Estate planning has always been about looking ahead, but the landscape has shifted again. With the federal One Big Beautiful Bill Act (OBBBA) signed into law in 2025 and Massachusetts updating its own estate tax rules in 2023–2024, the rules for passing on wealth look very different from what they did just a few years ago.

For high-net-worth individuals and families, particularly those with estates ranging from $10 million to $20 million, these changes present new opportunities, but also raise new challenges. In Massachusetts, where the state exemption is far lower than the federal one, proactive planning is critical.

Key Takeaways

• The federal estate tax exemption will permanently increase to $15 million per person ($30 million for married couples) beginning in 2026.
• Massachusetts’ exemption remains much lower at $2 million per person ($4 million for couples).
• For many families, income tax efficiency, particularly strategies around the step-up in basis, now matters more than federal estate tax exposure.
• Estate plans should be reviewed regularly (every 1–2 years or after major life events) to reflect both federal and state realities.

What the Federal Exemption Increase Means

Starting in 2026, individuals will be able to pass on up to $15 million (or $30 million for married couples) without federal estate or gift tax. This permanently removes the “sunset” provision of the 2017 tax law, which would have cut exemptions in half.

Because so few estates will now be subject to federal estate tax, the focus has shifted to income tax planning. A central tool is the step-up in basis, which allows heirs to inherit assets at their current market value. This often means little to no capital gains tax if the heirs later sell those assets.

The higher exemption also creates opportunities for lifetime gifting. Families can transfer appreciating assets out of their estates while avoiding gift taxes, ensuring that future growth takes place outside the taxable estate. The federal top tax rate, however, remains at 40% on amounts above the exemption.

Why Massachusetts Residents Still Need to Plan

Massachusetts’s estate tax exemption increased from $1 million to $2 million in 2023, with a credit that eliminates tax below that amount and softens the blow just above it. But compared to the federal limit, Massachusetts still stands out as one of the most restrictive states.

A married couple can now leave $30 million tax-free federally, but only $4 million before Massachusetts estate taxes apply. For estates valued between $10 million and $20 million, that gap can mean millions of dollars in state taxes without proper planning.

It’s also important to note that real estate and tangible personal property located outside Massachusetts are generally not subject to the state’s estate tax, which can offer planning opportunities for families with multistate assets.

Real-World Examples

Example 1: A $10M Massachusetts Estate

Imagine a married couple with a $10 million estate. They might assume they’re safely under the new federal exemption and won’t owe estate taxes. However, in Massachusetts, roughly $6 million of their estate would still be subject to taxation. That could translate into a state estate tax bill of around $700,000 or more—a surprise no family wants.

Example 2: Gifting Land Early

Timing also matters. Suppose an investor buys land for $1 million and gifts 25% of it to heirs at that value. Only $250,000 of their lifetime exemption is used. If that land later appreciates to $25 million, the growth on the gifted portion happens outside their estate, saving millions in estate taxes. This strategy is especially powerful in real estate, where appreciation can be dramatic.

Smart Planning Strategies for Massachusetts Families

• Review and update your plan: Old wills and trusts often contain formulas tied to outdated federal exemptions. Left unchanged, they can create unintended results.
• Prioritize income tax efficiency: Holding highly appreciated assets until death can secure the step-up in basis and minimize future capital gains taxes for heirs.
• Gift strategically: Use the expanded federal exemption to transfer appreciating assets out of your estate, especially real estate, partnership interests, or early-stage investments.
• Plan for Massachusetts estate taxes: Techniques like irrevocable trusts, spousal lifetime access trusts (SLATs), and gifting programs (outside the three-year look-back) can reduce state exposure while preserving some family access.
• Review regularly: Estate planning isn’t “set it and forget it.” Revisit your plan every 1–2 years or when life changes—births, marriages, divorces, business sales, or major acquisitions—shift your circumstances.

Why Timing Still Matters

While the federal exemption is now permanent, delaying planning has costs. The longer assets appreciate inside your estate, the larger your taxable base becomes. Early planning not only locks in today’s value but also allows growth to occur outside your estate.

Final Thoughts

The OBBBA provides certainty at the federal level, but Massachusetts families must still navigate a very different reality. With a $2 million state exemption compared to a $15 million federal one, proactive estate planning remains essential.

By combining tax-smart strategies with careful timing and regular reviews, families can reduce both state and federal taxes, preserve flexibility, and make sure their wealth transfers to the next generation as intended.

FAQs

Q: What is the federal estate tax exemption starting in 2026?
A: $15 million per person, indexed for inflation. Married couples can combine exemptions for $30 million.

Q: Does Massachusetts follow the federal exemption?
A: No. Massachusetts has its own $2 million exemption, which is much lower than the federal limit.

Q: If my estate is under $30 million, am I safe from taxes?
A: Not necessarily. In Massachusetts, estates above $2 million are still taxable—even if they’re under the federal limit.

Q: How can I reduce Massachusetts estate taxes?
A: Tools like irrevocable trusts, spousal lifetime access trusts (SLATs), and well-timed gifting can help minimize state estate tax exposure.

Q: How often should I update my estate plan?
A: Every 1–2 years, or after major life changes like a business sale, inheritance, birth of a child, or divorce.

The post Estate Planning for 2025 and Beyond: What Massachusetts Families and Investors Need to Know appeared first on Walter Shuffain.

This article outlines practical, accounting-informed strategies to help you make smart financial moves as your company grows.

1. Review Entity Structure as You Scale

As your business grows, your current structure may no longer serve you effectively. For instance, sole proprietorships and partnerships often result in higher self-employment taxes, which can limit profitability.

Many businesses transition to an S corporation or Limited Liability Company (LLC) to improve tax efficiency. S Corporations allow owners to take a portion of income as distributions rather than wages—potentially reducing self-employment taxes.

Accounting Tip: Evaluate how much of your income can be shifted into distributions without triggering IRS scrutiny. Review reasonable compensation standards annually with your CPA.

2. Use Section 179 and Bonus Depreciation for Asset Investments

Business expansion often comes with major investments—whether in equipment, technology, or vehicles. Instead of spreading the cost over several years through standard depreciation, you can take advantage of Section 179 and the 40% bonus depreciation rules to deduct a significant portion of the expense in the year the asset is placed in service.

In 2025, bonus depreciation remains at 40%, but it’s scheduled to phase out gradually in the coming years. That makes the timing of your purchases a powerful tax planning strategy.

Accounting Tip: Ensure purchases qualify for accelerated depreciation. Keep detailed records of asset costs, dates placed in service, and business use percentages to support your deductions.

3. Maximize Tax Credits Before Year-End

Don’t leave money on the table. Federal tax credits can reduce your tax bill dollar for dollar. Some of the most impactful credits for expanding businesses include:

• R&D Tax Credit – Qualifying activities include developing or improving products, processes, or software. While related costs must now be amortized over five years, the credit still offers valuable, immediate tax savings.
• Work Opportunity Tax Credit (WOTC) – Hiring employees from targeted groups (e.g., veterans or long-term unemployed) can trigger credits up to $9,600 per hire. WOTC is currently authorized through December 31, 2025.
• Energy-Efficient Commercial Building Deduction (Section 179D) – For upgrades that improve HVAC, lighting, or insulation.

Accounting Tip: Credits require timely documentation and sometimes certification. Your accountant can help ensure eligibility and maximize value.

4. Plan for Multi-State Tax Compliance

Expanding into new states—whether through remote employees, sales, or physical presence—can create nexus, meaning you may owe income, franchise, or sales taxes in those states.

Each state has its own rules. Failing to register or file can result in penalties or interest.

Accounting Tip: Your accounting team should run a nexus study annually. They’ll use revenue data, payroll records, and inventory locations to assess exposure and file accordingly.

5. Create a Tax-Efficient Reinvestment Strategy

Unexpected tax bills can quickly drain cash flow from growth. Work with your accountant to estimate quarterly tax payments and set aside reserves throughout the year.

Then, consider reinvestment strategies that also offer tax benefits—like funding retirement plans (e.g., SEP IRAs, solo 401(k)s), providing health insurance or fringe benefits, or reinvesting in new product development.

Accounting Tip: A cash flow forecast that includes tax liability projections is a powerful tool for decision-making. Revisit this model quarterly as your business grows.

Scaling Smart: Let Tax Strategy Fuel Your Growth

Tax planning is not just about avoiding problems—it’s about uncovering opportunities. Strategic accounting during growth phases can minimize taxes and maximize reinvestment potential.

Don’t wait until tax season. A proactive approach—grounded in accurate financials and strategic foresight—sets the foundation for sustainable, profitable scaling.

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Many individuals want to provide financial assistance to family members to help them experience the joys and pride of home ownership. From aiding grandchildren to purchase their first homes to empowering children or other loved ones to build their personal balance sheets through investing in residential real estate, there are many options to explore regarding how financial support is best provided. Each approach has tax implications, and determining the best approach will require consideration of a number of factors, including:

• Whether the residence is already owned by the family or is being newly acquired;
• The anticipated growth of the home’s value;
• The expected period of time that the family will own the home; and
• The availability of attractive bank financing terms.

This article explores some of the options that may be considered and identifies some of the tax implications that should be evaluated.

Navigating Estate and Gift Tax Exemptions

The estate and gift tax lifetime exemption is currently $13.61 million for individuals and $27.22 million for married couples, under the Tax Cuts and Jobs Act (TCJA), but it is set to be reduced to an estimated $7 million per person beginning January 1, 2026. If the value of your residential real estate is a significant component of your personal balance sheet, transferring those assets outside of your estate may be a prudent way to take advantage of the higher lifetime exemption before the TCJA estate tax provisions sunset.

The Generation-Skipping Transfer Tax

In addition to the estate and gift tax, the generation-skipping transfer (GST) tax often comes into play when wealth owners wish to transfer real estate, like vacation properties or second homes, to younger family members. GST tax is imposed on wealth transfers to grandchildren and more remote descendants that exceed the exemption limits so individuals cannot avoid transfer taxes by “skipping” a generation. The GST tax is levied in addition to gift or estate taxes and is not a substitute for them. The exemption for the GST tax is also $13.61 million per person and the exemption may be applied to gifts during lifetime or transfers through the grantor’s estate. The GST tax exemption is also scheduled to sunset at the end of 2025 and will be lowered to $7 million per person in 2026.

Gifting as a Means to Support Home Ownership

Many individuals consider offering a “deal” to their loved ones by pricing the residence at a level their family member can afford, below the current market rate. However, this situation can create a tax filing obligation because the IRS considers any transfer of assets for less than full and adequate consideration than would be paid “between a willing buyer and a willing seller” (Treas. Reg. §20.2031-1) to be a gift. A gift tax return must be filed to disclose the gift to the IRS, and it must include a qualified appraisal as of the transfer date if the delta between the transfer price and the market value of the gift is higher than the annual exclusion ($18,000 for 2024). When the total value of all gifts made throughout an individual’s life exceeds the lifetime exemption amount (again, currently set at $13.61 million per person), then a 40% gift tax will be assessed on the excess of the total over the lifetime exemption amount.

Rather than gifting an entire property, wealth owners can make a cash gift to a beneficiary to cover the down payment, the monthly mortgage, property tax, insurance payments, maintenance and repair costs, and more. As mentioned above, the Internal Revenue Code provides an annual gift exclusion that allows individuals to give up to $18,000 in 2024 to as many people as they’d like without incurring gift taxes. If the gift is solely in cash, does not exceed the annual exclusion amount, and there are no other gifts to report for the year, a gift tax return is not required.

Gifting Real Estate Through Trusts

Using trusts to gift real estate is a technique often used in estate planning, as many trusts include provisions that allow the trustee to make discretionary distributions to or on the beneficiary’s behalf for health, education, maintenance, and support. The ongoing costs of home ownership, such as real estate taxes, insurance, mortgage payments, and home repairs can fall within the maintenance and support standard, to assist beneficiary’s with home ownership expenses.

Some types of trusts can be structured to continue for several generations, allowing a wealth owner to provide for home ownership even for decedents who are not yet living at the time the trust is created, if desired. This is done by allocating the GST exemption to the trust. Some trusts qualify for the $18,000 annual gift exclusion too, if there is a single beneficiary and all the assets and income go to the beneficiary or their estate.

Using estate planning techniques like a qualified personal residence trust (QPRT) may allow individuals to transfer a residence to their children, and still allow that individual to live in the home.  In addition to reduced transfer taxes, any future appreciation in the residence after the QPRT is established is transferred to children without being subject to additional transfer tax. Learn more about QPRTs here.

Living Arrangements and Reduced Rent Options

If you already own the home you want to gift or transfer, you could consider allowing a family member to live there rent-free or at a reduced rent. An annual gift tax return may be required if the market value of the reduced rent is higher than the annual exclusion, but a key advantage of this approach is that if you intend to transfer the property to the beneficiary upon your passing, maintaining the asset within your estate ensures it will benefit from a step-up in basis. This is an attractive option for a home that has a very low basis and has appreciated significantly over many years of ownership.

Loan Options for Home Purchase Assistance

Another option you can consider is loaning your family member the money to purchase the home from you at fair market value. However, there are protocols that must be followed to avoid running afoul of IRS regulations. Such loans must be formally documented, and payments made according to the terms of the agreement. Interest rates on related-party loans must be set, at a minimum, at the interest rate provided by the IRS in monthly published Revenue Rulings (known as the Section 7520 rates), and other arm’s length terms must be observed.

Of course, the grantor could forgive part of the loan at any point during the loan term. If the loan forgiveness amount is $18,000 or less per year, then it should qualify for annual exclusion gifting and not reduce the grantor’s lifetime estate and gift exemption.

However, it’s important to avoid a predetermined arrangement for forgiving the loan annually under the annual exclusion, as the IRS might view this as a single gift made in the first year, resulting in an inadvertent reduction of the donor’s lifetime exemption.

Financing Strategies for Home Purchases

Many families have relationships with their banking partners that allow them to obtain favorable interest rates or terms. In addition, they may own other assets, such as brokerage accounts, that may be used as additional collateral to support a loan, although it would not be advantageous to sell those assets. Using such assets as collateral usually entails the addition of restrictions that prevent the disposition of the assets while being held for collateral without prior authorization from the financial institution. A parent or grandparent can serve as a personal guarantor on the loan between the beneficiary and the bank, but there may be a gift value to a personal guarantee, and consideration should be given as to whether this triggers a gift tax filing requirement.

Consulting with Advisors for Tailored Strategies

As you can see, there are many ways in which wealthy individuals may offer to help loved ones achieve home ownership or favorable living arrangements. Talking with your advisors will help determine which options accomplish your goals while utilizing tax-efficient strategies. We can address your inquiries and assist in crafting a personalized strategy that enables you to transfer your wealth not merely as a gift but with meaningful intent and purpose, aligning with your family’s home ownership goals and financial well-being.

Written  by Abbie M.B. Everist. Copyright © 2024 BDO USA, P.C. All rights reserved. www.bdo.com

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For many business owners, taxes often represent a hurdle to clear rather than a strategic asset to leverage. However, those who look beyond mere compliance can unlock the transformative power of tax planning as a key driver for sustainable business growth. Rather than viewing tax as a static annual obligation, repositioning it as a dynamic component of your business strategy can substantially impact your bottom line. Effective tax planning goes beyond preparing for tax season; it integrates with your company’s financial decision-making process, influencing everything from cash flow management to long-term investment strategies. This article outlines practical steps for business owners to harness tax planning effectively in their growth strategies.

Comprehensive Tax Analysis

Initiate your tax strategy by comprehensively analyzing your company’s financial situation. Assess all aspects—revenue, expenses, investments, and potential risks—to understand your tax obligations. Engaging with financial advisors to conduct this analysis can uncover valuable tax-saving opportunities that align with your business growth plans.

Tax Strategy and Business Goals Alignment

Ensure that your tax strategies are in sync with your business objectives. If expansion or capital investments are on the horizon, tailor your tax approach to support these aims. This could involve tax planning methods like income deferral or identifying deductions that can be claimed to reduce taxable income, thereby aligning with your business’s future financial goals.

Tax Credits and Incentives Utilization

Stay informed about tax credits and incentives that could benefit your business. Regularly review government offerings for R&D, environmental initiatives, or employment practices, and consider how to integrate these into your tax planning effectively. Consult with tax professionals to apply these credits in the most advantageous ways for your business.

Income and Expense Timing

The timing of income recognition and expense incurrence is crucial. Make informed decisions about when to realize income and incur expenses to manage your tax liabilities effectively. Adjusting the timing can lead to a more favorable tax position and improved cash flow, aiding reinvestment in your business.

Technology Investment for Tax Planning

Invest in technology to enhance your tax planning and business management processes. Accounting software and automation tools can provide accurate, real-time data, allowing for better financial decisions. This technological support is essential for maintaining efficiency and compliance with tax obligations.

Strategic Employee Compensation

Review your compensation strategies to optimize tax outcomes for the business and employees. Consider various compensation models, such as deferred compensation plans or other fringe benefits, which may offer tax advantages while supporting your talent acquisition and retention objectives.

Retirement Planning for Owners and Succession

Business owners should view retirement planning as a component of the company’s tax strategy. Structuring retirement savings tax-efficiently benefits both the individual’s and the business’s future. This planning also involves considering the tax implications of business succession and transition.

Tax planning is more than compliance; it’s a critical element of a sustainable business strategy. While navigating through these areas, it’s essential to maintain a forward-thinking approach, utilize available resources, and continuously adapt to changing tax laws. Before implementing any tax-related changes, consult a CPA to ensure the strategies are appropriate and beneficial for your business’s unique context. This careful and informed approach to tax planning will support your business’s growth and stability over the long term.

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In the dynamic world of real estate development, not every project reaches completion. Changes in market conditions, regulatory landscapes, or project viability can lead to the difficult decision of abandoning a project. While such situations are challenging, understanding the tax implications and opportunities for deductions can mitigate financial losses. This article outlines the key considerations for real estate developers and investors on when and how to write off abandoned project costs to maximize tax benefits.

Understanding Abandoned Project Costs

Abandoned project costs refer to expenditures associated with a real estate project not completed or carried through to fruition. These costs can include land acquisition expenses, preliminary survey fees, architectural and engineering design costs, and other developmental expenses incurred up to the point of abandonment.

When Can You Deduct Abandoned Project Costs?

The Internal Revenue Service (IRS) allows taxpayers to deduct losses for abandoned real estate projects, provided conditions are met. To qualify for a deduction, the abandonment must be absolute, meaning there must be a clear intent to discard the property and no expectation of recovering its cost. The decision to abandon a project should be substantiated with evidence such as board resolutions, public announcements, or documented changes in strategic direction.

Maximizing Deductions for Abandoned Projects

It’s crucial to strategically time the deduction to align with your tax profile and current income composition to maximize deductions for abandoned real estate project costs.

Abandoned project costs are typically classified as ordinary losses. Recognizing these costs as ordinary losses can be highly beneficial if you’re in a year with a significant amount of ordinary income. Ordinary losses reduce your ordinary income, typically taxed at a higher rate than capital gains.

This strategic timing hinges on intricate tax code nuances. Furthermore, the taxpayer should be careful not to treat the abandonment as a sale or exchange, as such transactions could trigger capital losses, which could cause significant tax inefficiencies. Consulting with a tax professional who can navigate these complexities and optimize your tax outcome based on your specific financial scenario and the timing of your abandoned real estate project is advisable.

Special Considerations for Developmental Costs

Abandoning a real estate project is never an easy decision, but understanding the tax implications and opportunities for deductions can provide a silver lining.

Developmental costs can be complex, with specific IRS rules determining their treatment for tax purposes. It’s important to consult with a tax professional to ensure that these costs are correctly classified and that the timing of any deductions is appropriate. For example, the IRS has specific provisions regarding the abandonment of depreciable property, which may require adjustments to the basis of the property before a loss deduction can be claimed.

For expert guidance on the costs associated with abandoned projects, reach out to Walter Shuffain. Our firm is at the forefront of the Real Estate Industry and is equipped with a team of specialized advisors with comprehensive knowledge of the real estate market. Discover the wide range of services we offer to the Real Estate sector.

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Individual Tax Planning

Change is constant, which means your tax strategy needs to evolve year after year as laws and policies change. This guide includes tax planning highlights and considerations for federal tax planning.

Business Tax Planning

Tax planning remains crucial for businesses seeking to maximize cash flow by effectively managing their long-term tax responsibilities. Below are year-end guides on various tax topics that impact business tax planning.

State and Local Tax

Discover expert insights and practical guidance for companies with 2023 year-end SALT planning and get a head start on your 2024 planning in this article.

Partnerships

The IRS has actively challenged partnerships’ tax positions in court over the past year, and the agency is dedicating funding and resources to examine partnerships further. There are a number of tax implications partnerships should consider, and they should plan for year-end and beyond. Here’s what you should be looking into.

Real Estate

When it comes to real estate transactions, understanding the tax implications is crucial. As we approach the end of the year and prepare for the year ahead, real estate businesses should take the time to review how current tax rules apply to their transactions. This guide will help you plan ahead and ensure your real estate transactions are structured in the most advantageous way possible.

Financial Transactions

Failing to understand the tax rules for financial transactions and instruments and how they apply to your business can be detrimental. Thankfully, companies can take some steps over the year to ensure they are compliant. Follow these considerations as part of your year-end tax planning.

Business Incentives & Tax Credits

Quite a few tax incentives and credits have been getting a lot of hype over the past few years. Here are a few you can consider including in your tax strategy for your business.

Tax Accounting Methods

Tax accounting methods determine when a taxpayer’s income is recognized and costs are deducted for tax purposes. To drive tax savings, taxpayers should strategically adopt or change tax accounting methods. However, the rules are complex. That is why we put together this guide on what you should consider for 2023 and 2024.

Each guide provides information and insights on what to consider for your year-end tax planning. As you examine your tax strategy, the Walter Shuffain team is available to answer your questions. Don’t hesitate to contact us!

The post Begin Your Tax Planning Journey Here appeared first on Walter Shuffain.

Single-Sales-Factor Apportionment

Effective for tax years beginning on and after January 1, 2025, Massachusetts corporate taxpayers will be required to apportion net income using a single sales factor. That is a departure from current law, which requires corporations (other than qualifying manufacturers) to use a three-factor formula of property, payroll, and a double-weighted sales factor.

Financial Institution Receipts From Investment and Trading

Also effective for tax years beginning in 2025, H. 4104 repeals the current sourcing of financial institution receipts from investment and trading assets and activities, which generally sources those receipts to the taxpayer’s regular place of business (where day-to-day investment and trading decisions are made). Beginning in 2025, those receipts – interest, dividends, net gains, and other income from investment assets and activities and income from trading assets – will be sourced using a fraction. The numerator will be the financial institution’s Massachusetts-sourced receipts from financial activities, such as lending, credit card receivables, leasing, and the denominator will be total receipts, excluding income from investment assets and activities.

Short-Term Capital Gains

For Massachusetts personal income tax purposes, the legislation reduces the short-term capital gains rate to 8.5%, retroactive to January 1, 2023. Previously, Massachusetts taxed any gain from the sale or exchange of capital assets held for no more than one year at a rate of 12%.

‘Wealth’ Taxes

• The legislation increases the state estate tax threshold to $2 million for decedents dying on or after January 1, 2023. It also alleviates the so-called cliff effect of the Massachusetts estate tax, whereby estates valued at over $1 million were subject to tax on their entire value. The legislation grants a state estate tax credit of up to $99,600 as relief and changes how the tax on out-of-state real estate and tangible personal property is calculated.
• Effective January 1, 2023, Massachusetts enacted the millionaires surtax, an additional 4% state income tax on the portion of a taxpayer’s annual income that exceeds $1 million. For income earned on or after January 1, 2024, H. 4104 requires married couples to file Massachusetts joint income tax returns for any year in which they file federal joint income tax returns.
• H. 4104 also requires the Department of Revenue to study the effect of an additional surtax of up to 4% on pass-through entities (PTEs) that have made the Massachusetts PTE tax election.

Insights

• Affected taxpayers should model the impact of the Massachusetts apportionment changes that will be effective for tax years beginning January 1, 2025, particularly if applying economic nexus or other state nexus positions to avoid Massachusetts sales factor throwback and/or throwout.
• PTEs and their owners should watch for the Department of Revenue’s study and possible recommendations concerning a PTE surtax.” Like requiring married joint filing when a federal joint return is filed, a 4% surtax on electing PTEs is intended to address avoidance of the millionaires surtax that went into effect earlier this year.

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Michael works predominantly with the firm’s real estate, professional services, and manufacturing clients. He joined Walter Shuffain in 2013 as an Audit Manager. Before relocating to the Boston area, Michael worked in accounting in New York City for over a decade with two of the Top 100 Accounting and Consulting firms in the United States.

Michael’s promotion to Shareholder is a testament to his work ethic, client-centric approach, and alignment with Walter Shuffains’ core values. Jonathan Yorks, Managing Shareholder of the firm, commends Michael’s leadership and technical ability that has served clients well through his years with the firm. Michael’s promotion symbolizes an important milestone in his career and a bright future for Walter Shuffain.

Michael holds a bachelor’s degree in accounting from the University of Maryland, College Park. Michael is a member of the American Institute of Certified Public Accountants and the Massachusetts Society of CPAs.

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We don’t expect immediate tax changes over the next year. However, never say never when it comes to congress.  

While preparing your business for the end of the year, look at these tax moves you may not have considered to lower your tax liability in 2022. 

Defer Taxable Income 

One way to lower your tax liability is to defer taxable income by increasing your deductible expenses, decreasing your income, or both. Consider sending invoices to clients in January 2023 rather than in December 2022 (if your cash flow allows). Then, pay outstanding invoices or bills before December 2022 instead of putting them off until next year. In addition, if your business team is considering selling investments or business properties, wait to close the sale until 2023 when possible.  

Maximize Retirement Plan Contributions 

Retirement plan contributions are an easy way to save for the future while decreasing taxable income. Bonus, monies deposited grow tax-free while it’s in the account. If your business already has a retirement plan set up, consider making the maximum deductible contribution for 2022. While you can sometimes make these contributions up until you file taxes, this reduces the timeframe for generating tax-deferred earnings.  

Don’t have a retirement plan established for your business? Now may be a good time to start one. Small business retirement plan options include the 401(k), defined benefit pension plans, SIMPLE-IRA plans, and SEP-IRAs. Self-employed persons can contribute up to 20% of self-employment earnings up to $61,000. If you’re self-employed by your corporation, that contribution increases to 25% of self-employed earnings up to $61,000.

In addition, setting up a retirement plan can come with additional tax credits. Small employers who start a new retirement plan are eligible for a nonrefundable income tax credit of up to $5,000 for the administrative and retirement-education-related expenses on qualified plans. Including an auto-enrollment feature on the qualified plan? Your business could be eligible for a tax credit of $500 yearly for the next three years.  

Contact our knowledgeable tax professionals to discuss the benefits of different retirement plans.  

Plan Your Business Asset Purchase 

In 2022, businesses can take a bonus depreciation deduction of 100% on qualified assets purchased during the year. Beginning in 2023, that rate drops to 80%, with the remaining 20% deducted during the asset’s recovery period. Note: Recovery periods can last up to 20 years, depending on the asset. 

Qualifying property that is not eligible for bonus depreciation may be eligible for Section 179, expensing up to $1.08 million. Keep in mind that this deduction begins to phase out when the asset’s cost exceeds $2.7 million. This means your business could possibly write off the entire cost of business asset purchases in 2022. Give our team a call to discuss what assets qualify for bonus depreciation and Section 179 deductions. 

Move Business Meetings 

The standard business meal deduction is 50% of the meal’s total cost. However, the cost of food and beverages for business meals provided by a restaurant that is paid or incurred in 2022 is 100% deductible. For businesses that use the per diem method to reimburse employees, consider asking those you’re meeting with in January to meet before the end of the year to increase business meal expenses while you can deduct the entirety of the cost. For businesses that use the cash method to reimburse meal expenses, consider prepaying the cost of business meals to be provided in a restaurant in 2023. It can be deducted if it is incurred within 12 months of the purchase date.  

To discuss any end-of-year moves your business can make to decrease your tax bill, or plan for the 2023 tax season (including the introduction of the Massachusetts Millionaire’s Tax), reach out to our team of experienced tax professionals! 

The post Time to Make Your Business Year-End Tax Moves appeared first on Walter Shuffain.

Have you ever received a surprise income tax bill? You’re not alone. According to an analysis of IRS data, just over one-fifth (21%) of U.S. taxpayers owe the IRS money each year. And while owing taxes might not come as a surprise to all those taxpayers, it does to many—often because they didn’t have enough tax withheld from their paychecks.

How does under-withholding happen?

In the U.S., income taxes are a “pay as you go” system, meaning you’re expected to pay taxes throughout the year as you earn income rather than in a lump sum when you file your federal income tax return.

You can do this by having an employer withhold taxes from your paycheck or making estimated tax payments.

If you don’t pay enough throughout the year, you will have to pay the difference when you file your return, and you might also owe interest and penalties. You can avoid an underpayment penalty if you owe less than $1,000 when you file your return or if you pay at least 90% of your current year tax or 110% of the tax shown on your prior return, whichever is smaller.

How do you know how much you’ll owe?

Withholding or making estimated payments is tricky because most people don’t know how much they’ll owe until they file their tax returns. Even if you make “safe harbor” payments based on last year’s tax bill, if your income is higher than last year, you could end up owing a lot of tax even if you manage to avoid an underpayment penalty.

That’s why, if you have taxes withheld from your paycheck, you should update your Form W-4 whenever there is a change to your tax situation.

What is Form W-4?

Form W-4 is a document your employer asks you to fill out. It instructs your employer on how much federal income tax they should withhold from your paycheck and send to the IRS on your behalf.

If you fill out the form right, your employer should withhold the correct amount from your paycheck, and you’ll owe very little when you file—or maybe even get a small tax refund.

The problem is that few people know how to fill out Form W-4 correctly.

How to fill out Form W-4 to prevent under-withholding

Filling out Form W-4 is straightforward if you’re single and have a relatively simple return. But the following situations can cause under-withholding problems.

• • You’re married. If you’re married and your spouse works, you will need to include information on your spouse’s income as well as your own.
  • You have more than one job. If you had another job earlier in the year or work a second job, you need to include information about the income and withholding from that other job.
  • You have other income. You need to ensure your W-4 accounts for all other sources of income, whether tax is withheld on that income or not. That includes retirement distributions, Social Security distributions, capital gains, dividends, unemployment compensation, interest, self-employment income, etc.

So while it might be tempting to fill out your W-4 and turn it in right away on your first day at a new job, you should really take your time. You might even need to look up information on your prior year return or call your accountant to ask questions.

Other situations that might trigger the need to fill out a new Form W-4 include:

• • Getting married or divorced
  • Taking on a second job or starting a business
  • Getting a raise or promotion
  • Inheriting assets
  • Having a child leave home
  • Receiving a large bonus

The IRS’s Tax Withholding Estimator tool is an excellent resource for helping you figure out where your withholding should be. When you enter information about your income and withholding, investments, side jobs, tax deductions, and credits, the tool provides all the information you need to complete the form correctly.

If you were surprised by a tax bill this year, now is a good time to review your withholding. The sooner you make changes, the more paychecks you’ll have to absorb those changes and make your tax withholding and take-home pay even throughout the year.

Of course, if you need help reviewing your withholding or filling out Form W-4, contact your Walter Shuffain advisor.

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