Month: February 2026

The One Big Beautiful Bill Act (OBBBA) dramatically expanded the employer childcare credit starting in 2026, turning a modest tax break into a significant planning opportunity for many businesses.

The employer childcare credit allows businesses to claim a general business tax credit for qualified childcare expenses paid for employees. Qualifying costs include 

• building, expanding, or operating an on-site childcare facility; 
• contracting with licensed off-site childcare providers such as day care centers or preschools; 
• working with third-party childcare platforms or “intermediate entities”; and 
• paying for childcare referral services. 

Businesses do not need to own or operate a childcare facility to qualify.

Beginning in 2026, small businesses with average annual gross receipts under $32 million may claim a 50 percent credit on qualified childcare expenses, up to a maximum annual credit of $600,000. 

Large businesses may claim a 40 percent credit, capped at $500,000 per year. 

By comparison, the credit for 2025 and earlier years maxed out at $150,000, making the new credit up to four times larger. Congress will adjust these limits for inflation starting in 2027.

OBBBA also makes the credit far more accessible for small employers. Businesses may now pool resources to contract jointly with licensed childcare providers or to jointly own or operate a childcare facility. Each business may claim its share of the credit, helping reduce both costs and administrative complexity.

Any business with W-2 employees can qualify, including sole proprietors, partnerships, LLCs, and S corporations. Owners generally cannot claim the credit for their own childcare costs, but they can claim it for qualified expenses paid on behalf of employees, including spouse-employees. 

Even when childcare benefits remain taxable to the employee or owner-employee, the credit often produces significant net tax savings.

Employers must include the value of employer-provided childcare in employee income unless the benefits qualify under a dependent care assistance program (DCAP). DCAPs allow limited tax-free benefits but impose strict non-discrimination rules that eliminate many small-business owners.

If you pay for employee childcare in any form, this expanded credit deserves immediate close attention.

If you want to discuss childcare benefits for your business, please call me directly at 408-778-9651

• By Leon Clinton
• February 17, 2026

I prepare your tax returns with care, transparency, and integrity. I do not commit fraud, and I never cut corners. Still, I want you to understand a growing risk that affects taxpayers everywhere: dishonest tax preparers exist, and their misconduct can haunt clients for decades.

Recent court cases show a troubling reality: When a tax return contains fraudulent items inserted by a tax preparer, some courts allow the IRS to audit that return forever. The three-year statute of limitations may never start. Even worse, the IRS can apply this rule even when the taxpayer had no knowledge of the fraud and relied in good faith on a licensed professional.

In one case, the IRS audited returns that were more than 25 years old because it uncovered fraud by a tax preparer. The taxpayer did nothing wrong, but the courts still held her responsible for what appeared on her returns. In those jurisdictions, the law places full responsibility on the taxpayer to review and stand behind every number.

This reality does not mean you should distrust your advisor. It does mean you should stay engaged. You should read your return before you sign it. You should ask questions about deductions, credits, or strategies you do not understand. If something looks unusually large or too good to be true, you should press for an explanation and documentation.

I encourage this level of involvement. An informed client strengthens the process and reduces risk for everyone. Fraud thrives in secrecy and indifference. Transparency, documentation, and communication shut that door.

My goal is not to alarm you, but to empower you. Awareness remains your best protection in a system that ultimately holds taxpayers accountable for their returns.If you want to discuss the recent cases mentioned above, please call me on my direct line at 408-778-9651

• By Leon Clinton
• February 13, 2026

Many married couples form an LLC to own rental property to obtain liability protection. After they create the LLC, they often ask an important tax question: Does the LLC force them to file a partnership return? 

The answer depends largely on where they live and how they own the property.

Federal tax rules treat any unincorporated business with two owners as a partnership by default. When a husband and wife form a two-member LLC, the IRS normally requires a partnership return on Form 1065. Some exceptions exist, but most couples do not qualify for them.

Tax law allows “mere co-ownership” of real estate without creating a partnership. This rule applies only when individuals own property directly as tenants in common and simply maintain and rent it. Once spouses place the property inside a multi-member LLC, they move beyond co-ownership and create a separate tax entity. At that point, the partnership rules apply.

Spouses sometimes ask about the qualified joint venture election. That option lets qualifying couples file a single Schedule E instead of a partnership return. Unfortunately, the election does not apply when spouses operate a rental through an LLC or any other state-law entity.

Spouses who live in community property states have more flexibility. In those nine states, married couples may treat an LLC-owned rental as a single disregarded entity and file one Schedule E. The other 41 states do not offer this option.

In those 41 states, the husband-and-wife LLC result stays clear: they must file a partnership return and issue Schedule K-1s. 

Before forming an LLC, couples should weigh the liability protection against the added tax filing complexity.

If you want to discuss an LLC, please call me on my direct line at 408-778-9651

• By Leon Clinton
• February 10, 2026