Many tax figures are annually adjusted for inflation and typically increase each year (or at least every few years). For 2026, some additional changes are going into effect under the One Big Beautiful Bill Act, signed into law July 4, 2025. Here’s an overview of some important limits and other tax figures for 2026. Keep in mind that exceptions or additional rules or limits may apply.

Standard deduction

• Single and married filing separately: $16,100
• Head of household: $24,150
• Married couples filing jointly: $32,200
• Additional standard deduction for those age 65 or older and/or blind: $2,050 ($1,650 per spouse if married). For taxpayers both 65 or older and blind, the additional deduction is doubled.

Itemized deduction limits

• Casualty loss deduction: only for eligible losses from federally or (new for 2026) state-declared disasters
• Charitable deduction floor (new for 2026): 0.5% of adjusted gross income (AGI)
• Mortgage interest deduction: interest on qualified debt up to $750,000
• Medical expense deduction floor: 7.5% of AGI
• State and local tax deduction: $40,400
• Overall limit for higher-income taxpayers (new for 2026): Generally, the tax benefit from itemized deductions for taxpayers in the 37% bracket will be as if they were in the 35% bracket

Retirement plan limits

• Traditional and Roth IRA contributions: $7,500
• Traditional and Roth IRA catch-up contributions for those age 50 or older: $1,100
• 401(k), 403(b) and 457 plan deferrals: $24,500
• 401(k), 403(b) and 457 plan catch-up contributions for those age 50 or older: $8,000
• 401(k), 403(b) and 457 plan additional catch-up contributions for those age 60, 61, 62 or 63: $3,250
• SIMPLE deferrals: $17,000
• SIMPLE catch-up contributions for those age 50 or older: $4,000
• SIMPLE additional catch-up contributions for those age 60, 61, 62 or 63: $1,250
• Contributions to defined contribution plans: $72,000
• Annual benefit limit for defined benefit plans: $290,000

Other tax-advantaged savings limits

• Health Savings Account (HSA) contributions: $4,400 for individuals, $8,750 for family coverage
• Health Flexible Spending Account (FSA) contributions: $3,400
• Child and dependent care FSA contributions: $7,500
• Trump account contributions: $5,000

Estate planning

• Gift and estate tax exemption: $15 million
• Generation-skipping transfer tax exemption: $15 million
• Annual gift tax exclusion: $19,000 (unchanged from 2025)

2026 tax planning

These are only some of the figures and limits that could affect your 2026 taxes. To learn more and begin planning for the new year, contact us.

© 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.

© 2025

If you inherit assets after a loved one passes away, they often arrive with a valuable — but frequently misunderstood — tax benefit called the step-up in basis. Below is an overview of how the rule works and what planning might need to be done.

What “basis” means

First, let’s look at a couple definitions. Basis is generally what the owner paid for an asset, adjusted for improvements, depreciation, return of capital, etc. Capital gain (or loss) equals the sale price minus the basis.

At death, many capital assets (stocks, real estate, business interests, collectibles, crypto, etc.) are stepped up (or down) to their fair market value (FMV) as of the date of death (or, if elected by the executor, the “alternate valuation date” six months later). The heir’s new basis is that FMV, erasing the tax on any unrealized gain or loss that accumulated during the deceased person’s life.

For example, your father bought ABC stock many years ago for $50,000. At his death, it’s worth $220,000. Your inherited basis is $220,000. If you sell immediately for $220,000, there’s no capital gains tax. Hold it and sell later for $260,000 and you’ll only recognize the $40,000 gain since the date of death.

Some assets don’t receive a stepped-up basis. For example, 401(k)s and IRAs are excluded.

Actions for heirs and future estates

There are some steps that heirs and individuals planning their estates can take.

After a death, heirs should:

• Document the FMV of assets on the date of death. You can use brokerage statements, appraisals, Zillow printouts, cryptocurrency exchange screenshots, etc.
• Retitle assets into your name or trust as soon as possible to avoid administrative issues.
• Keep meticulous records. You may sell years later, or the IRS may question you.

Asset owners planning ahead should:

• Inventory low-basis assets you plan to hold and include in your estate.
• Harvest losses strategically to offset gains you can’t eliminate through a step-up.
• Coordinate gifting and lifetime transfers. Remember that gifts use a carry-over basis. This means if you are given a gift (rather than an inheritance), your basis is generally the same as the donor’s was when the gift was made.

Good records and proactive planning

These are the basic rules. Other rules and limits may apply. For example, in some cases, a deceased person’s executor may be able to make an alternate valuation election. And gifts made just before a person dies (sometimes called “death bed gifts”) may be included in the gross estate for tax purposes.

Reach out to us for tax assistance when estate planning or after receiving an inheritance. We’ll help you chart the most tax-efficient path forward.

© 2025

If you own a small business with no employees (other than your spouse) and want to set up a retirement plan, consider a solo 401(k) plan. This is also an option for self-employed individuals or business owners who wish to upgrade from a SIMPLE IRA or Simplified Employee Pension (SEP) plan.

A solo 401(k), also known as an individual 401(k), may offer advantages in terms of contributions, tax savings and investment options. These accounts are geared toward self-employed individuals, including sole proprietors, owners of single-member limited liability companies, consultants and other one-person businesses.

How much can you contribute?

You can make large annual tax-deductible contributions to a solo 401(k) plan. For 2024, you can make an “elective deferral contribution” of up to $23,000 of your net self-employment (SE) income to a solo 401(k). The elective deferral contribution limit increases to $30,500 if you’ll be age 50 or older as of December 31, 2024. The larger $30,500 figure includes an extra $7,500 catch-up contribution that’s allowed for older owners.

On top of your elective deferral contribution, an additional contribution of up to 20% of your net SE income is permitted for a solo 401(k). This is called an “employer contribution,” though there’s technically no employer when you’re self-employed. For purposes of calculating the employer contribution, your net SE income isn’t reduced by your elective deferral contribution.

For the 2024 tax year, the combined elective deferral and employer contributions can’t exceed:

• $69,000 ($76,500 if you’ll be 50 or older as of December 31, 2024), or
• 100% of your net SE income.

Net SE income equals the net profit shown on Form 1040, Schedule C, E or F for the business, minus the deduction for 50% of self-employment tax attributable to the business.

What are the advantages and disadvantages?

Besides the ability to make significant deductible contributions, another solo 401(k) advantage is that contributions are discretionary. If cash is tight, you can contribute a small amount or nothing.

In addition, you can borrow from your solo 401(k) account, assuming the plan document permits it. The maximum loan amount is 50% of the account balance or $50,000, whichever is less. Some other plan options, including SEPs, don’t allow loans. This feature can be valuable if you need access to funds for business opportunities or emergencies.

The biggest downside to solo 401(k)s is their administrative complexity. Significant upfront paperwork and ongoing administrative efforts are required, including adopting a written plan document and arranging how and when elective deferral contributions will be collected and paid into the owner’s account. Also, once your account balance exceeds $250,000, you must file Form 5500-EZ with the IRS annually.

You can’t have a solo 401(k) if your business has one or more employees. Instead, you must have a multi-participant 401(k) with all the resulting complications. The tax rules may require you to make contributions for those employees. However, there are a few important loopholes. You can contribute to a plan if your spouse is a part-time or full-time employee. You can also exclude employees who are under 21 and part-time employees who haven’t worked at least 1,000 hours during any 12-month period.

Who’s the best candidate for this plan?

For a one-person business, a solo 401(k) can be a smart retirement plan choice if:

• You want to make large annual deductible contributions and have the money,
• You have substantial net SE income, and
• You’re 50 or older and can take advantage of the extra catch-up contribution.

Before establishing a solo 401(k), weigh the pros and cons of other retirement plans — especially if you’re 50 or older. Solo 401(k)s aren’t simple, but they can allow you to make substantial and deductible contributions to a retirement nest egg. Contact us before signing up to determine what’s best for your situation.

© 2024

The current estate tax exemption amount ($13.61 million in 2024) has led many people to feel they no longer need to be concerned about federal estate tax. Before 2011, a much smaller exemption resulted in many people with more modest estates attempting to avoid it. But since many estates won’t currently be subject to estate tax, it’s a good time to devote more planning to income tax saving for your heirs.

Important: Keep in mind that the federal estate tax exclusion amount is scheduled to sunset at the end of 2025. Beginning on January 1, 2026, the amount is due to be reduced to $5 million, adjusted for inflation. Of course, Congress could act to extend the higher amount or institute a new amount.

Here are some strategies to consider in light of the current large exemption amount.

Using the annual exclusion

One of the benefits of using the gift tax annual exclusion to make transfers during your lifetime is to save estate tax. This is because both the transferred assets and any post-transfer appreciation generated by those assets are removed from your (the donor’s) estate.

As mentioned, estate tax savings may not be an issue because of the large exemption amount. Further, making an annual exclusion transfer of appreciated property carries a potential income tax cost because the recipient receives your basis upon transfer. Thus, the recipient could face income tax, in the form of capital gains tax, on the sale of the gifted property in the future. If there’s no concern that an estate will be subject to estate tax, even if the gifted property grows in value, then you might want to base the decision to make a gift on other factors.

For example, gifts may be made to help a relative buy a home or start a business. But a donor shouldn’t gift appreciated property because of the capital gains that could be realized on a future sale by the recipient. If the appreciated property is held until the donor’s death, under current law, the heir will get a step-up in basis that will wipe out the capital gains tax on any pre-death appreciation in the property’s value.

Spouses now have more flexibility

Years ago, spouses often undertook complicated strategies to equalize their estates so that each could take advantage of the estate tax exemption amount. In many cases, a two-trust plan was established to minimize estate tax. “Portability,” or the ability to apply the decedent’s unused exclusion amount to the surviving spouse’s transfers during life and at death, became effective for estates of decedents dying after 2010. As long as the election is made, portability allows the surviving spouse to apply the unused portion of a decedent’s applicable exclusion amount (the deceased spousal unused exclusion amount) as calculated in the year of the decedent’s death. The portability election gives married couples more flexibility in deciding how to use their exclusion amounts.

Valuation discounts

Be aware that it may no longer be worth pursuing some estate exclusion or valuation discount strategies to avoid inclusion of property in an estate. It may be better to have the property included in the estate or not qualify for valuation discounts so that the property receives a step-up in basis. For example, the special use valuation — the valuation of qualified real property used for farming or in a business, based on the property’s actual use rather than on its highest and best use — may not save enough, or any, estate tax to justify giving up the step-up in basis that would otherwise occur for the property.

If you want to discuss estate planning or income tax saving strategies, contact us.

© 2024