As families prepare for the new school year, Connecticut is offering two valuable sales tax exemptions that can help reduce back-to-school shopping costs. Whether you’re buying school clothes or stocking up on classroom essentials, understanding these exemptions can lead to meaningful savings.

Connecticut Sales Tax Free Week Returns August 16–22

Connecticut’s annual Sales Tax Free Week will take place Sunday, August 16, through Saturday, August 22, 2026. During this period, most clothing and footwear priced under $300 per item may be purchased free of Connecticut sales tax.

The exemption applies whether you shop:

• In Connecticut retail stores
• Online through qualifying retailers

It’s important to note that the $300 limit applies to each individual item—not the total purchase. An unlimited number of qualifying items may be purchased tax-free, provided each item costs less than $300.

Items That Do Not Qualify

Certain products remain taxable, including:

Specialized athletic or protective clothing not normally worn as everyday apparel

• Specialized athletic or protective clothing not normally worn as everyday apparel
• Jewelry
• Handbags
• Wallets
• Luggage
• Umbrellas
• Watches and similar accessories

If an item costs more than $300, the entire purchase price is taxable. However, if a retailer coupon reduces the final sales price below $300, the item may qualify for the exemption.

Permanent Sales Tax Exemption for Nonelectronic School Supplies

Beginning July 1, 2026, Connecticut also provides a year-round sales tax exemption for qualifying nonelectronic school supplies purchased for nonbusiness purposes.

Examples of qualifying supplies include:

• Notebooks
• Composition books
• Binders
• Pens and pencils
• Crayons and markers
• Glue sticks
• Scissors
• Rulers
• Paper
• Folders
• Lunch boxes
• Pencil boxes
• Chalk
• Highlighters and other traditional classroom supplies

Electronic versions of these items—or electronics such as laptops, tablets, or calculators—do not qualify under this exemption.

Business Purchases Are Different

The exemption for nonelectronic school supplies is intended only for personal, nonbusiness use.

If supplies are purchased by or for a business, they generally remain taxable. Retailers are instructed to presume purchases are for personal use unless the buyer indicates the items are being purchased for business purposes. Businesses that do not pay sales tax at the time of purchase may be required to self-report and remit use tax.

Planning Your Back-to-School Shopping

By combining Connecticut’s Sales Tax Free Week with the permanent exemption for qualifying nonelectronic school supplies, families can stretch their back-to-school budgets even further.
Before you shop:

• Purchase qualifying clothing and footwear between August 16 and August 22 to take advantage of Sales Tax Free Week.
• Keep individual clothing items below the $300 price limit whenever possible.
• Remember that qualifying nonelectronic school supplies are already exempt year-round when purchased for personal use.

With a little planning, Connecticut families can make the most of these tax-saving opportunities while preparing students for the upcoming school year.

Questions about Connecticut sales tax rules or other tax planning opportunities? Contact the professionals at Beers, Hamerman, Cohen & Burger, P.C. We’re here to help you navigate changing tax laws and make informed financial decisions.

Longer days and warmer weather often inspire people to get out, travel, tackle projects and make the most of the season. As you enjoy summer, consider briefly taking off your sunglasses to get a closer look at how some seasonal activities could help lower your tax bill. Here are six to examine.

1. Renting Out Your Home for Two Weeks or Less

Do you live in an area where an event — such as a golf tournament or music festival — is held? If so, consider departing during the event and renting your home to attendees. As long as you rent out your home for no more than two weeks total during the year, you don’t have to report the rental income.

That means it’s completely exempt from federal income tax. But you also can’t deduct rental-based expenses, such as advertising or cleaning.

You might use the extra income to splurge on your own vacation while the event takes place — or you can spend it on upgrades or repairs to your home that you’ve been putting off.

2. Using — and Not Using — Your Vacation Property

Do you own a vacation home? If you rent out a second home (or your principal residence) for 15 days or more during the year, you’ll have to report the income on your tax return. But you also may be entitled to deduct some or all of your rental expenses — such as utilities, repairs, insurance and depreciation. Exactly what you can deduct depends on whether the home is classified as a personal residence or rental property for tax purposes.

Your vacation home is classified as a personal residence if personal use during the year exceeds the greater of 1) 14 days, or 2) 10% of the days you rent out the home at fair market rates. Personal use generally means use by an owner, certain family members of an owner and any other party (family member or otherwise) who pays less than fair market rates.

When calculating personal use, disregard days of vacancy and days spent substantially on repairing and maintaining your property (not improving it). These generally aren’t counted as personal-use days, even if family members use the property for recreational purposes on the same day.

Here’s how the tax treatment varies:

Personal residence. You can deduct rental expenses only to the extent of your rental income. Any excess can be carried forward to offset rental income in future years. If you itemize deductions rather than claiming the standard deduction, you can also take an itemized deduction for the personal portion of both mortgage interest and property taxes, subject to the applicable limits. (For more on itemizing vs. claiming the standard deduction, see No. 6 below.)

Rental property. You can deduct rental expenses, including losses, subject to the real estate activity rules. Property tax attributable to the rental use of the home isn’t subject to the limit on the itemized state and local tax (SALT) deduction. You can’t deduct any interest that’s attributable to your personal use of the home. However, if you itemize deductions, you can take the personal portion of property tax as an itemized deduction (subject to the SALT limit — see No. 3 below).

In some situations, it may be beneficial to reduce personal use of a vacation home so it will be classified as a rental property.

3. Hitting the Road or Water with an RV or Boat

Are you shopping for a recreational vehicle (RV) or boat for personal use this summer and beyond? If you itemize deductions, you can deduct state and local sales taxes paid during the year — including the potentially large sales tax amount on your RV or boat purchase — in lieu of deducting your state and local income taxes.

With the SALT deduction limit more than quadrupled for 2026 by last year’s One Big Beautiful Bill Act (OBBBA), there may be a bigger likelihood that your total SALT expense won’t exceed the limit — $40,400 ($20,200 for married taxpayers filing separately). However, when modified adjusted gross income (MAGI) exceeds the applicable threshold, the cap is reduced by 30% of the amount by which MAGI exceeds the threshold — but not below $10,000 ($5,000 for separate filers).

If instead of keeping track of all your actual expenses, you choose to deduct sales taxes based on the optional IRS table, you can still write off the actual sales tax for certain high-cost items — including RVs and boats — in addition to the table amount (subject to the overall SALT limit and other rules).

Also be aware that an RV or boat can qualify as a personal residence if it has sleeping, cooking and toilet facilities. If this is the case and you itemize deductions, you may also be able to deduct mortgage interest on the RV or boat, as well as state and local property tax on it, if applicable, within the usual limits.

4. Combining a Business Trip with a Vacation

Do you have to go on any business trips this summer? If you’re the owner of the business or self-employed and the primary purpose of a trip is business-related, you potentially can write off a portion of your travel expenses — even if you do some vacationing while you’re away.

For instance, if you fly cross-country and spend the workweek in meetings and the weekend sightseeing, the entire cost of your airfare plus costs of lodging, local transportation and meals during the workweek generally will be deductible within the usual tax law limits (such as the 50% limit on the meal deduction). But you can’t write off expenses for days not spent on business activities.

If your family accompanies you on the business trip, their expenses aren’t deductible (unless a family member is also an employee of your business and has a legitimate business reason to be on the trip). But you can write off what it would have cost you to travel alone. For instance, if you pay $250 per night for a hotel room and a single room costs $200, you can deduct $200 per night — but only for the period you’re doing business. If on Saturday and Sunday you’re primarily relaxing and enjoying vacation activities with your family, you can’t deduct any of the hotel expenses for those nights.

5. Sending the Kids to Day Camp

Are any of your children going to day camp this summer? Assuming you work full-time and certain other requirements are met, the cost qualifies for the dependent care credit.

For middle-income-and-higher taxpayers, the credit generally equals 20% of the first $3,000 of qualified expenses for one child or 20% of up to $6,000 of such expenses for two or more children. That’s a maximum credit of $600 for one child or $1,200 for two or more children. For 2026, the OBBBA increased the credit percentage from 35% to 50% for lower-income taxpayers, and certain middle-income taxpayers may be eligible for a percentage between 20% and 35%.

This tax break is available only for day camps, including specialty camps for athletics or the arts. An overnight camp doesn’t qualify.

6. Doing a Big Cleanup

Are you planning to spend some downtime this summer cleaning out the garage, attic or basement? You’ll likely find some household goods — such as used clothing or furniture — that you don’t need or want anymore. Instead of discarding these items, consider donating them to charity. Assuming they’re still in good condition, you’ll be eligible for a charitable deduction based on their current fair market value.

However, you can deduct donations of property only if you itemize deductions. If you expect to claim the standard deduction in 2026 (rather than itemizing), you won’t get any tax break from the donation. Itemizing saves tax only if your total itemized deductions for the year are higher than your standard deduction. With today’s high standard deductions, many taxpayers’ itemized deductions don’t exceed that threshold.

Some charitably inclined taxpayers may benefit from a “bunching” strategy, in which they bunch their charitable donations into alternating years and itemize deductions in those years. If it makes sense for you to claim the standard deduction for 2026 and bunch donations into 2027, consider setting aside the items you’d like to donate and dropping them off at your chosen charity next year.

But also be aware that, beginning in 2026, the OBBBA imposed a 0.5% floor on the charitable deduction for itemizers. This generally means that only charitable donations in excess of 0.5% of your adjusted gross income (AGI) will be deductible if you itemize deductions. So, if your AGI is $100,000, your first $500 of charitable donations for the year won’t be deductible.

Before Summer Slips AwayA little tax planning now may pay off when it’s time to file your return next year. If you have questions about any of these strategies or would like to discuss your situation, contact your tax advisor.

Parents, grandparents and others can now contribute to Internal Revenue Code Section 530A accounts — also known as “Trump Accounts” — to benefit eligible children. This new type of tax-advantaged savings vehicle was created by last year’s One Big Beautiful Bill Act.

Who’s Eligible?

A 530A account can be set up for anyone who’ll be under age 18 at the end of the tax year and who has a Social Security number. Beginning July 4, 2026, contributions can be made to accounts for eligible beneficiaries.

In addition, U.S. citizen children born from January 1, 2025, through December 31, 2028, may qualify for an initial $1,000 government-funded deposit. If your child is eligible for the government contribution but you determine that another savings vehicle is better for your family, you should still seriously consider opening a 530A account. Even if you or other family members never make a contribution, the tax-deferred compounding growth on $1,000 can lead to a substantial balance over time.

How Is the Account “Tax-Advantaged”?

A 530A account is essentially a type of IRA in which account funds can grow tax-deferred until withdrawn. But it’s initially subject to special rules that don’t apply to other IRAs. These rules are generally in effect only during the period that begins when the account is opened and ends December 31 of the year before the calendar year in which the child reaches age 18 — what’s referred to as the “growth period.” During this time:

• The child doesn’t have to have earned income in order for account contributions to be made,
• The account has a lower annual contribution limit than traditional and Roth IRAs, generally $5,000 (adjusted for inflation after 2027),
• Contributions must be made during the calendar year to count toward that year’s limit — the contribution deadline doesn’t extend to April 15 of the next year as it does for traditional and Roth IRAs,
• Individual contributors can’t claim a tax deduction for their contributions,
• The account funds can be invested only in eligible investments — generally, mutual funds or exchange-traded funds (ETFs) that track an index of primarily U.S. companies, such as the Standard and Poor’s 500, and meet other criteria, and
• The account generally can’t make distributions (including hardship distributions).

Beginning January 1 of the year the child turns 18, most of the special growth-period rules cease to apply, and the traditional IRA rules generally take effect. Applicable traditional IRA rules include those regarding contributions, distributions, required minimum distributions (RMDs), taxation (including the 10% early withdrawal penalty) and Roth IRA conversions.

What Are the Reporting Requirements?

In late June, the IRS issued Revenue Procedure 2026-25, which, among other things, allows qualifying 530A account contributions to be treated as completed gifts rather than gifts of a future interest. Why does this matter? It means that your contributions may qualify for the gift tax annual exclusion and you may not have to file a gift tax return (Form 709) — but only if certain requirements are met.

Under safe harbor rules included in this IRS guidance, 530A account contributions will be eligible for the gift tax annual exclusion and you won’t be required to file a gift tax return if all these requirements are met:

• Your cash contributions to 530A accounts for beneficiaries under age 18 are your only taxable gifts for the calendar year.
• The total amount of each beneficiary’s gift (including contributions to a 530A account) doesn’t exceed the gift tax annual exclusion amount ($19,000 per recipient for 2026).
• Your 530A account contributions don’t result in a gift tax or generation-skipping transfer (GST) tax liability after applying your available lifetime gift and GST tax exemptions ($15 million each for 2026, less any exemption you’ve already used during your life).
• You’re not otherwise required to file a gift tax return for the year.

But if just one of the conditions isn’t met, your contributions will be treated as gifts of a future interest, which means they won’t be eligible for the annual exclusion and you must file a gift tax return for every account beneficiary who receives a contribution. The gifts can still be tax-free, but you’ll have to apply your lifetime gift tax exemption — and your GST tax exemption if the GST tax also applies (generally when a gift is made to a grandchild or someone else two generations or more below you).

How Are the Accounts Set Up?

Unlike regular IRAs, 530A accounts must be created initially by the U.S. Treasury Secretary. To have an account established for your child, you must make an election. Also, as mentioned, the child must have a Social Security number before the election is made.

You can make the election by filing Form 4547, “Trump Account Election(s),” through the Trump Accounts app (available at trumpaccounts.gov) or through your online IRS Individual Account.

Who Else Can Contribute?

During the growth period, 530A accounts may receive several types of contributions in addition to those made by parents, other family members, friends or the children themselves. For example, an account can accept a “qualified general contribution” funded by states and political subdivisions, the federal government, Indian tribal governments, or certain nonprofits.

These contributions, which are funneled through the Treasury Department, can be made only to “qualified classes,” such as children who reside in certain areas or were born in specific years. They don’t count toward the annual contribution limit.

Employers can contribute up to $2,500 per year (adjusted for inflation after 2027) to the accounts of employees or their dependents, with contributions generally excluded from the employee’s taxable income. The limit applies on a per-employee basis. However, employer contributions do count toward the annual contribution limit.

Can the Accounts Help Save for Education?

530A accounts might not be the best option for building savings for your child’s education. Both Sec. 529 plans and Coverdell Education Savings Accounts (ESAs) also allow tax-deferred growth, but withdrawals for qualified education expenses are tax-free. On the other hand, 530A account distributions are taxed as ordinary income to the extent that they aren’t attributable to after-tax contributions (though if used for education expenses, they may be eligible for an exception to the early withdrawal penalty).

Plus, tax-free 529 plan and ESA distributions can be used to fund elementary and secondary education expenses (subject to certain limits). 530A funds can’t be withdrawn until the year the child turns 18.

There are other 529 plan advantages. Contributions may qualify for state tax deductions. And they aren’t subject to an annual limit, provided they don’t exceed the amount needed to cover the beneficiary’s qualified expenses. (Note that gift tax rules might apply, depending on the contribution amount.)

Moreover, up to $35,000 of funds left in a 529 plan account for at least 15 years can be rolled over into the beneficiary’s Roth IRA without incurring the normal 10% penalty for nonqualified withdrawals or resulting in taxable income. Roth IRAs don’t have RMDs, and qualified withdrawals are tax-free. Certain restrictions on 529 plan rollovers apply, but this rollover option could be a significant advantage over 530A accounts, which eventually become traditional IRAs and would be subject to some tax if converted to a Roth IRA.

Investment options for 529 plans are limited to those permitted by the plan administrator, typically mutual funds and ETFs. But they may offer greater choice than 530A accounts. ESAs allow a wider range of investments, typically everything your broker offers. However, the maximum contribution to an ESA is limited to $2,000 per beneficiary per year, and contributors are subject to income-based contribution limits.

Can Your Family Benefit?

530A accounts can help eligible children build long-term wealth and give them a head start on retirement savings. They can prove useful well before retirement, too: Although penalties will generally apply to withdrawals before age 59½, there are exceptions, such as for first-time homebuyer expenses up to $10,000. Discuss with your tax and financial advisors how you might use a 530A account to your family’s benefit.

In businesses structured as limited partnerships, the advantage of being a limited partner (as opposed to a general partner) is that you’re typically not personally liable for the partnership’s debts. This is why many ventures use limited partnerships to attract investors — because, as a limited partner, your liability is generally confined to your investment, which includes your initial capital contribution and any additional amounts you’re required to contribute.

Another advantage of limited partner status is that your share of partnership income may be excluded from self-employment tax. However, the exclusion doesn’t include guaranteed payments for providing services or capital to the partnership, regardless of whether the business is profitable.

With all that in mind, being a limited partner may seem like an attractive arrangement. But there’s a notable risk to consider: You may be subject to the passive activity loss (PAL) rules, which can create a significant federal income tax challenge.

Suspended Losses

Under the PAL rules, you can deduct passive losses originating from your limited partnership interest only to the extent you have passive income from that or other passive activities. Disallowed passive losses are suspended until 1) they’re “freed up” by future passive income from the partnership or other passive activities, or 2) you sell or otherwise transfer your loss-producing limited partnership interest in a taxable transaction.

Important: With limited exceptions, rental activities are generally treated as passive regardless of the taxpayer’s level of participation. So, if you join a limited partnership formed to invest in rental properties, your ability to deduct losses as a limited partner is likely to be subject to the PAL rules.

Also, keep in mind that the PAL rules aren’t the only potential restriction on loss deductions. Basis limitations, at-risk rules and, for noncorporate taxpayers, excess business loss rules may affect whether and when losses are deductible. (Your tax advisor can help you determine whether any of these apply to your situation.)

3 Material Participation Tests

Disallowed passive losses from a limited partnership can accumulate for years before they become deductible. But an exception may be available when losses attributable to your limited partnership interest qualify as nonpassive. In such instances, subject to applicable limitations, you can generally deduct the losses against your other taxable income.

Eligible losses may qualify as nonpassive if you materially participate in the business. As a limited partner, you’re deemed to do so only if you pass at least one of the following three tests:

1. You participate in the business for more than 500 hours during the tax year,
2. You materially participated for any five of the 10 immediately preceding tax years, whether consecutive or not, or
3. You materially participated in a personal service activity for any three previous tax years, whether consecutive or not.

In this context, a personal service activity is generally defined as one involving certain professional fields or any other trade or business in which capital isn’t a material income-producing factor. (Your tax advisor can explain further.)

These tests are applied for the relevant tax year. Special timing rules may apply when a partner holds both general and limited partner interests. (See “Dual-Status Partners” below.) However, most partnerships and almost all partners use the calendar year for tax purposes.

Also bear in mind that, if you’re married, your spouse’s participation in the limited partnership activity is treated as your participation — regardless of whether your spouse owns an interest in the partnership or whether you file a joint return.

Dual-Status Partners

A partner who holds both a general and limited partner interest in the same business is typically treated as a general partner for purposes of applying the material participation rules. General partners can pass the material participation test in four additional ways — for a total of seven — beyond the three tests described above.

However, this exception applies only if the general partner interest was held at all times during the partnership’s tax year ending with or within the individual partner’s tax year. If the partner directly or indirectly owned the limited partner interest for only part of that year, the general partner interest must have been held throughout the shorter ownership period.

Nonqualifying Activities

The general rule for determining a limited partner’s level of material participation is that any participation in any capacity may be treated as qualifying participation. However, there are two exceptions to watch out for:

1. Work not customarily performed by an owner. If the work performed by a limited partner isn’t of a type customarily done by a business owner — and one of the principal purposes of performing the work is to avoid disallowance of losses under the PAL rules — the limited partner’s work may not count toward material participation.

For example,Hannah is a limited partner in a business that develops AI software for online retail stores. She wants to claim that she materially participates in the business to treat her share of the partnership’s losses as nonpassive and, therefore, deductible. So, she performs about 25 hours of cleanup work per week at the partnership’s office after it closes for the day. Because this isn’t the type of work an owner would normally do, and its principal purpose is to circumvent the PAL rules, Hannah’s janitorial duties wouldn’t constitute material participation in the partnership.

2. Work done as an investor. Work performed by a limited partner in the capacity of an investor doesn’t count toward material participation in the partnership — unless the partner has daily involvement in management or operations. Typical nonqualifying investor activities include:

• Studying and reviewing financial statements or operational reports,
• Compiling or preparing summaries or analyses of the finances or operations of the business for the partner’s own use, and
• Monitoring the business in a nonmanagerial capacity.

For instance,Hunter is a limited partner in a start-up that owns 15 retail stores that sell products to tech enthusiasts. He’s not involved in the partnership’s day-to-day management or operations but follows the business closely.

Each month, for his own benefit, Hunter reviews the partnership’s financial statements and summarizes the data. Then, using ratios and other financial analyses, he compares his results with data from other similar businesses. Hunter spends about 20 hours a month on these activities, but because his work is clearly that of an investor, it wouldn’t count as material participation.

Look Before You Leap

Limited partner status can offer valuable liability protection and self-employment tax advantages. However, it can also complicate the deductibility of business losses.

Before investing in a limited partnership — or assuming that your losses will be currently deductible — be sure you fully understand how the PAL rules apply to your situation. For help with that, contact your tax advisor to discuss all the tax consequences before you commit to an investment or file a return reporting partnership losses.

The IRS recently announced an increase in the optional standard mileage rate for business vehicle use for the second half of 2026. The adjustment reflects higher fuel costs this year. It’s accompanied by a hike in the standard mileage rate for medical travel and qualifying moving expenses for certain individuals. Let’s take a closer look at what’s changed and why.

Two Pathways to Choose From

If you use a vehicle for business purposes, you generally have the option to deduct the actual expenses attributable to your business use. This includes expenses such as gas, oil, tires, insurance, repairs, licenses and vehicle registration fees. In addition, you may claim a depreciation allowance for the vehicle based on the percentage of business use. However, annual write-offs are subject to “luxury car” limits that are indexed annually.

The maximum first-year depreciation deduction allowed for a passenger car placed in service in 2026 is generally $20,300 (the usual $12,300 deduction + $8,000 for bonus depreciation). So the maximum first-year deduction for a vehicle used 90% for business in 2026 would be limited to $18,270 (90% of $20,300).

Keeping track of every vehicle-related expense under the actual expense method can be burdensome, but you may have a simpler option: Instead of deducting your actual expenses, you may be able to use an IRS-approved standard mileage rate. This shortcut is available to most taxpayers. However, you can’t use the standard mileage rate if you:

• Use five or more cars at the same time (such as fleet operations),
• Have used the Modified Accelerated Cost Recovery System (MACRS), claimed bonus depreciation or depreciated the vehicle using a method other than straight-line,
• Have taken a Section 179 deduction for the vehicle, or
• Have previously claimed actual expenses for a leased vehicle.

Important: To use the standard mileage rate for a vehicle you own, you must choose it in the first year the vehicle is available for use in your business. In later years, you can choose to use the standard mileage rate or actual expenses. If you switch to actual expenses, however, special depreciation rules apply. For a leased vehicle, taxpayers electing the standard mileage rate must use that method for the entire lease period, including renewals.

With the standard mileage rate, you don’t have to account for all your actual expenses. But you must still record the mileage for each business trip, the dates, the destinations, the names and relationships of the business parties involved, and the business purpose of the travel. The rate is adjusted annually by the IRS.

Most employees can’t deduct unreimbursed business mileage on their federal income tax returns. However, employers may use the standard mileage rate to reimburse employees tax-free under an accountable plan, provided applicable substantiation requirements are met.

Midyear Adjustment

The IRS generally adjusts the standard mileage rates annually based on a study of vehicle operating costs. However, unusual circumstances may prompt a midyear change.

Initially, the IRS established a standard mileage rate of 72.5 cents per mile for business vehicle use in 2026 (up 2.5 cents from 70 cents per mile in 2025). But recent increases in fuel prices prompted a midyear adjustment. Such adjustments are rare; the last time the IRS changed its mileage rates midyear was in 2022.

Effective July 1, 2026, the standard rate for business vehicle use increased to 76 cents per mile — up 3.5 cents from the first half of the year. This rate is scheduled to remain in effect through year end. The IRS is expected to publish its standard mileage rates for 2027 later this year.

Applying Two Rates for 2026

Here’s an example to show how the two standard mileage rates apply in 2026. For simplicity, assume that you drive 10,000 miles every six months on business. You also incur $1,000 in related tolls and parking fees during the year.

Based on the initial IRS rate, your cents-per-mile deduction for business driving for the first six months of 2026 is $7,250 (10,000 × $0.725). However, for the last six months of the year, you can deduct $7,600 (10,000 × $0.76) for business mileage. So, your total deduction for 2026 would be $15,850 ($7,250 + $7,600 + $1,000 in tolls and parking fees).

Other Changes

In addition to adjusting the rate for business driving, the IRS announced that the new rate for qualifying medical care and eligible moving expenses is 23.5 cents per mile for the remainder of 2026 (up from 20.5 cents per mile for the first half of the year). Under current law, the moving rate is available only to certain active-duty military personnel and certain members of the intelligence community.

Important: The 14-cents-per-mile rate for charitable use of a vehicle remains unchanged. It’s set by statute, so it can only be amended by Congress.

Choosing the Most Favorable Method

Be aware that you still may fare better from a tax standpoint with the actual expense method than with the standard mileage rate — even after the latest increase. Contact your tax advisor for help determining which method is right for your situation.

Summer may feel far removed from tax-filing season. But for strategic taxpayers, it’s a great time to gather information and plot moves that may pay off when they file their 2026 return. Here are some midyear tax planning tips to consider.

Be Mindful of Your Rate and Bracket

Many people don’t think about their individual tax rate or bracket until gearing up to file their return. But it’s critical to be mindful of these important details throughout the year. So consider reviewing your projected income for the rest of 2026 now and determining whether changes to your tax bracket may be afoot.

The good news is that the One Big Beautiful Bill Act (OBBBA), enacted in July 2025, made permanent the rates established under the Tax Cuts and Jobs Act (TCJA) of 2017. These rates — 10%, 12%, 22%, 24%, 32%, 35% and 37% — are generally lower than those before the TCJA.

Tax brackets are adjusted annually for inflation, but the 2027 adjustments are expected to be relatively modest. So, with your tax advisor’s help, you can plan with a relatively strong sense of certainty about how next year’s brackets will compare to this year’s.

Start Weighing the Standard Deduction vs. Itemizing

One particular area of tax planning to focus on is your deductible expenses. Waiting until the end of the year to look at these may limit your options. Size up your deductible expenses now to help answer a key question for all individual filers: Should I take the standard deduction or itemize?

For 2026, the basic standard deduction amounts are $16,100 for singles and married couples filing separately, $24,150 for heads of household, and $32,200 for married couples filing jointly. These will be adjusted for inflation for 2027 and beyond.

Important: In 2026, taxpayers who are age 65 or older or blind can claim an additional standard deduction of $2,050 ($1,650 per spouse if married). The amount is doubled for taxpayers both over 65 and blind.

Itemizing saves tax only if your total itemized deductions exceed your standard deduction. As you ponder whether itemizing on your 2026 return will be beneficial, review how much you expect to pay in state and local taxes (SALT), including property taxes and state income or sales taxes. Beginning in 2025, the OBBBA temporarily increased the SALT deduction limit through 2029. For 2026, the cap is $40,400 per return (half that for separate filers), though the allowable deduction begins to phase down for higher-income earners. The elevated SALT cap could make itemizing more beneficial for some taxpayers.

If it’s looking like your total itemizable deductions for this year will be close to your standard deduction, determine whether you could incur enough additional itemized deduction expenditures between now and year end to surpass your standard deduction. If so, you can reduce your 2026 federal income tax liability.

Of course, you won’t be able to claim those accelerated payments as itemized deductions on your 2027 tax return. But the 2027 standard deduction will be bigger than the 2026 one, thanks to the annual inflation adjustment. So, claiming the standard deduction can potentially save you more tax in 2027 than it would in 2026. (And if you still end up with enough itemized deductions in 2027 to exceed your standard deduction, you can itemize for that tax year, too.)

Important: Starting in 2026, taxpayers in the top 37% bracket face a new limitation that diminishes the tax benefit of itemized deductions. If you’re likely to land in this bracket, ask your tax advisor whether income-reduction strategies or timing moves could help.

If Itemizing, Accelerate Certain Expenses

For many itemizers, the easiest deductible expense to prepay this year is a January 2027 mortgage payment. Assuming you have one, accelerating it into this year will give you 13 months of 2026 itemized home mortgage interest deductions. Although the TCJA put stricter limits on this write-off, which were retained under the OBBBA, you may not be subject to them. (Check with your tax advisor to be sure.)

Plus, beginning in 2026, mortgage insurance premiums may be deductible as mortgage interest expense. You may also be able to prepay your property tax bill that’s due in early 2027 and deduct it on your 2026 return. (Ask your tax advisor about the applicable rules for both strategies.)

Do you typically give to charities? If so, look into making bigger charitable donations between now and year end to IRS-approved organizations. You can compensate by making smaller donations next year, if you wish.

Important: Bear in mind that, beginning in 2026, nonitemizers can deduct up to $1,000 ($2,000 for joint filers) of eligible cash donations. Meanwhile, itemizers face a new floor of 0.5% of adjusted gross income (AGI) on deductible charitable contributions. This generally means that only charitable donations exceeding 0.5% of your AGI are deductible if you itemize. So, if your AGI is $100,000, your first $500 of charitable donations for the year won’t be deductible.

Another potential option, if feasible, is to accelerate elective medical procedures, dental work or vision care expenditures into this year. So long as you itemize, you can deduct many medical and dental expenses to the extent they exceed 7.5% of your AGI. Other eligible expenses include health insurance premiums, long-term care insurance premiums (limits apply) and prescription drugs.

Check Up on Your Investments

If you’re an investor, midyear is an excellent time to determine where you stand in terms of gains and losses. That way, you can make more informed investment decisions for the rest of the year.

The stock market has generally been up in 2026. Therefore, you’ve probably already collected some gains in your portfolio. But you may have sustained some losses as well. Gains and losses typically don’t have a current tax impact until you realize them — that is, sell an investment held in a taxable account (not in a tax-advantaged retirement account) at a gain or loss.

What to do? If you hold investments in taxable brokerage firm accounts, consider the tax-saving advantage of selling appreciated securities that you’ve held for more than 12 months vs. those you’ve held for a shorter period. The federal income tax rate on net long-term capital gains recognized this year is 15% for most people. However, it can reach a maximum rate of 20% at high income levels.

The additional 3.8% net investment income tax also kicks in for taxpayers with modified AGI over $200,000 ($250,000 for joint filers and $125,000 for separate filers). So, the actual effective federal income tax rate on long-term capital gains can be 18.8% (15% plus 3.8%) or 23.8% (20% plus 3.8%) at higher income levels. Still, that’s much better than the 40.8% maximum effective rate that can apply to net short-term capital gains (top 37% ordinary income rate plus 3.8%).

If your taxable brokerage accounts hold investments that are currently worth less than you paid for them, consider whether it makes sense to sell and realize capital losses. Under a strategy often called “harvesting losses,” realized capital losses are first used to offset realized capital gains, which can reduce your capital gains tax liability.

So, if you’ve already realized gains for 2026 or expect to realize some before year end, harvesting losses may allow you to reduce or eliminate tax on those gains. Doing so can be especially valuable when losses offset short-term capital gains, because of the higher ordinary income rate that applies.

Should harvesting losses cause your 2026 realized capital losses to exceed your 2026 realized capital gains, the result would be a net capital loss for the year. In this situation, you can deduct up to $3,000 ($1,500 for married taxpayers filing separately) of losses per year against ordinary income. Furthermore, you can carry forward excess losses until death, and building up losses for future use could be beneficial.

Gain Greater Visibility

To succeed at midyear tax planning, you don’t have to predict every detail of your financial circumstances from now until year end. You just need to gain some degree of greater visibility, so you can make smarter decisions while there’s still plenty of time to act. Contact your tax advisor to discuss which tax-saving opportunities are shaping up to be right for you.

As part of New York’s 2026–2027 budget legislation, the state has enacted a new “pied-à-terre” tax on certain luxury residential properties in New York City that are not used as primary residences.

Effective July 1, 2026, the annual surcharge will generally apply to qualifying high-value second homes, condominiums, and cooperative apartments located within New York City.

The tax is aimed primarily at nonresident owners of luxury residential properties and will apply based on property value thresholds and residency status. During the initial phase of implementation, the surcharge will apply to certain class one properties valued at $5 million or more and condominium or cooperative units valued at $1 million or more.

Beginning in 2028, the valuation methodology will transition to a comparable-sales approach for determining whether a property meets the applicable thresholds.

The New York City Department of Finance will annually determine whether a property qualifies as a primary residence and may require supporting documentation from property owners.

Owners of potentially affected New York City properties should review their residency status, property use arrangements, and valuation considerations to better understand how the new surcharge may impact them.

If you have questions regarding how this legislation may affect your situation, please contact a member of our tax team.

The U.S. Supreme Court recently ruled that certain tariffs imposed under the International Emergency Economic Powers Act (IEEPA) were illegal. As a result, U.S. Customs and Border Protection (CBP) has begun implementing a process to issue refunds to affected businesses. For some companies, this may provide an opportunity to recover cash from tariffs paid on imports over the past year.

CBP has launched the Consolidated Administration and Processing of Entries (CAPE) tool within its Automated Commercial Environment (ACE) portal to facilitate the refund process. According to federal court filings, CBP estimates that more than 300,000 importers paid approximately $166 billion in tariffs on over 53 million entries. But not all these tariffs will ultimately qualify for refunds.

Who Qualifies?

Eligibility generally applies to the “importer of record.” This term refers to the business entity that officially imported goods into the United States. In some cases, a customs broker that filed entries on behalf of a company may also play a role in the refund process.

If your business imports goods directly or uses a customs broker to handle import filings, there’s a strong possibility you may qualify for a refund. It’s important to note that consumers aren’t eligible for tariff refunds.

For qualifying companies, these refunds are more than just minor reimbursements — substantial dollar amounts may be at stake. Refunds can help boost cash flow and profitability. You also may need to adjust your recent financial statements or amend previously filed tax returns, depending on how tariffs were originally treated. For example, tariff refunds may affect taxable income, deductions and/or inventory accounting.

How Does the Refund Process Work?

Although CBP has introduced the CAPE tool to streamline claims, the process still requires careful coordination. Businesses should be prepared to:

• Identify affected import transactions,
• Gather supporting documentation, including entry filings and duty payments,
• Coordinate with customs brokers, if applicable, and
• Submit claims accurately through the CAPE tool.

In many cases, the customs broker who originally filed the entry may assist with tariff refunds. But companies shouldn’t assume the process is being handled automatically. A coordinated approach expedites claims processing. It also helps prevent incomplete or inaccurate filings, missed deadlines, overlooked financial reporting, and unanticipated tax consequences.

Next Steps

If your business imports goods, now’s the time to determine whether you’re eligible and, if so, begin preparing your claim. First, identify who’ll be responsible for filing your refund claim and gathering the required documentation. This person should promptly review your import activity during the affected period and reconcile import data to the general ledger to estimate the total potential refunds. Carefully review this documentation to identify missed entries or inconsistencies across multiple entities or systems. Proper substantiation is essential for obtaining CBP approval of your claim.

Also, be aware that CBP is currently processing refunds in phases. In Phase 1, CBP has said importers and customs brokers may file requests through the ACE portal by uploading a CAPE Declaration listing the relevant entry numbers. As a result, you should confirm whether your entry falls within the currently available phase.

Professional Guidance

Your financial advisor can help you assess how the refund affects your financial statements and tax filings. This professional can guide you through the refund filing process to ensure you accurately capture the full opportunity — and comply with applicable reporting requirements.

The One Big Beautiful Bill Act (OBBBA), enacted in 2025, made permanent the federal income tax deduction for qualified business income (QBI). This break was originally introduced under the Tax Cuts and Jobs Act. Many business owners have been curious about whether and how this tax break may apply to their rental real estate activities. If you count yourself among them, here’s the scoop.

Ground Rules

Under current law, self-employed individuals, sole proprietors and owners of the following pass-through entities may be eligible to deduct as much as 20% of their QBI:

• Partnerships,
• Most limited liability companies (LLCs), and
• S corporations.

QBI is generally defined as the net amount of qualified items of income, gain, deduction and loss that are effectively connected with the conduct of an eligible U.S. trade or business. It doesn’t include certain investment items, reasonable compensation paid to an owner for services rendered to the business, or any guaranteed payments to a partner or LLC member treated as a partner for services rendered to the partnership or LLC.

Special Rules and Restrictions

The deduction can’t exceed 20% of the taxpayer’s taxable income. Eligible taxpayers can claim the deduction regardless of whether they itemize deductions or pay the alternative minimum tax. However, an applicable limit begins to phase in when income exceeds certain thresholds. For 2026, these thresholds are:

• $201,750 for single and head-of-household filers,
• $201,775 for married individuals filing separately, and
• $403,500 for married couples filing jointly.

For 2026, the limit fully phases out when income exceeds $276,750 ($276,775 for separate filers and $553,500 for joint filers).

If your income exceeds the applicable fully phased-in amount, your QBI deduction is limited to the greater of 1) your share of 50% of the amount of W-2 wages paid to employees by the qualified business during the tax year, or 2) the sum of your share of 25% of W-2 wages plus 2.5% of the cost (not reduced by depreciation taken) of qualified property.

Qualified property is the depreciable tangible property — including real estate — owned by a qualified business as of year end and used by the business at any point during the tax year to produce QBI. (Additional rules apply.)

Starting in 2026, the OBBBA also created an inflation-adjusted minimum QBI deduction of $400 for taxpayers with at least $1,000 of QBI from one or more active businesses in which they materially participate. “Material participation” generally requires your regular, continuous and substantial involvement in business operations. (The material-participation concept applies to this new minimum deduction; it isn’t a general requirement for claiming the QBI deduction.) The deduction amount and the QBI thresholds will be adjusted annually for inflation.

Safe Harbor for Rental Real Estate

In 2019, the IRS finalized a safe harbor that allows certain rental real estate to be treated as a trade or business for purposes of the QBI deduction. The safe harbor is available to taxpayers seeking to claim the deduction for a “rental real estate enterprise,” which is defined as an interest in real property held to generate rental or lease income. That can mean an interest in a single property or interests in multiple properties. The taxpayer must hold each interest directly or through a so-called “disregarded entity” that isn’t considered separate from its owner for tax purposes (for example, a single-member LLC).

If you satisfy the safe harbor requirements, the IRS will treat your interest in rental real estate as a single trade or business for purposes of the deduction. And if you don’t satisfy all the requirements, your interest may still qualify for the deduction if it otherwise meets the definition of a trade or business under the QBI deduction rules.

So, what are the requirements? First, you must maintain separate books and records to reflect income and expenses for each rental real estate enterprise. For eligible enterprises that have existed for less than four years, 250 or more hours of rental services need to be performed annually. For other rental real estate enterprises, 250 or more hours of such services must be performed in at least three of the past five years.

Also, you need to maintain contemporaneous records (including time reports, logs or similar documents) that show:

• A description of rental services performed,
• The dates on which such services were performed,
• The number of hours of services performed, and
• Who performed the services.

In addition, you must attach a statement to each tax return filed for any tax year you claim the safe harbor. The statement should include 1) a description of all rental real estate properties included in each rental real estate enterprise, 2) a description of rental real estate properties acquired and disposed of during the taxable year, and 3) a representation that the requirements have been fulfilled.

Certain rentals, however, generally don’t qualify for the safe harbor. These include real estate used by the taxpayer as a residence or rented or leased under a triple-net lease, where the tenant pays taxes, insurance and maintenance. Rental real estate leased to a commonly controlled trade or business is also excluded from the safe harbor, but such an arrangement may still qualify for the QBI deduction under separate rules.

A Closer Look at Rental Services

According to IRS guidance, rental services are broadly defined and include:

• Advertising to rent out the property,
• Negotiating and executing leases,
• Verifying information contained in rental applications,
• Collecting rent,
• Operating, maintaining and repairing the property (including buying materials and supplies),
• Managing the property, and
• Supervising employees and independent contractors.

Rental services can be performed by you (the owner) or your employees, agents or independent contractors whom you engage. Note that the term doesn’t include financial or investment management activities — such as arranging financing, procuring property, studying and reviewing financial statements or operational reports, improving property, or spending time traveling to and from property.

Key Question

The good news is that running a sole proprietorship or pass-through business that conducts rental real estate activities doesn’t automatically disqualify you from claiming the QBI deduction. And the bad news? It doesn’t automatically entitle you to it either.

The key question is whether your rental activities rise to the level of a trade or business under the QBI deduction rules or otherwise qualify under the IRS safe harbor for rental real estate enterprises. Your tax advisor can help you evaluate your company’s eligibility, maximize any available deduction and maintain detailed records to support the claim.

Recently, many taxpayers across the country have received IRS Notice CP53E, creating confusion and concern about whether the notices are legitimate and what action, if any, should be taken. As part of the IRS’s continued transition away from paper refund checks and toward electronic payments, these notices are being issued to taxpayers whose direct deposit information could not be processed or verified.

The IRS has confirmed that the CP53E notice is a legitimate communication. In many cases, the notice is sent when the IRS is unable to issue a refund via direct deposit due to missing, incorrect, or mismatched banking information. However, some taxpayers have reportedly received these notices unexpectedly, including situations where refunds were already scheduled to be applied to estimated taxes or where balances were due, which has understandably led to confusion.

Why Are Taxpayers Receiving These Notices?

The notices are tied to the federal government’s broader initiative to modernize payment processing and reduce the use of paper checks for federal disbursements, including tax refunds. According to reports, more than one million CP53E notices have already been issued during this filing season.

Common reasons a taxpayer may receive a CP53E notice include:

• Invalid or outdated bank account information
• A mismatch between the taxpayer’s name and the bank account
• A rejected direct deposit from the financial institution
• Missing direct deposit information on the return

AICPA Advisory and IRS Response

The American Institute of CPAs (AICPA) recently issued an advisory regarding the growing confusion surrounding CP53E notices. According to the AICPA, the IRS is aware that some notices may have been sent incorrectly, including:

• Situations where taxpayer overpayments were already scheduled to be applied to 2026 estimated taxes
• Returns where a balance was due rather than a refund owed

At this time, the AICPA stated that “until further guidance is issued, the IRS is not recommending any further action.”

The AICPA also cautioned taxpayers that some fraudulent notices may be circulating and advised taxpayers to carefully verify that any QR code included in correspondence directs users to “irs.gov” before taking any action.

Important: Be Cautious of Scams

One reason these notices have generated concern is that some legitimate IRS notices now include QR codes, something taxpayers are not accustomed to seeing in official IRS correspondence. Unfortunately, scammers are attempting to take advantage of this confusion by creating fraudulent notices designed to steal personal or banking information.
Taxpayers should exercise caution and avoid scanning QR codes or clicking links in unsolicited correspondence until the notice has been verified through official IRS channels.

What Should You Do If You Receive a CP53E Notice?

If you receive a CP53E notice, we recommend the following steps:

1. Do not panic.
2. Do not provide banking information through unfamiliar links or websites.
3. Go directly to the IRS website by typing “IRS.gov” into your browser.
4. Log into your IRS Online Account to verify whether the notice appears there.
5. Contact our office if the notice does not align with your tax return or expected refund status.

The IRS generally requires taxpayers to respond within 30 days if they wish to update direct deposit information electronically. If no action is taken, the IRS has stated that a paper refund check may still be issued, although processing could take approximately six weeks longer.

Our Recommendation

As with any IRS correspondence involving sensitive information, taxpayers should take a cautious and measured approach. While many CP53E notices are legitimate, the increase in related scam activity makes verification especially important.

Our firm strongly recommends that clients:

• Verify notices directly through IRS.gov
• Avoid scanning QR codes from unexpected mailings
• Reach out to our office with any questions before responding

If you have received a CP53E notice and would like assistance determining whether it is legitimate or understanding the next steps, please contact our office. We are happy to help guide you through the process safely and efficiently.