Retirement is often viewed as an opportunity to travel, spend time with family or simply enjoy the fruits of a long career. Yet the transition may bring a tangle of tax considerations. Planning carefully can help you minimize tax bills. Below are four steps to take if you’re approaching retirement, along with the tax implications.

1. Consider your post-career lifestyle

Begin by assessing what retirement might look like for you. For example, will you relocate to a different state or downsize by selling your home? Will you continue to work part-time?

Tax implications: Moving to a state with lower income or property taxes may stretch your retirement savings. If you sell your home and the capital gain exceeds $250,000 ($500,000 for married couples filing jointly), you’ll need to pay tax on the amount over the exclusion limit. And if you work part-time, your earnings could reduce your Social Security benefits (depending on your age) or push you into a higher tax bracket.

2. Assess your income sources

Social Security is a major income component for many retirees, and deciding when to start collecting benefits is crucial. The government will permanently reduce your monthly benefit if you begin collecting before your full retirement age. Conversely, if you delay benefits past your full retirement age (up to age 70), you’ll receive larger monthly payments.

Tax implications: Depending on your total income (including wages, retirement distributions and taxable investment income), up to 85% of your Social Security benefits could be taxable. Proper planning can help you manage taxable income and potentially reduce or avoid higher taxes on benefits.

If you’re fortunate enough to have a pension, find out your payout options. Some pensions offer lump-sum distributions, while others offer monthly annuity payments.

Tax implications: Most pension income is taxable at ordinary income tax rates.

In addition to retirement accounts, you may have savings and investments in brokerage accounts that can supplement your income.

Tax implications: Capital gains and dividends may be taxed differently than ordinary income, potentially at lower rates. Strategic withdrawals from taxable accounts and retirement accounts can help you manage your overall tax liability.

3. Develop a retirement account withdrawal strategy

Once you turn 73, you must take required minimum distributions (RMDs) from most tax-deferred retirement accounts such as traditional IRAs and 401(k)s. Failing to do so can result in hefty penalties.

Tax implications: RMDs are treated as ordinary income for tax purposes. If you don’t need them for living expenses, you might consider a qualified charitable distribution (QCD) to lower your taxable income. With a QCD, funds go directly from your retirement account to a qualified charity. They can count toward your RMD but aren’t included in your taxable income.

Distributions from Roth IRAs and Roth 401(k)s are generally tax-free (if holding-period requirements are met), making them valuable tools for reducing taxes in retirement. If you have traditional and Roth accounts, you might choose to take withdrawals from Roth accounts in years when you want to manage your tax bracket more carefully.

Tax implications: Roth accounts don’t require RMDs during the original owner’s lifetime.

4. Plan for health care expenses

Medical costs can significantly impact retirees. Medicare premiums, hospital visits, prescriptions and potential long-term care are just some of the expenses that can eat into your retirement savings without careful planning.

Tax implications: Health Savings Accounts (HSAs) allow for tax-deductible contributions, tax-free growth and tax-free withdrawals for qualified medical expenses. If you’re retiring soon and have a high-deductible health plan, maximizing HSA contributions can be a smart move. In addition, qualified medical expenses can sometimes be deducted if they exceed a certain percentage of your adjusted gross income (AGI).

Final thoughts

Retirement can span decades, and tax laws frequently change. By combining various withdrawal strategies and staying proactive about tax changes, you can tame the tax tangle. These are only some of the tax issues and implications. Contact us. We can help forecast tax outcomes under different scenarios and advise on strategies that complement your retirement goals.

Chances are, you’re more concerned about your 2024 tax return right now than you are about your 2025 tax situation. That’s understandable because your 2024 individual tax return is due to be filed by April 15 (unless you file for an extension).

However, it’s a good time to familiarize yourself with tax amounts that may have changed for 2025 due to inflation. Not all tax figures are adjusted annually for inflation, and some amounts only change when Congress passes new laws.

In addition, there may be tax changes due to what’s happening in Washington. With Republicans in control of both the White House and Congress, we expect major tax law changes in the coming months. With that in mind, here are some Q&As about 2025 tax limits.

I haven’t been able to itemize deductions on my last few tax returns. Will I qualify for 2025?

Beginning in 2018, the Tax Cuts and Jobs Act eliminated the ability to itemize deductions for many people by increasing the standard deduction and reducing or eliminating various deductions. For 2025, the standard deduction amount is $30,000 for married couples filing jointly (up from $29,200 in 2024). For single filers, the amount is $15,000 (up from $14,600 in 2024) and for heads of households, it’s $22,500 (up from $21,900 in 2024). If the total amount of your itemized deductions (including mortgage interest) is less than the applicable standard deduction amount, you won’t itemize for 2025.

If I don’t itemize deductions, can I claim charitable deductions on my 2025 return?

Generally, taxpayers who claim the standard deduction on their federal tax returns can’t deduct charitable donations.

How much can I contribute to an IRA for 2025?

If you’re eligible, you can contribute up to $7,000 a year to a traditional or Roth IRA. If you earn less than $7,000 during the year, you can contribute up to 100% of your earned income. (This is unchanged from 2024.) If you’re 50 or older, you can make an additional $1,000 “catch up” contribution (for 2024 and 2025).

I have a 401(k) plan with my employer. How much can I contribute to it?

In 2025, you can contribute up to $23,500 to a 401(k) or 403(b) plan (up from $23,000 in 2024). You can make an additional $7,500 catch-up contribution if you’re age 50 or older (for 2024 and 2025). However, there’s something new this year for 401(k) and 403(b) participants of certain ages. Beginning in 2025, those who are age 60, 61, 62 or 63 can make catch-up contributions of up to $11,250.

I occasionally hire a cleaning person. Am I required to withhold and pay FICA tax on the amounts I pay him or her?

In 2025, the threshold for when a domestic employer must withhold and pay FICA for babysitters, house cleaners, etc. who are independent contractors is $2,800 (up from $2,700 in 2024).

How much of my earnings are taxed for Social Security in 2025?

The Social Security tax “wage base” is $176,100 for this year (up from $168,600 in 2024). That means you don’t owe Social Security tax on amounts earned above that. (You must pay Medicare tax on all amounts you earn.)

How much can I give to one person without triggering a gift tax return in 2025?

The annual gift tax exclusion for 2025 is $19,000 (up from $18,000 in 2024).

How will the changes in Washington affect taxes this year and in the future?

We obviously can’t predict the future with certainty. The specifics of any new tax legislation depend on various political and economic factors. However, there are likely to be many changes in the next few years. President Trump and Republicans have signaled that they’d like to extend and possibly make permanent the provisions in the Tax Cuts and Jobs Act that expire after 2025. They’ve also discussed raising or eliminating the cap on the state and local tax deduction. Other proposals include expanding the Child Tax Credit and making certain types of income (tips, overtime and Social Security benefits) tax-free. Some of these tax breaks could become effective for the 2025 tax year.

Changes ahead

These are only some of the tax amounts and potential changes that may apply to you. Contact us if you have questions or need more information.

The nationwide price of gas is slightly higher than it was a year ago and the 2025 optional standard mileage rate used to calculate the deductible cost of operating an automobile for business has also gone up. The IRS recently announced that the 2025 cents-per-mile rate for the business use of a car, van, pickup or panel truck is 70 cents. In 2024, the business cents-per-mile rate was 67 cents per mile. This rate applies to gasoline and diesel-powered vehicles as well as electric and hybrid-electric vehicles.

The process of calculating rates

The 3-cent increase from the 2024 rate goes along with the recent price of gas. On January 17, 2025, the national average price of a gallon of regular gas was $3.11, compared with $3.08 a year earlier, according to AAA Fuel Prices. However, the standard mileage rate is calculated based on all the costs involved in driving a vehicle — not just the price of gas.

The business cents-per-mile rate is adjusted annually. It’s based on an annual study commissioned by the IRS about the fixed and variable costs of operating a vehicle, including gas, maintenance, repairs and depreciation. Occasionally, if there’s a substantial change in average gas prices, the IRS will change the cents-per-mile rate midyear.

Standard rate or real expenses

Businesses can generally deduct the actual expenses attributable to business use of a vehicle. These include gas, oil, tires, insurance, repairs, licenses and vehicle registration fees. In addition, you can claim a depreciation allowance for the vehicle. However, in many cases, certain limits apply to depreciation write-offs on vehicles that don’t apply to other types of business assets.

The cents-per-mile rate is beneficial if you don’t want to keep track of actual vehicle-related expenses. With this method, you don’t have to account for all your actual expenses. However, you still must record certain information, such as the mileage for each business trip, the date and the destination.

Using the cents-per-mile rate is also popular with businesses that reimburse employees for business use of their personal vehicles. These reimbursements can help attract and retain employees who drive their personal vehicles a great deal for business purposes. Why? Under current law, employees can’t deduct unreimbursed employee business expenses, such as business mileage, on their own income tax returns.

If you do use the cents-per-mile rate, keep in mind that you must comply with various rules. If you don’t comply, the reimbursements could be considered taxable wages to the employees.

When you can’t use the standard rate

There are some cases when you can’t use the cents-per-mile rate. It partly depends on how you’ve claimed deductions for the same vehicle in the past. In other situations, it depends on if the vehicle is new to your business this year or whether you want to take advantage of certain first-year depreciation tax breaks on it.

As you can see, there are many factors to consider in deciding whether to use the standard mileage rate to deduct vehicle expenses. We can help if you have questions about tracking and claiming such expenses in 2025 — or claiming 2024 expenses on your 2024 income tax return.

Once you reach age 73, tax law requires you to begin taking withdrawals — called Required Minimum Distributions (RMDs) — from your traditional IRA, SIMPLE IRA and SEP IRA. Since funds can’t stay in these accounts indefinitely, it’s important to understand the rules behind RMDs, which can be pretty complex. Below, we address some common questions to help you navigate this process.

What are the tax implications if I want to withdraw money before retirement? 

If you need to take money out of a traditional IRA before age 59½, distributions are taxable, and you may be subject to a 10% penalty tax. However, there are several ways that you can avoid the 10% penalty tax (but not the regular income tax). They include using the money to pay:

• Qualified higher education expenses,
• Up to $10,000 of expenses if you’re a first-time homebuyer,
• Expenses after you become totally and permanently disabled,
• Expenses of up to $5,000 per child for qualified birth or adoption expenses, and
• Health insurance premiums while unemployed.

These are only some of the exceptions to the 10% tax allowed before age 59½. The IRS lists them all in this chart.

When am I required to take my first RMD?

For an IRA, you must take your first RMD by April 1 of the year following the year in which you turn 73, regardless of whether you’re still employed. The RMD age used to be 72 but the Secure 2.0 Act raised it to 73 starting in 2023.

How do I calculate my RMD?

The RMD for any year is the account balance as of the end of the immediately preceding calendar year divided by a distribution period from the IRS’s “Uniform Lifetime Table.” A separate table is used if the sole beneficiary is the owner’s spouse who’s 10 or more years younger than the owner.

How should I take my RMDs if I have multiple accounts?

If you have more than one IRA, you must calculate the RMD for each IRA separately each year. However, you may aggregate your RMD amounts for all of your IRAs and withdraw the total from one IRA or a portion from each of your IRAs. You don’t have to take a separate RMD from each IRA.

Can I withdraw more than the RMD?

Yes, you can always withdraw more than the RMD. But you can’t apply excess withdrawals toward future years’ RMDs.

In planning for RMDs, you should weigh your income needs against the ability to keep the tax shelter of the IRA going for as long as possible.

Can I take more than one withdrawal in a year to meet my RMD?

You may withdraw your annual RMD in any number of distributions throughout the year, as long as you withdraw the yearly total minimum amount by December 31 (or April 1 if it is for your first RMD).

What happens if I don’t take an RMD?

If the distributions to you in any year are less than the RMD for that year, you’ll be subject to an additional tax equal to 50% of the amount that should have been paid but wasn’t.

Plan carefully

Contact us to review your traditional IRAs and analyze other retirement planning aspects. We can also discuss who you should name as beneficiaries and whether you could benefit from a Roth IRA. Roth IRAs are retirement savings vehicles that operate under a different set of rules than traditional IRAs. Contributions aren’t deductible, but qualified distributions are generally tax-free.

When selling business assets, understanding the tax implications is crucial. One area to focus on is Section 1231 of the Internal Revenue Code, which governs the treatment of gains and losses from the sale or exchange of certain business property.

Business gain and loss tax basics

The federal income tax character of gains and losses from selling business assets can fall into three categories:

• Capital gains and losses. These result from selling capital assets which are generally defined as property other than 1) inventory and property primarily held for sale to customers, 2) business receivables, 3) real and depreciable business property including rental real estate, and 4) certain intangible assets such as copyrights, musical works and art works created by the taxpayer. Operating businesses typically don’t own capital assets, but they might from time to time.
• Sec. 1231 gains and losses. These result from selling Sec. 1231 assets which generally include 1) business real property (including land) that’s held for more than one year, 2) other depreciable business property that’s held for more than one year, 3) intangible assets that are amortizable and held for more than one year, and 4) certain livestock, timber, coal, domestic iron ore and unharvested crops.
• Ordinary gains and losses. These result from selling all assets other than capital assets and Sec. 1231 assets. Other assets include 1) inventory, 2) receivables, and 3) real and depreciable business assets that would be Sec. 1231 assets if held for over one year. Ordinary gains can also result from various recapture provisions, the most common of which is depreciation recapture.

Favorable tax treatment

Gains and losses from selling Sec. 1231 assets receive favorable federal income tax treatment.

Net Sec. 1231 gains. If a taxpayer’s Sec. 1231 gains for the year exceed the Sec. 1231 losses for that year, all the gains and losses are treated as long-term capital gains and losses — assuming the nonrecaptured Sec. 1231 loss rule explained later doesn’t apply.

An individual taxpayer’s net Sec. 1231 gain — including gains passed through from a partnership, LLC, or S corporation — qualifies for the lower long-term capital gain tax rates.

Net Sec. 1231 losses. If a taxpayer’s Sec. 1231 losses for the year exceed the Sec. 1231 gains for that year, all the gains and losses are treated as ordinary gains and losses. That means the net Sec. 1231 loss for the year is fully deductible as an ordinary loss, which is the optimal tax outcome.

Unfavorable nonrecaptured Sec. 1231 loss rule

Now for a warning: Taxpayers must watch out for the nonrecaptured Sec. 1231 loss rule. This provision is intended to prevent taxpayers from manipulating the timing of Sec. 1231 gains and losses in order to receive favorable ordinary loss treatment for a net Sec. 1231 loss, followed by receiving favorable long-term capital gain treatment for a net Sec. 1231 gain recognized in a later year.

The nonrecaptured Sec. 1231 loss for the current tax year equals the total net Sec. 1231 losses that were deducted in the preceding five tax years, reduced by any amounts that have already been recaptured. A nonrecaptured Sec. 1231 loss is recaptured by treating an equal amount of current-year net Sec. 1231 gain as higher-taxed ordinary gain rather than lower-taxed long-term capital gain.

For losses passed through to an individual taxpayer from a partnership, LLC, or S corporation, the nonrecaptured Sec. 1231 loss rule is enforced at the owner level rather than at the entity level.

Tax-smart timing considerations

Because the unfavorable nonrecaptured Sec. 1231 loss rule cannot affect years before the year when a net Sec. 1231 gain is recognized, the tax-smart strategy is to try to recognize net Sec. 1231 gains in years before the years when net Sec. 1231 losses are recognized.

Conclusion

Achieving the best tax treatment for Sec. 1231 gains and losses can be a challenge. We can help you plan the timing of gains and losses for optimal tax results.

When deciding on the best structure for your business, one option to consider is a C corporation. This entity offers several advantages and disadvantages that may significantly affect your business operations and financial health. Here’s a detailed look at the pros and cons of operating as a C corporation.

Tax implications

A C corporation allows the business to be treated and taxed separately from you as the principal owner. The corporate tax rate is currently 21%, which is lower than the highest noncorporate tax rate of 37%.

One of the primary disadvantages of a C corporation is double taxation. The corporation’s profits are taxed at the corporate level and then any dividends distributed to shareholders are taxed again at the individual level. This can result in a higher overall tax burden than other business structures. However, since most of the corporate earnings will be attributable to your efforts as an employee, the risk of double taxation is minimal since the corporation can deduct all reasonable salary that it pays to you.

Because the corporation is taxed as a separate entity, all items of income, credit, loss and deduction are computed at the entity level when arriving at corporate taxable income or loss. One potential disadvantage to a C corporation for a new business is that losses are trapped at the entity level and, thus, generally can’t be deducted by the owners. However, if you expect to generate profits in year one, this might not be a problem.

Liability protection

One of the most significant advantages of a C corporation is the limited liability protection it offers. Shareholders aren’t personally liable for the corporation’s debts and liabilities. This means personal assets are generally protected if the business faces legal issues or bankruptcy.

Complying with requirements

To ensure that a corporation is treated as a separate entity, it’s important to observe various formalities required by your state. These include:

• Filing articles of incorporation,
• Adopting bylaws,
• Electing a board of directors,
• Holding organizational meetings, and
• Keeping minutes of meetings.

Complying with these requirements and maintaining an adequate capital structure will ensure you don’t inadvertently risk personal liability for the business’s debts.

Fringe benefits

A C corporation can also be used to provide fringe benefits and fund qualified pension plans on a tax-favored basis. Subject to certain limits, the corporation can deduct the cost of a variety of benefits such as health insurance and group life insurance without adverse tax consequences to you. Similarly, contributions to qualified pension plans are usually deductible but aren’t currently taxable to you.

Raising capital

A C corporation also gives you considerable flexibility in raising capital from outside investors. A C corporation can have multiple classes of stock — each with different rights and preferences that can be tailored to fit your needs and those of potential investors. Also, if you decide to raise capital through debt, interest paid by the corporation is deductible.

The right fit

Although the C corporation form of business could be appropriate for you at this time, you may be able to change the corporation from a C corporation to an S corporation in the future, if S status is more appropriate at that time. This change will ordinarily be tax-free, except that built-in gain on the corporate assets may be subject to tax if the assets are disposed of by the corporation within 10 years of the change.

This is only a brief overview of the pros and cons of being a C corporation. Contact us if you have questions or would like to explore the best choice of entity for your business.

When deciding on the best structure for your business, one option to consider is a C corporation. This entity offers several advantages and disadvantages that may significantly affect your business operations and financial health. Here’s a detailed look at the pros and cons of operating as a C corporation.

Tax implications

A C corporation allows the business to be treated and taxed separately from you as the principal owner. The corporate tax rate is currently 21%, which is lower than the highest noncorporate tax rate of 37%.

One of the primary disadvantages of a C corporation is double taxation. The corporation’s profits are taxed at the corporate level and then any dividends distributed to shareholders are taxed again at the individual level. This can result in a higher overall tax burden than other business structures. However, since most of the corporate earnings will be attributable to your efforts as an employee, the risk of double taxation is minimal since the corporation can deduct all reasonable salary that it pays to you.

Because the corporation is taxed as a separate entity, all items of income, credit, loss and deduction are computed at the entity level when arriving at corporate taxable income or loss. One potential disadvantage to a C corporation for a new business is that losses are trapped at the entity level and, thus, generally can’t be deducted by the owners. However, if you expect to generate profits in year one, this might not be a problem.

Liability protection

One of the most significant advantages of a C corporation is the limited liability protection it offers. Shareholders aren’t personally liable for the corporation’s debts and liabilities. This means personal assets are generally protected if the business faces legal issues or bankruptcy.

Complying with requirements

To ensure that a corporation is treated as a separate entity, it’s important to observe various formalities required by your state. These include:

• Filing articles of incorporation,
• Adopting bylaws,
• Electing a board of directors,
• Holding organizational meetings, and
• Keeping minutes of meetings.

Complying with these requirements and maintaining an adequate capital structure will ensure you don’t inadvertently risk personal liability for the business’s debts.

Fringe benefits

A C corporation can also be used to provide fringe benefits and fund qualified pension plans on a tax-favored basis. Subject to certain limits, the corporation can deduct the cost of a variety of benefits such as health insurance and group life insurance without adverse tax consequences to you. Similarly, contributions to qualified pension plans are usually deductible but aren’t currently taxable to you.

Raising capital

A C corporation also gives you considerable flexibility in raising capital from outside investors. A C corporation can have multiple classes of stock — each with different rights and preferences that can be tailored to fit your needs and those of potential investors. Also, if you decide to raise capital through debt, interest paid by the corporation is deductible.

The right fit

Although the C corporation form of business could be appropriate for you at this time, you may be able to change the corporation from a C corporation to an S corporation in the future, if S status is more appropriate at that time. This change will ordinarily be tax-free, except that built-in gain on the corporate assets may be subject to tax if the assets are disposed of by the corporation within 10 years of the change.

This is only a brief overview of the pros and cons of being a C corporation. Contact us if you have questions or would like to explore the best choice of entity for your business.

There are two tax breaks that help eligible parents offset the expenses of adopting a child. In 2025, adoptive parents may be able to claim a credit against their federal tax for up to $17,280 of “qualified adoption expenses” for each child. This is up from $16,810 in 2024. A tax credit is a dollar-for-dollar reduction of tax.

Also, adoptive parents may be able to exclude from an employee’s gross income up to $17,280 in 2025 ($16,810 in 2024) of qualified expenses paid by an employer under an adoption assistance program. Both the credit and the exclusion are phased out if the parents’ income exceeds certain limits detailed below.

Parents can claim both a credit and an exclusion for the expenses of adopting a child. But they can’t claim both a credit and an exclusion for the same expenses.

Which expenses qualify?

To be eligible for the credit or the exclusion, the expenses must be “qualified adoption expenses.” These are the reasonable and necessary adoption fees, attorneys’ fees, court fees, travel expenses (including meals and lodging), and other costs directly related to the legal adoption of an “eligible child.”

Qualified expenses don’t include those incurred when adopting a spouse’s child or arranging a surrogate parent. They also don’t include expenses that violate state or federal law or those paid using funds received from a government program. Expenses reimbursed by an employer don’t qualify for the credit, but benefits provided by an employer under an adoption assistance program may be eligible for the exclusion.

Expenses related to an unsuccessful attempt to adopt a child may qualify. Expenses connected with a foreign adoption (the child isn’t a U.S. citizen or resident) qualify only if the child is adopted.

Taxpayers who adopt a child with special needs are deemed to have qualified adoption expenses in the tax year in which the adoption becomes final in an amount sufficient to bring their total aggregate expenses for the adoption to $17,280 in 2025 ($16,810 in 2024). They can take the adoption credit or exclude employer adoption assistance up to that amount, whether or not they had those actual expenses.

Who is an eligible child? 

An eligible child is under age 18 at the time you pay a qualified expense. A child who turns 18 during the year is eligible for the part of the year he or she is under age 18. A person who is physically or mentally incapable of caring for him- or herself is eligible, regardless of age.

A special needs child refers to one whom the state has determined can’t or shouldn’t be returned to his or her parents and who can’t be reasonably placed with adoptive parents without assistance because of a specific factor or condition. Only a child who is a citizen or resident of the U.S. is included in this category.

What are the phaseout amounts? 

The credit allowed in 2025 begins to phase out for taxpayers with adjusted gross incomes (AGIs) over $259,190 ($252,150 for 2024) and is eliminated when AGIs reach $299,190 ($292,150 in 2024).

Note: The adoption credit isn’t “refundable.” So, if the sum of your refundable credits (including any adoption credit) for the year exceeds your tax liability, the excess amount isn’t refunded to you. In other words, you can only claim the credit up to the amount of your tax liability.

Need help unlocking tax relief?

Contact us with any questions. We can help ensure you get the full benefit of the tax savings available to adoptive parents.

Medicare health insurance premiums can add up to big bucks — especially if you’re upper-income, married, and you and your spouse both pay premiums. Read on to understand how taxes fit in.

Premiums for Part B coverage 

Medicare Part B coverage is commonly called Medicare medical insurance. Part B mainly covers doctors’ visits and outpatient services. Eligible individuals must pay monthly premiums for this benefit. Medicare is generally for people 65 or older. It’s also available earlier to some people with disabilities, and those with end-stage renal disease and ALS.

The monthly premium for the current year depends on your modified adjusted gross income (MAGI), as reported on your Form 1040 for two years earlier. MAGI is the adjusted gross income (AGI) number on your Form 1040 plus any tax-exempt interest income.

For 2025, most individuals will pay the base monthly Part B premium of $185 per covered person.

Higher-income individuals must pay a surcharge on top of the base premium. For 2025, a surcharge applies if you: 1) filed as an unmarried individual for 2023 and reported MAGI above $106,000 for that year or 2) filed jointly for 2023 and reported MAGI above $212,000 for that year.

For 2025, Part B monthly premiums, including surcharges if applicable, for each covered individual can be found on this web page.

Part B premiums, including any surcharges, are withheld from your Social Security benefit payments and are shown on the annual Form SSA-1099 sent to you by the Social Security Administration (SSA).

Premiums for Part D drug coverage

Medicare Part D is private prescription drug coverage. Base premiums vary depending on the plan. Higher-income individuals must pay a surcharge on top of the base premium.

For 2025, surcharges apply to those who: 1) filed as an unmarried individual for 2023 and reported MAGI above $106,000 for that year or 2) filed a joint return for 2023 and reported MAGI above $212,000. You can find the 2025 monthly Part D surcharges for each covered person on this web page.

You pay the base Part D premium, which depends on the private insurance company plan you select, to the insurance company. Any surcharge will be withheld from your Social Security benefit payments and reflected on the annual Form SSA-1099 sent to you by the SSA.

Deducting Medicare premiums

You may be able to combine premiums for Medicare insurance with other qualifying health care expenses to claim an itemized medical expense deduction. Your deduction equals total qualifying expenses to the extent they exceed 7.5% of your adjusted gross income (AGI).

Your 2024 tax return and 2026 Medicare premiums 

Decisions reflected on your 2024 Form 1040 can affect your 2024 MAGI and, in turn, your 2026 Medicare health insurance premiums. This issue is especially relevant if you’re self-employed or an owner of a pass-through business entity (LLC, partnership or S corporation) because you have more opportunities to micro-manage your 2024 MAGI at tax return time. For example, you may choose to make bigger or smaller deductible contributions to a self-employed retirement plan and maximize or minimize depreciation deductions for business assets.

While your 2026 Medicare health insurance premiums may seem to be an issue in the distant future, 2026 will be here before you know it.

Optimize your situation

As you can see, Medicare health insurance premiums can add up. In addition, what you do on your yet-to-be-filed 2024 tax return can impact your 2026 premiums. We can help you make the best decisions to optimize your overall situation.

You’re not alone if you’re confused about the federal tax treatment of business-related meal and entertainment expenses. The rules have changed in recent years. Let’s take a look at what you can deduct in 2024.

Current law

The Tax Cuts and Jobs Act eliminated deductions for most business-related entertainment expenses. That means, for example, that you can’t deduct any part of the cost of taking clients out for a round of golf or to a football game.

You can still generally deduct 50% of the cost of food and beverages when they’re business-related or consumed during business-related entertainment.

Allowable food and beverage costs

IRS regulations clarify that food and beverages are all related items whether they’re characterized as meals, snacks, etc. Food and beverage costs include sales tax, delivery fees and tips.

To be 50% deductible, food and beverages consumed in conjunction with an entertainment activity must: be purchased separately from the entertainment or be separately stated on a bill, invoice, or receipt that reflects the usual selling price for the food and beverages. You can deduct 50% of the approximate reasonable value if they aren’t purchased separately.

Other rules

Per IRS regulations, no 50% deduction for the cost of business meals is allowed unless:

1. The meal isn’t lavish or extravagant under the circumstances.

2. You (as the taxpayer) or an employee is present at the meal.

3. The meal is provided to you or a business associate.

Who are business associates? They’re people with whom you reasonably expect to conduct business — such as established or prospective customers, clients, suppliers, employees or partners.

IRS regulations make it clear that you can deduct 50% of the cost of a business-related meal for yourself — for example, because you’re working late at night.

Traveling on business

Per IRS regulations, the general rule is that you can still deduct 50% of the cost of meals while traveling on business. The longstanding rules for substantiating meal expenses still apply. Message: keep receipts.

IRS regulations also reiterate the longstanding general rule that no deductions are allowed for meal expenses incurred for spouses, dependents, or other individuals accompanying you on business travel. (This is also true for spouses and dependents accompanying an officer or employee on a business trip.)

The exception is when the expenses would otherwise be deductible. For example, meal expenses for your spouse are deductible if he or she works at your company and accompanies you on a business trip for legitimate business reasons.

100% deductions in certain situations

IRS regulations confirm that some longstanding favorable exceptions for meal and entertainment expenses still apply. For example, your business can deduct 100% of the cost of:

• Food, beverage, and entertainment incurred for recreational, social, or similar activities that are primarily for the benefit of all employees (for example, at a company holiday party);
• Food, beverages, and entertainment available to the general public (for example, free food and music you provide at a promotional event open to the public);
• Food, beverages and entertainment sold to customers for full value;
• Amounts that are reported as taxable compensation to recipient employees; and
• Meals and entertainment that are reported as taxable income to a non-employee recipient on a Form 1099 (for example, a customer wins a dinner cruise for ten valued at $750 at a sales presentation).

In addition, a restaurant or catering business can deduct 100% of the cost of food and beverages purchased to provide meals to paying customers and consumed at the worksite by employees who work in the restaurant or catering business.

Bottom line

Business-related meal deductions can be valuable, but the rules can be complex. Contact us if you have questions or want more information.