Tax

There is an ugly tax law change taking effect in 2026 that could affect a common workplace practice: providing coffee, snacks, and other small refreshments to employees.

For years, these items have been treated as de minimis fringe benefits, meaning employees are not taxed on them, and employers were generally allowed a deduction. But beginning in 2026, the tax code eliminates the employer deduction, even though the benefit remains tax-free to employees.

This change stems from the Tax Cuts and Jobs Act, which gradually phased out the deduction. While employers could deduct 50 percent of these costs through 2025, the deduction drops to 0 percent starting in 2026.

As a result, your business will now bear the full cost of providing break-room refreshments. This creates an unusual mismatch: employees still receive a tax-free benefit, but employers receive no tax relief for providing it.

From a practical standpoint, this rule may influence how businesses approach workplace amenities. Many employers offer coffee and snacks to improve productivity, encourage collaboration, and keep employees on-site. Eliminating the deduction may lead some businesses to scale back these offerings, though doing so could negatively affect morale and efficiency.

What should you do now?

• Review your current spending on employee refreshments.
• Evaluate the increased cost beginning in 2026.
• Consider whether the benefits in productivity and workplace culture justify continuing the practice.
• Ensure your accounting properly reflects the non-deductible nature of these expenses.

While this tax law change may seem minor, it has real cost implications and may require thoughtful planning.

If you want to discuss how to handle break-room refreshments, please call me directly at 408-778-9651.

• By Leon Clinton
• June 19, 2026

Here’s a valuable tax strategy, commonly known as the Augusta rule, that can help you generate tax-free income while claiming a legitimate business deduction.

If you own a business structured as an S corporation, a C corporation, or a partnership, you may rent your personal residence to your business for up to 14 days per year. When this is done correctly, the results are highly favorable: your business deducts the full rental expense while you personally receive the rental income tax-free.

For example, if your home rents for $1,500 per day and your business rents it for 14 days, your business can claim a $21,000 deduction. That deduction reduces business income, and in the case of an S corporation or a partnership, it reduces income that flows through to you.

On your personal tax return, you report the $21,000 as taxable income, then subtract it under the 14-day rule, so your net result is zero tax on the $21,000.

While tax law supports this strategy, proper execution is critical. You must follow several key rules, including:

• Rent for a business purpose. The rental must be for legitimate business use, such as meetings, planning sessions, or employee events.
• Avoid entertainment use. Most entertainment expenses are not deductible, so the rental should not be for entertainment purposes.
• Charge fair market rent. You must charge a reasonable rental rate supported by documentation, such as comparable market data or an appraisal.
• Document the business activities. Keep detailed records of meeting agendas, attendees, and business activities to substantiate the deduction.

Failure to meet these requirements—particularly proving fair rental value and business use—can result in the IRS disallowing the entire deduction.

If you want to discuss the Augusta rule, please call me directly at 408-778-9651.

• By Leon Clinton
• June 16, 2026

Recent tax law changes make it more challenging to receive meaningful tax benefits from charitable giving.

Under the current 2026 rules, higher standard deductions and new limitations mean many taxpayers receive little or no benefit from itemizing charitable contributions. Additionally, personal donations are made with after-tax dollars, often increasing the overall cost of giving.

But as a business owner, you can beat this problem.

Your business can structure certain payments to charities as ordinary and necessary business expenses. When structured this way, your business takes the deduction on its business return, reducing not only income taxes but also (potentially) self-employment taxes or, if applicable, payroll taxes. In addition, the business deduction generally lowers your adjusted gross income, improving eligibility for other tax benefits.

To qualify, the payment must have a clear business purpose and a reasonable expectation of financial return. In practice, this means the expense should function as advertising, promotion, or customer development.

There are several proven strategies:

• Sponsoring charitable events to promote your business
• Donating a percentage of sales to encourage customer purchases
• Supporting local organizations to enhance community branding
• Using coupons or rebate-style programs tied to charitable giving

Proper documentation is essential. To support the deduction, maintain records such as sponsorship agreements, marketing materials, and evidence of business intent.

If you want to discuss how to use your business to support charities, please call me on my direct line at 408-778-9651.

• By Leon Clinton
• June 12, 2026