Tax Cut analysis - US Department of Treasury

 In June of 2026, the US Department of Treasury analyzed the impact of the recent tax law changes (as well as the importance of extending the 2017 tax law) on working families.  The complete analysis can be found here.  Below you will find some of the highlights from the analysis:

• Tax relief came primarily to families making less than $200k  per year
• Those making between $100k and $200k experienced an average tax cut of $1250; those making between $50k and $100k averaged $815
• No tax on tips - saw 7.5 million filers claim an average deduction of $7k
• No tax on overtime - saw over 29 million filers claim an average deduction of over $3k
• Enhanced Senior Deduction - over 35 million filers claimed an average deduction of over $7500
• No tax on car loans - average deduction of over $1800 for 1.4 million filers
• Trump Accounts - 5.5 million accounts opened
• Enhanced Child credit - 40 million families claimed the credit
• Total individual tax relief - $82 billion

These numbers are for returns filed by April 15th.  They do not account for taxpayers who filed extensions to October 15th.  Thus, the numbers will show greater impact once the extended returns are added to the analysis.

The good news is that the 2017 law was made permanent along with enhancements from the One Big Beautiful Bill (OBBB) which was passed in July of 2025.  Tax bills since 2001 have carried with them  uncertainty because they have included sunset provisions (expiration dates) in order to get them passed through Congress.  This was true with the 2017 bill.  It was set to expire in Dec of 2025.  Now that the bill is made permanent, individuals and businesses have more certainty in their future tax planning.  

There is always a risk that this current tax bill can be repealed and replaced by a future Congress. But for now, it is the law in place and it is providing significant relief to taxpayers.

LFC will be watching for any update on these statistics once the extended returns are processed and added to the current data.

2026 Year-end tax planning with LFC

As we move into the last quarter of 2026, it is a good idea to consider reviewing one's tax situation before the close of the year.  This review will help with the following:

• Maximizing the benefits provided in the One Big Beautiful Bill (OBBB)
• If necessary, make adjustments to estimated tax payments (final quarter payment due 1/15/27)
• Determining contribution amounts for retirement plans
• Decide if making purchases on business equipment for additional depreciation deduction is warranted

Other important items for business owners include:

• Making sure year-end payroll processing is on track
• All vendor data files are in order for 1099 processing in Jan 2027
• Potential write-off of accounts receivable for non-collectible customer balances (bad debt expense) for accrual-based accounting systems
• Ensure all bank and credit card accounts have each month's reconciliation completed
• If business maintains inventory, perform a physical count of items on hand as of 12/31/26.  For retail businesses, this would include sellable goods inventory; for manufactures, it would include finished goods, works in progress, and parts.
• Review owner capital accounts for distributions, outstanding loans, and capital contributions for the current year
• Review fixed asset purchases and disposals during the current year to update fixed asset list
• Final review of accounting system before file is provided to tax preparer

LFC can help with the year-end review as well as tax preparation for your business.  We also provide tax services to individuals.

Use the Contact Us tab or schedule a meeting from this blog to reach out to us.

Charitable Contributions for 2026

 Starting in 2026, non-itemizing taxpayers will be able to deduct contributions to qualified public charities.  The limits on the deduction are as follows:

• $1,000 for single taxpayers
• $2,000 for married filing taxpayers

These contributions must be in the form of cash or credit card transactions.

Other important information on charitable contributions for itemizing taxpayers for 2026:

• Contribution limit for cash contributions at 60% of AGI has been made permanent by the One Big Beautiful Bill (OBBB)
• Contributions are subject to a .5% Adjusted Gross Income (AGI) floor

The .5% floor means deductible contributions for itemizers must surpass .5% of one's AGI before any contribution is allowed.  The excess contributions of the .5% floor are allowed for the current year; the portion reduced by the .5% floor are carried forward for up to 5 years.  Any carryover charitable deduction not used with the 5-year period will expire.

IRS On-line Services

 The IRS has been actively encouraging individual taxpayers to look into their array of online tools to help them gain information relating to one's tax situation.  This would include:

• Balance information
• Make payments
• View history
• View tax return information
• Access transcripts
• Check status of refunds
• View digital notices from the IRS
• Obtain identity protection

The individual account information can be obtained here.

Businesses can access IRS information through the IRS business account tool.  One will find information on:

• General business information on file with the IRS
• Account history and payment history
• Make payments and deposits
• View IRS notices and letters

Business Account information can be found here.

Other tools are available from the IRS:

• Get a transcript
• Direct Pay with Bank account
• Payment Plan Information
• Tax Withholding Estimator
• Tax Assistant
• Mobile App

Feel free to contact LFC for more information.  Use the contact tab from this blog.

Depreciation & Section 179 Explained

 Depreciation and Section 179 Deductions can be a challenging aspect of one's business accounting and tax return.  The regulations regarding these deductions can be complex.  Despite the complexity, general definitions and rules are provided below:

Depreciation defined

Depreciation - for assets with a useful life of greater than 1 year, an annual depreciation expense is available for each year of an asset's useful life.  Assets would include office furniture, vehicles, buildings, intangible assets, machinery, tools, etc. Each one of these assets has a recovery period (useful life) for which an expense can be taken.  Below are examples of various assets and their recovery periods per the IRS:

Office furniture                     7 years

Automobiles                          5 years

Appliances                             5 years

Residential Rental Prop     27.5 years

Computers                             5 years

Normally, these assets would be depreciated over its recovery period.  For example, an appliance costing $2000 and depreciated over 5 years would experience a $400 deduction each year for 5 years.

Section 179 defined

Section 179 deduction -  refers to expensing an asset on one's tax return in its first year (deducting its entire cost) rather than depreciating it over its useful life.  The IRS provides guidelines on when this is permissible and what the limitations are.  You can find information on Section 179 and other depreciation information  here.  

The use of 179 deduction for an asset in its first year is illustrated below in a simple example to reflect tax savings:

Purchase of asset:

Office computer                 $5000   (Purchased 1/1)

First year depreciation        1000     (5 year property)

179 Deduction                    5000

The 179 Deduction provides tax savings of:     5000

                                                                              .22   (tax bracket)

                                                                          1100    Tax savings

For businesses with frequent turnover of assets, a strategy of when to use Section 179 with asset purchases and when not to use it can provide optimal tax savings over the long term.  However, a point should be made regarding 179 deduction:   if an asset has been expensed using Section 179 and it is disposed (sold, donated to a charity, given away, etc) before its useful life has passed (example:  a computer disposed of before 5 years when it had been expensed by 179), the item is subject to depreciation recapture. This means the item needs to recapture the depreciation taken before it would have been fully depreciated had it not been expensed with 179.  The recaptured depreciation is added back on one's tax return in the year of disposal.

Handling depreciation expense for a business can be challenging.  Let LFC help your business work with you in determining a strategy for your fixed assets.  Use the Contact Us or Set Appointment feature on this blog to schedule a time.