Month: August 2025

Filing tax forms is never fun—but it’s important to stay ahead of changes that can reduce your reporting burden.

If your business pays independent contractors (non-employees) for services, you are required to file IRS Form 1099-NEC if total payments exceed a specific threshold. For decades, this threshold has been $600 or more in a calendar year. Failing to file can result in substantial penalties.

That threshold is about to change.

Thanks to the One Big Beautiful Bill Act (OBBBA), beginning with payments made in 2026, you file Form 1099-NEC if you pay an independent contractor $2,000 or more during the year. Starting in 2027, this amount will be adjusted annually for inflation in $100 increments.

This welcome update means many businesses will have fewer 1099-NEC filing obligations.

Changes to Form 1099-K Thresholds

The OBBBA also revised the filing rules for Form 1099-K, which is used by third-party settlement organizations (TPSOs) such as PayPal, Uber, and eBay. These platforms are responsible for issuing 1099-Ks when payments meet certain criteria. For example, if you pay a contractor via PayPal, you (the contractor’s client) do not file a 1099-K—PayPal does, if the 1099-K filing threshold is met.

Previously, the 1099-K threshold was set to drop to $5,000 in 2025 and then to $600 in 2026—potentially triggering billions of filings. However, the OBBBA reverses this change.

Effective retroactively to 2022 (yep, three years ago), TPSOs need to file Form 1099-K if both of the following apply:

• The recipient is paid more than $20,000.
• The recipient has more than 200 transactions during the year.

This rollback to the 2022 threshold means far fewer Forms 1099-K will be issued. Both TPSOs and recipients can breathe a sigh of relief.

A Final Reminder

Regardless of whether a 1099 form is issued, all taxpayers must report all taxable income on their tax returns—even if it’s not reported to the IRS by a third party.

If you would like to discuss the new 1099 rules, please call me on my direct line at 408-778-9651.

• By Leon Clinton
• August 29, 2025

Do you contribute to charitable organizations? If so, recent legislation—the One Big Beautiful Bill Act (OBBBA)—includes significant changes to the tax treatment of charitable donations, starting in 2026. Some are helpful, others less so, depending on your income and filing status.

Good News for Non-Itemizers

Currently, taxpayers who take the standard deduction (i.e., don’t itemize) generally cannot deduct charitable contributions. That will change in 2026.

Beginning in 2026, non-itemizers will be allowed to deduct cash donations to charity up to

• $1,000 per year for single filers, or
• $2,000 per year for married couples filing jointly.

Note. Contributions to donor-advised funds are excluded.

New Limits for Itemizers and High-Income Donors

If you itemize your deductions and make substantial charitable donations, take note: starting in 2026, your ability to deduct those donations will be reduced.

In 2026, you may deduct charitable contributions to the extent they exceed 0.5 percent of your adjusted gross income (AGI). Here’s how this new floor works:

Example. If your AGI in 2026 is $200,000 and you donate $10,000 to charity, only the amount over $1,000 (0.5 percent of AGI) is deductible. Your allowed deduction is $9,000.

You cannot carry forward the disallowed $1,000 unless your total charitable contributions for the year exceed one of the limits, such as 60 percent or more of your AGI for cash donations.

Changes for C Corporations

Regular C corporations are also affected. Beginning in 2026,

• charitable contributions are deductible to the extent they exceed 1 percent of a corporation’s taxable income; and
• the disallowed portion can be carried forward for up to five years if the total donations for the year exceed 10 percent of the corporation’s taxable income.

Planning Opportunities Before the Rules Change

Because the new limitations won’t take effect until January 1, 2026, you have a valuable opportunity to maximize deductions under the current rules in 2025:

• If you itemize, consider accelerating your charitable giving before year-end.
• You might double your planned donations in 2025 and scale back in 2026.

This strategy allows you to deduct the full amount of your contributions without the new 0.5 percent AGI floor.

Bunching Donations Going Forward

Once the new rules are in place, both individuals and corporations may benefit from a “bunching” strategy:

• Combine multiple years of charitable giving into one year to exceed the new deduction thresholds.
• For example, you could donate two years’ worth of contributions in 2026 (and itemize), then take the standard deduction in 2027 while making little or no donations that year.

If you want to discuss charitable giving, please call me on my direct line at 408-778-9651.

• By Leon Clinton
• August 27, 2025

If the $10,000 cap on state and local tax (SALT) deductions limits your write-offs, here’s good news: the One Big Beautiful Bill Act (OBBBA) temporarily increases the cap starting in 2025.

From 2025 through 2029, you may deduct up to

• $40,000 if married filing jointly, or
• $20,000 if married filing separately.

The limits adjust annually for inflation beginning in 2026. But unless extended by Congress, the cap returns to $10,000/$5,000 in 2030.

There’s a catch. The increased deduction phases out if your modified adjusted gross income (MAGI) exceeds

• $500,000 (joint filers), or
• $250,000 (married filing separately).

The phaseout reduces your SALT deduction by 30 percent of MAGI in excess of the threshold, with a floor of $10,000 or $5,000. For example, if your MAGI is $550,000, you can deduct only $25,000 of your SALT, not the full $40,000.

You can still choose to deduct sales taxes instead of income taxes—useful if your income taxes are low but sales or property taxes are high.

Importantly, state-level SALT deduction workarounds for pass-through entities (such as S corporations, partnerships, or LLCs) remain in place. These allow business entities to pay SALT at the entity level and pass through the deduction to owners—effectively bypassing the federal cap.

To maximize your deduction, consider managing your MAGI by

• spreading capital gains over multiple years;
• staging Roth IRA conversions; or
• leveraging your state’s SALT workaround, if available.

If you want to discuss the SALT cap, please call me on my direct line at 408-778-9651.

• By Leon Clinton
• August 22, 2025