Month: July 2026

If you own more than 2 percent of an S corporation, the good news is that the rules for deducting your health insurance remain unchanged for 2026. By following a few important steps, you can continue to deduct the cost of coverage for yourself, your spouse, your dependents, and your children under age 27.

To qualify, your S corporation must either pay your health insurance premiums directly or reimburse you for them. The corporation must then include the premium amount as taxable wages in box 1 of your Form W-2, but not in boxes 3 or 5. You can then claim the self-employed health insurance deduction on your individual tax return if you meet the eligibility requirements.

One of the most common mistakes involves compensation. Your deduction cannot exceed your box 5 Medicare wages. If you take little or no salary, you may lose part or all of the deduction, even though the premiums appear on your W-2.

Another trap affects family members who work in the business. Under the tax law’s family attribution rules, certain relatives may be treated as shareholders even if they own no stock directly. This can change how their health insurance must be reported and deducted.

Finally, be careful if you reimburse non-owner employees for individually purchased health insurance. Doing so outside an approved arrangement can trigger substantial IRS penalties.

If you want to discuss S corporation health insurance, please call me directly at 408-778-9651

• By Leon Clinton
• July 12, 2026

Beginning in 2026, the Section 199A qualified business income deduction becomes a permanent part of tax planning for pass-through business owners.

This deduction can allow owners of sole proprietorships, partnerships, S corporations, and certain other pass-through businesses to deduct up to 20 percent of their qualified business income. C corporations do not qualify.

The 2026 rules bring several favorable changes. First, the deduction no longer expires after 2025. Second, the income phase-in ranges increase, which may allow more taxpayers to receive at least a partial deduction. For 2026, the threshold is $201,775 for single filers and heads of household, and $403,500 for married couples filing jointly.

If your taxable income is at or below these amounts, the deduction is generally straightforward, and most types of pass-through businesses can qualify.

If your taxable income exceeds the threshold, planning becomes more important. W-2 wages, qualified business property, retirement plan contributions, and business structure may affect the amount of your deduction. Certain service businesses, such as law, health, accounting, consulting, and financial services, may face additional limits at higher income levels.

The new rules also create a $400 minimum deduction for some taxpayers with at least $1,000 of qualified business income from an active trade or business.

If you want to discuss the Section 199A deduction, please call me directly at 408-778-9651

• By Leon Clinton
• July 9, 2026

If your business receives an Employee Retention Credit (ERC) refund in 2026 for wages paid in 2020 or 2021, you may have an important tax planning opportunity.

Many businesses filed ERC claims years after they filed their original income tax returns. Because the IRS took so long to process many claims, some refunds are only now being paid, even though the related tax years are closed.

To address this situation, the IRS currently allows taxpayers to report the ERC refund as taxable income in the year they receive it. Following this guidance can help you avoid unnecessary disputes with the IRS.

At the same time, you may want to protect your rights. Some tax professionals believe the IRS’s position could ultimately be rejected by the courts. If that happens, taxpayers who paid tax on their ERC refunds may be entitled to a refund.

One way to preserve that opportunity is to file a protective refund claim after reporting the income on your 2026 return. This approach complies with current IRS guidance while keeping the door open to recover the tax if the law changes in your favor.

If you want to discuss your ERC refund, please call me directly at 408-778-9651

• By Leon Clinton
• July 7, 2026