Month: August 2025

If you will be age 65 or older on December 31, 2025, you have a new opportunity for tax savings.

The One Big Beautiful Bill Act (OBBBA) created a new bonus tax deduction—available for seniors beginning this year (2025). You can claim this deduction whether or not you itemize.

How Much Can You Deduct?

If you qualify, you may be eligible for a bonus deduction of up to $6,000 per person. For married couples filing jointly—where both spouses are age 65 or older—the total potential deduction is $12,000.

Important. If married, you must file a joint return to benefit even when only one spouse qualifies; filing separately disqualifies you.

This bonus deduction is in addition to

• the regular standard deduction, and
• the existing age-based additional deduction.

Income Limits Apply

The deduction phases out at higher income levels:

• For singles: begins at $75,000 modified adjusted gross income (MAGI); fully phased out at $175,000
• For joint filers: begins at $150,000; fully phased out at $250,000

MAGI includes AGI plus certain rarely seen tax-free foreign income.

Planning Opportunity

To maximize this deduction, consider strategies to keep MAGI below (or not far above) the phaseout thresholds:

• Spread capital gains over multiple years
• Break up Roth IRA conversions over time
• Make additional business deductions or retirement plan contributions

If you want to discuss the new seniors’ deduction, please call me on my direct line at 408-778-9651.

• By Leon Clinton
• August 19, 2025

If you own a business and have children, the One Big Beautiful Bill Act (OBBBA) just made the popular “hire your child” tax strategy even more attractive starting in 2025.

Thanks to the OBBBA, the standard deduction for a single taxpayer increases to $15,750 in 2025 (with annual inflation adjustments going forward). This means your child can earn up to $15,750 in wages from your business and pay zero federal income tax—regardless of whether you itemize or take the standard deduction.

If you’re a sole proprietor or operate a spouse-only partnership, the benefits are even better. Wages paid to your children under age 18 are exempt from Social Security and Medicare (FICA) taxes, and those under age 21 are exempt from federal unemployment tax (FUTA). This allows you to deduct their wages while avoiding employment tax costs entirely.

For example, if you hire three of your children and pay each $15,750 for legitimate work, they owe no federal tax—and you could save thousands by deducting those wages on your Schedule C, lowering both your income and self-employment taxes.

Even if you operate as an S or C corporation (where payroll taxes apply), the strategy still works. While FICA and FUTA taxes are owed, you receive a deduction for those taxes, and your children still owe no income tax on their wages. In one example, a family netted $9,663 in government-paid tax savings after accounting for taxes paid and deductions received.

In short, hiring your child can create a win-win: they earn tax-free income, and you reduce your tax bill. 

If you want to talk about hiring your child, please call me on my direct line at 408-778-9651.

• By Leon Clinton
• August 14, 2025

Did you know that giving money or property to someone without receiving full value in return may be considered a taxable gift under federal law? While making a gift is often a generous and well-intentioned act, it can come with reporting obligations—and in some cases, tax consequences.

What Is Considered a Gift?

A gift for tax purposes occurs when you transfer money, property, or other assets without receiving something of equal value in return. In such cases, you—the donor—may be required to file a federal gift tax return, and for substantial gifts, you could face gift taxes of up to 40 percent.

Importantly, gift tax liability falls on the donor, not the recipient. The person receiving the gift does not report it as income and does not pay gift tax (except in rare arrangements where they agree to do so).

Most Gifts Are Not Taxed—Here’s Why

Although the federal gift tax exists to prevent unlimited tax-free transfers of wealth during a person’s lifetime, relatively few people pay it—thanks to several key exclusions and exemptions.

1. Annual Gift Tax Exclusion. Each year, you can give a certain amount to any number of individuals without incurring gift tax or triggering a reporting requirement. For 2025, this annual exclusion amount is $19,000 per recipient. So, for example, if you have three children, you can give each of them $19,000 in 2025—totaling $57,000—without needing to file a gift tax return.

2. Gift Splitting for Married Couples. If you’re married, you and your spouse can combine your exclusions—a strategy known as gift splitting. This allows you to give up to $38,000 per recipient in 2025 without triggering gift tax.

3. Lifetime Estate and Gift Tax Exemption. In addition to the annual exclusion, lawmakers allow a much larger lifetime exemption. Here are the 2025 limits:

• $13.99 million per individual
• $27.98 million for a married couple

This exemption covers the total value of gifts made during your lifetime and transfers made at death.

Even when you owe no tax, you must report gifts that exceed the annual limit to the IRS using Form 709, the U.S. Gift and Generation-Skipping Transfer Tax Return.

Gifts That Are Never Taxed

Certain gifts are completely exempt from gift tax, including:

• Charitable contributions
• Direct payments of another person’s education tuition (not room and board)
• Direct payments of medical expenses to providers
• Gifts between U.S. citizen spouses
• Gifts to political organizations

Direct Gifts vs. Trust-Based Gifting

Giving directly—such as writing a check to a loved one—is the simplest form of gifting. However, it also means giving up all control over the assets. For those wishing to retain some oversight, gifts can be made through irrevocable trusts, which allow you to remove assets from your taxable estate while controlling how and when beneficiaries access those assets.

Trust-based gifting strategies can be powerful, but they come with complex legal and tax considerations, and should be implemented carefully with the help of an attorney.

If you would like to discuss gifts, please call me directly at 408-778-9651.

• By Leon Clinton
• August 12, 2025