The wages you pay your child are generally deductible as a business expense. For your child’s income tax purposes, wages received will be at least partially protected from federal income tax by his or her standard deduction.
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Getting a large inheritance can create new financial opportunities. But it’s important to handle inherited assets carefully, especially when it comes to taxes and planning.
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Generally, scholarships received by degree candidates are tax-free to the extent they’re used for qualified tuition and related expenses.
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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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Depending on your situation, you may be able to claim certain medical expenses as deductions on your tax return.
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Summer is here, and you may be planning a picnic or other outing for your employees. When doing so, keep tax deductions in mind. Most entertainment expenses aren’t deductible, and business meals are generally subject to a 50% deduction limit. But, you may be able to deduct 100% of employee party costs. The event must be for your entire staff and not be “lavish or extravagant.” Deductible costs include food, beverages, live music and venue rentals.
Detailed invoicing and recordkeeping are a must. Before sending out invitations, contact the office about maximizing your tax deduction.
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Eligible individuals with disabilities and their family members can use ABLE accounts to pay for qualified expenses.
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Making a family loan isn’t the only way to assist a loved one with purchasing a home. If you aren’t concerned about being paid back, a straightforward option is gifting cash. In 2025, you can give up to $19,000 to anyone without federal gift tax consequences under the gift tax annual exclusion.
If your loved one is married, you can gift up to $38,000 to the couple tax-free. If you’re married, you and your spouse can jointly give up to $76,000 to the couple, all without federal gift tax consequences (4 x $19,000).
Gifts exceeding these limits reduce your lifetime gift and estate tax exemption, which for 2025 is $13.99 million ($27.98 million for married couples). State tax consequences must also be considered. Contact the office to explore the best approach for your situation.
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by Natalie Nguyen
Depreciation is a key concept in accounting and finance, reflecting how an asset loses value over time due to factors like wear and tear, aging, or obsolescence. But did you know that depreciation also has significant tax implications? In this blog post, we’ll explore these tax aspects and their impact on businesses.
Depreciation is the process of allocating the cost of a tangible asset over its useful life. It shows how companies account for the gradual loss of value in their assets.
For businesses, depreciation is considered an expense. Even though it’s a non-cash expense, it helps reduce taxable income. The IRS allows businesses to deduct this calculated depreciation from their corporate income taxes, which can significantly lower their tax liability and boost after-tax profits.
Bonus depreciation is a tax incentive that lets businesses accelerate deductions on “qualified property” in addition to regular depreciation when these assets are first put into use. This incentive encourages businesses to invest in new equipment.
Initially introduced through the Job Creation and Worker Assistance Act in 2002, this provision allowed businesses to deduct an extra 30% of the cost of eligible assets beyond the standard depreciation expense. In 2017, the Tax Cuts and Jobs Act increased the bonus depreciation rate to 100%. This rate started phasing out at the end of 2022, decreasing by 20% each year (80% in 2023, 60% in 2024, 40% in 2025, and 20% in 2026), with the provision set to expire by the end of 2026.
Eligible property for bonus depreciation includes depreciable assets with a useful life of 20 years or less, such as vehicles, furniture, manufacturing equipment, and heavy machinery. “Qualified improvement property” is also eligible for bonus depreciation.
Unfortunately, California does not conform to the federal bonus depreciation provision. While businesses can realize significant initial year tax savings at the federal level, they may find more tax savings at the state level in later years due to this lack of conformity.
As bonus depreciation phases out, small businesses can still leverage initial-year expensing through Section 179 of the Internal Revenue Code. Under Section 179, businesses can deduct the full purchase price of qualifying equipment bought or financed within the tax year, subject to certain limits and phase-outs. For the 2024 tax year, the federal deduction limit under Section 179 is set at $1,220,000, with a phase-out threshold starting at $3,050,000. For example, if a company purchases $1,000,000 in qualifying equipment before the end of 2024, it can deduct the entire amount from its gross income. However, if the purchase price reaches $1,500,000, it becomes subject to phase-out. Purchases exceeding $3,050,000 do not qualify for additional deductions and are handled using the standard depreciation method.
In California, the state conforms to Section 179 but caps the maximum deduction at $25,000 per year, phasing out completely when the total purchase price for the year exceeds $200,000.
Since depreciation reduces taxable income, it also reduces the taxes a company owes, leading to a higher net income. However, it’s important to note that because depreciation is a non-cash expense, it doesn’t impact the company’s cash flow.
Understanding the tax implications of depreciation is crucial for businesses, as it can lead to significant tax savings and influence decisions regarding asset acquisition and disposal.
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MobiusDaXter, CC BY-SA 3.0, https://creativecommons.org/licenses/by-sa/3.0, via Wikimedia Commons
Some small businesses struggle with employee morale for a variety of reasons, one of which may be economic uncertainty. If you want to boost employees’ spirits without a big financial outlay, an achievement awards program is a relatively low-cost fringe benefit that may be a win-win addition.
Under such an initiative, you can hand out awards at an appointed time, such as a year-end ceremony or holiday party. And, as long as you follow the rules, the awards will be tax-deductible for your company and tax-free for recipient employees.
To qualify for favorable tax treatment, achievement awards must be granted to employees for either promoting safety in the workplace or length of service. The award can’t be disguised compensation or a payoff for closing a big deal. In addition, they must be tangible items, ranging from a gold watch or a smartphone to a plaque or a trophy. Examples of awards that would violate the rules are gift certificates, vacations, or tickets to sporting events or concerts.
Additional requirements apply to each type of award:
1. Safety awards. These can’t go to managers, administrators, clerical workers or other professional employees. Also, safety awards won’t qualify for favorable tax treatment if the company grants them to more than 10% of eligible employees in the same year.
2. Length-of-service awards. To receive such an award, an employee must have worked for the business for at least five years. In addition, the employee can’t have received a length-of-service award within the last five years.
Also keep in mind that the award must be part of a “meaningful presentation.” That doesn’t mean you have to host a gala awards dinner at the Ritz, but the award should be marked by a ceremony befitting the occasion.
There are limits on an award’s value depending on whether the achievement awards program is nonqualified or qualified. For a nonqualified program, the annual maximum award is $400. For a qualified program the maximum is $1,600 (including nonqualified awards). Any excess above these amounts is nondeductible for the employer and taxable to the employee. If an employee receives multiple awards in one year, these figures apply to the total, not to each individual award.
To establish a qualified program, and therefore benefit from the higher limit, you must meet two additional requirements. First, awards must be granted under a written plan and the plan must be open to all eligible employees without favoritism. Second, the program must not discriminate in favor of highly compensated employees as to eligibility or benefits. For 2024, the salary threshold for a highly compensated employee is $155,000.
Awards of nominal value are generally not taxable. These are small, infrequent gifts such as a coffee mug, a t-shirt or an occasional meal.
If an achievement awards program makes sense for your company, be sure that these requirements are met. Otherwise, you and your employees could suffer negative tax consequences. Contact the office for guidance in setting up a program that checks all the boxes.
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