What’s Your Potential Business Vehicle Deduction?

If you used one or more vehicles in your business during 2025, you may be eligible for valuable tax deductions on your 2025 income tax return. Businesses can generally deduct expenses attributable to business use of a vehicle plus depreciation. However, the rules are complicated, and your deduction may be affected by factors such as the vehicle’s weight, business vs. personal use, and whether you use the actual expense method or the cents-per-mile rate.

Actual expenses plus depreciation

The year you place a vehicle in service, you can choose to deduct the actual expenses attributable to your business vehicle use or, if the vehicle is a car, SUV, van, pickup or panel truck, claim the cents-per-mile deduction (discussed later). Deductible expenses include gas, oil, tires, insurance, repairs, licenses and vehicle registration fees. You’ll need to track and substantiate these expenses.

If you use the actual expense method, you also can claim a depreciation deduction for the vehicle by making a separate depreciation calculation for each year until the vehicle is fully depreciated. According to the general rule, you calculate depreciation over a six-year span for a percentage of the purchase cost as follows:

Year 1 — 20%
Year 2 — 32%
Year 3 — 19.2%
Year 4 — 11.52%
Year 5 — 11.52%
Year 6 — 5.76%

If a vehicle is used 50% or less for business purposes, you must use the straight-line method (10% in Years 1 and 6 and 20% in Years 2 through 5) to calculate depreciation deductions instead of the percentages listed above.

Depending on the cost of a passenger auto, your deduction may be less than the percentage of cost above because “luxury auto” annual depreciation ceilings apply. These are indexed for inflation and may change annually. For a passenger auto placed in service in 2025, generally the ceilings are as follows:

Year 1 — $20,200 ($12,200 if you don’t claim first-year bonus depreciation)
Year 2 — $19,600
Year 3 — $11,800
Each remaining year until the vehicle is fully depreciated — $7,060

These ceilings are proportionately reduced for any nonbusiness use.

More favorable depreciation rules apply to heavier SUVs, pickups and vans. For example, 100% bonus depreciation or the normal Section 179 expensing limit ($2.5 million for 2025) generally is available for vehicles with a gross vehicle weight rating (GVWR) of more than 14,000 pounds. A reduced Sec. 179 limit of $31,300 applies to vehicles (typically SUVs) rated at more than 6,000 pounds but no more than 14,000 pounds. Again, this favorable tax treatment is available only if the vehicle is used more than 50% for business.

The cents-per-mile method

The 2025 cents-per-mile rate for the business use of a car, SUV, van, pickup or panel truck is 70 cents (increasing to 72.5 cents for 2026). This rate applies to gasoline- and diesel-powered vehicles as well as electric and hybrid-electric vehicles. A depreciation allowance is built into the rate, so you can’t claim both the depreciation deductions discussed earlier and the cents-per-mile rate for the same vehicle.

The rate is adjusted annually. It’s based on an annual study commissioned by the IRS about the fixed and variable costs of operating a vehicle, including gas, maintenance, repairs and depreciation. Occasionally, if there’s a substantial change in average gas prices, the IRS will change the cents-per-mile rate midyear.

The cents-per-mile rate is beneficial if you don’t want to keep track of actual vehicle-related expenses or worry about depreciation calculations. Although you don’t have to account for all your actual expenses, you still must record certain information, such as the mileage for each business trip, the date and the destination.

Choosing or changing your method

There’s much to consider before deciding whether to use the actual expense method or cents-per-mile method to deduct expenses for a vehicle your business placed in service in 2025. For a vehicle placed in service earlier, if you previously deducted actual expenses for the vehicle, you can’t use the cents-per-mile rate for 2025 (or any other future year). However, if you previously used the cents-per-mile rate, you can switch to the actual expense method in a later year — but you can claim only straight-line depreciation.

If you lease a business vehicle, there also are deduction opportunities but the rules are different. Contact us if you’d like more information. We can also answer questions about claiming 2025 business vehicle expenses on your 2025 return or planning for and tracking 2026 expenses.

When your financial statements arrive, it’s tempting to glance at the bottom line and move on. After all, you’ve got customers to serve and employees to manage. But your income statement is more than a report card. It can be a strategic tool to help you spot growth opportunities, tighten your execution and make smarter decisions that move your business forward.

Measure what matters

The income statement is a good starting point for analyzing your financials and identifying inefficiencies and anomalies. The following ratios are commonly used to gauge profitability:

Gross profit margin. This is gross profit (revenue minus cost of goods sold) divided by revenue. It’s a good ratio to compare with industry statistics because it’s typically calculated on a consistent basis, though the definition of cost of goods sold can vary between companies.

Net profit margin. This is calculated by dividing net income by revenue. If the margin is rising, the company is generally doing something right. Often, this ratio is computed on a pretax basis to accommodate differing tax rates.

Return on assets. This is net income divided by the company’s total assets. The return shows how efficiently management is using its assets.

Return on equity. This is calculated by dividing net income by shareholders’ equity. The resulting figure shows how well the shareholders’ investment is performing compared to competing investments. However, private companies should use this ratio with caution because their equity levels can fluctuate due to owner withdrawals or tax strategies.

You can use these profitability ratios to compare your company’s performance over time and against industry norms.

Dig deeper into the details

If your company’s profitability ratios have deteriorated compared to last year or industry norms, it’s important to find the cause. If the whole industry is suffering, the decline is likely part of a macroeconomic trend. If the industry is healthy but your company’s margins are falling, it’s time to identify internal factors and take corrective measures.

Depending on the source of the problem, you might need to cut costs, reevaluate staffing levels, automate certain business functions, eliminate unprofitable segments or product lines, raise prices or possibly conduct a forensic accounting investigation. For instance, a hypothetical manufacturer might discover that its gross margin fell due to rising labor costs from excessive overtime or because supplier prices rose faster than the company adjusted its pricing.

Build a winning game plan

In today’s volatile economy, it’s easy to blame shrinking profit margins on external pressures. But assumptions can be costly. Your income statement provides insight into your team’s performance, from your operational efficiency to pricing and spending. A careful review of your income statement — including revenue trends, cost drivers and operating expenses — often uncovers actionable opportunities for improvement. We can help you develop strategies to boost profitability and keep your business competing at the highest level.

If your organization sponsors a retirement plan for employees, you’ve probably noticed that compliance hasn’t been easy over the last few years. Whether the SECURE Act, the CARES Act and other pandemic-era legislation, or SECURE 2.0, employers have had to deal with significant changes.

The IRS apparently sympathizes. In its recently issued Notice 2026-9, the tax agency has extended the general deadline for amending certain IRA-based plans.

Key point

The key point of Notice 2026-9 is that the deadline for making required written amendments to certain retirement plans has been extended to December 31, 2027. (According to the notice, the deadline could be extended further if necessary.) For employers, the two arrangements chiefly in question are:

Simplified Employee Pension (SEP) plans, under which sponsors provide participants with SEP-IRAs, and
Savings Incentive Match Plans for Employees (SIMPLEs), under which sponsors provide participants with SIMPLE IRAs.

The notice also covers traditional and Roth IRAs, but these are generally individually owned.

The two plans mentioned are popular with many small and midsize employers because they’re generally easier and less expensive to maintain than, say, a traditional 401(k) plan. The IRS extension aims to help such organizations catch up and avoid compliance issues from outdated paperwork — a credible threat given how frequently the rules have changed.

Indeed, it’s important to note that the deadline extension applies to amendments required under not only the most recent SECURE 2.0, but also the earlier SECURE Act, CARES Act and even the largely forgotten Relief Act of 2020. In other words, Notice 2026-9 addresses the cumulative effect of several years’ worth of legislative updates.

Timely opportunity

Like many employers, your organization may have already implemented some or all of the operational changes required by these laws. But have you formally updated your plan document? Many employers have fallen behind on this crucial compliance matter.

Although the deadline has been pushed to the end of next year, don’t let procrastination win the day if your plan document still needs to be updated. In fact, you might think of IRS Notice 2026-9 as a timely opportunity to both review and revise your plan document and assess how well your retirement arrangement is working.

The truth is, while the deadline extension applies to the timing of written amendments, employers are still expected to operate their plans in compliance with applicable laws as the various changes take effect. The distinction matters. The IRS can deem a plan out of compliance even if the employer-sponsor intends to fix it later — especially if improper administration has occurred. For example, rules regarding eligibility, contributions or distributions may have changed in ways that materially affect employee-participants’ benefits.

Bottom line: The extended amendment deadline provides breathing room, but it doesn’t eliminate the need for proper administration. Now’s a good time to confirm that your organization or its third-party administrator is tracking and implementing the required updates, and that your plan document has been amended accordingly.

Sound move

Sponsoring an IRA-based retirement plan can be a sound move for many small and midsize employers. But even seemingly minor compliance mistakes can lead to big headaches. If you have a SEP or SIMPLE IRA plan, we can help evaluate its operation and identify required amendments. We can also assist you in deciding whether another type of retirement plan may now be a better fit for your organization.

If you made large gifts to family members or heirs last year, you may need to file a 2025 gift return by April 15. So, it’s important to understand whether you’re required to file a federal gift tax return — and when it might be beneficial to file one even if not required.

When filing a return is required

Generally, you must file a gift tax return (Form 709) if, during the 2025 tax year, you made gifts (other than to your U.S. citizen spouse) that exceeded the $19,000-per-recipient annual gift tax exclusion. If you split gifts with your spouse to take advantage of your combined $38,000 annual exclusion, both you and your spouse must file separate gift tax returns.

You also need to file a gift tax return if you made gifts to a Section 529 college savings plan and wish to accelerate up to five years’ worth of annual exclusions ($95,000) into 2025. Other times filing is required include when you made gifts:

That exceeded the $190,000 annual exclusion amount (for 2025) for gifts to a noncitizen spouse,
Of future interests (such as remainder interests in a trust), regardless of the amount, or
Of community property.

Keep in mind that you’ll owe gift tax only to the extent that an exclusion doesn’t apply and you’ve used up your lifetime gift and estate tax exemption ($13.99 million for 2025). As you can see, some gifts require filing a return even if you don’t owe tax.

When filing a return isn’t required

Generally, no gift tax return is required if you:

Paid qualifying education or medical expenses on behalf of someone else directly to the educational institution or health care provider,
Made gifts of present interests that fell within the annual exclusion amount,
Made outright gifts, in any amount, to a spouse who’s a U.S. citizen, including gifts to marital trusts that meet certain requirements, or
Made charitable gifts and aren’t otherwise required to file Form 709 — if a return is required, charitable gifts should also be reported.

If you gifted hard-to-value property, such as artwork or interests in a family-owned business, consider filing a gift tax return even if you’re not required to. Adequate disclosure of the gift on a return triggers the statute of limitations, generally preventing the IRS from challenging your valuation more than three years after you file.

In some cases, it’s even advisable to file a gift tax return to report nongifts. For example, suppose you sold assets to a family member or a trust. Again, filing a return triggers the statute of limitations and prevents the IRS from claiming, more than three years after you filed the return, that the assets were undervalued and, therefore, are partially taxable.

Questions? We can help

Gift and estate tax rules are complex. Determining whether you must file a gift return (or whether you should file one even if not required) isn’t always easy. If you need help, please contact us.

Some customers naturally require more time and resources than others. But when certain relationships consistently consume more of your and your employees’ time than they generate in profit, it may be time to reassess. Taking a closer look at customer‑level profitability can help you understand where resources are going and ensure that high‑value relationships receive the attention they deserve.

Estimate their value to your business

Before you do anything else, determine individual customer profitability. If your business software tracks customer purchases and your accounting system has adequate cost-accounting or decision-support capabilities, this process will be easier. Even if you don’t maintain cost data, you can sort the good from the bad by reviewing customer purchase volume and average sale price. Often, such data can be supplemented by general knowledge of the relative profitability of different products or services.

Don’t ignore indirect costs. High marketing, handling, service or billing costs for individual customers or customer segments can significantly affect their profitability even if they purchase high-margin products.

Give them a grade

After you’ve assigned profitability levels to customers or customer categories, sort them into the following groups:

Group A. These customers are highly profitable. To further increase their value to your business, spend time learning what motivates them. Your proprietary products? Your prices? Your customer care? Developing a good understanding of this group will help you grow these relationships and provide insight into attracting similar customers.

Group B. Customers in this group may not be extremely profitable, but they positively contribute to your bottom line. There’s a good chance that, with the right mix of product, service and marketing resources, you can turn some of them into A customers. But be sure to monitor them closely to prevent them from slipping into the C group.

Group C. These customers tend to be unprofitable. They may also be difficult to work with and perpetually dissatisfied. They may expect special pricing or services, or pay invoices late. Fortunately, eliminating C customers probably won’t require a formal breakup. You can start by reducing the level of attention they receive. Remove them from marketing lists and tell your salespeople to stop contacting them. After a while, most C customers who are ignored will leave on their own.

When a strategic overhaul is warranted

It’s normal for businesses to have a mix of highly and less profitable customers. The key is making intentional decisions about where to invest your time and resources. Reallocating attention away from consistently unprofitable customer relationships — and toward your A and B groups — can boost your company’s financial performance. However, if C customers make up a large portion of your customer base, you may need to consider broader strategic changes. These could include reviewing pricing, refining service offerings, adjusting processes or rethinking which markets and customer segments you want to serve. Contact us to learn more.

An advance payment is one received by a business before it provides whatever is being paid for. For federal income tax purposes, generally advance payments must be reported as taxable income in the year received. This treatment always applies if your business uses the cash method of accounting for tax purposes. But, if your business uses the accrual method, it may qualify for favorable tax deferral treatment.

Tax deferral privilege

Accrual-basis businesses can elect to postpone including all or part of an eligible advance payment in taxable income until the year after it’s received. To be eligible for the deferral election, among other requirements, an advance payment must:

At least partially be included in revenue for a later year according to your business’s applicable financial statement (AFS) or, if your business doesn’t have an AFS, treated as earned in a later year, and
Be received for goods, services or other eligible items listed in IRS guidance.

If your accrual-basis business received eligible advance payments in 2025, you potentially can elect to defer reporting some or all of that income until 2026 for federal tax purposes.

What is an AFS?

An AFS can be an audited financial statement used for credit or financial reporting purposes or certain reports submitted to federal or state agencies. A form filed with the Securities and Exchange Commission, such as a 10-K or annual report, also can be an AFS.

If your business doesn’t have an AFS and elects to use the deferral method for advance payments, the payment must be included in taxable income in the year received to the extent of the amount that is treated by your business as earned in that year. The remaining portion of the advance payment must be included in taxable income the following year.

What types of payments are eligible?

Advance payments that may be eligible for deferral include payments for:

Services,
The sale of goods,
Gift cards,
The use of intellectual property,
The sale or use of computer software,
Warranty contracts, and
Subscriptions.

Other payments specified in IRS guidance also may be eligible.

Eligible advance payments don’t include rents (with some exceptions), certain insurance premiums, payments for financial instruments, payments for certain service warranty contracts, and other payments specified in IRS guidance.

Some examples

The following examples illustrate how eligible advance payments can be deferred for federal income tax purposes:

Taxpayer has an AFS. A calendar-year accrual method S corporation provides tennis facilities and lessons. On November 15, 2025, it received payment for a one-year contract for 48 one-hour tennis lessons beginning on that date. Eight lessons were given in 2025. On its AFSs, the business recognizes one-sixth (8/48) of the advance payment as revenue for 2025 and five-sixths (40/48) as revenue for 2026. Making the advance payment deferral method election, the business includes only one-sixth of the advance payment in taxable income for 2025. The remaining five-sixths must be included in taxable income for 2026.

Taxpayer doesn’t have an AFS. A calendar-year accrual method LLC provides online security protection services for computers, tablets and cell phones. On September 1, 2025, it received payment for two years of protection services beginning on that date. The business determines that four months of its services should be treated as earned in 2025. Making the advance payment deferral election, the business includes only one-sixth (4/24) of the advance payment in taxable income for 2025. The remaining five-sixths (20/24) must be included in taxable income for 2026.

Can you benefit?

We’ve only scratched the surface of complicated tax rules and regulations that apply to the treatment of advance payments. Contact us for help determining if your business is eligible to defer 2025 advance payments. We can also calculate the possible current tax savings.

You understand how important customer lists are to your business’s financial success. So do employees. In fact, some dishonest workers may be tempted to take lists with them when they leave — or even sell them while still employed by your company.

Employees bent on fraud may misuse legitimate access to download or forward customer data. Others may use more underhanded methods, such as copying unsecured files left on a desk. To keep your customer details confidential and out of the hands of dishonest employees, ask and answer the following ten questions:

1. Who has access to your customer list? Ideally, only employees with a defined business need should have access. Formal access controls also help prove that the company did its part to keep the customer list confidential.

2. Are there tiers of access? Not every element of your customer list may be needed by every employee granted access. Consider blocking sensitive data on a role-based or need-to-know basis.

3. Do you review access regularly? Many companies conduct quarterly reviews, but the right frequency depends on your risk level. Be sure to update access immediately when employees change roles or leave.

4. Who has edit rights? Look at who’s allowed to change customer data — and how. For example, can anyone update or delete customer records? If so, is there an audit log that records such activity, and do you routinely review it?

5. Can employees export the list? Depending on your software, employees may be able to print, download or email the list. Is it possible to block such activities? Can you prevent screenshots? If not, consider prevention tools or restricting on-screen views to limit what can be captured in a single screenshot.

6. Are workers trained to protect customer data? Without training, some employees may inadvertently share customer data with unauthorized parties, such as vendors. Make sure staffers know your data-sharing policies.

7. Have you thought about mobile device access? If workers can access customer data on their own or work-provided mobile phones, that data could be vulnerable to theft. Consider prohibiting certain types of access or installing stronger security on devices.

8. What about independent contractor access? Providing short-term access to customer data is sometimes necessary. Ensure you have a strict access review policy in place for contractors and other external parties.

9. Have some employees signed customized agreements? Consult legal counsel about whether key employees should sign confidentiality or nondisclosure agreements, and whether noncompetes are enforceable in your state. Such agreements can strengthen your ability to pursue legal remedies if an employee steals data.

10. Do you follow a formal offboarding process? When an employee leaves your company, collect all company owned devices and secure their data. Remove the terminated worker’s admin rights to your systems and deactivate logins and passwords. It might also make sense to audit their recent network activity to identify any unusual access or downloads.

To keep customer relationships under your control, establish strong access policies and follow them. Contact us for help with internal controls or if you suspect data theft.

As an employer, have you noticed it’s been harder to keep employees motivated, focused or fully invested in their work? If so, you’re not alone. A recent Gallup survey found that U.S. employee engagement has yet to recover from a notable decline in the last few years. Even more concerning, the drop has been most pronounced among younger workers.

Survey says

In late January, Gallup published an article on its website detailing the results of its latest employee engagement survey. The data showed that, on average, only 31% of U.S. employees were actively engaged at work in 2025. That figure was unchanged from 2024. However, it’s well below the 36% engagement rate recorded in 2020, which was the culmination of a decade of steady gains.

Although a five-point drop may not seem like a big deal, Gallup estimates that this represents approximately eight million fewer engaged employees nationwide. And the decline has been especially noticeable among younger workers — specifically, Generation Z (typically defined as people born from 1997 through 2012) and younger millennials (generally, those born around 1990 to 1996).

Start with clarity

Among the most concerning findings of the Gallup survey is that employees increasingly feel uncertain about what’s expected of them. In many industries, job responsibilities can shift quickly in response to staffing changes and evolving technology. And this is causing considerable stress for workers.

You may occasionally need to ask team members to take on additional duties without much advance notice or formal training. Yet clear expectations are the basis for job stability and, in turn, engagement. Strive to help employees understand:

What success looks like in their respective roles,
Which objectives should take priority, and
How you’ll evaluate their performance.

Communication on these topics should be consistently worded and applied from the C-suite on down.

Strengthen supervisors’ skills

Another important point raised by the Gallup survey is that many employees, particularly younger ones, lack a sense that anyone at work genuinely cares about them. This is where your supervisors play a frontline role.

Unfortunately, in many small and midsize organizations, employees are often promoted to supervisory roles because they excel technically — not because they’ve received formal leadership training. As a result, communication and recognition may unintentionally take a back seat to task completion.

Be sure to support your supervisors with robust initial training and ongoing upskilling. They should provide their teams with consistent feedback, acknowledge strong performances and show genuine interest in each employee’s distinctive challenges. Generally, many younger employees tend to expect more frequent feedback and guidance. So, this could become a more pressing issue in the years ahead.

Offer learning and growth

The Gallup survey also found a decline in employees’ sense of learning and growth. Often, once workers are trained, they have little to no opportunity to learn new skills or grow professionally unless they pursue management roles. And those may be few and far between at smaller organizations. The result: Engagement can fade quickly.

Remember, “growth” doesn’t necessarily have to be synonymous with “promotion.” To the extent feasible, give employees opportunities to grow within their roles. This can mean gradually assuming more responsibilities, undergoing cross-training, taking on project leadership or participating in strategic planning. When employees see a path to more interesting, varied job duties, they’re more likely to stay engaged.

Seize the opportunity

Employee engagement influences productivity, retention, hiring costs and overall financial performance. So, the national trends raised by the Gallup survey represent valid concerns for employers. But they offer an exciting opportunity, too. By responding thoughtfully and proactively, your organization can strengthen its culture and differentiate itself from competitors who may be slower to respond. We’d be happy to help you evaluate engagement strategies from a cost-benefit perspective to ensure they align with your budget and strategic objectives.

Pay equity is the philosophy and practice of “equal pay for equal work.” Employers known for fair pay practices stand out in today’s competitive labor market. Fostering pay equity can also help reduce the risk of employment law litigation. But what does pay equity mean in practice?

What it does and doesn’t mean

First and foremost, pay equity doesn’t mean all employees receive the same amount of compensation. Instead, companies that embrace pay equity make compensation decisions free of unjust biases related to protected characteristics such as age, race, gender, disability, national origin and sexual orientation. Employees’ pay, both when workers are hired and when they receive raises, is determined according to objective, job-related factors, including:

Education and training,
Experience,
Skills,
Responsibilities,
Performance, and
Tenure.

Determining whether pay inequities currently exist within your business requires a careful, honest assessment. Many companies conduct a formal pay equity audit. This is a thorough statistical analysis of compensation history, policies and structure. The audit’s objective is to identify any inconsistencies, gaps and incongruities that can’t be explained rationally.

Consider these policies

If you discover signs of pay inequity in your company, put in place policies to help eliminate them. For example, you might want to use only initials or random ID numbers during early screenings of job candidates, such as resumé reviews. This practice minimizes the chance that hiring managers will distinguish candidates by ethnicity, gender or other protected identities.

Also, during candidate interviews, refrain from asking about pay history. Many states and municipalities prohibit such questions, so ask your attorney what applies in your situation. (You might also want to take that opportunity to ensure you understand all antidiscrimination laws that affect hiring decisions.) But even if your state or local law doesn’t forbid past salary questions, it’s a well-established best practice to avoid them. Women and people of color are more likely to have been paid less in their previous positions. By using historical compensation to set their current salaries, you risk compounding pay disparities.

More ideas

Here are some other ideas that can help your organization achieve pay equity:

Set standard pay ranges. Generate objective criteria for recruiting, hiring, compensating, evaluating and promoting employees. Then set standard pay ranges that reflect each position’s value to the business.

Avoid individual decision-making. Limit managers’ ability to single-handedly adjust pay for specific employees. These decisions can lead to pay inequities and other problems, such as accusations of favoritism.

Provide training. To help managers and supervisors understand pay equity, conduct information sessions. Such training will help them recognize potential issues and discuss compensation with their reports.

Prioritize transparency. Let staffers know how you set compensation. Also, reassure them that they can discuss pay with their supervisors without fear of retaliation.

Fair work culture

The best talent is typically drawn to companies that prioritize employee well-being and cultivate a fair, transparent work culture. Pay equity can help communicate such principles to potential job candidates. Contact us if you’d like help analyzing compensation data or coordinating with legal counsel on a pay equity audit.

The deadlines for filing 2025 tax returns (or extensions) are fast approaching. Although most tax planning moves must be completed by December 31 of the tax year, there are some decisions you can make when filing your return that can save taxes now or in the future. One such decision is whether to claim accelerated depreciation breaks.

Depreciation basics

For assets with a useful life of more than one year, the cost generally must be depreciated over a period of years (unless accelerated depreciation breaks are available). In other words, taxpayers can deduct only a portion of the asset’s cost each year over the depreciation period.

The depreciation period depends on the type of asset, ranging from three years (such as for software and small tools) to 39 years (for commercial real estate). The Modified Accelerated Cost Recovery System (MACRS) provides larger deductions in the early years of an asset’s life than the straight-line method.

In many cases, assets can be depreciated much more quickly under special tax breaks. Some of these breaks were enhanced by last year’s One Big Beautiful Bill Act (OBBBA).

First-year bonus depreciation

Under the OBBBA, 100% first-year bonus depreciation can be claimed on 2025 tax returns for qualified assets that were acquired after January 19, 2025, and placed in service in 2025.

Eligible assets include:

Depreciable personal property, such as equipment, computer hardware and peripherals,
Transportation equipment, including certain passenger vehicles, and
Commercially available software.

First-year bonus depreciation can also be claimed for real estate qualified improvement property (QIP). QIP is defined as an improvement to an interior portion of a nonresidential building placed in service after the date the building was placed in service. However, expenditures attributable to the enlargement of a building, elevators or escalators, or the internal structural framework of a building don’t count as QIP and usually must be depreciated over 39 years.

The first-year bonus depreciation percentage is 40% for qualified assets acquired on or before January 19, 2025, and placed in service in 2025.

Bonus depreciation is automatically applied to eligible assets unless you elect out of it. However, you can elect out of it only on an asset class basis. For example, you can elect out of it for all three-year property, but you can’t elect out of it for just one specific three-year asset.

Section 179 expensing election

Sec. 179 expensing allows small businesses to write off the full cost of 2025 eligible assets. For tax years beginning in 2025, the maximum Sec. 179 deduction is $2.5 million (double the pre-OBBBA limit).

Eligible assets include:

Depreciable personal property, such as equipment, computer hardware and peripherals,
Transportation equipment, including certain passenger vehicles,
Commercially available software, and
Real estate QIP.

For nonresidential real property, Sec. 179 deductions are also allowed for qualified expenditures for:

Roofs,
HVAC equipment,
Fire protection and alarm systems, and
Security systems.

Finally, eligible assets include depreciable personal property used predominantly to furnish lodging, such as furniture and appliances in a property rented to transients.

In addition to the annual expense limit, Sec. 179 expensing is subject to a couple of other limits that don’t apply to bonus depreciation. First, the deduction is phased-out dollar for dollar if you put more than $4 million of qualifying assets into service last year. Second, Sec. 179 deductions can’t cause an overall business tax loss. The Sec. 179 deduction limits can be tricky if you own an interest in a pass-through business entity.

That said, claiming Sec. 179 expensing can be beneficial for assets not eligible for 100% bonus depreciation or if you want to immediately deduct the cost of some, but not all, assets in a particular asset class that is also eligible for bonus depreciation.

Depreciation deduction strategies

Claiming the maximum depreciation deductions you can on your 2025 income tax return will generally provide the greatest 2025 tax savings. Among other benefits, this can boost cash flow and provide more funds for further investment in the business.

But there are circumstances where it may be better to depreciate assets over a period of years. For example, the Section 199A qualified business income (QBI) deduction for pass-through businesses can be up to 20% of an owner’s QBI. Because of the income limitations on this deduction, claiming big first-year depreciation deductions can reduce QBI and lower or even eliminate your allowable QBI deduction.

Depreciating assets over a period of years can also be beneficial if you expect to be subject to higher tax rates in the future, such as if you may be in a higher tax bracket or lawmakers increase rates. When you claim 100% bonus depreciation or Sec. 179 expensing today, you’re eliminating your depreciation deductions for those assets in the future. And deductions save more tax when tax rates are higher.

Time to get started

We can identify which depreciation breaks you’re eligible for, review your overall tax situation and help determine whether it will be beneficial for you to maximize depreciation-related breaks on your 2025 tax return. We can also strategize with you on tax planning for 2026 asset investments. Please contact us to get started.

HR problems rarely announce themselves ahead of time. Instead, they show up as employee complaints, inconsistent decisions, documentation gaps, and situations that pull you away from patient care and daily operations.

In this 12-minute on-demand webinar, Amy Cell, President of Yeo & Yeo HR Advisory Solutions, breaks down the most common HR challenges medical practices face and what you can do now to prevent them from becoming ongoing distractions.

What You’ll Learn:

The HR issues that most often create recurring problems in medical practices
Where policies, documentation, and processes commonly fall short
Practical steps to reduce HR-related interruptions
Tips to help you address issues proactively instead of reacting later

Why Watch:
If HR issues tend to surface at the worst possible time—or linger longer than they should—this webinar will help you understand what’s driving them and how to reduce risk, protect your time, and keep your focus where it belongs: patient care.

Watch the Webinar

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Many people think of estate planning as a “one-and-done” task — something you complete and file away. But an estate plan should evolve as your life and finances and relevant laws change. An outdated plan can create confusion, unintended tax consequences or outcomes that no longer reflect your wishes.

The higher federal gift and estate tax exemption that was made permanent by last year’s One Big Beautiful Bill Act is one reason to review your estate plan now. But you should also review your plan whenever something significant changes in your life. Let’s take a look at common situations that signal the need to revisit your will, trusts, powers of attorney or other estate planning documents.

Major life events

Life transitions are the most common reasons estate plans need attention. Marriage or remarriage is a big one, especially if you have children from a prior relationship. Divorce is equally important. Failing to update your documents could leave an ex-spouse in control of your assets or medical decisions.

The birth or adoption of a child or grandchild should also trigger a review. You’ll want to name a guardian or adjust beneficiary designations to reflect your growing family. Similarly, the death or incapacity of a spouse, beneficiary, trustee or executor means your plan may no longer function as intended.

Financial changes matter, too

Your estate plan should reflect your current financial situation. If your net worth has increased significantly — through business growth, inheritance, real estate appreciation or investment success — your existing plan may not adequately address tax planning or asset protection.

Starting, buying or selling a business is another major reason to update your estate plan. Business ownership often requires specific provisions for succession planning, valuation and continuity. Retirement also can prompt changes, as income sources shift and distribution strategies evolve.

Don’t forget supporting documents

Updating an estate plan isn’t just about your will or trusts. Beneficiary designations on retirement accounts and life insurance policies should be reviewed regularly, as they generally override what’s stated in your will.

Powers of attorney and health care directives are also critical to review. Make sure they continue to reflect your wishes and that those you’re providing with decision-making authority are still people you trust and who are able to serve.

The bottom line

An estate plan is only effective if it reflects your current wishes and circumstances, as well as current law. Regular reviews help ensure your assets are distributed as intended, your loved ones are protected, and unnecessary taxes or legal complications are avoided.

Because estate planning intersects with taxes, financial planning and your long-term goals, it’s wise to review your plan with qualified professionals. We can help you identify when updates may be needed and coordinate with your legal and financial advisors to keep your plan on track.

Yeo & Yeo CPAs & Advisors is pleased to announce that Matt Black, ASA, will lead the firm’s Valuation, Forensics and Litigation Support Services Group.

Yeo & Yeo’s Valuation, Forensics, and Litigation Support Services Group provides valuation, forensic accounting, and litigation support services to businesses, law firms, receivers, trustees, financial institutions, and individuals. The team supports clients through some of their most complex and high-stakes situations, including mergers and acquisitions, succession planning, shareholder disputes, divorce proceedings, and litigation matters requiring expert financial analysis and testimony. Previously led by Principal Chris Sheridan, CPA, CFE, CVA, the group has expanded in both scope and complexity of engagements. Sheridan will continue to serve as a core member of the group, providing deep experience and continuity for clients.

Black joined Yeo & Yeo in 2025 as a Senior Business Valuation Manager in response to the firm’s continued growth and increasing client demand for specialized business valuation and litigation support services. Black was brought on to be solely dedicated to business valuation and litigation matters, strengthening the firm’s ability to deliver focused expertise and consistent leadership in this highly technical area.

“Matt’s background and exclusive focus on valuation and litigation services have further strengthened our ability to serve clients facing complex financial and legal challenges,” said Sheridan. “His experience enhances our team’s depth and his leadership positions the group to continue growing while delivering the high level of insight and credibility our clients expect.”

Black’s background includes more than 15 years of experience in business valuation, litigation support, consulting, and mergers and acquisitions for privately held companies across a wide range of industries. Prior to joining Yeo & Yeo, he held several leadership roles, including Senior Manager at KPMG, one of the nation’s four largest accounting firms. He holds the Accredited Senior Appraiser (ASA) credential, reflecting his experience valuing both closely held and publicly traded companies, as well as a broad range of business intangible assets. His work often supports complex financial decisions and legal matters where precision, objectivity, and defensible analysis are critical.

“Clients rely on valuation and forensic work to bring clarity to challenging situations,” Black said. “Whether they’re navigating a transaction, resolving a dispute, or planning for the future, our goal is to provide clear, well-supported insights they can trust to move forward with confidence.”

Black is a member of the American Society of Appraisers and holds a Bachelor of Arts in Finance from Michigan State University. Outside of work, he is actively involved in the community, volunteering with Special Olympics Michigan and previously serving on the organization’s board. He also supports Make-A-Wish Michigan.

As remote and hybrid work have become more common, corporate retreats have surged in recent years. Some or all of your employees may now work from home and experience little in-person interaction with coworkers. A retreat can foster collegial relationships and, ultimately, greater productivity. But the first decision you’ll likely need to make is whether your retreat will be a smaller-scale affair held in your office or an off-site retreat. There are ways to make either one affordable.

Your office

Staying on your company’s premises can keep out-of-pocket costs in check. The most obvious is that you won’t need to rent meeting rooms. And, assuming employees live in the area, you won’t have transportation and lodging expenses. You’ll also likely spend less on food and beverages. A local restaurant can cater your meals and snacks, and you could buy beverages in bulk.

On the downside, employees tend to view on-site retreats as just another day at the office. This can hamper creative thinking and team building and limit possible activities. Worse, employees may be distracted if they can frequently run back to their desks to check email and voicemail.

Off-site locations

In general, workers are better able to focus on a retreat agenda at an off-site location. They’re in a new, “special” environment with no visual cues to trigger workday routines. So, even though you’ll incur greater costs than if you’d stayed in your office, you may get a better return on investment.

The fact is, hotels and other facilities that host company retreats need and want your business! Many things may be negotiable, and you might be able to snag discounts by booking or paying early. Get several quotes and compare prices and services. You’ll have more leverage if you avoid scheduling your retreat during seasonal peaks when local venues tend to be busy with weddings, trade shows and industry conferences.

Hotels earn their biggest margins on food, beverages and meeting setup fees, so they may be willing to provide complimentary or discounted rooms for guest speakers and out-of-town employees. Also, try to negotiate a flat food-and-beverage price for the entire retreat, rather than a per-person or per-event rate.

Possible tax relief

Here’s another way to save: Some of your company retreat expenses may be tax-deductible. They need to meet IRS criteria as “ordinary and necessary” business expenses and can’t be extravagant or include expenditures for employees’ spouses. In general, business meals are only 50% deductible, and entertainment costs are nondeductible. Contact us to learn more about tax-deductible costs and the IRS’s documentation requirements.

Launching a start-up comes with no shortage of big decisions and fast-moving priorities. In the rush to grow, financial fundamentals can sometimes take a back seat — often with costly consequences. Some common accounting missteps that new business owners should avoid include:

Overlooking day-to-day spending. Starting a new business is exciting, and it’s natural to focus on generating revenue and building business relationships. But it’s essential to keep detailed, timely records of expenses, including receipts and invoices. This will help you properly allocate costs, price products and services, assess and improve financial performance, and claim tax deductions.

Skipping regular account reviews. Reconciling accounts involves comparing your records to your bank and credit card statements to identify and correct any discrepancies. Account reconciliation helps ensure your business pays close attention to expenses and available cash. It can also help prevent and detect fraud by third parties and employees.

Blurring the line between personal and company finances. When you own a business, you need to keep personal and business matters separate for financial reporting, tax and legal purposes. Maintaining separate bank and credit card accounts and clearly distinguishing between personal and business activities will help avoid confusion. These practices also make it easier to track business expenses and support accurate budgeting and forecasting.

Getting worker status wrong. How much control do you exercise over the people who work for your business? Are your workers an integral part of your operations? Misclassifying employees as independent contractors can have serious legal and financial consequences. Make sure you understand the differences between employees and contractors and categorize them appropriately. If you don’t follow the rules, the IRS, the U.S. Department of Labor and a state tax agency might challenge the status of your workers. Some state rules may be stricter than the federal ones.

Being unprepared for tax obligations. Because many start-ups run at a loss, at least initially, some owners forget to set aside money for taxes. This can lead to cash shortages and other financial difficulties when tax time rolls around. Failure to make timely federal and state tax payments can result in penalties and interest charges. And don’t forget about payroll, sales and property tax obligations. Even if your business operates at a loss, these taxes may still be due.

Neglecting formal accounting systems and controls. Entrepreneurs must select and consistently apply an accounting method that best fits their business needs. Many fledgling businesses start off using cash- or tax-basis accounting, then graduate to accrual-basis reporting as they mature. But lenders, franchisors and investors sometimes require accrual-basis financial reporting from the get-go. Working with an experienced accountant can help you evaluate these requirements, select affordable, user-friendly bookkeeping software and establish consistent processes for recording business transactions.

It also pays to invest upfront in simple internal controls — such as locks on file cabinets, regular software updates, network backups and antivirus programs — to help prevent theft and fraud. Start-ups with valuable intellectual property, such as patents, secret recipes and proprietary software, should consider protecting these assets by implementing network security policies, filing appropriate legal protections, and requiring employees and contractors to sign noncompete agreements, where legally permitted. Additional internal control measures can be implemented as your business matures.

Fortunately, these common accounting missteps are preventable if you take proactive measures to avoid them. Building a strong financial foundation begins with seeking guidance from experienced bookkeeping and accounting professionals. In addition to helping you design and implement sound financial systems and controls, we offer interim CFO and bookkeeping services to support your business while you recruit and onboard the right talent for your finance and accounting department. Contact us to learn more.

U.S. businesses may want to operate abroad for many reasons. Examples include opportunities to grow their customer bases, diversify revenue streams, establish competitive advantages and reduce production costs. Amid all the potential benefits, however, lie some serious risks, including fraud. Business customs and laws can vary widely by country. So before you start operating abroad, perform thorough due diligence.

Corrupt business customs

Corruption is a business risk in every country, but in some countries, it’s widespread. For example, if you want to build a factory, you might encounter officials who expect cash bribes or local politicians accustomed to excessive wining and dining in exchange for their cooperation. If you’re importing or exporting goods, customs officials might solicit bribes to process shipments faster or to mischaracterize their origins or contents. Companies may also face liability under U.S. anti-bribery laws for improper payments made abroad.

One common scenario encountered by U.S. companies operating abroad is pressure to hire friends, family members and associates of government decision-makers. These job candidates may be unqualified for open positions and may expect light (or no) responsibilities. What’s more, you might be pressured to pay them above-market rates so that they can give the official who “recommended” them a kickback.

Legal and financial protection

Foreign laws may offer less protection than U.S. businesses are accustomed to, particularly for intellectual property (IP). Weak IP laws or minimal enforcement might enable other companies to use your logo, patents or trade secrets without consequences. Litigation to fight such activities can be expensive, and claims may be difficult to prove. And if you do attempt to sue, a foreign legal system could treat your business differently than it treats locally owned companies.

Large banks and other financial institutions generally have people, processes and technology to prevent fraud. But smaller foreign banks sometimes struggle to prevent sophisticated fraud schemes, including cybertheft. This could result in thieves gaining access to your business accounts and proprietary assets.

Steps to reduce risk

If you decide to operate abroad, you can help reduce fraud exposure by engaging legal and financial professionals familiar with your destination country. Your advisors can inform you about such critical matters as the culture, business practices, politics, labor conditions and regulatory environment.

Work with your advisors to identify possible fraud risks and evaluate the effectiveness of your existing internal controls. (Once you’re up and operating in the country, you can add or revise controls as necessary.) Also conduct thorough due diligence on all potential suppliers, business partners and major customers in the country before giving them your money, products or trust.

Develop hiring policies and programs for foreign-based employees, including antifraud training. Make sure your employee handbook specifies that activities such as accepting bribes will result in termination.

Pros and cons

There may be other downsides associated with operating abroad, including tax, currency exchange, regulatory, infrastructure and political disadvantages. Before deciding to expand globally, contact us to help you find foreign opportunities and minimize threats.

Tax credits reduce tax liability dollar-for-dollar. As a result, they can be more valuable than deductions, which reduce only the amount of income subject to tax. One tax credit that hasn’t been getting much attention lately but that can still be valuable for some small businesses is the credit for providing health insurance to employees.

Who’s eligible?

Under the Affordable Care Act (ACA), certain small employers that provide employees with health care coverage are eligible for this tax credit. Although it’s been available for more than a decade and generally can be claimed for only two years, some small businesses may still be eligible. These may include newer businesses as well as older ones that only recently have begun offering health insurance.

The maximum credit is 50% of group health coverage premiums paid by the employer, if it contributes at least 50% of the total premium or of a benchmark premium. For 2025, the full credit is available for employers with 10 or fewer full-time equivalent employees (FTEs) and average annual wages of $33,300 or less per employee. Partial credits are available on a sliding scale to businesses with fewer than 25 FTEs and average annual wages of less than $66,600. (These amounts are annually adjusted for inflation and increase to $34,100 and $68,200, respectively, for 2026.)

As noted, the credit can be claimed for only two years. Also, those years must be consecutive. (Credits claimed before 2014 don’t count, however.) If you started offering employee health insurance in 2025, you may be eligible for the credit on your 2025 return (and again on your 2026 return next year). If you’re offering coverage beginning in 2026, you may be able to claim the credit when you file your 2026 return next year (and then again on your 2027 return the following year).

Keep in mind that additional rules apply to the health care coverage credit. But premiums that aren’t eligible for the credit generally can be deducted, subject to the rules that apply to deductions for ordinary business expenses.

Can your business claim the credit?

If you’re not sure whether your business is eligible for a full (or partial) credit for health care coverage, contact us. We can help assess your eligibility. We can also advise on whether you may be eligible for other tax credits on your 2025 return and if you can take any steps this year so you can potentially claim credits on your 2026 return next year.

Yeo & Yeo is pleased to welcome Connor Braun, CPA, to the firm as a Manager. He is an experienced advisor specialized in business and individual tax planning.

“Connor brings a solid foundation in tax planning and a dedication to client service that aligns well with our firm’s values,” said Dave Jewell, Managing Principal and Tax & Consulting Service Line Leader. “We look forward to the role he’ll play in supporting our clients and contributing to the team during a busy and important time of year.”

Braun brings more than four years of experience in public accounting, serving manufacturing, construction, and real estate clients. He holds a Bachelor of Science in Business Administration with a focus on accounting from Central Michigan University, and is a member of the American Institute of Certified Public Accountants and the Michigan Association of Certified Public Accountants. He joins Yeo & Yeo from Plante Moran, where he served as a Senior Tax Accountant. Braun is based in the firm’s Saginaw office.

“Yeo & Yeo has a strong reputation for putting people first—both clients and team members,” Braun said. “I’m grateful for the opportunity to grow here and to contribute to a firm that truly values collaboration, community, and long-term relationships.”

Businesses and other types of organizations now commonly rely on independent contractors to stay flexible, competitive and cost-effective. But in the day-to-day hustle and bustle of working with these providers, it’s easy for reporting and withholding requirements to slip through the cracks. Even small oversights on either obligation can lead to IRS notices, penalties and administrative headaches. Here’s a brief refresher on handling nonemployee compensation.

Reporting requirement

Generally, businesses or other organizations aren’t responsible for withholding federal employment taxes from nonemployee compensation — though certain payments may be subject to income tax withholding, as we’ll discuss below. That said, if you paid $600 or more to an independent contractor in 2025, you must report that compensation to the IRS.

Important: For payments made after December 31, 2025, the threshold has increased to $2,000 under the One Big Beautiful Bill Act (OBBBA). It will be annually adjusted for inflation.

Independent contractor payments are reported on Form 1099-NEC, “Nonemployee Compensation.” You must file the form by January 31 of the year following the payment in question (or the next business day if it falls on a weekend). Note that this is a hard deadline. Unlike other information returns, Form 1099-NEC isn’t subject to an automatic 30-day filing extension. An extension may be available under certain hardship conditions, but it must be requested before the filing deadline using Form 8809, “Application for Extension of Time to File Information Returns.”

Withholding obligation

Independent contractor compensation that must be reported on Form 1099-NEC may be subject to backup withholding, which helps ensure the IRS receives tax due on certain nonwage income. Examples of these situations include when 1) a payee (the contractor) hasn’t provided you with a Taxpayer Identification Number (TIN), or 2) the payee provided a TIN, but the IRS notifies you that it doesn’t match the payee’s name.

A payee’s TIN is either a Social Security Number, an Employer Identification Number, an Individual TIN or an Adoption TIN. When backup withholding is required, a flat 24% rate applies. (This percentage was made permanent under the OBBBA.)

Backup withholding is reported on Form 945, “Annual Return of Withheld Federal Income Tax.” It generally must continue until you receive proper certification from the IRS or corrected information from the payee. In limited cases, contractors may also be able to stop backup withholding by showing that it will cause them undue hardship. If the IRS determines that backup withholding should stop, the payee will receive a written certification to that effect.

Essential part

If you engage independent contractors, reporting their compensation correctly — and properly applying backup withholding when so required — is an essential part of your tax compliance responsibilities. With a strict filing deadline for Form 1099-NEC, and very limited availability of an extension, preparation and accurate recordkeeping are key. We can help you meet your reporting obligations and comply with current IRS requirements.

Yeo & Yeo has been awarded on USA TODAY’s list of America’s Most Recommended Tax & Accounting Firms 2026. The award list was announced on February 4, 2026, and can currently be viewed on USA TODAY’s website.

For the third time, USA TODAY and Statista are awarding the titles of “America’s Most Recommended Tax Firms” and “America’s Most Recommended Accounting Firms” through an independent survey based on the number of recommendations received from peers, clients, and additional company data.

Respondents were recruited via an online survey and through a carefully profiled online-access panel. Recommendations from professionals working at tax and accounting firms (peers) and professionals working with tax and accounting firms (clients) were considered in equal measure. Self-recommendations were excluded from the analysis, and multiple quality reviews were conducted before publication. In total, around 3,300 recommendations were considered.

Based on the results of the survey, Yeo & Yeo is proud to be recognized on USA TODAY’s list of America’s Most Recommended Tax & Accounting Firms 2026. This recognition solidifies Yeo & Yeo as an exceptional firm, respected by our peers and valued by our customers. In total, 100 tax firms and 100 accounting firms were awarded, respectively.

Statista publishes hundreds of worldwide industry rankings and company listings with high-profile media partners. This research and analysis service is based on the success of statista.com, the leading data and business intelligence portal that provides statistics, relevant business data, and various market and consumer studies and surveys.