Businesses that sponsor a 401(k) must stay on top of it
If your business sponsors a 401(k) plan, year end is the perfect time to make sure you’re on top of your fiduciary responsibilities and administrative processes. A well-run plan should never be regarded as “plug-and-play.” To avoid legal troubles and uphold participants’ confidence, regularly reevaluate investment selection and management, fee structure (including total plan cost), third-party administrator performance, and ERISA compliance. Periodic internal audits can help catch inconsistencies, misunderstandings and wrongdoings before they turn into costly plan failures. Contact us for help identifying costs and fees, spotting potential compliance gaps, and tightening internal controls.
New itemized deduction limitation will affect high-income individuals next year
Beginning in 2026, taxpayers in the top (37%) federal income tax bracket will see their itemized deductions reduced. Generally, their tax benefit from the deductions will be as if they were in the 35% bracket. If you’re at risk of being subject to the new limitation, you can take steps in 2025 to help mitigate the negative impact. For example, make large charitable contributions this year instead of next. If you aren’t already maxing out your state and local tax (SALT) deduction, you might be able to pay state and local property tax bills in 2025 instead of 2026. We can help you look at your tax picture for this year and next to determine what strategies will be most beneficial overall.
New deduction for QPP can save significant taxes for manufacturers and similar businesses
New for 2025, 100% first-year depreciation is available for nonresidential real estate classified as qualified production property (QPP). QPP generally means factory buildings. Normally, nonresidential buildings must be depreciated over 39 years. QPP 100% first-year depreciation is available for property whose construction begins after Jan. 19, 2025, and before 2029. The property generally must be placed in service in the U.S. or a possession before 2031. Also, the original use of the property generally must commence with the taxpayer. Additional rules and limits, as well as some exceptions, apply. IRS guidance is expected. Contact us with questions and to learn about the latest developments.
Productivity metrics can help business owners see reality
Productivity metrics give business owners a clear view of how effectively they’re using time, talent and capital. Common examples include revenue per employee, output per hour worked, utilization rate and customer satisfaction scores. Choosing the right metrics and tracking them consistently over appropriate intervals allows you to identify inefficiencies, streamline operations and align employee performance with strategic objectives. For small companies, simple spreadsheets may be adequate. But don’t overlook more sophisticated tech solutions, such as digital dashboards and project management platforms. Contact us to start leveraging productivity metrics that help your business thrive.
Shift income to take advantage of the 0% long-term capital gains rate
Are you thinking about making financial gifts to loved ones? Would you also like to reduce your capital gains tax? If so, consider giving appreciated stock instead of cash. You might be able to eliminate all federal tax liability on the appreciation, or at least significantly reduce it, by giving appreciated stock instead of cash to loved ones in the 0% bracket. The recipients can sell the assets at no or a low federal tax cost. Before acting, make sure the recipients won’t be subject to the “kiddie tax.” Also consider any gift and generation-skipping transfer tax consequences. We can answer any questions you have and suggest other ways you can reduce taxes on your investments.
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.