The U.S. tax code is constantly changing. What saved you money last year might cost you this year. Between shifting income thresholds, changing deduction rules, and overlooked credits, you now need to stay focused on your tax plan throughout the year. Here are several bits of tax wisdom that can help you lower your bill to the IRS.
Phaseouts matter (a lot). A lot of tax breaks, such as child tax credits, tax benefits for college costs, or the new senior deduction don’t disappear all at once. Instead, they phase out slowly as your income rises. This means earning a bit more could quietly cost you some of these benefits.
What you can do: Keep an eye on how much income you’re showing on paper and how it will impact these phaseouts. You might be able to stay in the sweet spot so you don’t lose the value of your deductions or credits by putting more into your retirement account or timing when you receive certain payments.
Are itemized deductions going the way of the dinosaur? Not so fast! Yes, the standard deduction is now higher than ever ($31,500 for married couples, $15,500 for singles in 2025), which has made itemizing less common. But with an increase of the state and local tax (SALT) deduction from $10,000 to $40,000, you may be shifting back to itemizing your deductions without realizing it.
What you can do: Don’t assume you’ll be taking the standard deduction again this year. Add up your potential itemized deductions, especially if your expenses vary, to see how close you are to being able to itemize. Consider bunching charitable contributions or property taxes into one year to clear the standard deduction hurdle.
Timing is everything (especially with capital gains). If you sell assets held longer than a year, you’ll likely qualify for long-term capital gains rates (0%, 15%, or 20%). But miss that time by even a day and you could pay ordinary income rates, which can be nearly double. Strategic timing can also help you harvest losses to offset gains and reduce your overall tax bill.
What you can do: If possible, hold investments that are profitable for at least one year and a day before selling to qualify for lower tax rates. Use end-of-year tax-loss harvesting to offset gains, and stagger sales across tax years if needed.
Don’t sleep on the Qualified Business Income deduction. If you’re a small business owner, self-employed, or even a gig worker, you may be eligible for a 20% deduction on your qualified business income. Planning how and when revenue hits your books could make or break your eligibility for this significant deduction.
What you can do: Review how your business is structured and how much income you’re reporting. You may be able to reduce taxable income through retirement contributions, shifting income between years, or reclassifying your business activities.
Tax-deferred doesn’t mean tax-free. Traditional 401(k)s and IRAs offer tax deferral, not tax elimination. When you withdraw funds in retirement, you’ll pay ordinary income tax on the distributions. If you expect to be in a high tax bracket in retirement, it may be a better idea to contribute to a Roth account now and pay taxes up front.
What you can do: Schedule a planning session to discuss whether diversifying your retirement accounts between traditional and Roth makes sense for your situation. Also consider planning for the timing of distributions from these accounts to be as tax efficient as possible. Run long-term tax projections to decide which type of contribution makes sense today. Consider partial Roth conversions during lower-income years. Tax planning isn’t a once-a-year scramble, but rather a year-round strategy. And with these pieces of prevailing tax wisdom, you can be better prepared to cut your tax bill. Please call if you have any questions about your tax situation.
Our tax code contains plenty of opportunities to cut your taxes. There are also plenty of places in the tax code that could create a surprising tax bill. Here are some of the more common traps.
Home office tax surprise. If you deduct home office expenses on your tax return, you could end up with a tax bill when you sell your home in the future. When you sell a home you’ve been living in for at least 2 of the past 5 years, you may qualify to exclude from your taxable income up to $250,000 of profit from the sale of your home if you’re single or $500,000 if you’re married. But if you have a home office, you may be required to pay taxes on a proportionate share of the gain.
For example, let’s say you have a 100-square-foot home office located in a garage, cottage or guest house that’s on your property. Your main house is 2,000 square feet, making the size of your office 5% of your house’s overall area. When you sell your home, you may have to pay taxes on 5% of the gain. (TIP: If you move your office out of the detached structure and into your home the year you sell your home, you may not have to pay taxes on the gain associated with the home office.)
Even worse, if you claim depreciation on your home office, this could add even more to your tax surprise. This depreciation surprise could happen to either a home office located in a separate structure on your property or in a home office located within your primary home. This added tax hit courtesy of depreciation surprises many unwary users of home offices.
Kids getting older tax surprise. Your children are a wonderful tax deduction if they meet certain qualifications. But as they get older, many child-related deductions fall off and create an unexpected tax bill. And it does not happen all at once.
As an example, one of the largest tax deductions your children can provide you is via the child tax credit. If they are under age 17 on December 31st and meet several other qualifications, you could get up to $2,000 for that child on the following year’s tax return. But you’ll lose this deduction the year they turn 17. If their 17th birthday occurs in 2025, you can’t claim them for the child tax credit when you file your 2025 tax return in 2026, resulting in $2,000 more in taxes you’ll need to pay.
Limited losses tax surprise. If you sell stock, cryptocurrency or any other asset at a loss of $5,000, for example, you can match this up with another asset you sell at a $5,000 gain and – presto! You won’t have to pay taxes on that $5,000 gain because the $5,000 loss cancels it out. But what if you don’t have another asset that you sold at a gain? In this example, the most you can deduct on your tax return is $3,000 (the remaining loss can be carried forward to subsequent years).
Herein lies the tax trap. If you have more than $3,000 in losses from selling assets, and you don’t have a corresponding amount of gains from selling assets, you’re limited to the $3,000 loss.
So if you have a big loss from selling an asset in 2025, and no large gains from selling other assets to use as an offset, you can only deduct $3,000 of your loss on your 2025 tax return.
Planning next year’s tax obligation tax surprise. It’s always smart to start your tax planning for next year by looking at your prior year tax return. But you should then take into consideration any changes that have occurred in the current year. Solely relying on last year’s tax return to plan next year’s tax obligation could lead to a tax surprise.
Please call to schedule a tax planning session so you can be prepared to navigate around any potential tax surprises you may encounter on your 2025 tax return.
As a business owner, you’re required to pay three different types of payroll taxes.
FICA (Federal Insurance Contributions Act) is the tax used to fund Social Security and Medicare programs.
FUTA (Federal Unemployment Tax Act). Employers pay this federal tax to provide unemployment benefits to laid-off workers.
SUTA (State Unemployment Tax Act). State governments also collect taxes known as SUTA that finance each state’s unemployment insurance fund.
While FICA may be easy to understand, unemployment tax calculations are easily misunderstood.
How FUTA and SUTA taxes are calculated
The FUTA calculation. The federal unemployment tax rate is 6% on the first $7,000 of each employee’s income, regardless of where the company does business. In addition,
employers who pay their state’s SUTA taxes on time can receive a maximum credit of 5.4%, reducing the FUTA rate to 0.6%. Certain employee benefits—employer contributions to health plans, pensions, and group life insurance premiums, for example—are also excluded from the calculation.
SUTA taxes are more complicated. Tax rates and taxable thresholds (known as wage bases) vary from state to state, industry to industry, and business to business. In Oregon, for example, the first $54,300 of an employee’s salary is taxed under SUTA. In Arkansas, that threshold is $7,000. In Oregon, a new employer is taxed at a rate of 2.4%, but more established businesses in that state have rates ranging from 0.9% to 5.4%. In Arkansas, the tax rate can range from 0.1% to 5.0%. Other factors affecting your SUTA tax liability include the business’s history of on-time payments to the state insurance fund and the number of former employees receiving unemployment benefits.
How to reduce your SUTA and FUTA tax bills
Hire cautiously. If you employ someone who doesn’t work out, you could end up with additional unemployment claims and a higher SUTA tax rate.
Train vigorously. To increase productivity and reduce turnover, target your investment in continuing education. Keep employees happy and loyal. Again, high turnover leads to unemployment claims, which leads to bigger SUTA tax bills.
Terminate judiciously. If you must reduce personnel, consider offering severance or outplacement benefits to terminated employees. The sooner they return to the job market, the fewer the unemployment claims that will be factored into your company’s SUTA tax calculation.
Dispute carefully. Take the time to verify the accuracy of unemployment claims, as bogus representations by former workers can drive up your SUTA taxes. If an employee was fired for gross misconduct and thus disqualifying himself or herself from collecting unemployment, have strong documentation to support the termination.
Pay regularly. Under federal guidelines, employers who make their SUTA contributions on time can reduce the amount of FUTA taxes by up to 90%.
Remember, you do not need to navigate the complications inherent in filing your business taxes. They can be complicated and easily overlooked when you add things like sales taxes and income taxes. If you have questions or need help please call.
You may receive a tax document with incorrect information. You may also discover that a tax form you’re expecting was never delivered. Here are several situations you may encounter with incorrect information and what you can do about it.
Situation: You receive a tax document with wrong personal information, such as an incorrect Social Security number. What you can do: Immediately contact the company that sent you the tax document and ask that the information be corrected. If it’s your Form W-2 with wrong information, ask your employer for a corrected W-2 (Form W-2C, Corrected Wage and Tax Statement).
Situation: You disagree with the amount of wages or income reported on a tax form. What you can do: Contact your employer and ask for a corrected W-2 (Form W-2C, Corrected Wage and Tax Statement). If you do not receive the corrected W-2, you should report the incorrect amount as noted on the W-2 to avoid an IRS correspondence audit AND then correct the amount on your tax return.
This is especially important because if the W-2 information is not corrected, you will not get Social Security credit for any missing wages you earned. If this happens to you, make sure your employee record is corrected as soon as possible.
Situation: The business that issued your tax document went out of business and you can’t locate the owner. What you can do: You are required to report all your income, whether or not you receive information forms (W-2s or 1099s) from the parties who paid you. You’ll have to reconstruct your income and income tax withholding based on your paycheck stubs or other documents.
Make sure your income is also properly reported on your account with the Social Security Administration, as your future benefits could be negatively impacted if they aren’t properly reported by your employer. According to the IRS, you should contact the IRS and a representative will record a W-2 complaint on your behalf.
Situation: You never receive a tax document that you were expecting. What you can do: If you don’t receive a Form W-2 or Form 1099-R (for retirement distributions) by the end of February, you can call the IRS at 800-829-1040 for assistance. Be sure to have your employer’s name and address, along with your name, address and Social Security number, before calling.
Situation: You receive a missing or corrected tax document after filing your return. What you can do: You may need to file an amended tax return to include the missing tax document or if the dollar amount on the corrected tax document is significantly different from what you reported on your tax return.
Remember that when you receive these informational tax forms to immediately review them for accuracy. The best way to get them corrected is early detection.
You will soon have to confront a higher tax bill if Congress doesn’t extend many credits, deductions, and lower tax rates that are set to expire at the end of this year. Here’s who should be considering ongoing tax planning sessions as this uncertainty plays out in Congress and the Executive office:
Your income will increase in 2025. Maybe you are looking to move jobs or obtain a promotion. This should trigger a planning session as marginal rates currently max out at 37% at a fairly high income, but that could all change beginning in 2026.
You were an itemized deductions taxpayer. A number of taxpayers may begin itemizing deductions again in 2026 if the rules expire as they are currently scheduled to. This means planning your expenses in light of this impending roll back of rules will take some thought. This is especially true if you have high state income and real estate taxes.
You have a large estate. The current estate exemption ($13.99 million in 2025 for single taxpayers, $27.98 million for married) drops back to $5 million in 2026. While this reset amount will be adjusted for inflation going forward, gifting money or other assets can help reduce the size of your taxable estate while taking advantage of this historically high exemption amount.
You have investments. Review your investments to be as tax efficient as possible. Municipal bonds and tax-deferred plans like 401(k)s and IRAs may also become more attractive after 2025. Also consider tax-loss harvesting strategies to offset future gains. Another idea: if your tax rate will be lower in 2025 compared to 2026, consider selling appreciated assets in 2025 at a lower tax rate, then immediately purchase the asset again. Remember that wash sales rules only apply to losses, not gains!
You have pass-through business income. If you are a small business owner, assess how the loss of the Qualified Business Income deduction will affect your tax liability. Review whether you should change your entity type to minimize the loss of this deduction.
By starting to plan now, you can be ready for whatever tax environment you’ll be navigating in 2025.
To ensure your tax return is filed quickly and without error, double-check this list of commonly-overlooked items. These little pesks are among the commonly missed items reported as hold ups to filing individual tax returns:
Missing forms. Using last year’s tax return as a checklist, double check that all your W-2s and 1099s are received and applied to your tax return. Missing items here will be caught by the IRS mismatch program, creating an unwanted correspondence audit. If you are missing a form, contact the company responsible for issuing them as soon as possible.
Dependent information. If you added a new dependent in 2024, provide the name, Social Security number and birth date to have them added to your tax return. If you have a dependent that shares custody with someone else, discuss the plan for who is going to claim this person. Your tax return cannot be filed if there is a conflict in this area.
Cost basis information. If you sold any assets (typically investments or real estate), you need to know how much it cost you to determine your taxable capital gain or loss. Check your investment statements to ensure that your broker includes the required information and that you believe it is accurate. Sometimes it’s difficult to find this information on the Form 1099-B summary, but it might be listed later in the statement details.
Schedule K-1s. As an owner of a partnership or S corporation, you will need to receive a Form K-1 that reports your share of the profit or loss from the business activity. When you receive your K-1, pay special attention to box 17 (code V) for S corporations and box 20 (code Z) for partnerships. This is where information is included for the Qualified Business Income Deduction.
Digital asset transactions. If you are buying or selling cryptocurrency or other digital assets, provide details to support the cost basis and sales price of each transaction.
Forms or documents with no explanation. If you receive a tax form, but have no explanation for the form, questions will arise. For instance, if you receive a retirement account distribution form, it may be deemed income. If it is part of a qualified rollover, no tax is due. An explanation is required to file your information correctly.
Missing signatures. Both you and your spouse need to review and sign the e-file approval forms before the tax return can be filed. The sooner you review and approve your tax return, the sooner it can be filed.
By knowing these commonly missed pieces of information, hopefully your tax filing experience will be a smooth one.
