Generally, scholarships received by degree candidates are tax-free to the extent they’re used for qualified tuition and related expenses.
Continue readingAre College Scholarships Really Tax-Free?
2026 Business Mileage Rate Gets a Boost
Are you a business owner or self-employed? Do you drive for business purposes? If so, you’ll be happy to know that the IRS’s standard mileage rate for business driving in 2026 is 72.5 cents per mile (up from 70 cents in 2025). Meanwhile, medical and moving mileage rates are 20.5 cents per mile, while the charitable rate is 14 cents.
You can choose to deduct eligible vehicle expenses based on business use under the actual expense method or by applying the standard mileage rate, which simplifies recordkeeping. Bear in mind, however, that the IRS requires documentation in either case. Contact the office for help determining which approach delivers the greater tax benefit for your situation.
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Unlock Bigger Deductions on Rental Real Estate
Many rental property owners are surprised to learn that federal tax law often restricts their ability to deduct losses, treating most rental activities as passive unless specific requirements are met.
Continue readingMore Taxpayers May Qualify for the Casualty Loss Deduction
Starting in 2026, personal casualty loss deductions will no longer be limited to federally declared disasters.
Continue readingHow Does the New Tax Deduction for Car Loan Interest Work?
Generally personal interest expense isn’t deductible. You might be able to deduct your car loan interest, but various rules and limits apply.
Continue readingLast-Minute Tax Strategy: Accelerating Deductions
Have you been claiming the standard deduction the last few years? If so, you may want to rethink that for 2025.
Continue readingDeductions vs. Credits
Many taxpayers are unclear on the difference between deductions vs. credits. Both can be powerful tax-saving tools. Here’s how they each work:
Deductions lower a taxpayer’s taxable income before the tax is calculated. For instance, on an individual return, you can either claim the standard deduction or itemize deductions, depending on which option reduces your taxable income more.
Credits directly reduce the tax due, dollar-for-dollar. As a result, credits are more valuable than deductions of the same dollar amount. Some credits, such as the Child Tax Credit, are partially or fully refundable, meaning that if the credit exceeds the tax owed, the taxpayer may receive some or all of the difference as a refund.
If you have additional questions or are interested in tax services, don’t hesitate to contact our office.
408-252-1800
Updated Guide to Robust Depreciation Write-offs for Your Business
Tax-saving benefits are generally available when your business puts newly acquired qualifying assets into service. Under Section 179 of the tax code, companies can take substantial depreciation deductions, subject to various limits adjusted annually for inflation.
Another potential write-off is for first-year bonus depreciation. Like the Sec. 179 deduction, bonus depreciation is subject to limits that change annually. But the limits are going down rather than up. And under the Tax Cuts and Jobs Act, bonus depreciation is scheduled to disappear after 2026.
Basics You Need to Know
Most tangible depreciable assets, such as equipment, furniture and fixtures, computer hardware, and some software, qualify for the Sec.179 deduction in the year you purchase and place them in service. Vehicles also qualify, but they’re subject to additional limitations.
For tax years beginning in 2025, the Sec. 179 deduction maxes out at $1.25 million and begins to phase out when total qualifying assets exceed $3.13 million (up from $1.22 million and $3.05 million, respectively, for 2024).
For qualifying assets placed in service in 2025, first-year bonus depreciation drops to 40% (from 60% in 2024). This figure is scheduled to drop to 20% for 2026 and to be eliminated in 2027. However, Congress may restore it to 100% before then.
How Income Affects Your Deduction
Under tax law, a Sec. 179 deduction can’t result in an overall business taxable loss. So, the deduction is limited to your net aggregate taxable income from all your companies. This includes wages and other compensation, your net business income, net proceeds from selling business assets, and possibly net rental income.
If the business income limitation reduces your Sec. 179 deduction, you can carry forward the disallowed amount or use first-year bonus depreciation. Unlike Sec. 179, bonus depreciation isn’t subject to dollar limits or phaseouts.
Sec. 179 Deductions, First-Year Bonus Depreciation or Both?
You may still be undecided about the best tax-saving strategy for assets you purchased and placed in service in 2024. Here’s an example that combines two methods:
In 2024, a calendar-tax-year C corporation purchased and placed in service $500,000 of assets that qualify for the Sec. 179 deduction and first-year bonus depreciation. However, due to the taxable income limitation, the company’s Sec. 179 deduction is limited to $300,000, which can be claimed on the corporation’s federal income tax return.
The company can deduct 60% of the remaining $200,000 using first-year bonus depreciation ($500,000 minus $300,000). So, the write-offs for the year include 1) a Sec. 179 deduction of $300,000 and 2) $120,000 of bonus depreciation (60% of $200,000). Thus, the company achieves $420,000 in write-offs on its 2024 tax return, leaving only $80,000 to depreciate in future tax years. (Note: If the business income limitation didn’t apply, the company could have written off the entire amount under the Sec. 179 deduction rules because its asset additions were below the phaseout threshold.)
Don’t Go It Alone
Depending on the details, you may have a robust depreciation deduction for 2024 and possibly depreciation to carry forward in 2025. However, maximizing the benefits of both depreciation methods can be complex. And it might adversely affect your company’s eligibility for certain other deductions, such as the Section 199A qualified business income deduction for eligible pass-through businesses. So, don’t go it alone.
Contact the office for help devising the optimal tax strategy for your business and staying atop the latest tax law developments.
408-252-1800
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Feeling Charitable? Be Sure You Can Substantiate Your Gifts
As the end of the year approaches, many people give more thought to supporting charities they favor. To avoid losing valuable charitable deductions if you itemize, you’ll need specific documentation, depending on the type and size of your gift. Here’s a breakdown of the rules:
Cash gifts under $250
A canceled check, bank statement or credit card statement will do. Or ask the charity for a receipt or “other reliable written record” that provides the organization’s name, the date and the amount of the gift.
Cash gifts of $250 or more
You’ll need a contemporaneous written acknowledgment from the charity stating the amount of the gift. That means you received the acknowledgment before the earlier of your tax return due date (including extensions) or the date you file your return. If you make multiple separate gifts to the same charity of less than $250 each (monthly contributions, for example) that total $250 or more for the year, you can still follow the substantiation rules for cash gifts under $250.
Noncash gifts under $250
Get a receipt showing the charity’s name, the date and location of the donation, and a description of the property.
Noncash gifts of $250 or more
Obtain a contemporaneous written acknowledgment from the charity that contains the information required for cash gifts, plus a description of the property.
Noncash gifts of more than $500
In addition to the above, keep records showing the date you acquired the property, how you acquired it and your adjusted basis in it. Also, file Form 8283.
Noncash gifts of more than $5,000 ($10,000 for closely held stock)
In addition to the above, obtain a qualified appraisal and include an appraisal summary, signed by the appraiser and the charity, with your return. (No appraisal is required for publicly traded securities.)
Noncash gifts of more than $500,000 ($20,000 for art)
In addition to the above, include a copy of the signed appraisal, not just a summary, with your return.
Finally, if you received anything in exchange for your donation, such as a book for making an online donation or food and drink at a fundraising event, ask the charity for the fair market value of the item(s). You’ll need to subtract it from your charitable deduction.
Saving taxes isn’t the primary motivator for charitable donations, but it may affect the amount you can afford to give. Substantiate your donations to ensure you receive the deductions you deserve.
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Factoring the QBI Deduction into Tax Planning for Your Business
Thanks to the Tax Cuts and Jobs Act, sole proprietors and owners of pass-through entities, such as partnerships, S corporations and, generally, limited liability companies, may be able to claim tax deductions based on their qualified business income (QBI deduction) and certain other income.
This deduction can be up to 20% of your QBI, subject to limits that apply at higher income levels. However, some tax planning strategies can increase or decrease your allowable QBI deduction for 2024. So if you’re eligible for this deduction, it’s important to consider the impact other year-end strategies will have on it before executing them. Also keep in mind that this deduction is scheduled to expire at the end of 2025 unless Congress acts to extend it.
Contact the office for help optimizing your overall tax results.
408-252-1800
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