Top 5 Year-End Tax Planning Moves Before 2026: What Businesses & Individuals Should Know

Dec 01, 2025

As we approach the end of the year—and as major tax law changes begin to take effect—it’s critical for both businesses and individuals to take stock of evolving tax provisions. The recent updates from the 119th Congress, as detailed in William Vaughan Company’s 2025 Year-End Tax Planning Webinar, contain significant opportunities and pitfalls. Smart planning now can unlock growth, mitigate risks, and ensure you’re maximizing every available benefit.

Below, we break down the top 5 tax planning considerations you should address before 2026:

1. Leverage Bonus Depreciation and Expensing Changes – for businesses:

  • Immediate expensing is available for property with a class life of 20 years or less, placed in service after January 19, 2025.
  • Qualified Production Property: Eligible manufacturers who place qualifying real property in service between July 4, 2025 and December 31, 2030, may benefit from accelerated depreciation on this property. This property must meet several specific requirements in order to qualify.
  • State Tax Considerations: For certain states (Michigan in particular), Individuals and flow-through entities must use IRC rules as of 12/31/24 for bonus depreciation, which continues the planned phase-outs and limitations as outlined in the Tax Cuts and Jobs Act of 2017.

Action Step: Review capital expenditure plans now. Accelerate purchases or construction to maximize deductions under the current, more favorable rules.

2. Prepare for Beneficial Changes to Interest Expense Limitations
What’s changing:

  • Starting January 1, 2025, businesses subject to Section 163(j) interest expense limitations can calculate their amount of limited interest expense based on their EBITDA. Previously, Depreciation & Amortization could not be added back in this calculation, which resulted in less allowed interest expense.
  • Starting January 1, 2026 any interest capitalized as additional tax basis to an asset must be broken out of that assets depreciation and subjected to the 163(j) limitations as if it were not part of depreciation.
  • Michigan businesses: Recent decoupling from federal rules means separate treatment for business interest deductions.

Action Step: Conduct a Section 163(j) analysis to determine if upcoming changes in the limitations will impact your financing structure or projected taxable income.

3. Understand and Optimize Research & Experimental Expenditures (Section 174)
Significant changes to Section 174, governing Research and Experimental (R&E) expenditures, have a direct impact on businesses engaged in innovation, product development, or process improvement. Here’s what you need to know:

Recent Legislative Updates

  • Pre-2022: Businesses could elect to deduct R&E expenses in the year incurred.
  • 2022–2024: R&E costs had to be capitalized and amortized (generally over five years for domestic and fifteen years for foreign expenditures).
  • Post-2024 (Starting in 2025): Businesses may once again elect to deduct R&E expenses in the year incurred (except foreign expenses, which remain subject to 15-year amortization)

Strategic Planning Opportunities

  • Previously Amortized Costs Going Forward:
    • For 2025, all businesses can elect to expense all prior years unamortized R&E costs in the current year or choose to expense half in 2025 and the remaining half in 2026.
    • If your business has less than $31 million in gross sales on average over the last 3 years, the new law allows for amending prior returns. I.e. you may go back and expense R&E costs in the year they were incurred and claim refunds. The deadline to amend these returns is generally by July 6, 2026, a much shorter timeframe than typically allowed for amendments.
  • Michigan Decoupling:
    • The state now decouples from federal rules on Section 174A (R&E expenses), in addition to Section 163(j), Section 179, and bonus depreciation provisions (Sections 168(n) & 168(k)), after Michigan’s latest budget package passed (H.B. 4961, signed 10/7/25).

Action Steps for Businesses

  • Review your current and planned R&E activities.
    • Evaluate whether you should accelerate R&E spending into 2025 to maximize immediate deductions.
    • Determine if you are eligible to amend prior year returns and evaluate whether you should do so, in order to meet the fast-approaching deadline.
    • Coordinate with tax advisors to track eligible expenditures and ensure compliance with both federal and state rules.
  • Individuals & Flow-Through Entities:
    • Between section 174A, 163(j) and 168(k) taxable income may be down in 2025 compared to prior years. If you are an S-Corporation, be sure to consider your stock basis and the deductibility of losses when making key decisions for 2025.
    • Also consider making a Roth conversion to take advantage of lower tax brackets if income is lower due to 2025 tax law changes.

4. Maximize Individual Deductions and Credits Before Phase-outs
Standard deduction increases (effective 2025):

  • Single: $15,750
  • Married Filing Jointly: $31,500
  • Additional $6,000 for taxpayers 65+ (phase-outs apply).

Other highlights:

  • State and Local Tax (SALT) cap: $40,000 for 2025-2029, then drops to $10,000 in 2030 (phase-outs apply).
  • Mortgage insurance premiums: Deductible from 2026.
  • Charitable deduction for non-itemizers: Up to $2,000 for joint filers from 2026.
  • Child Tax Credit: Increased and inflation-adjusted.
  • Charitable donations for itemizers: Deductions will be limited for taxpayers in the maximum tax bracket of 37% at 35%. Donations will also be subject to a floor of 0.5% of the taxpayers taxable income beginning in 2026.

Action Step: Bunch deductions: Consider timing charitable giving, SALT payments, and other deductions to optimize their tax impact before stricter caps and limitations set in. Consider making large doner advised fund (DAF) donations in 2025 to take advantage of the deductions before the new limitations take effect.

5. Estate & Gift Tax Planning

  • Exemption increases to $15M in 2026 (from $13.99M in 2025).
  • Annual gifting limit: $19,000 in 2025, inflation-adjusted for 2026.
  • Portability remains for spouses.

Action Step: Review your estate plan: High-net-worth individuals should review gifting strategies and trusts now that we have some certainty in the annual and lifetime limits.

Why Proactive Planning Matters
With so many provisions phasing in and out, proactive tax planning is essential. The coming years will see the continuance of many prominent TCJA provisions, new deductions, and complex interactions between federal and state rules. William Vaughan Company is here to help you navigate these changes, optimize your tax position, and ensure compliance.

Connect with Us.
Ruben Becerra, CPA – ruben.becerra@wvco.com
Chad Gates, CPA – chad.gates@wvco.com

Categories: Tax Planning

Alert: State Revenue Departments Report A Surge In Tax Phishing Scams

Sep 22, 2025

Across the US, state revenue departments, including those in Ohio and Michigan, have begun reporting a surge in tax phishing scams targeting taxpayers via text messages. These fraudulent messages claim the recipient’s tax refund has been approved and instruct them to click on a link to “finalize processing.” The link directs users to a website impersonating the state’s official tax portal, often displaying authentic-looking logos and branding.

What is a phishing scam?
Phishing scams are a form of social engineering where attackers deceive people into revealing sensitive information or installing malware such as viruses, worms, adware, or ransomware on their devices.

Essential tips for personal protection:

  • Do not click links or respond to suspicious texts: Ignore and delete any unsolicited messages claiming to be from state revenue agencies or the IRS regarding tax refunds.
  • Do not share personal or financial information via text: State revenue departments and the IRS do not communicate tax matters or request sensitive information via text.
  • Verify website addresses: Always double-check URLs before entering any information to ensure you are using the official state revenue department or IRS website.

Next Steps:
If you believe you have been targeted by a tax phishing scam or have shared information with scammers, you should report the scam to the following authorities:

  • Local law enforcement
  • Relevant credit reporting agencies (let them know your information has been compromised).
  • Your Financial Institution
  • State Attorney General
  • State Revenue Department Fraud Prevention Unit

If you are unsure about an incoming message, contact your state revenue agency directly through their official channels. For your convenience, the Ohio Department of Taxation has developed an official video detailing how to recognize fraudulent communications: ODT Scam Awareness Video.

Connect With Us.
wvco.com

Categories: IT & Risk Services, Tax Planning

IRS Releases New Employee Retention Tax Credit Guidance

Mar 28, 2025

Wait, we’re talking about the Employee Retention Tax Credit (ERC) yet again? Yes, you read it right, after hearing very little on the topic for the past 18 months, ERC is back in the news. On March 20, 2025, the IRS released new Employee Retention Tax Credit Guidance in an updated FAQ.

Specifically, the IRS introduced a new section entitled “Income Tax & ERC,” that addresses, one, situations where taxpayers didn’t reduce their claimed wage expense but received the ERC, and two, situations where taxpayers did reduce wage expenses but had a disallowed ERC claim. The tax authority also expanded guidance on reporting ERC fraud.

Here is what you need to know:

Income Tax & ERC

  • The IRS stands by its original position that taxpayers should have reduced their deductible wage expense by the amount of allowed ERC in the tax year the qualified wages were paid or incurred. However, the IRS is now providing alternative solutions for claiming unreduced wages. Under the revised guidelines, taxpayers now have the option to report the overstated wage expense as gross income in the tax year when the Employee Retention Credit was received, rather than amending their previous returns. This marks a shift from the earlier policy.
  • The updated FAQ also addresses scenarios where an ERC claim was denied after a taxpayer had already reduced their wage expenses for the year in which the qualified wages were paid. In these cases, taxpayers can now adjust their current return to reflect the increased wage expense corresponding to the disallowed ERC, instead of filing an amended tax return, an AAR, or a protective claim for refund for the earlier tax year. It’s important to note that taxpayers may still opt to amend previous returns to recapture the previously reduced wages.

ERC Scams

  • The IRS has issued further guidance on the procedures for reporting ERC-related fraud, strongly urging taxpayers to report any suspicious activities, including illegal, tax-related activities involving ERC claims, individuals who promote improper and abusive tax schemes, and tax return preparers who deliberately prepare improper returns. The step-by-step process for reporting ERC fraud can be found in the “ERC Scam” section of the FAQ.

To read the full FAQ along with the updated guidance, please refer to the IRS website here. To better understand how this new guidance may impact your business, we encourage you to connect with our Employee Retention Tax Credit (ERC) lead, Mike Hanf.

Mike Hanf, Tax Partner – mike.hanf@wvco.com

Categories: Tax Compliance

Before the Deal: An Introduction to Due Diligence

Mar 24, 2025

Understanding Buy-Side and Sell-Side Due Diligence

Buying or selling a business is a highly intricate process that requires strategic foresight and rigorous analysis. Whether operating on the buy-side or sell-side, conducting comprehensive due diligence is the cornerstone of deal success, mitigating exposure to financial, operational, and legal risks.

What is due diligence?
Due diligence is an investigative process designed to validate and assess all material aspects of a potential transaction. It involves a deep dive into financial, legal, operational, technological, and commercial factors to ensure a well-informed decision-making process. Due diligence highlights considerations by providing an investigative lens that ultimately protects the buyer and the seller from potential pitfalls, safeguarding against unforeseen liabilities and value erosion.

Basics of Buy-Side Due Diligence
On the buy-side of a transaction, ensuring that a potential target is a solid investment and aligns with your business’s overarching goals is paramount. Therefore, the primary focus of buy-side due diligence is to verify the accuracy and integrity of the seller’s financial disclosures while identifying potential red flags. Key areas of review include:

  • Quality of Earnings (QoE): Assessing revenue sustainability, EBITDA adjustments, and non-recurring expenses to gauge true earnings power.
  • Cash Flow Analysis: Examining historical and projected free cash flow to ensure liquidity adequacy and debt serviceability.
  • Balance Sheet Strength: Evaluating working capital efficiency, asset quality, contingent liabilities, and off-balance sheet exposures.
  • Legal & Compliance Risks: Identifying potential litigation, contractual obligations, and regulatory concerns that could impact post-transaction integration.

While audited financial statements provide a fundamental baseline, they often fail to capture operational synergies, market positioning, and cultural fit – making an integrated due diligence approach essential.

Basics of Sell-Side Due Diligence
For sellers, a proactive due diligence strategy enhances deal certainty and strengthens negotiating leverage. The goal is to preemptively identify and address areas of concern that could derail valuation or delay closing. Sell-side due diligence entails:

  • Financial Statement Readiness: Ensuring GAAP/IFRS compliance, reconciling discrepancies, and preparing robust financial models to withstand buyer scrutiny.
  • Legal and Regulatory Preparedness: Resolving outstanding liabilities, clarifying ownership structures, and securing necessary approvals to expedite deal execution.
  • Commercial Positioning: Validating customer contracts, market share stability, and competitive differentiation to justify premium valuations.

By conducting due diligence preemptively, sellers can bolster buyer confidence, minimize post-LOI renegotiations, and drive a more efficient closing timeline.

Making Informed Decisions
Regardless of deal positioning, due diligence is a critical component of transactional success. Whether assessing an acquisition target or preparing for a liquidity event, the process is inherently resource-intensive and demands meticulous planning. Engaging a third-party advisory firm can provide an independent, data-driven perspective, enhance deal certainty, and optimize transaction outcomes.

Connect With Us.

Patrick Mannion, Managing Director

Transaction Advisory Service

spatrick.mannion@wvco.com

Categories: M&A

UPDATED 3/3/205 – BOI Reporting Reinstated: Latest Legal Developments

Feb 20, 2025

UPDATE 3/3/2025: FinCEN Not Issuing Fines or Penalties in Connection with Beneficial Ownership Information Reporting Deadlines, read FINCEN’s release here!

On Monday, February 17, a federal district court judge in Texas lifted the suspension on the Corporate Transparency Act, reinstating the requirement to report beneficial ownership information.

In a recent announcement from the Financial Crimes Enforcement Network (FinCEN), the deadline for most companies to submit their reports has been extended to 30 calendar days from February 19, 2025, setting the new due date to March 21, 2025.

FinCEN also mentioned plans to review the beneficial ownership information reporting requirements under the Corporate Transparency Act. This review aims to reduce the reporting burden on low-risk entities while focusing enforcement efforts on threats that pose significant risks to U.S. national security. The criteria for identifying low-risk companies remain unclear, but this evaluation will occur over the next 30 days.

For general details on BOI Reporting being reinstated, please visit William Vaughan Company’s BOI Insights & Resource Hub. For comprehensive guidance, we encourage you to visit FINCEN’s website.

Categories: Tax Compliance

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