In most states, business owners of pass-through entities, including S-corporations and partnerships, are able to take advantage of pass-through entity tax payments. Whereby, you elect to pay the state income tax on the profits of the business at the business level, instead of the personal level. The benefit is deducting the state tax payments as a business expense, thereby reducing the federal taxable income that flows through to your personal income tax return.
States have varying rules and due dates to opt-in to take advantage of pass-through entity tax payments.
For cash method businesses, you have to pay the taxes during the year in order to deduct it as a business expense for that tax year.
For most states, business owners claim a tax credit on their personal state income tax return for their share of pass-through entity tax paid on their behalf by the business.
Pass-through entity tax payments allow business owners to deduct state income tax payments on the profits on their businesses, even when they claim the standard deduction or run into limitations with claiming the payments as an itemized deduction on their personal income tax returns.
Contact me to discuss this topic in further detail
Please note: the information on this website is intended to provide general advice to start the discussion with your tax professional. The information on this website may not apply to your specific situation. Only an experienced professional with the details of your specific situation can advise you on making the best decision. Contact me or your tax professional to discuss the information on this site to make an informed decision.
Traditional and Roth IRAs are powerful tools to save and invest for your financial future. Here are important details on Traditional and Roth IRA accounts.
Traditional IRA:
Tax Deductible (subject to income limitations if you or your spouse are covered by a retirement plan at work see table below)
No income limits on contributions (though your contribution may not be tax deductible)
Ideal for taxpayers above the Roth IRA income limits, older taxpayers (fewer years for earnings growth), taxpayers with higher tax rates when contributing, or taxpayers that expect lower tax rates in retirement.
Roth IRA:
Contributions are NOT tax deductible
Distributions (amounts withdrawn) are Not Taxable if criteria are met
Income Limits Apply to Contributions (see table below)
Ideal for younger taxpayers (more years for earnings growth), taxpayers with lower tax rates when contributing, taxpayers that expect higher tax rates in their future.
Info that applies to Both Traditional & Roth IRA Accounts:
IRA contributions can be made in addition to retirement plan contributions made through employers, such as 401k or Simple IRA contributions
IRA accounts are setup by individual taxpayers (separate from plans offered through employers)
Requires earned income by you or your spouse
Earnings Grow Tax-Free
$7,000 contribution limit (for traditional & Roth IRA accounts combined) per tax year plus an additional $1,000 for taxpayers that are 50 years of age or older for the 2025 tax year.
Contributions can be made by the due date of your tax return for the prior tax year (2025 contributions can be made by April 15, 2026). Extensions do not apply.
Traditional IRA – How Much can you Deduct?
While income limits do not apply to how much you can contribute to a traditional IRA, there are income limits that apply to how much you can deduct if you or your spouse are covered by a retirement plan at work. Check the table below to determine how much you can deduct if you are covered by a retirement plan at work.
Contact me to discuss this topic in further detail
Please note: the information on this website is intended to provide general advice to start the discussion with your tax professional. The information on this website may not apply to your specific situation. Only an experienced professional with the details of your specific situation can advise you on making the best decision. Contact me or your tax professional to discuss the information on this site to make an informed decision.
Maximizing contributions to retirement plans can be a great way to reduce your tax liability and save for your future benefit. Contribution limits vary by type of retirement plan and other details. Below is a brief overview of retirement plans and contribution limits for tax year 2025:
For Employees:
401k:
Employees that have access to 401k plans through their employer can contribute up to $23,500. If you are 50 years of age or older, you can make an additional $7,500 catch-up contribution. If you are age 60 to 63, your catch-up contribution limit is $11,250.
Age
Standard Limit
Catch-Up Limit
Total
Under 50
$23,500
N/A
$23,500
50+ (except 60-63)
$23,500
$7,500
$31,000
60-63
$23,500
$11,250
$34,750
Simple IRA:
Employees can contribute $16,500 to a Simple IRA account, plus catch-up contributions if you are 50 years of age or older.
Employees of companies with 25 or fewer employees can contribute up to $17,600 (plus catch-up contributions if you are 50 years of age or older).
Age
Standard Limit
Catch-Up Limit
Total
Under 50
$16,500
N/A
$16,500
50+ (except 60-63)
$16,500
$3,500
$20,000
60-63
$16,500
$5,250
$21,750
Traditional IRA and Roth IRA Accounts:
In addition to work-related retirement plans, you can contribute up to $7,000 for tax year 2025 (plus an additional catch-up contribution of $1,000 if you are 50 years of age or older) to a Traditional or Roth IRA account. See my post on IRA Contributions for income limits on deducting traditional IRA contributions and contributing to a Roth IRA.
Age
Standard Limit
Catch-Up Limit
Total
Under 50
$7,000
N/A
$7,000
50+
$7,000
$1,000
$8,000
For Self-Employed Individuals and Business Owners:
As a business owner, your contributions can be limited based on the extent other employees contribute to the retirement plan. However, if you do not have any other employees, then you can contribute significant amounts to your retirement plan.
Individual 401k Plans: There are a few contribution limits to be aware of:
Overall $70k limit for each employee (combined for employee & employer contributions), before catch-up contributions for those 50 years of age or older.
Employee Contributions: $23,500 as an employee contribution, before catch-up contributions for those 50 years of age or older.
Company Contributions: The limit on company contributions depends on how your business files its tax returns (e.g. S-Corporation, Schedule C). For S-Corp owners, company contributions are limited to 25% of qualifying W-2 wages.
SEP IRA Plans:
There is an overall limit of $70k for each employee.
Additionally, contributions are limited based on how the business files its tax returns (e.g. S-Corporation, Schedule C). For S-Corp owners, company contributions are limited to 25% of qualifying W-2 wages.
Traditional IRA and Roth IRA Accounts:
In addition to work-related retirement plans, you can contribute up to $7,000 for tax year 2025 (plus an additional catch-up contribution of $1,000 if you are 50 years of age or older) to a Traditional or Roth IRA account. See my post on IRA Contributions for income limits on deducting traditional IRA contributions and contributing to a Roth IRA.
Contact me to discuss this topic in further detail
Please note: the information on this website is intended to provide general advice to start the discussion with your tax professional. The information on this website may not apply to your specific situation. Only an experienced professional with the details of your specific situation can advise you on making the best decision. Contact me or your tax professional to discuss the information on this site to make an informed decision.
Before the end of the year, it’s a good idea to review your pay stubs to make sure everything appears to be accurate. It’s always easier to fix things before year-end payroll reports are filed and W-2 forms are issued. There’s still time left in the year to make changes and avoid issues.
Some common areas to review include:
-Make sure your address is up-to-date
-Make sure your employer is withholding state and local taxes for the correct jurisdictions
-See if you’re on track to max-out retirement plan contributions and other benefits your employer offers
-Ensure wage & withholding amounts are accurate and there aren’t any glaring errors
Please note: the information on this website is intended to provide general advice to start the discussion with your tax professional. The information on this website may not apply to your specific situation. Only an experienced professional with the details of your specific situation can advise you on making the best decision. Contact me or your tax professional to discuss the information on this site to make an informed decision.
Health Savings Accounts (HSA) allow taxpayers with qualifying health insurance coverage to make tax deductible contributions to fund their accounts to be used for medical expenses. Often, taxpayers without an HSA are not able to receive any tax benefit from their out-of-pocket medical expenses, as they’re required to reduce their medical expenses by a percentage of their income, and it’s only the amount leftover (if any) that they can benefit from deducting as an itemized deduction.
With an HSA, it doesn’t matter how high your income is, you’re able to deduct amounts you contribute to an HSA on your federal income tax return. This deduction is in the adjustment to income category to arrive at federal adjusted gross income (AGI) and is not an itemized deduction.
Eligibility Requirements: As mentioned above, in order to contribute to an HSA, you must have an HSA compatible health insurance plan. Compatible health plans often contain HSA in the name of the plan to indicate they are HSA compatible. If your plan does not contain HSA in the name, you should contact your health insurance company to inquire whether it is an HSA compatible plan. While many taxpayers are aware of the requirement for the health plan to have a high deductible, there are lesser known requirements that may make the health plan not HSA compatible.
Unlike a Flex Spending Account (FSA), HSAs are not “use it or lose it” accounts. The amounts you contribute to an HSA can stay in the account for any number of years.
Some HSA providers allow you to invest in mutual funds or index funds in the HSA account. Similar to a retirement plan, these earnings grow tax-free.
An HSA account is like a special kind of bank account that many different banks and other institutions offer.
Amounts paid from an HSA are tax-free if they are used for qualifying medical expenses.
There are the HSA contribution limits for the 2025 tax year (these amounts assume a full year of HSA compatible health coverage):
For a health plan that covers only one taxpayer (and not their family): $4,300
For family coverage: $8,550
Additionally, taxpayers that are 55 years of age or older at the end of the tax year are able to contribute an additional $1,000. Bringing the total annual contribution to $5,300 for self-only health coverage and $9,550 for family health coverage.
Health Coverage
2025 Contribution Limit
Catch-up Limit (age 55+)
Self-Only
$4,300
$1,000
Family
$8,550
$1,000
Due Date: Contributions to HSA accounts can be made as late as the due date for your tax return. Extensions do not extend this deadline. This means a contribution for the 2025 tax year can be made as late as April 15, 2026.
Contact me to discuss this topic in further detail
Please note: the information on this website is intended to provide general advice to start the discussion with your tax professional. The information on this website may not apply to your specific situation. Only an experienced professional with the details of your specific situation can advise you on making the best decision. Contact me or your tax professional to discuss the information on this site to make an informed decision.
There are income limits on contributing to a Roth IRA. Taxpayers whose incomes are above these limits can get around these limits with the backdoor Roth IRA strategy. Using this strategy, a taxpayer contributes to their traditional IRA account and converts the amount to their Roth IRA account. There are no income limits on contributing to a traditional IRA account (though such a contribution may not be tax deductible). Under the current tax law, and for the past 10 years, there are no income limits on converting an amount from a traditional IRA to a Roth IRA, though this may result in recognizing income tax as discussed below.
It’s important to note, when you convert an amount from a traditional IRA to a Roth IRAaccount this is a taxable event that may result in recognizing taxable income.
If you have a traditional IRA, SEP IRA, or Simple IRA that has an existing balance, that balance is likely from making tax-deductible contributions and earnings in the account. When converting an amount to a traditional IRA to a Roth IRA, you must look at it as if you’re converting a portion of all the balances in your traditional, SEP, and Simple IRA accounts to the Roth IRA, even if the traditional, SEP, or Simple IRA accounts are held at a different brokerage. You’re not able to pick and say the amount you’re converting is only X amount from Y account.
As a result, the backdoor Roth IRA strategy is best suited for taxpayers that don’t have existing balances in traditional, SEP, or Simple IRA accounts.
As an example if you have $100,000 in a traditional IRA account from tax-deductible contributions and earnings from prior years, and you contribute $7,000 to the traditional IRA for the 2025 tax year (which you don’t plan on deducting on your income tax returns), and convert $7,000 to your Roth IRA in 2025: the majority of the $7,000 converted to your Roth IRA is taxable. You should view this amount as a portion of the $100,000 of pre-tax contributions and earnings. The actual calculation to determine the taxable amount of the conversion is $6,542 ($100,000 / $107,000 X $7,000). The non-taxable amount of the conversion is $458 ($7,000 / $107,000 X $7,000). In this example, $100,000 is the ending balance of the traditional IRA account on December 31, 2025, which is used in the calculation shown, as well as the pre-tax balance and earnings prior to the most recent $7,000 contribution.
Contact me to discuss this topic in further detail
Please note: the information on this website is intended to provide general advice to start the discussion with your tax professional. The information on this website may not apply to your specific situation. Only an experienced professional with the details of your specific situation can advise you on making the best decision. Contact me or your tax professional to discuss the information on this site to make an informed decision.
All taxpayers are required to pay taxes throughout the calendar year to avoid paying Underpayment Penalties.
Most employees have income taxes withheld from their wages to help pay in these taxes throughout the year, but depending on your overall tax situation, these payments may not be sufficient to avoid the underpayment penalty.
For self-employed individuals, if you’re not paid wages from your business, you don’t have the option of having income tax withheld from your income. Instead, you pay in your taxes by making quarterly estimated tax payments.
Step-by-step instructions for making individual federal and most state quarterly estimated tax payments can be found on my website here: How to Make Quarterly Estimated Tax Payments
There are two major guidelines to help determine how much you should pay in throughout the year. To avoid penalties, you should pay the lessor of:
At least 90% of your current year’s tax liability
This requires you to know or estimate your current year tax liability. You can work with your accountant to determine how much your current year’s tax liability will be and/or use your prior year’s taxes as a guide.
Safe Harbor
Using this method you would determine how much you’re required to pay for the current year using amounts from your prior year’s taxes. Depending on your income and filing status, you would pay either 100% or 110% of your prior year’s total tax amount towards your current year’s tax liability. This rule is common referred to as Safe Harbor.
Any remaining tax is due with your tax return by April 15. An extension to file your tax return does not extend the due date for paying any tax due with your return.
Please note: the information on this website is intended to provide general advice to start the discussion with your tax professional. The information on this website may not apply to your specific situation. Only an experienced professional with the details of your specific situation can advise you on making the best decision. Contact me or your tax professional to discuss the information on this site to make an informed decision.
A major tax benefit available to self-employed individuals and business owners are retirement plan contributions. Contributions to retirement plans can save a significant amount of tax and allow you to save and invest for your retirement. Employer retirement plans have significantly higher contribution limits than traditional and Roth IRA accounts.
If the business has other full-time employees, the owners’ retirement plan contributions may be limited by the extent other employees participate in the retirement plan. Additionally, employer retirement plan contributions must be made on behalf of all eligible employees, not just the owners.
Common employer retirement plan options include Individual 401k plans and SEP IRA accounts.
The amount and timing of contributions varies depending on a number of factors including how the business is taxed, wages to owners and other employees, and the net income of the business.
As an example, for tax year 2025, if your business files taxes as an s-corporation and you have no other employees, you can contribute $23,500 as an employee contribution to an Individual 401k plan plus the business can make a contribution of up to 25% of your qualifying W-2 wages. This allows business owners to potentially contribute $45k+ to retirement accounts every year.
Contact me to discuss this topic in further detail
Please note: the information on this website is intended to provide general advice to start the discussion with your tax professional. The information on this website may not apply to your specific situation. Only an experienced professional with the details of your specific situation can advise you on making the best decision. Contact me or your tax professional to discuss the information on this site to make an informed decision.
If you have a profitable business, it likely makes sense to work with an accountant for year-end tax planning. Your accountant can provide an estimate of the bottom-line numbers for your current year’s taxes before year-end to avoid surprises, plan accordingly, and discuss tax saving opportunities.
Some large end-of-year purchases and deductions that business owners often consider to help minimize their tax liabilities include:
–Vehicle Purchases – SUVs and trucks with a gross vehicle weight over 6,000 pounds may be deducted in full in the year of purchase, to the extent the vehicles are used for business based on mileage.
–Furniture Purchases for a home office or office outside of your home.
Your accountant can model out these purchases and deductions in your business to help determine the tax savings to be realized from these types of investments.
With the exception of retirement plan contributions, these types of purchases and investments only make sense when you’re considering these investments in your business as the tax savings from these investments does not outweigh the cash required to make these purchases.
Contact me to discuss this topic in further detail
Please note: the information on this website is intended to provide general advice to start the discussion with your tax professional. The information on this website may not apply to your specific situation. Only an experienced professional with the details of your specific situation can advise you on making the best decision. Contact me or your tax professional to discuss the information on this site to make an informed decision.
Self-employed individuals and business owners that use an area of their home for business may be able to take a tax deduction for costs associated with a home office.
In order to claim the home office deduction, the area in your home must be used exclusively for business on a regular basis. The area does not need to be physically separated from areas used personally. A dinning room table use for both personal and business use would not count as the area must be used exclusively for business.
To claim the home office deduction, you’ll need to determine the square footage of the area used for business and the square footage of your entire home. A portion of the costs of your home can be deducted in proportion to the business square footage relative to the total square footage of your entire home.
Common Home Office Expenses Include:
-Rent payments or mortgage interest and real estate taxes if you own your home
-Utilities (electric, water, and gas)
-Homeowner’s insurance or renter’s insurance
-Homeowners’ association or condo dues
-Depreciation, if you own your home – a portion of the cost of your home allocated to the area used for business is deducted over a number of years.
Don’t include: amounts where the business use is not representative based on the square footage of the home office relative to the entire home, such as internet access, telephone, etc.
Contact me to discuss this topic in further detail
Please note: the information on this website is intended to provide general advice to start the discussion with your tax professional. The information on this website may not apply to your specific situation. Only an experienced professional with the details of your specific situation can advise you on making the best decision. Contact me or your tax professional to discuss the information on this site to make an informed decision.