What you need to know about deducting business gifts
Thoughtful business gifts are a great way to show appreciation to customers and employees. They can also deliver tax benefits. Unfortunately, the IRS limits most business gift deductions to $25 per person per year, a cap that hasn’t changed since 1962. But there are exceptions. Here are three: 1) gifts to a company for use in the business, 2) incidental costs of making a gift, such as engraving or shipping, and 3) gifts to employees (though other limits apply and they may be treated as taxable compensation). Be sure to properly document gifts. Record each gift’s description, cost, date and business purpose, and the relationship of the recipient to your business. Contact us with questions.
Businesses should review their key payroll tax responsibilities
Business owners: Staying compliant with payroll taxes is essential to avoiding penalties. Regularly review your key responsibilities. These include: 1) Federal taxes, which must be withheld based on wages and information provided on employees’ Forms W-4. 2) State and local taxes, which vary based on the specifics in your area. 3) FICA taxes, which fund Social Security and Medicare. 4) FUTA taxes, which help states pay employees who’ve been involuntarily terminated. 5) Additional Medicare tax, which applies to higher-income earners. 6) State unemployment obligations, which also vary based on each state’s unemployment program. Contact us for help assessing and improving your payroll processes.
Year-end tax planning for accrual-basis taxpayers
Projecting your business’s income for this year and next can allow you to time income and deductible expenses to your tax advantage. Unfortunately, controlling such timing can be more challenging for accrual-basis taxpayers than for cash-basis ones. But accrual-basis taxpayers also have some unique opportunities. For example, if they properly record and recognize expenses incurred in 2025 but that won’t be paid until 2026, those expenses can be deducted on the 2025 income tax return, reducing 2025 tax. Common examples include commissions, wages, payroll taxes, advertising, interest, utilities, insurance and property tax. Contact us to discuss more year-end tax planning strategies.
How the Social Security wage base will affect your payroll taxes in 2026
The 2026 Social Security wage base has been released: $184,500 (up from $176,100 for 2025). Wages and self-employment income in excess of this wage base won’t be subject to Social Security tax. What if you have two jobs? Social Security tax will be withheld by both employers. Can you ask your employers to stop withholding Social Security tax once, on a combined basis, you’ve reached the wage base threshold? No, each employer must continue to withhold Social Security tax until your wages with that employer exceed the wage base. Fortunately, when you file your income tax return, you’ll get a credit for any excess withheld. Have questions? Contact us.
Writing an AI governance policy for your business
Artificial intelligence (AI) is transforming how businesses operate by streamlining operations and boosting productivity. But it also brings new risks. With so many AI tools available, employees may misuse them. Consider creating a formal AI governance policy. This written framework establishes how a company may use AI responsibly, transparently, ethically and legally. As technology evolves, especially with the rise of agentic AI, your business must protect data integrity and nurture customer trust. We can help you evaluate the costs, tax implications and financial impact of AI usage so you can balance innovation with sound fiscal management and robust compliance practices.
Is an HDHP plus an HSA a financially smart health care option for you?
Pairing a high-deductible health plan (HDHP) with a Health Savings Account (HSA) can be a financially smart option, particularly for healthy individuals. Insurance premiums will be lower because of the high deductible. And the HSA provides a tax-advantaged way to fund the deductible and other medical expenses. It can even help fund retirement. Among the tax benefits: 1) Contributions are pretax or deductible. 2) Contributions your employer makes aren’t included in your taxable income. 3) Earnings in the HSA aren’t taxed. 4) Distributions to pay qualified expenses are tax-free. 5) Distributions after age 65 are penalty-free even if not used for medical expenses (but income taxes do apply).
Review your business expenses before year end
Now is a good time to review your business’s expenses for deductibility. Accelerating certain expenses into this year will reduce 2025 taxes and might even provide permanent tax savings. There’s no master list of deductible business expenses in the federal tax code. Some deductions are expressly authorized or excluded, but most are governed by the general rule that businesses can deduct their “ordinary and necessary” expenses. Understanding what’s deductible and what’s not isn’t easy. We can review your current expenses and help determine whether accelerating expenses into 2025 makes sense for your business. Contact us to discuss year-end tax planning and to start strategizing for 2026.
Fundamental building blocks of an employee wellness program
Employee wellness programs are employer-sponsored initiatives designed to promote physical, mental and emotional well-being in the workplace. A program built on certain fundamental building blocks can help businesses manage health care costs, boost productivity and improve retention. For example, create a straightforward design that’s easy to explain and implement. Communicate clearly with concise and engaging materials. Rely on qualified vendors for program services. Monitor participation and outcomes so you can make informed adjustments. Whether you’re launching or refining your program, we’d be happy to help you budget effectively, identify tax benefits and measure its financial impact.
The 2025 SALT deduction cap increase might save you substantial taxes
If you pay more than $10,000 in state and local taxes (SALT), such as property tax and state income tax, a 2025 tax law change could significantly reduce your federal income tax liability. For 2018–2024, the SALT itemized deduction was limited to $10,000. For 2025, you can deduct up to $40,000. But the deduction drops by 30% of the amount by which modified adjusted gross income (MAGI) exceeds $500,000; when MAGI reaches $600,000, the $10,000 cap applies. (Be aware that lower limits and thresholds apply to married taxpayers filing separately.) To maximize your deduction, you may want to take steps to keep your MAGI under the reduction threshold or accelerate property tax payments into 2025.
Should your business maximize deductions for real estate improvements now or spread them out?
Have you made improvements to business real estate? You may be eligible for tax breaks for qualified improvement property (QIP). 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. QIP can be depreciated over 15 years (rather than 39). It’s also eligible for bonus depreciation and Sec. 179 expensing, which have been enhanced for 2025 and beyond. While maximizing first-year depreciation can be beneficial, sometimes spreading out depreciation deductions over multiple years can be better, such as if you’re in a higher tax bracket in the future. We can help you determine what’s best for you.