Month: August 2026

If your first house-flipping project ended in a loss, don’t assume you’re limited to deducting only $3,000 per year. Depending on your specific facts, you may qualify to deduct the entire loss in the current year.

The key issue is whether the IRS views you as a real estate dealer or as an investor. Investors generally face the $3,000 annual limit on capital losses. Dealers, however, report their activity as a business, allowing losses to offset ordinary income in full. In many cases, dealer treatment can also reduce self-employment tax.

Qualifying as a dealer depends on more than the number of properties you have sold. The IRS and the courts look at your overall business intent and activities. Factors include why you purchased the property, the extent of your rehabilitation work, how quickly you marketed the property for sale, and whether you conducted the activity in a businesslike manner.

But dealer status is not always an advantage. If future flips generate profits, those profits become ordinary income rather than capital gains. Dealer property also does not qualify for Section 1031 exchanges or installment-sale reporting.

If you intend to build a house-flipping business, good records are essential. Maintain a written business plan, keep separate books and bank accounts, track your time, and consistently report the activity as a business from year to year.

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

• By Leon Clinton
• August 20, 2026

If you own more than 2 percent of an S corporation, your dental, vision, and Medicare premiums can qualify for the same valuable tax treatment as your major medical insurance premiums.

To secure the deductions, follow the same three-step process for all qualifying premiums.

First, your S corporation must either pay the premiums directly or reimburse you after you provide proof of payment. Second, the corporation must include the premiums in box 1 of your Form W-2, but not in box 3 or 5. Third, you claim the combined medical, dental, vision, and qualifying Medicare premiums as the self-employed health insurance deduction on your individual tax return.

Qualifying Medicare costs can include Part B, Part D, Medicare Advantage, Medigap, and certain voluntarily paid Part A premiums. Even when Social Security deducts Medicare premiums directly from your benefits, your corporation can reimburse you if you provide documentation, such as your Form SSA-1099 or Medicare statement.

Two important limitations apply.

You generally cannot claim the deduction for any month when you or your spouse qualified for subsidized health coverage through another employer. In addition, your total deduction cannot exceed your box 5 Medicare wages from the S corporation. Therefore, your salary should be high enough to cover the combined amount of all medical, dental, vision, and Medicare premiums.

Qualifying premiums paid for relatives who work for the corporation may require the same W-2 treatment. The family attribution rules can apply even when those relatives own no stock directly.

If you want to discuss S corporation health insurance and Medicare premium deductions, please call me on my direct line at 408-778-9651

• By Leon Clinton
• August 18, 2026

The home-office deduction can produce substantial tax savings, especially when it converts what would otherwise be commuting miles into deductible business mileage. But many business owners accidentally put this valuable deduction at risk.

If you use your home office for more than one purpose, each use must qualify under the tax rules. A single non-qualifying use can jeopardize the deduction.

One of the biggest traps involves W-2 employment. Federal law now permanently denies employees a home-office deduction on their personal tax returns. That means if you use the same office for both your self-employed business and your W-2 job, your employee use can threaten the deduction for your business.

The same caution applies if you operate multiple businesses from the same office. Each business must independently qualify for the home-office deduction. Likewise, if you share the office with your spouse, your spouse’s use must also qualify—unless you split the room so each spouse uses a separate portion exclusively.

If your business operates as either an S or a C corporation, there is still a way to benefit from a home office. Rather than claiming the deduction personally, the corporation can reimburse your home-office expenses through an accountable plan.

The consequences of losing the home-office deduction can extend beyond the office itself. You may also lose valuable business mileage deductions if the IRS reclassifies your trips as non-deductible commuting.

If you want to discuss the home office, please call me on my direct line at 408-778-9651

• By Leon Clinton
• August 13, 2026