Property taxes are still on the upswing in many parts of the U.S. To help get a handle on your property taxes, here’s a look at what goes into determining your bill and a few ideas that may help to reduce it.
Background
Property taxes are typically calculated using two factors:
The assessed value of your property (set by your local assessor)
Your local tax rate (set by schools, counties, fire departments, etc.)
Why this matters: Even if your home’s value doesn’t change, your tax bill can go up if any of the taxing authorities raise their rates. And while setting the tax rates is usually a legislative process, establishing the value of your property often has judgement applied.
Ideas to lower your property tax bill
Understand and adhere to the calendar. Challenging the value of your property requires an understanding of the process for doing so AND hitting the proper deadlines. If there’s an appeals process, know it and make sure you meet their deadlines or you could be out of luck for that year.
Challenge your property’s assessed value. You have the right to appeal your property’s assessment by filing a formal appeal with your local assessor. If you can show your home was assessed for more than it’s worth compared to similar homes, you might get your tax bill reduced. If you want to appeal, you need to act fast. There are typically just a few weeks each year to appeal your assessment. So mark the date and gather evidence early if you plan to dispute it. But do your homework! Collect actual sales of similar properties that show a lower sales price, and be ready to defend the condition of your property if it is an older home. Assessors are quick to dismiss complainers with no facts to back them up.
Claim all exemptions and eligible tax breaks. Contact your local assessor’s office to see what exemptions you can claim. Many states and counties offer breaks for veterans, people with disabilities, low-income households, older residents and those in designated areas like historical districts or disaster zones.
Compare local tax rates before you buy or move. Property taxes are determined locally by counties, cities, or school districts, which means two identical homes in nearby ZIP codes can have drastically different tax bills. So always check the local tax rate before you buy or move. Look at the history of property taxes in your target neighborhood and see how it changed over the past several years. Then compare it with other homes in the area to ensure the rate increase is consistently applied.
Calculate the tax impact of renovations before building. Adding a new deck or renovating your kitchen may increase your home’s assessed value, especially if the county finds out through permits or a property inspection. So even if you don’t sell your home, upgrades can mean a bigger tax bill. Some areas reassess properties automatically after building permits are pulled. So always factor in long-term tax implications when upgrading your home.
Review your lot details for unused land. Your property tax bill covers not only the value of your house, but also the value of your land. If part of your property can’t be used, like wetlands, steep slopes, or areas with easements, ask your assessor if your bill can be adjusted.
Property taxes are one of the few taxes you can actually fight and get lowered. But you can’t do that if you don’t understand how the system works. So don’t just pay the bill without looking at it. There’s often money to be saved if you understand the details.
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.
As a freelancer or contractor, at some point you may wish to incorporate and be taxed as an S corporation. Here’s a closer look at the process of becoming an S corporation and when switching might make sense for you.
The main benefits of S corporations
Self-employment tax savings. As a sole proprietor, you’re required to pay a 15.3% self-employment tax (which includes Social Security and Medicare) on your entire income. However, with an S corporation, you can split your income into two parts: a reasonable salary (which is subject to Social Security and Medicare taxes) and distributions (which are subject to income taxes but not Social Security and Medicare taxes).
Pass-through taxation. Similar to sole proprietorships, S corporations are considered pass-through entities. This means that the business itself doesn’t pay income taxes. Instead, profits and losses pass through the business to the owner’s personal tax return. Profits of a C corporation, on the other hand, are taxed twice – once at the entity level, and again on the owner’s tax return.
Legal protection. If there is a risk of possible legal action, an S corporation can potentially help protect your personal assets from your business assets. For example, this can be especially helpful if you are in the contractor trade and the customer makes a claim against the fulfillment of your contract.
While transitioning from a sole proprietor to an S corporation can certainly result in significant tax savings, there are a few trade-offs to consider.
Trade-offs to consider
Most of the trade-offs are centered around administrative requirements and potential costs. These include:
Running payroll. Even if you’re the only employee, you’ll need to set up payroll and withhold taxes. Many business owners use a payroll service to handle this.
Separate tax filing. Your business will now need to file a Form 1120-S tax return with a March 15th due date in addition to your personal tax return.
Accountants or bookkeepers are typically used. Most S corporation owners work with professionals to handle bookkeeping and tax filings.
Reasonable salary requirement. The IRS expects owners to pay themselves a fair market wage. Underpaying yourself to avoid taxes can lead to penalties.
State-level requirements. Some states have minimum franchise taxes or annual fees for corporations and LLCs, regardless of income.
When it makes sense to switch
Switching to an S corp generally becomes worth considering when your net income (after expenses) is in the range of $75,000 to $100,000 or more per year.
Here’s an example: Assume you earn $120,000 in net income as a consultant.
As a sole proprietor, you’d pay self-employment tax on the full amount, about $18,000.
As an S corp, if you pay yourself a reasonable salary of $60,000, you’d only pay payroll taxes on that amount, roughly $9,200. The remaining $60,000 in profit would be subject to income taxes but not payroll taxes.
That’s a potential tax savings of nearly $9,000 per year.
Switching from a sole proprietor to S corp can offer real tax advantages, but it’s not a one-size-fits-all solution. It’s usually best practice to review your situation once per year to ensure your business is organized properly.
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.
Summer work can be financially rewarding, but it can also come with tax consequences that are sometimes overlooked. Here are several ideas for managing your tax obligations that come with seasonal jobs.
Keep it separate. If you mow lawns, babysit or do another cash job where you haven’t filled out a Form W-4 for tax withholdings, the IRS may consider you to be a business for tax purposes. If you are considered to be in business, it’s a good idea to keep your business transactions separate from personal transactions. If you do comingle both types of transactions, the IRS may disallow all business expenses and leave you with a much higher tax bill.
Document your driving. If you are driving for business purposes, document your mileage as it happens. The IRS allows 70 cents a mile for the portion of driving time you spend on business use. Use an app or driving log to record your business driving, and don’t forget to hang on to all receipts.
Keep your receipts. If you want to deduct a business expense, you need to prove that you paid for it. The IRS says any recordkeeping system is okay as long as it clearly shows your expenses. Keep receipts, canceled checks, bank statements and other easy-to-understand records of what you spent the money on and when. Many bookkeeping and accounting systems can help digitize these records, making them easier to corral for tax time.
Calculate your estimated tax bill. Plan to file a tax return (it may be your first return) early next year. Depending on how much you make the rest of the year, you may get back every dollar that was withheld from your paychecks for taxes. If you were self-employed for your summer job, remember that you’ll need to set aside some of your earnings to pay federal, state, and local taxes.
Remember that all income is taxable. No matter how you earn your money, all earned income is taxable. Even tips, cash payments and income from freelance platforms must be reported on your tax return. If you receive a W-2 from an employer, the income is automatically reported to the IRS. If you freelance work, you might receive a 1099 form. But even if you don’t get a 1099, you’re still responsible for reporting all income you earn.
Summer work can provide much more than a temporary income boost — it can also be an opportunity to build good financial habits. By staying mindful of your tax obligations, you can avoid tax surprises and enjoy your hard-earned money.
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.
