Month: November 2025

All small-business owners with one to 49 employees should have a medical plan for their business. Sure, it’s true that with 49 or fewer employees, the tax law does not require you to have a plan, but you should.

When you have 49 or fewer employees, most medical plan tax rules are straightforward.

Here are five opportunities for you to consider:

1. If you have a Section 105 plan in place and have not been reimbursing expenses monthly, do a reimbursement now to get your 2025 deductions, and then put yourself on a monthly reimbursement schedule in 2026.
2. If you want to implement a qualified small employer health reimbursement arrangement (QSEHRA), but you have not yet done so, make sure to get that done correctly now. You are late, so you could suffer that $50-per-employee penalty should your lateness be found out. 
3. But if you are thinking of the QSEHRA and want to help your employees with more money and flexibility, consider the individual coverage health reimbursement arrangement (ICHRA) instead. It’s got more advantages.
4. If you operate your business as an S corporation and want an above-the-line tax deduction for the cost of your health insurance, you need the S corporation to (a) pay for or reimburse you for the health insurance, and (b) put that insurance cost on your W-2. Make sure the reimbursement happens before December 31 and you have the reimbursement set up to show on the W-2.
5. Claim the tax credit for the group health insurance you give your employees. If you recently provided your employees with group health insurance, see whether your pay structure and number of employees put you in a position to claim a 50 percent tax credit for some or all of the monies you paid for health insurance in 2025 (and possibly in prior years).

If you need more insights into the opportunities described above, please call me on my direct line at 408-778-9651  

• By Leon Clinton
• November 18, 2025

Are you thinking of getting married or divorced? If so, consider December 31, 2025, in your tax planning. 

Here’s another planning question: Do you give money to family or friends (other than your children who are subject to the kiddie tax)? If so, you need to consider the zero-tax planning strategy. 

And now, consider your children who are under the age of 18. Have you paid them for the work they’ve done for your business? Have you paid them the right way?

Here are five strategies to consider as we come to the end of 2025.

1. Put Your Children on Your Payroll

If you have a child under the age of 18 and you operate your business as a Schedule C sole proprietorship or as a spousal partnership, you need to consider having that child on your payroll. Why? 

• First, neither you nor your child would pay payroll taxes on the child’s income. 
• Second, with a traditional IRA, the child can avoid all federal income taxes on up to $22,750 of earned income.

If you operate your business as a corporation, you can still benefit by employing the child even though both your corporation and your child suffer payroll taxes.

2. Get Divorced after December 31

The marriage rule works like this: you are considered married for the entire year if you are married on December 31.

Although lawmakers have made many changes to eliminate the differences between married and single taxpayers, the joint return will work to your advantage in most cases.

Warning on alimony! The Tax Cuts and Jobs Act changed the tax treatment of alimony payments under divorce and separate maintenance agreements executed after December 31, 2018:

• Under the old law, the payor deducts alimony payments, and the recipient includes the payments in income.
• Under the new law, which applies to all agreements executed after December 31, 2018, the payor gets no tax deduction, and the recipient does not recognize income.

3. Stay Single to Increase Mortgage Deductions

Two single people can deduct more mortgage interest than a married couple. 

If you own a home with someone other than a spouse, and if you bought it on or before December 15, 2017, you individually can deduct mortgage interest on up to $1 million of a qualifying mortgage. 

For example, if you and your unmarried partner live together and own the home together, the mortgage ceiling on deductions for the two of you is $2 million. If you get married, the ceiling drops to $1 million.

If you and your unmarried partner bought your house after December 15, 2017, the reduced $750,000 mortgage limit applies, and your combined ceiling is $1.5 million.

4. Get Married on or before December 31

Remember, if you are married on December 31, you are married for the entire year.

If you are thinking of getting married in 2025, you might want to rethink that plan for the same reasons that apply to divorce (as described above). The IRS could make considerable savings available to you for the 2025 tax year if you get married on or before December 31, 2025.

To know your tax benefits and detriments, each of you must run the numbers in your tax returns. If the numbers work out, you may want to take a quick trip to the courthouse.

5. Make Use of the 0 Percent Tax Bracket

In the old days, you used this strategy with your college student. Today, this strategy does not work with that student, because the kiddie tax now applies to students up to age 24. 

But this strategy is a good one, so ask yourself this question: Do I give money to my parents or other loved ones to make their lives more comfortable?

If the answer is yes, is your loved one in the 0 percent capital gains tax bracket? The 0 percent capital gains tax bracket applies to a single person with less than $48,350 in taxable income and to a married couple with less than $96,700 in taxable income.

If the parent or other loved one is in the 0 percent capital gains tax bracket, you can add to your bank account by giving this person appreciated stock rather than cash.

Example. You give Aunt Millie shares of stock with a fair market value of $20,000, for which you paid $2,000. Aunt Millie sells the stock and pays zero capital gains taxes. She now has $20,000 in after-tax cash, which should take care of things for a while.

Had you sold the stock, you would have paid taxes of $4,284 in your tax bracket (23.8 percent x $18,000 gain).

Of course, $1,000 of the $20,000 you gifted (the amount over the $19,000 gift-tax exclusion) goes against your $13.99 million estate tax exemption if you are single. 

If you’re married and you make the gift together, you each have a $19,000 gift-tax exclusion, for a total of $38,000, and that eliminates the gift tax. But if you don’t live in a community property state, you must file a gift-tax return that shows the government you split the gift.

I know that taxes can cause confusion. Remember, that’s why you have me! I’m always here to be of service. If you want to discuss any of the strategies described above, please call me on my direct line at 408-778-9651  

• By Leon Clinton
• November 14, 2025

Here’s an important tax planning strategy that can save you thousands in penalties if you’ve missed estimated tax payments for 2025.

The Penalty Problem

When you don’t make your 2025 estimated tax payments on time, the IRS charges a non-deductible 7 percent penalty that compounds daily.

Because penalties are not deductible, they are considerably more costly than deductible interest.

Simply writing a check today won’t erase the penalties. It only prevents them from growing further. But there is a powerful way to make them disappear entirely.

The One Perfect Solution

By using a retirement account with 60-day rollover provisions, you can eliminate estimated tax penalties instantly. Here’s how:

• Withdraw funds from your IRA, 401(k), or other eligible plan, and direct the custodian to withhold federal income tax.
• Repay the full amount into the retirement account within 60 days using other funds.

The IRS treats the withheld taxes as if they were made evenly across all four estimated tax deadlines. And because you repaid the account within 60 days, the withdrawal is not taxable, and no penalty applies.

Other Options and Pitfalls

If you are age 73 or over, you can use withholding taxes from required minimum distributions (RMDs) to cover both your RMD and your estimated tax needs.

Don’t use a W-2 bonus. It triggers payroll taxes and can reduce your Section 199A deduction—likely more costly (and perhaps far more costly) than the penalty itself.

If you want to discuss underpayments of estimated tax, please call me directly at 408-778-9651

• By Leon Clinton
• November 7, 2025