Month: September 2025

Section 529 plan accounts—also called “qualified tuition plans” (QTPs)—have long provided a powerful tax-advantaged way to save for education expenses for children, grandchildren, and even yourself. 

While contributions to these accounts are not federally tax-deductible, the money in them grows tax-free, and withdrawals remain tax-free when used for qualifying education expenses.

The recently enacted One Big Beautiful Bill Act (OBBBA) makes Section 529 plans more valuable than ever by expanding the types of expenses you can pay with these funds.

Expanded Education Uses

Historically, families used Section 529 funds primarily for college costs, with up to $10,000 per year available for K-2 tuition. 

Beginning July 5, 2025, you may also use Section 529 funds to cover a wide range of qualified post-secondary credentialing expenses. These include costs for professional and occupational licenses, certificates, and credentials offered by four-year universities, community colleges, trade schools, technical schools, and other recognized providers.

You may also use Section 529 funds for continuing education courses if you already hold a degree or credential.

Examples include:

• Fees for a state license for barbers or hairstylists
• Continuing education courses for medical doctors
• The cost of the tools required for a welding certificate

Section 529 plans have evolved from college savings tools into accounts for career and lifelong learning.

Who Can Benefit

Although many families open Section 529 accounts for children and grandchildren, adults may also use them. You can set up an account for yourself or your spouse to fund continuing education or professional credentialing. 

Because no time limit applies, you can leave the money in the account until you need it, or transfer it to another beneficiary. In addition, you can roll over up to $35,000 of Section 529 funds into a Roth IRA.

Expanded K-12 Benefits

The OBBBA also broadens tax-free withdrawals for K-12 education. Beyond tuition, you may now use Section 529 funds for books, online materials, tutoring, standardized test fees, and therapy for students with disabilities. Starting in 2026, the annual withdrawal limit for K-12 expenses doubles to $20,000.

If you would like to discuss Section 529 plans, please call me directly at (408)-778-9651  

• By Leon Clinton
• September 30, 2025

Do you own stock in a high-growth small business? Or are you a founder, an investor, or an employee of one? If so, you need to understand how the One Big Beautiful Bill Act (OBBBA) expands the tax benefits of qualified small business stock (QSBS).

What QSBS Is

“QSBS” refers to stock issued by regular C corporations. When the corporation and the shareholder meet specific requirements, QSBS owners can avoid federal tax on most or all of their gains when they sell the stock. This can mean tax-free profits worth tens of millions of dollars.

Which Companies Qualify

Not all businesses may issue QSBS. The law excludes certain industries, including finance, insurance, farming, professional services (such as law, accounting, and consulting), and hospitality. Additionally, only smaller companies are eligible. Previously, a company could not exceed $50 million in total assets when issuing QSBS. The OBBBA raises that cap to $75 million, giving larger businesses access to this powerful tax benefit.

New Holding Period Rules

You must hold QSBS for a minimum period before you can exclude gains from tax. The five-year requirement remains in place for the full 100 percent tax exclusion. However, the OBBBA introduces new flexibility for OBBBA-qualified QSBS: you can now receive partial exclusions if you hold stock for only three or four years.

Higher Exclusion Limits

Before the OBBBA, the law allowed you to exclude from tax the greater of $10 million or 10 times your basis in the stock. The OBBBA increases the dollar limit to $15 million while keeping the 10-times-basis rule. This change delivers another significant win for QSBS owners.

Effective Date

All these enhancements apply to QSBS issued on or after July 5. Together, they represent the most significant upgrade to QSBS benefits in more than a decade. For many investors, these rules could transform successful small business investments into tax-free windfalls.

Example. Suppose you invest $100,000 in QSBS shares in 2026 and sell them in 2031 for $1.1 million. Because you held the stock for five years, you can exclude your $1 million gain from federal tax. This saves you from paying both the 20 percent federal long-term capital gains tax and the 3.8 percent net investment income tax—$238,000 in tax savings.

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

• By Leon Clinton
• September 26, 2025

The recently enacted One Big Beautiful Bill Act (OBBBA) includes several permanent changes that directly affect taxpayers who itemize deductions. Some provisions take away opportunities, while others preserve valuable tax breaks. Here’s what you need to know—and how you can plan to win.

Permanent Repeal of Miscellaneous Itemized Deductions

The Tax Cuts and Jobs Act (TCJA) suspended miscellaneous itemized deductions for 2018-2025. The OBBBA makes that suspension permanent.

This means you can no longer deduct unreimbursed employee business expenses, investment expenses, or other items previously subject to the 2 percent adjusted gross income (AGI) floor. If you incur employee business expenses, the solution is straightforward: have your corporation reimburse you so the expense gets properly deducted.

Itemized Deductions That Remain

Many important deductions remain available. You may still claim

• mortgage interest;
• state and local taxes (SALT);
• charitable contributions;
• medical expenses, including health insurance premiums; and
• personal casualty and theft losses.

These deductions continue to appear on Schedule A of Form 1040, subject to existing limits.

New Limits for High-Income Taxpayers

Starting in 2026, high-income taxpayers in the 37 percent bracket face a new reduction in itemized deductions. The OBBBA caps the benefit of itemized deductions at no more than 35 percent of their value.

For example:

• If your taxable income barely crosses into the 37 percent bracket, your deductions will be reduced modestly.
• If you have significant income, your deductions may be reduced or even eliminated.

In short, the higher your income above the 37 percent threshold, the greater the haircut on your itemized deductions.

Planning Strategies

To protect your deductions, use these strategies:

• Avoid unreimbursed employee expenses by arranging corporate reimbursements.
• Monitor your taxable income to reduce the risk of crossing into the 37 percent bracket. For 2025, this threshold starts at $626,350 for single filers and $751,600 for joint filers (adjusted annually for inflation).

Takeaway

The OBBBA reshapes itemized deductions for the long term. While some opportunities have disappeared, key deductions remain, and planning strategies still exist to maximize your tax benefit. By structuring expenses properly and managing taxable income, you can continue to win under the new rules.

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

• By Leon Clinton
• September 23, 2025