up contributions to SIMPLE plans for those age 50 or older	$3,500	$4,000
Catch-up contributions to SIMPLE plans for those age 60, 61, 62 or 63	$5,250	$5,250
Catch-up contributions to IRAs for those age 50 or older	$1,000	$1,100
Compensation for benefit purposes for qualified plans and SEPs	$350,000	$360,000
Minimum compensation for SEP coverage	$750	$800
Highly compensated employee threshold	$160,000	$160,000

*Starting in 2026, the SECURE 2.0 Act requires the catch-up contributions of higher-income taxpayers to be treated as post-tax Roth contributions. Generally for 2026, the requirement will apply to taxpayers who earned more than $150,000 during the prior year. However, new final regulations state that the deadline for plan amendments to implement this change is December 31, 2026. So there might not be any adverse consequences for plans that continue to allow non-Roth account catch-up contributions for higher-income taxpayers in 2026.

Your modified adjusted gross income (MAGI) may reduce or even eliminate your ability to take advantage of IRAs. Fortunately, IRA-related MAGI phaseout range limits will all increase for 2026:

Traditional IRAs. MAGI phaseout ranges apply to the deductibility of contributions if a taxpayer (or his or her spouse) participates in an employer-sponsored retirement plan:

For married taxpayers filing jointly, the phaseout range is specific to each spouse based on whether he or she is a participant in an employer-sponsored plan:
- For a spouse who participates, the 2026 phaseout range limits will increase by $3,000, to $129,000–$149,000.
- For a spouse who doesn’t participate, the 2026 phaseout range limits will increase by $6,000, to $242,000–$252,000.
For single and head-of-household taxpayers participating in an employer-sponsored plan, the 2026 phaseout range limits will increase by $2,000, to $81,000–$91,000.

Taxpayers with MAGIs in the applicable range can deduct a partial contribution; those with MAGIs exceeding the applicable range can’t deduct any IRA contribution.

But a taxpayer whose deduction is reduced or eliminated can make nondeductible traditional IRA contributions. The $7,500 contribution limit for 2026 (plus $1,100 catch-up, if applicable, and reduced by any Roth IRA contributions) still applies.

Nondeductible traditional IRA contributions may also be beneficial if your MAGI is too high for you to contribute (or fully contribute) to a Roth IRA.

Roth IRAs. Whether you participate in an employer-sponsored plan doesn’t affect your ability to contribute to a Roth IRA, but MAGI limits may reduce or eliminate your ability to contribute:

For married taxpayers filing jointly, the 2026 phaseout range limits will increase by $6,000, to $242,000–$252,000.
For single and head-of-household taxpayers, the 2026 phaseout range limits will increase by $3,000, to $153,000–$168,000.

You can make a partial contribution if your MAGI falls within the applicable range, but no contribution if it exceeds the top of the range.

(Note: Married taxpayers filing separately are subject to much lower phaseout ranges for traditional and Roth IRAs.)

When reviewing your retirement plan, be sure to take these 2026 contribution limits into account. We can help you review your retirement plan and make any necessary revisions.

Minimize your business’s 2025 federal taxes by implementing year-end tax planning strategies

Tax Prep, Planning & Strategy|November 19, 2025

The One Big Beautiful Bill Act (OBBBA) shifts the landscape for year-end tax planning. The law has significant implications for some of the most tried-and-true tax-reduction measures. It also creates new opportunities for businesses to reduce their 2025 tax liability before December 31. Here are potentially some of the most beneficial ones.

Investments in capital assets

Thanks to bonus depreciation, businesses have commonly turned to year-end capital asset purchases to cut their taxes. The OBBBA helps make this strategy even more powerful for 2025.

Under the Tax Cuts and Jobs Act (TCJA), 100% first-year bonus depreciation declined by 20 percentage points each year beginning in 2023, falling to 40% in 2025. The OBBBA restores and makes permanent 100% bonus depreciation for qualified new and used assets acquired and placed in service after January 19, 2025. (Qualified purchases made in 2025 on or before January 19 remain subject to the 40% limit.)

The law also boosts the Section 179 expensing election limit for small and midsize businesses to $2.5 million, with the phaseout threshold lifted to $4 million. (Both amounts will be adjusted annually for inflation.)

Most assets eligible for bonus depreciation also qualify for Sec. 179 expensing. But Sec. 179 expensing is allowed for certain expenses not eligible for bonus depreciation — specifically, roofs, HVAC equipment, fire protection and alarm systems, and security systems for nonresidential real property, as well as depreciable personal property used predominantly in connection with furnishing lodging.

Sec. 179 expensing is subject to several limitations that don’t apply to first-year bonus depreciation, especially for S corporations, partnerships and limited liability companies treated as partnerships for tax purposes. So, when assets are eligible for either break, claiming allowable 100% first-year bonus depreciation may be beneficial.

However, Sec. 179 expensing is more flexible — you can take it on an asset-by-asset basis. With bonus depreciation, you have to take it for an entire class of assets (for example, all MACRS 7-year property). Business vehicles are popular year-end purchases to boost depreciation-related tax breaks. They’re generally eligible for bonus depreciation and Sec. 179 expensing, but keep in mind that they’re subject to additional rules and limits. Also, if a vehicle is used for both business and personal use, the associated expenses, including depreciation, must be allocated between deductible business use and nondeductible personal use.

As an added perk, the OBBBA changes the business interest deduction — specifically, the calculation of adjusted taxable income — which could allow you to deduct more interest on capital purchases beginning in 2025.

Pass-through entity tax deduction

Dozens of states enacted pass-through entity tax (PTET) deduction laws in response to the TCJA’s $10,000 limit on the federal deduction for state and local taxes (SALT), also referred to as the SALT cap. The mechanics vary, but the deductions generally let pass-through entities (partnerships, limited liability companies and S corporations) pay an elective entity-level state tax on business income with an offsetting tax benefit for the owners. The organization deducts the full payment as a business expense.

Before year end, it’s important to review whether a PTET deduction is available to you and, if so, whether it’ll make sense to claim it. This can impact other year-end tax planning strategies.

The PTET deduction may be less relevant for 2025 because the OBBBA temporarily boosts the SALT cap to $40,000 (with 1% increases each year through 2029). The higher cap is subject to phaseouts based on modified adjusted gross income (MAGI); when MAGI reaches $600,000, the $10,000 cap applies.

But the PTET deduction may still be worthwhile in some circumstances. It could pay off, for example, if an owner’s MAGI excludes the owner from benefiting from the higher cap or if an owner’s standard deduction would exceed his or her itemized deductions so the owner wouldn’t benefit from the SALT deduction.

By reducing the income passed through from the business, a PTET deduction election could also help an owner reduce his or her liability for self-employment taxes and avoid the 3.8% net investment income tax. Moreover, lower income could unlock eligibility for other tax breaks, such as deductions for rental losses and the Child Tax Credit. Bear in mind, though, that while a PTET deduction could help you qualify for the Section 199A qualified business income (QBI) deduction despite the income limit (see below), it also might reduce the size of the deduction.

QBI deduction

Eligible pass-through entity owners can deduct up to 20% of their QBI, whether they itemize deductions or take the standard deduction. QBI refers to the net amount of income, gains, deductions and losses, excluding reasonable compensation, certain investments and payments to partners for services rendered.

The deduction is subject to limitations based on taxable income and, in some cases, on W-2 wages paid and the unadjusted basis of qualified property (generally, the purchase price of tangible depreciable property held at the end of the tax year). The OBBBA expands the phase-in ranges for those limits so that more taxpayers will qualify for larger QBI deductions beginning in 2026.

In the meantime, you can still take steps to increase your QBI deduction for 2025. For example, if your income might be high enough that you’ll be subject to the W-2 wage or qualified property limit, you could increase your W-2 wages or purchase qualified property. Timing tactics — generally, accelerating expenses into this year and deferring income into 2026 — might also help you avoid income limits on the deduction.

Research and experimental deduction

The OBBBA makes welcome changes to the research and experimental (R&E) deduction. It allows businesses to capitalize domestic Section 174 costs and amortize them over five years beginning in 2025.

It also permits “small businesses” (those with average annual gross receipts of $31 million or less for the previous three tax years) to claim the R&E deduction retroactive to 2022. And businesses of any size that incurred domestic R&E expenses in 2022 through 2024 can elect to accelerate the remaining deductions over either a one- or two-year period.

You don’t necessarily need to take steps before year end to benefit from these changes. But it’s important to consider how claiming larger R&E deductions on your 2025 return could impact your overall year-end planning strategies.

It’s also a good idea to start thinking about how you’ll approach the R&E expense deduction on your 2025 tax return. For example, it might make more sense to continue to amortize your qualified R&E expenses. You also should determine if it would be beneficial to recover remaining unamortized R&E expenses in 2025 or prorate the expenses across 2025 and 2026. And if you’re eligible to claim retroactive deductions, review your R&E expenses for 2022 through 2024 to decide whether it would be beneficial to do so.

Don’t delay

We’ve focused on year-end strategies affected by the OBBBA, but there are also strategies not significantly impacted by it that are still valuable. One example is accelerating deductible expenses into 2025 and deferring income to 2026 (or doing the opposite if you expect to be in a higher tax bracket next year). Another is increasing retirement plan contributions (or setting up a retirement plan if you don’t have one).

Now is the time to execute the last-minute strategies that will trim your business’s 2025 taxes. We can help you identify the ones that fit your situation.

Boost your tax savings by donating appreciated stock instead of cash

Tax Prep, Planning & Strategy|November 18, 2025

Saving taxes probably isn’t your primary reason for supporting your favorite charities. But tax deductions can be a valuable added benefit. If you donate long-term appreciated stock, you potentially can save even more.

Not just a deduction

Appreciated publicly traded stock you’ve held more than one year is long-term capital gains property. If you donate it to a qualified charity, you may be able to enjoy two tax benefits.

First, if you itemize deductions, you can claim a charitable deduction equal to the stock’s fair market value. Second, you won’t be subject to the capital gains tax you’d owe if you sold the stock.

Donating appreciated stock can be especially beneficial to taxpayers facing the 3.8% net investment income tax (NIIT) or the top 20% long-term capital gains rate this year.

The strategy in action

Let’s say you donate $15,000 of stock that you paid $5,000 for, your ordinary-income tax rate is 37% and your long-term capital gains rate is 20%. Let’s also say you itemize deductions.

If you sold the stock, you’d pay $2,000 in tax on the $10,000 gain. If you were also subject to the 3.8% NIIT, you’d pay another $380 in NIIT.

By instead donating the stock to charity, you save $7,930 in federal tax ($2,380 in capital gains tax and NIIT plus $5,550 from the $15,000 income tax deduction). If you donated $15,000 in cash, your federal tax savings would be only $5,550.

3 important considerations

There are a few things to keep in mind when considering a stock donation:

1. The charitable deduction will provide a tax benefit only if your total itemized deductions exceed your standard deduction. For 2025, the standard deduction is $15,750 for singles and married couples filing separately, $23,625 for heads of households, and $31,500 for married couples filing jointly.

2. Donations of long-term capital gains property are subject to tighter deduction limits. The limits are 30% of your adjusted gross income for gifts to public charities and 20% for gifts to nonoperating private foundations (compared to 60% and 30%, respectively, for cash donations).

3. Don’t donate stock that’s worth less than your basis. Instead, sell the stock so you can deduct the loss and then donate the cash proceeds to charity.

A tried-and-true year-end tax strategy

If you expect to itemize deductions on your 2025 tax return, making charitable gifts by December 31 is a great way to reduce your tax liability. And donating highly appreciated stock you’ve hesitated to sell because of the tax cost can be an especially smart year-end strategy. To learn more about minimizing capital gains tax or maximizing charitable deductions, contact us today.

Should your business maximize deductions for real estate improvements now or spread them out?

Management Advisory Services & Business Consulting|November 13, 2025

Commercial real estate usually must be depreciated over 39 years. But certain real estate improvements — specifically, qualified improvement property (QIP) — are eligible for accelerated depreciation and can even be fully deducted immediately. While maximizing first-year depreciation is often beneficial, it’s not always the best tax move.

QIP defined

QIP includes any improvement to an interior portion of a nonresidential building that’s placed in service after the date the building was placed in service. But expenditures attributable to the enlargement of the building, any elevator or escalator, or the building’s internal structural framework don’t count as QIP.

QIP has a 15-year depreciation period. It’s also eligible for bonus depreciation and Section 179 expensing.

100% bonus depreciation

Additional first-year bonus depreciation is available for eligible assets, including QIP. The One Big Beautiful Bill Act (OBBBA), signed into law in July, increases bonus depreciation to 100% for assets acquired and placed in service after Jan. 19, 2025. It also makes 100% bonus depreciation permanent.

But be aware that bonus depreciation is only 40% for assets acquired Jan. 1, 2025, through Jan. 19, 2025, and placed in service any time in 2025. So, if your objective is to maximize first-year deductions on QIP acquired during that period, you’d claim the Sec. 179 deduction first. (See below.) If you max out on that, then you’d claim 40% first-year bonus depreciation.

In some cases, a business may not be eligible for bonus depreciation. Examples include real estate businesses that elect to deduct 100% of their business interest expense and dealerships with floor-plan financing — if they have average annual gross receipts exceeding $31 million for the previous three tax years.

Sec. 179 expensing

Similar to 100% bonus depreciation, Sec. 179 expensing allows you to immediately deduct (rather than depreciate over a number of years) the cost of purchasing eligible assets, including QIP. But the break is subject to annual dollar limits, which the OBBBA increases.

For qualifying assets placed in service in tax years beginning in 2025, the maximum allowable Section 179 depreciation deduction is $2.5 million (up from $1.25 million before the OBBBA). In addition, the break begins to phase out dollar-for-dollar when asset acquisitions for the year exceed $4 million (up from $3.13 million before the OBBBA). These amounts will continue to be annually adjusted for inflation after 2025.

Another restriction is that you can claim Sec. 179 expensing only to offset net income. The deduction can’t reduce net income below zero to create an overall business tax loss.

One advantage over bonus depreciation is that, for Sec. 179 expensing purposes, QIP also includes HVAC systems, nonresidential building roofs, fire protection and alarm systems, and security systems that are placed in service after the building is first placed in service.

Spreading out QIP depreciation

There are a few reasons why it may be more beneficial to spread out QIP depreciation over 15 years rather than claiming large first-year depreciation deductions:

Bonus depreciation can trigger the excess business loss rule. Although you can claim 100% first-year bonus depreciation even if it will create a tax loss, you could inadvertently trigger the excess business loss rule.

The rule limits deductions for current-year business losses incurred by noncorporate taxpayers: Such losses generally can offset income from other sources, such as salary, self-employment income, interest, dividends and capital gains, only up to the applicable limit. For 2025, the limit is $313,000 ($626,000 for a married joint filer).

As a result, your 100% first-year bonus depreciation deduction might effectively be limited by the excess business loss rule. However, any excess business loss is carried over to the following tax year and can then be deducted under the rules for net operating loss carryforwards.

Large first-year deductions can result in higher-taxed gain when QIP is sold. First-year bonus depreciation and Sec. 179 deductions claimed for QIP can create depreciation recapture that’s taxed at your ordinary income rate when the QIP is sold. Under rates made permanent by the OBBBA, the maximum individual rate on ordinary income is 37%. You may also owe the 3.8% net investment income tax (NIIT).

On the other hand, for QIP held for more than one year, gain attributable to straight-line depreciation is taxed at an individual federal rate of only 25%, plus the 3.8% NIIT if applicable.

Depreciation deductions may be worth more in the future. When you claim big first-year depreciation deductions for QIP, your depreciation deductions for future years are reduced accordingly. If you’re in a higher income tax bracket in the future or federal income tax rates go up, you’ll have effectively traded potentially more valuable future-year depreciation deductions for less-valuable first-year deductions.

Keep in mind that, while the OBBBA did “permanently” extend current rates, that only means they have no expiration date. Lawmakers could still increase rates in the future.

What’s best for you

Many factors must be considered before deciding whether to maximize QIP first-year depreciation deductions or spread out the deductions over multiple years. We can help you determine what’s best for your situation.

4 year-end planning steps to trim your 2025 taxes

Tax Prep, Planning & Strategy|November 7, 2025

Now is the time of year when taxpayers search for last-minute moves to reduce their federal income tax liability. Adding to the complexity this year is the One Big Beautiful Bill Act (OBBBA), which significantly changes various tax laws. Here are some of the measures you can take now to reduce your 2025 taxes in light of the OBBBA.

Reevaluate the standard deduction

Taxpayers can choose to itemize certain deductions or take the standard deduction based on their filing status. Itemizing deductions saves tax if the total exceeds the standard deduction. The number of taxpayers who itemize dropped dramatically after the Tax Cuts and Jobs Act (TCJA) nearly doubled the standard deduction. The OBBBA increases it further. The standard deduction for 2025 is:

$15,750 for single filers and married individuals filing separately,
$23,625 for heads of households, and
$31,500 for married couples filing jointly.

Taxpayers age 65 or older or blind are eligible for an additional standard deduction of $2,000 or, for joint filers, $1,600 per spouse age 65 or older or blind. (For taxpayers both 65 or older and blind, the additional deduction is doubled.)

But other OBBBA changes could make itemizing more beneficial. For example, if you’ve been claiming the standard deduction recently, the expanded state and local tax (SALT) deduction might cause your total itemized deductions to exceed your standard deduction for 2025. (See No. 2 below.) If it does, you might benefit from accelerating other itemized deductions into 2025. In addition to SALT, potential itemized deductions include:

Qualified medical and dental expenses (to the extent that they exceed 7.5% of your adjusted gross income),
Home mortgage interest (generally on up to $750,000 of home mortgage debt on a principal residence and a second residence),
Casualty losses (from a federally declared disaster), and
Charitable contributions (see No. 3 below).

Note, too, that higher earners will face a limit on their itemized deductions in 2026. The OBBBA effectively caps the value of itemized deductions for taxpayers in the highest tax bracket (37%) at 35 cents per dollar, compared with 37 cents per dollar this year. If you’re among that group, you may want to accelerate itemized deductions into 2025 to leverage the full value.

Maximize your SALT deduction

The OBBBA temporarily quadruples the so-called “SALT cap.” For 2025 through 2029, taxpayers who itemize can deduct up to $40,000 ($20,000 for separate filers), with 1% increases each subsequent year, meaning $40,400 in 2026 and so on. Deductible SALT expenses include property taxes (for homes, vehicles and boats) and either income tax or sales tax, but not both. The SALT cap is scheduled to return to the TCJA’s $10,000 cap ($5,000 for separate filers) beginning in 2030.

In the meantime, the temporary limit increase could substantially boost your tax savings, depending on your SALT expenses and your modified adjusted gross income (MAGI). The allowable deduction drops by 30% of the amount by which your MAGI exceeds a threshold of $500,000 ($250,000 for separate filers). When MAGI reaches $600,000 ($300,000 for separate filers), the $10,000 (or $5,000) cap applies.

If your 2025 SALT deductions exceed the old $10,000 cap but your total itemized deductions would still be under the standard deduction, “bunching” could help you make the most of the higher SALT cap. For example, if you receive your 2026 property tax bill before year end, you can pay it this year and deduct both your 2025 and 2026 property taxes in 2025. You might increase the deduction further by accelerating estimated state or local income tax payments into this year, if applicable. You could bunch other itemized deductions into 2025 as well. (See No. 1 above.)

In 2026, you’d go back to claiming the standard deduction. And then you’d repeat the bunching for the 2027 tax year and itemize that year.

Prepare for changes to charitable giving rules

Donating to charity is a valuable and flexible year-end tax planning tool. You can give as much or as little as you like. As long as the recipient is a qualified charity, you can properly substantiate the donation and you itemize, you’ll likely be able to claim a tax deduction. But beginning in 2026, the OBBBA imposes a 0.5% of adjusted gross income (AGI) “floor” on charitable contribution deductions.

The floor generally means that only charitable donations in excess of 0.5% of your AGI can be claimed as an itemized deduction. In other words, if your AGI for a tax year is $100,000, you can’t deduct the first $500 ($100,000 × 0.5%) of donations made that year.

So if you can afford it, you might want to bunch donations you’d normally make in 2026 into 2025 instead, so that you can avoid the new floor. (Bear in mind that a charitable deduction might nonetheless be more valuable next year if you’ll be in a higher tax bracket.)

One way to save even more taxes with your charitable donations is to give appreciated stock instead of cash. You can avoid the long-term capital gains tax you’d owe if you sold the stock and also claim a charitable deduction for the fair market value (FMV) of the shares.

On the other hand, if you don’t itemize, you may want to delay your 2025 charitable contributions until next year. Beginning in 2026, the OBBBA creates a permanent deduction for nonitemizers’ cash contributions, up to $1,000 for individuals and $2,000 for married couples filing jointly. Donations must be made to public charities, not foundations or donor-advised funds.

Manage your MAGI

MAGI is the trigger for certain additional taxes and the phaseouts of many tax breaks, including some of the newest deductions. For example, the OBBBA establishes a temporary “senior” deduction of $6,000 for taxpayers age 65 or older. This can be claimed in addition to either the standard deduction or itemized deductions. But the senior deduction begins to phase out when MAGI exceeds $75,000 ($150,000 for joint filers).

As discussed in No. 2, the enhanced SALT deduction is also subject to MAGI phaseouts. So, too, are the Child Tax Credit and the new temporary deductions for qualified tips, overtime pay and car loan interest. In terms of being a tax trigger, your MAGI plays a role in determining your liability for the 3.8% net investment income tax.

It can pay, therefore, to take steps to reduce your MAGI. For example, you might spread a Roth conversion over multiple years, rather than completing it in a single year. You can also max out your contributions to traditional retirement accounts and Health Savings Accounts.

If you’re age 70½ or older, qualified charitable distributions (QCDs) from your traditional IRA are another avenue for reducing your MAGI. While a charitable deduction can’t be claimed for QCDs, the amounts aren’t included in your MAGI and can be used to satisfy an IRA owner’s required minimum distribution (RMD), if applicable. This can be beneficial because charitable donation deductions (and other itemized deductions) don’t reduce MAGI and RMDs typically are included in MAGI.

Begin planning now

Don’t miss out on both new and traditional planning opportunities to reduce your 2025 taxes. The best strategies for you depend on your specific situation. We’d be pleased to help you with your year-end tax planning.

The 2025 SALT deduction cap increase might save you substantial taxes

Tax Prep, Planning & Strategy|November 6, 2025

If you pay more than $10,000 in state and local taxes (SALT), a provision of the One Big Beautiful Bill Act (OBBBA) could significantly reduce your 2025 federal income tax liability. However, you need to be aware of income-based limits, and you may need to take steps before year end to maximize your deduction.

Higher deduction limit

Deductible SALT expenses include property taxes (for homes, vehicles and boats) and either income tax or sales tax, but not both. Historically, eligible SALT expenses were generally 100% deductible on federal income tax returns if an individual itemized deductions. This provided substantial tax savings to many taxpayers in locations with higher income or property tax rates (or higher home values), as well as those who owned both a primary residence and one or more vacation homes.

Beginning in 2018, the Tax Cuts and Jobs Act (TCJA) limited the deduction to $10,000 ($5,000 for married couples filing separately). This SALT cap was scheduled to expire after 2025.

Rather than letting the $10,000 cap expire or immediately making it permanent, the OBBBA temporarily quadruples the limit. Beginning in 2025, taxpayers can deduct up to $40,000 ($20,000 for married couples filing separately), with 1% increases each subsequent year. Then in 2030, the OBBBA reinstates the $10,000 cap.

The increased SALT cap could lead to major tax savings compared with the $10,000 cap. For example, a single taxpayer in the 35% tax bracket with $40,000 in SALT expenses could save an additional $10,500 in taxes [35% × ($40,000 − $10,000)].

Income-based reduction

While the higher limit is in place, it’s reduced for taxpayers with incomes above a certain level. The allowable deduction drops by 30% of the amount by which modified adjusted gross income (MAGI) exceeds a threshold amount. For 2025, the threshold is $500,000; when MAGI reaches $600,000, the previous $10,000 cap applies. (These amounts are halved for separate filers.) The MAGI threshold will also increase 1% each year through 2029.

Here’s how the earlier example would be different if the taxpayer’s MAGI exceeded the threshold: Let’s say MAGI is $550,000, which is $50,000 over the 2025 threshold. The cap would be reduced by $15,000 (30% × $50,000), leaving a maximum SALT deduction of $25,000 ($40,000 − $15,000). Even reduced, that’s more than twice what would be permitted under the $10,000 cap. The reduced deduction would still save an additional $5,250 in taxes [35% × ($25,000 − $10,000) compared to when the $10,000 cap applied.

Itemizing vs. the standard deduction

The SALT deduction is available only to taxpayers who itemize their deductions. The TCJA nearly doubled the standard deduction. As a result of that change and the $10,000 SALT cap, the number of taxpayers who itemize dropped substantially. And, under the OBBBA, the standard deduction is even higher — for 2025, it’s $15,750 for single and separate filers, $23,625 for head of household filers, and $31,500 for married couples filing jointly.

But the higher SALT cap might make it worthwhile for some taxpayers who’ve been claiming the standard deduction post-TCJA to start itemizing again. Consider, for example, a taxpayer who pays high state income tax. If that amount combined with other itemized deductions (generally, certain medical and dental expenses, home mortgage interest, qualified casualty losses, and charitable contributions) exceeds the applicable standard deduction, the taxpayer will save more tax by itemizing.

Year-end strategies

Here are two strategies that might help you maximize your 2025 SALT deduction:

1. Reduce your MAGI. If it’s nearing the threshold that would reduce your deduction or already over it, you can take steps to stay out of the danger zone. For example, you can make or increase pretax retirement plan and Health Savings Account contributions. Likewise, you can avoid moves that increase your MAGI, like Roth IRA conversions, nonrequired traditional retirement plan distributions and asset sales that result in large capital gains.

2. Accelerate property tax deductions. If your SALT expenses are less than $40,000 and your MAGI is below the reduction threshold for 2025, for example, you might prepay your 2026 property tax bill this year. (This assumes the amount has been assessed — you can’t deduct a prepayment based only on your estimate.)

Plan carefully

In your SALT planning, also be aware that SALT expenses aren’t deductible for purposes of the alternative minimum tax (AMT). A large SALT deduction could have the unintended effect of triggering the AMT, particularly after 2025.

Under the right circumstances, the increase to the SALT deduction cap can be a valuable tax saver. But careful planning is essential. Contact us for assistance with maximizing your SALT deduction and other year-end tax planning strategies.

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