The twisty journey of the Corporate Transparency Act’s (CTA’s) beneficial ownership information (BOI) reporting requirements has taken yet another turn. Following a February 18, 2025, ruling by a federal district court (Smith v. U.S. Department of the Treasury), the requirements are technically back in effect for covered companies. But a short time later, the U.S. Department of the Treasury announced it would suspend enforcement of the CTA against domestic reporting companies and U.S. citizens. Here are the latest developments and what they may mean for you.

Latest announcement

On March 2, the Treasury Department stated the following in a press release: “The Treasury Department is announcing today that, with respect to the Corporate Transparency Act, not only will it not enforce any penalties or fines associated with the beneficial ownership information reporting rule under the existing regulatory deadlines, but it will further not enforce any penalties or fines against U.S. citizens or domestic reporting companies or their beneficial owners after the forthcoming rule changes take effect either. The Treasury Department will further be issuing a proposed rulemaking that will narrow the scope of the rule to foreign reporting companies only. Treasury takes this step in the interest of supporting hard-working American taxpayers and small businesses and ensuring that the rule is appropriately tailored to advance the public interest.”

The reinstatement

On January 23, 2025, the U.S. Supreme Court granted the government’s motion to stay, or halt, a nationwide injunction issued by a federal court in Texas (Texas Top Cop Shop, Inc. v. Bondi). But a separate nationwide order from the Smith court was still in place until February 18, 2025, so the reporting requirements remained on hold. With that order now stayed, the new deadline to file a BOI report with the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) is technically March 21, 2025.

Reporting companies that were previously given a reporting deadline later than this deadline are required to file their initial BOI report by the later deadline. For example, if a company’s reporting deadline is in April 2025 because it qualifies for certain disaster relief extensions, it’s allowed to follow the April deadline rather than the March deadline.

Important: Due to ongoing litigation in another federal district court (National Small Business United v. Yellen), members of the National Small Business Association as of March 1, 2024, aren’t currently required to report their BOI to FinCEN.

BOI requirements in a nutshell

The BOI requirements are intended to help prevent criminals from using businesses for illicit activities, such as money laundering and fraud hidden through shell companies or other opaque ownership structures. Companies covered by the requirements are referred to as “reporting companies.”

Such businesses have been reporting certain identifying information on their beneficial owners. FinCEN estimated that approximately 32.6 million companies would be affected by the reporting rules in the first year.

Beneficial owners are defined as natural persons who either directly or indirectly 1) exercise substantial control over a reporting company, or 2) own or control at least 25% of a reporting company’s ownership interests. Individuals who exercise substantial control include senior officers, important decision makers, and those with authority to appoint or remove certain officers or a majority of the company’s governing body.

For each beneficial owner, under the requirements, a reporting company must provide the individual’s:

• Name,
• Date of birth,
• Residential address, and
• Identifying number from an acceptable identification document, such as a passport or U.S. driver’s license, and the name of the issuing state or jurisdiction of the identification document.

A reporting company also must submit an image of the identification document.

BOI reporting isn’t an annual obligation. However, companies must report any changes to the required information previously reported about their businesses or beneficial owners. Updated reports are due no later than 30 days after the date of the change.

Stay tuned

The temporary stay of the injunction in the Smith case applies only until the U.S. Court of Appeals for the Fifth Circuit rules on FinCEN’s appeal of the lower court’s original injunction order in that case. The appeal was filed on February 5, 2025. Additional challenges are also proceeding in other courts. It’s also possible that Congress will pass legislation to repeal the BOI requirements.

Meanwhile, the March 2 Treasury announcement appears to ease compliance concerns for domestic companies. However, FinCEN will continue to enforce requirements for foreign reporting companies. Contact us if you have questions about your situation.

Although 2024 is in the review mirror, you may still be able to take actions in early 2025 to lower last year’s federal income tax bill. Here are five ideas to consider.

1. Make a Deductible HSA Contribution

If you had qualifying high-deductible health insurance coverage last year, you can still establish a health savings account (HSA) and make a deductible contribution to it for the 2024 tax year. The contribution deadline for a tax year is April 15 of the following tax year.

For 2024, the maximum deductible HSA contribution is:

• $4,150 for self-only coverage, or
• $8,300 for family coverage (anything other than self-only coverage).

The write-off for HSA contributions is an above-the-line deduction. That means you can take it even if you don’t itemize.

The HSA contribution privilege isn’t subject to income limitations. Even billionaires can contribute if they have qualifying high-deductible health insurance coverage and meet the other eligibility requirements.

2. Choose to Deduct State and Local Sales Taxes Instead of State and Local Income Taxes 

You may be able to claim itemized deductions on last year’s federal income tax return for state and local sales taxes instead of state and local income taxes. This option may make sense for people who:

• Live in a jurisdiction with low or no state and local personal income taxes, or
• Owe little or no state income taxes for whatever reasons.

Additionally, this option is relevant only if your allowable itemized deductions for last year exceed your allowable standard deduction for last year. The basic standard deductions for 2024 are:

• $29,200 for married couples who file jointly,
• $21,900 for heads of households, and
• $14,600 for single people and married people who file separately. 

Important: The annual limit for deducting all categories of state and local taxes (SALT) combined is $10,000 ($5,000 for married people who file separately). So, if you paid more than $10,000 for state and local property taxes in 2024, you’ve already hit the annual limit. You don’t need to consider the amounts paid for state income or sales taxes.   

However, suppose you benefit from choosing the state sales tax option. In that case, you can use an IRS-provided table (based on where you live, your income and the number of your dependents) to determine your allowable sales tax deduction. If you use the table, you also can add on actual sales tax amounts from major purchases, such as:

• Motor vehicles, including motorcycles, off-road vehicles and RVs,
• Boats,
• Aircraft, and
• Home improvements. 

On the other hand, if you kept receipts from all your 2024 purchases, you can add up the actual sales tax amounts and deduct the total (subject to the overall SALT limitation). This requires significant legwork, but it may result in a higher deduction than using the IRS table.  

3. Make a Deductible Traditional IRA Contribution

If you’ve not yet made a deductible traditional IRA contribution for your 2024 tax year, you can still do so between now and April 15. If your 2024 income permits, you can potentially make a deductible contribution of up to $7,000 ($8,000 if you were age 50 or older as of December 31, 2024). If you’re married, your spouse may also be eligible to make a separate contribution.

There’s currently no age limit for making deductible traditional IRA contributions. In prior years, this option wasn’t available to people who were 70 ½ or older. That restriction no longer exists.

But there are some important caveats to consider. First, you must have enough earned income (typically from jobs or self-employment) for 2024 to equal or exceed your IRA contribution for the year. If you’re married, you or your spouse (or both) can be the source of the earned income. 

Second, deductible IRA contributions are phased out (reduced or eliminated) if your 2024 modified adjusted gross income (MAGI) exceeds applicable limits and you and/or your spouse participated in a tax-favored retirement plan last year. Tax-favored retirement plans include employer-sponsored plans and self-employed plans, such as Simplified Employee Pensions (SEPs), Savings Incentive Match Plans for Employees (SIMPLE) IRAs or Keogh plans.

The 2024 MAGI phaseout ranges for making deductible traditional IRA contributions are as follows:

• $77,000 and $87,000 for single individuals who participated in a tax-favored retirement plan in 2024,
• $123,000 and $143,000 for married couples who both participated in tax-favored retirement plans in 2024, 
• $123,000 and $143,000 for a married individual who participated in a tax-favored retirement plan but whose spouse didn’t participate in a tax-favored retirement plan in 2024, and
• $230,000 and $240,000 for a married individual who didn’t participate in a tax-favored retirement plan but whose spouse participated in a tax-favored retirement plan in 2024.

If you’re single and didn’t participate in a tax-favored retirement plan in 2024, there’s no MAGI limit on making a deductible traditional IRA contribution for 2024 (assuming you have sufficient earned income for the year).

Likewise, if you’re married and neither you nor your spouse participated in a tax-favored retirement plan last year, there’s no MAGI limit on making a deductible traditional IRA contribution for 2024 (assuming you have sufficient earned income for the year). In this situation, both spouses can make separate contributions if you have IRAs set up in your respective names.        

4. Add Up Health Insurance Premiums and Medical Expenses

You can claim an itemized medical expense deduction to the extent your total qualifying expenses exceed 7.5% of your adjusted gross income (AGI) for the year. This may seem like a daunting hurdle to clear, but it may be worth considering, especially if you’re older, have a serious medical condition, or support one or more dependents. For example, if you pay health care expenses for an elderly parent who qualifies as your dependent, you can deduct their qualifying expenses, too.

When adding up your medical expenses, don’t forget to include premiums for private health insurance coverage and premiums for Medicare health insurance. These items are costly and can help put you over the AGI limit.

Important: If you’re self-employed or an S corporation shareholder-employee, you can probably claim an above-the-line deduction for your health insurance premiums — including Medicare premiums. Ask your tax advisor for details.

5. Deduct 2025 Personal Casualty Loss on Your 2024 Return

Under current law, you may be able to claim a tax deduction for personal casualty losses from a federally declared disaster. A special rule allows you to claim a deduction on either:

• Your return for the year the casualty event actually occurs, or
• An original or amended return for the year before the casualty event.

In effect, this timing rule allows you to claim the deduction in the year when it’s most beneficial.

If you’ve already been affected by a federally declared disaster in 2025 (such as the recent California wildfires) or you’re hit with another federally declared disaster that happens later this year, you can elect to deduct qualifying losses from 2025 on your 2024 return instead of waiting to deduct it on your 2025 return. Choosing this option may allow you to get tax relief sooner. Plus, if your 2024 income is lower than your 2025 income, claiming the loss in 2024 can also result in a bigger deduction.

How much can you deduct for qualifying losses related to personal-use property? Under the general rules for claiming an itemized deduction for personal-use property losses incurred between 2018 and 2025, the disaster must be on the IRS list of federally declared disasters, and the full amount of the loss isn’t deductible for federal income tax purposes. To calculate your allowable personal casualty loss deduction under the general rules, you must:

• Subtract any insurance proceeds,
• Subtract $100 per casualty event, and
• Subtract 10% of your AGI for the year you claim the loss deduction.

The Federal Disaster Tax Relief Act, which became law in December 2024, liberalized the rules for deducting eligible personal casualty losses for some taxpayers. This law introduced new tax relief for victims of federally declared disasters that began on or after December 28, 2019, and on or before December 12, 2024. It allows eligible taxpayers to claim personal casualty losses without itemizing deductions on Schedule A. In addition, a casualty loss from these qualified disasters doesn’t need to exceed 10% of AGI. However, the $100 limit per casualty is increased to $500.

Important: If you were a victim of a federally declared disaster that falls under the scope of the Federal Disaster Tax Relief Act, you may qualify for a tax refund from a prior year under the liberalized rules. Contact your tax advisor to see if you should file an amended return.

These are the rules for personal casualty losses. Business casualty losses can be deducted without limitations.

Coming Soon

The federal income tax filing deadline for individuals is just around the corner. Contact your tax advisor to determine whether these or any other last-minute strategies might work for your circumstances.

The deadlines for filing 2024 tax returns (or extensions) are fast approaching. Has your small business taken advantage of all the legitimate ways to lower its federal income tax bill for 2024? Fortunately, it may not be too late to make some tax-smart moves for last year.

Here are five last-minute tax breaks that may benefit business owners and strategies to optimize your tax results for 2024. These breaks may be available to the following types of entities:

• C corporations,
• Sole proprietorships,
• Single-member limited liability companies (LLCs) treated as sole proprietorships for tax purposes, and
• Pass-through entities, including partnerships, LLCs treated as partnerships for tax purposes and S corporations. 

1. QBI Deductions 

The deduction based on qualified business income (QBI) was a key element of the Tax Cuts and Jobs Act. This break is available to individual owners of sole proprietorships, single-member LLCs treated as sole proprietorships for tax purposes and pass-through entities. Estates and trusts that own these types of businesses are also eligible for the QBI deduction.  

For tax years through 2025, the deduction can be up to 20% of the owner’s QBI. It’s subject to restrictions that can apply:

• At higher income levels, and
• Based on the owner’s taxable income.

It’s important to remember that the QBI deduction can also be claimed for up to 20% of income from qualified real estate investment trust dividends and up to 20% of qualified income from publicly traded partnerships. 

Because of the income limitations on this deduction, other last-minute tax planning moves may inadvertently increase or decrease your allowable QBI deduction. For instance, claiming big first-year depreciation deductions or making deductible retirement plan contributions (discussed below) can reduce QBI and lower your allowable QBI deduction. Work with your tax advisor to get the best overall tax results by making the right moves on your 2024 business return or forms.        

2. Section 179 First-Year Depreciation Breaks

The first-year Section 179 depreciation deduction privilege allows many small businesses to write off the full cost of some or all of their 2024 depreciable asset additions on their 2024 federal income tax returns. For tax years beginning in 2024, the maximum Sec. 179 deduction is $1.22 million.

Eligible assets include:

• Depreciable personal property, such as equipment, computer hardware and peripherals,
• Transportation equipment, including certain passenger vehicles, and
• Commercially available software.

Sec. 179 deductions can also be claimed for real estate qualified improvement property (QIP) up to the maximum allowance of $1.22 million. QIP is defined as an improvement to an interior portion of a nonresidential building placed in service after the date the building was placed in service. However, expenditures attributable to the enlargement of a building, elevators or escalators, or the internal structural framework of a building don’t count as QIP and usually must be depreciated over 39 years. There’s no separate Sec. 179 deduction limit for QIP. These deductions reduce your maximum Sec. 179 deduction dollar for dollar.

For nonresidential real property, Sec. 179 deductions are also allowed for qualified expenditures for:

• Roofs,
• HVAC equipment,
• Fire protection and alarm systems, and
• Security systems.

Finally, eligible assets include depreciable personal property used predominantly to furnish lodging, such as furniture and appliances in a property rented to transients.

Important: A phaseout rule kicks in if you put more than $3.05 million of qualifying assets into service last year. In addition, Sec. 179 deductions can’t cause an overall business tax loss. The Sec. 179 deduction limitation rules can be tricky if you own an interest in a pass-through business entity.

3. First-Year Bonus Depreciation Deductions

Depreciable assets that can’t be written off in 2024 under the Sec. 179 deduction rules may qualify for first-year bonus depreciation deductions. Specifically, 60% first-year bonus depreciation can be claimed for qualified assets that were placed in service in calendar year 2024.

Important: The limitations to Sec. 179 deductions don’t apply to first-year bonus depreciation deductions. 

Eligible assets for first-year bonus depreciation include:

• Depreciable personal property, such as equipment, computer hardware and peripherals,
• Transportation equipment, including certain passenger vehicles, and
• Commercially available software.

First-year bonus depreciation can also be claimed for real estate QIP.

The first-year bonus depreciation percentage is scheduled to drop to 40% for qualified assets placed in service in calendar-year 2025, unless Congress passes legislation to change the bonus depreciation rules. There’s also a possibility that Congress will reinstate 100% first-year bonus depreciation for 2025. Contact your tax advisor for the latest developments on this potentially valuable tax break.

4. Tax-Favored Retirement Plans

If your business doesn’t already have a tax-favored retirement plan, now might be the time to take the plunge. Current rules allow for significant annual deductible contributions.

For example, you can set up a Simplified Employee Pension (SEP) IRA if you’re self-employed. Then, you can contribute up to 20% of your net self-employment income, with a maximum contribution of up to $69,000 for your 2024 tax year. If you’re employed by your own corporation, you can contribute up to 25% of your salary, with a maximum contribution of up to $69,000. If you’re self-employed and in the 32% federal income tax bracket, making a maximum contribution could cut what you owe Uncle Sam for 2024 by a whopping $22,080 ($69,000 times 32%). If you’re employed by your own C corporation, a company contribution of $69,000 to your account could cut your company’s tax bill by $14,490 ($69,000 times 21%). 

Other small business retirement plan options include:

• 401(k) plans and solo 401(k)s that are set up for just one person,
• Self-employed defined contribution Keogh plans,
• Corporate defined contribution profit-sharing plans,
• Defined benefit pension plans, and
• Savings Incentive Match Plans for Employees (SIMPLE) IRAs.

Depending on your circumstances, these plans may allow bigger deductible contributions and/or more flexibility than a SEP-IRA.

Important: Your business can adopt a tax-favored retirement plan and fund it as late as the due date (including any extension) of its federal income tax return for the plan adoption year. The plan can then receive deductible contributions made by that due date. (See “Tax Filing Deadlines for 2024” at right.)

For instance, if you extend your 2024 personal tax return and operate a calendar-year sole proprietorship or single-member LLC that’s treated as a sole proprietorship for federal tax purposes, you have until October 15, 2025, to establish a plan and make the initial deductible contribution.

There’s a critical exception, however. To make a SIMPLE IRA contribution for the 2024 tax year, you must have set up the plan by October 1, 2024. So, it’s too late to use that option for 2024.

5. Business Casualty Loss Deductions

If your business has already been affected by a federally declared disaster in 2025 (such as the recent California wildfires) or is hit with another federally declared disaster that happens later this year, you can claim a deduction for an uninsured business casualty loss. You can elect to deduct qualifying losses from 2025 on your business’s 2024 return instead of waiting to deduct it for the 2025 tax year.

Choosing this option may allow you to get tax relief sooner. Plus, if your 2024 income is lower than your 2025 income, claiming the loss in 2024 can also result in a bigger deduction.  

For More Ideas

These are just five last-minute tax-saving maneuvers that small business owners may be able to make before Tax Day. As always, your tax professional can advise you on the optimal tax-saving strategies for your situation.

Question: We sponsor a 401(k) plan and we have a number of “missing participants.” We’ve been told this is what to call account holders who are former employees with out-of-date contact information. What can we do?

Answer: When employees leave their jobs, financial advisors typically encourage them to roll over their 401(k) plans into a new employer’s plan or perhaps an IRA. Many people follow this advice, but as you’ve discovered, not everyone does.

As you may be able to attest, many employers that sponsor 401(k)s or other qualified plans end up with account holders who are former employees with out-of-date contact information.

The situation can create administrative hassles for you at first and, later, turn into a major problem when the accounts in question must start making distributions. Here are some best practices to consider when you find yourself with a missing participant.

Take these Steps

When a participant is unresponsive or you reasonably believe your contact information is inaccurate, first consider taking four basic steps:

1. Use certified mail to reach out to the person or, if more cost-effective, a private delivery service with similar tracking features,

2. Review your employment records and all your benefits plans for up-to-date information,

3. Attempt to identify and contact the individual’s designated beneficiaries under those plans for information, and

4. Use free electronic tools such as internet search engines, public record databases and social media accounts.

You might also reach out to a participant’s colleagues or union, as well as register the person’s name on public or private pension registries. According to guidance issued by the U.S. Department of Labor, privacy concerns regarding such actions can be alleviated if your retirement plan fiduciary asks the missing participant’s current employer, other plan fiduciary or beneficiary to have the missing participant contact your retirement plan.

Escalate Your Efforts

If initial search steps are unsuccessful and the account balance is large enough to justify the expense, paying for a professional search may be appropriate. This could mean using fee-based internet search engines, commercial locator services, credit-reporting agencies, information brokers, investigation databases and other similar premium services.

You might be able to charge the fee against the account if it’s reasonable and the allocation method is consistent with your plan’s terms and the Employee Retirement Income Security Act.

A Permissible Forfeiture

Some plan documents describe how to handle account balances of missing participants when search efforts fail. Others may authorize administrative committees to adopt policies for this situation. Following written policies and procedures for handling missing participants — and documenting actions taken — helps ensure consistency and lower the risk of legal liability.

Some plan provisions or policies direct fiduciaries to allocate the funds in the account among the accounts of the remaining participants, subject to restoration if the individual should reappear. Under IRS regulations, such an allocation may be a permissible forfeiture so long as the plan is obligated to restore the missing individual’s account balance in the event the person is eventually found.

Prevent the Problem

Although it may be obvious, the best practice of all is to establish strong administrative procedures that minimize the likelihood of missing participants. These include:

• Proactively maintaining an accurate plan census,
• Periodically prompting participants and beneficiaries to reconfirm their contact info, and
• Regularly auditing census data, paying special attention to contact info in business transactions or when recordkeepers change.

Even changing the way plan communications are written and designed can increase the chances that participants will recognize and engage with them.

Address the Challenges

Sponsoring a 401(k) plan can help attract strong job candidates, retain employees and boost morale. But plan administration has its challenges — and one of them is missing participants. Work with your benefits advisors to address the matter. Meanwhile, we can help you assess the costs and financial impact of your plan.

A federal district court judge in Texas has lifted the final nationwide injunction preventing the enforcement of beneficial ownership information (BOI) reporting under the Corporate Transparency Act (CTA). The order, signed on February 17, 2025, allows the Financial Crimes Enforcement Network (FinCEN) to resume its BOI reporting requirements.

FinCEN has acknowledged the need for a transition period and has granted a 30-day filing delay to assist reporting companies in meeting their compliance obligations. On February 18, FinCEN issued a notice stating that it “intends to extend the reporting deadline for all reporting companies 30 days from the date the stay is granted.” Additionally, FinCEN will evaluate options to modify deadlines and reporting requirements for lower-risk entities, including many U.S. small businesses, while maintaining a focus on entities that pose significant national security risks.

Under this extension, reporting companies formed on or after February 18, 2025, will now have 30 days from their formation date to comply with CTA filing requirements. This delay provides a critical opportunity for businesses to ensure they meet regulatory obligations without undue hardship.

There is potential for further extensions. On February 10, the U.S. House of Representatives voted unanimously (408-0) to postpone the CTA’s reporting deadline to January 1, 2026. The measure is currently under consideration in the U.S. Senate. Should this proposal pass, businesses would have additional time to comply with BOI reporting requirements.

We strongly encourage all reporting companies that have yet to file their BOI reports to take immediate action. Ensuring compliance by the revised deadline is essential to avoid potential penalties or complications. If you need assistance navigating these requirements, our team is available to provide guidance and support.

Let’s say you have an unincorporated sideline activity that you think of as a business, including an activity involving horses. If you have a net loss (deductible expenses exceed revenue) on that activity and you think you can deduct that loss on your personal federal income tax return, think again!

In IRS audits and in court cases involving money-losing sidelines, the tax agency frequently argues the activities are hobbies, rather than businesses. Be aware that the federal income tax rules for hobby losses aren’t in your favor. It can be difficult to prove an activity is a bonafide business. And now, due to a change included in the Tax Cuts and Jobs Act (TCJA), the rules are even less favorable for 2018 to 2025.

But don’t give up hope on claiming losses. If you can show a profit motive for your sideline activity, you can deduct the losses. And history shows that the IRS loses about as many court cases on this issue as it wins. Here’s what you need to know about the TCJA change for hobby losses and what to do if you have a money-losing sideline activity.

Basic Rules

If you operate an unincorporated for-profit business that generates a net tax loss for the year, you can generally deduct the full amount of the loss on your federal income tax return. That means the loss can be used to offset income from other sources and reduce your federal income tax bill. On the other hand, the tax results aren’t good if your money-losing sideline activity must be treated as a not-for-profit hobby.

Before the TCJA, you could potentially deduct hobby-related expenses up to the amount of income from the activity. However, you had to treat those expenses as miscellaneous itemized deductions that could be written off only to the extent they exceeded 2% of adjusted gross income (AGI). And, if you were subject to the alternative minimum tax (AMT) for the year, your otherwise-allowable hobby deductions were disallowed under the AMT rules.

TCJA effect: For 2018 to 2025, the TCJA eliminates write-offs for the miscellaneous itemized deductions that had been subject to the 2%-of-AGI threshold. This wipes out deductions from hobby activities.

So, under the new law, hobby-related deductions are disallowed for regular tax purposes as well as for AMT purposes. Expect IRS auditors to focus even more attention on taxpayers with money-losing sideline activities. That means it’s now more important than ever to establish that a money-losing activity is a for-profit business that has simply hasn’t yet become profitable. We’ll explain more about how to do that below.

The next step is to determine if your money-losing sideline activity is a hobby or a business.

Safe-Harbor Rules

Fortunately, there are two safe-harbor rules for determining if you have a for-profit business.

1. An activity is presumed to be a for-profit business if it produces positive taxable income (revenues exceed deductions) for at least three out of every five years. Losses from the other years can be deducted because they are business losses as opposed to hobby losses.

2. A horse racing, breeding, training, or showing activity is presumed to be a for-profit business if it produces positive taxable income in two out of every seven years.

Taxpayers who can plan ahead to qualify for these safe-harbor rules can deduct their losses in unprofitable years.

Intent to Make Profit

Even if you can’t qualify for one of the safe-harbor rules, you still may able to treat the activity as a for-profit business and rightfully deduct the losses. Basically, you must demonstrate an honest intent to make a profit. Factors that can prove (or disprove) such intent include:

• Conducting the activity in a business-like manner by keeping good records and searching for profit-making strategies.
• Having expertise in the activity or hiring advisors who do.
• Spending enough time to justify the notion that the activity is a business and not just a hobby.
• Expectation of asset appreciation. (This is the reason the IRS will almost never claim that owning rental real estate is a hobby even when tax losses are incurred for many years.)
• Success in other ventures, which indicates business acumen.
• The history and magnitude of income and losses from the activity. Occasional large profits hold more weight than more frequent small profits, and losses caused by unusual events or bad luck are more justifiable than ongoing losses that only a hobbyist would be willing to accept.
• Your financial status. In the eyes of the IRS, “rich” folks can afford to absorb ongoing losses (which may indicate a hobby) while ordinary folks are usually trying to make a buck (which indicates a business).
• Elements of personal pleasure. Racing horses is a lot more fun than draining septic tanks, so the IRS is far more likely to claim the former is a hobby if losses start showing up on your tax returns.

Some Good News

Being able to claim business status is helpful for deducting losses. Hobby status is not, especially under the TCJA.

The good news is that, over the years, the U.S. Tax Court has concluded that several pleasurable activities could be classified as for-profit businesses rather than hobbies, based on evaluating the factors listed in this article. So, there’s often reason for hope.

That said, hobby loss deductions have been a hot issue for the IRS, and the new tax law adds fuel to the fire. So, it’s important for you to be on the correct side of as many of the factors as possible. Your tax advisor can help you create documentation to prove that that you are, in fact, on the right side.

President Trump and the Republican Congress plan to act swiftly to make broad changes to the United States — including its federal tax system. Congress is already working on legislation that would extend and expand provisions of the sweeping Tax Cuts and Jobs Act (TCJA), as well as incorporate some of Trump’s tax-related campaign promises.

To that end, GOP lawmakers in the U.S. House of Representatives have compiled a 50-page document that identifies potential avenues they may take, as well as how much these tax and other fiscal changes would cost or save. Here’s a preview of potential changes that might be on the horizon.

Big plans

The TCJA is the signature tax legislation from Trump’s first term in office, and it cut income tax rates for many taxpayers. Some provisions — including the majority affecting individuals — are slated to expire at the end of 2025. The nonpartisan Congressional Budget Office estimates that extending the temporary TCJA provisions would cost $4.6 trillion over 10 years. For context, the federal debt currently rings in at more than $35 trillion, and the budget deficit is $711 billion.

In addition to supporting the continuation of the TCJA, the president has pushed to reduce the 21% corporate tax rate to 20% or 15%, with the goal of generating growth. He also supports eliminating the 15% corporate alternative minimum tax imposed by the Inflation Reduction Act (IRA), signed into law during the previous administration. It applies only to the largest C corporations.

Regarding tax cuts for individuals beyond TCJA extensions, Trump has expressed that he’s in favor of:

• Eliminating the estate tax (which currently applies only to estates worth more than $13.99 million),
• Repealing or raising the $10,000 cap on the deduction for state and local taxes,
• Creating a deduction for auto loan interest, and
• Eliminating income taxes on tips, overtime and Social Security benefits.

Finally, he wants to cut IRS funding, which would reduce expenditures but also reduce revenues. Without offsets, these plans would drive up the deficit significantly.

Possible offsets

The House GOP document outlines numerous possibilities beyond just spending reductions to pay for these tax cuts. For example, tariffs — a major plank in Trump’s campaign platform — may play a role.

The GOP document suggests a 10% across-the-board import tariff. Trump, however, has discussed and imposed various tariff amounts, depending on the exporting country. The 25% tariffs on Canadian and Mexican products, which were imposed earlier, have been paused until March 4. An additional 10% tariff on Chinese imports took effect on February 4.

In addition, Trump said tariffs on goods from other countries, including the 27-member European Union, could happen soon. While he maintains that those countries will pay the tariffs, it’s generally the U.S. importer of record that’s responsible for paying tariffs. Economists generally agree that at least part of the cost would then be passed on to consumers.

The House GOP document also examines generating savings through changes to various tax breaks. Here are some of the options:

The mortgage interest deduction. Suggestions include eliminating the deduction or lowering the current $750,000 limit to $500,000.

Head of household status. The document looks at eliminating this status, which provides a higher standard deduction and certain other tax benefits to unmarried taxpayers with children compared to single filers.

The child and dependent care tax credit. The document considers eliminating the credit for qualified child and dependent care expenses.

Renewable energy tax credits. The IRA created or expanded various tax credits encouraging renewable energy use, including tax credits for electric vehicles and residential clean energy improvements, such as solar panels and heat pumps. The GOP has proposed changes ranging from a full repeal of the IRA to more limited deductions.

Employer-provided benefits. Revenue could be raised by eliminating taxable income exclusions for transportation benefits and on-site gyms.

Health insurance subsidies. Premium tax credits are currently available for households with income above 400% of the federal poverty line (the amounts phase out as income increases). Revenue could be raised by limiting such subsidies to the “most needy Americans.”

Education-related breaks are also being assessed. The House GOP document looks at how much revenue could be generated by eliminating credits for qualified education expenses, the deduction for student loan interest and federal income-driven repayment plans. The GOP is also weighing the elimination of interest subsidies for federal loans while borrowers are still in school and imposing taxes on scholarships and fellowships, which currently are exempt.

The hurdles

Republican lawmakers plan on passing tax legislation using the reconciliation process, which requires only a simple majority in both houses of Congress. However, the GOP holds the majority in the House by only three votes.

That gives potential holdouts within their own caucus a lot of leverage. For example, deficit hawks might oppose certain proposals, while centrist members may prove reluctant to eliminate popular tax breaks and programs.

Republican representatives of all stripes are likely to oppose moves that would hurt industries in their districts, such as the reduction or elimination of certain clean energy incentives. And, of course, lobbyists will make their voices heard.

Stay tuned

The GOP hopes to enact tax legislation within President Trump’s first 100 days in office, but that may be challenging. We’ll keep you apprised of important developments.

Years ago, many taxpayers itemized deductions instead of claiming the standard deduction. But fewer taxpayers are itemizing today due to a bevy of changes in the Tax Cuts and Jobs Act (TCJA). The TJCA provisions that increased the standard deduction and limited or suspended certain itemized deductions are currently scheduled to expire after 2025. However, these provisions will likely be extended (or possibly expanded) now that Republicans control Congress and the White House.  

In the meantime, if you expect to itemize deductions on your 2024 federal tax return or are close to the cutoff between itemizing or claiming the standard deduction, you should consider steps to maximize your deductions. Here are eight personal deductions that may fall through the cracks if you don’t make your tax preparer aware of your ability to claim them:

1. Charitable Travel

If you incur travel expenses on behalf of a qualified charitable organization, you can generally deduct your unreimbursed out-of-pocket costs. For example, if you fly to a meeting to represent a charity, you can deduct the following costs:

• Airfare,
• Lodging,
• Meals while you’re away from home, and
• Local transportation (for example, taxis or ride services between the airport and hotel).

Suppose you drive your personal vehicle for charity-related travel. In that case, you can write off your actual expense attributable to the charitable travel, supported by records, or use a simplified “standard rate.” The standard rate is statutorily set (and not indexed for inflation) at only 14 cents per mile (plus related tolls and parking fees).

2. Casualty Losses

Although the TCJA suspended the rules for personal casualty and theft loss deductions for 2018 through 2025, you can still deduct losses for unreimbursed damages in a federally designated disaster area. But the full amount of the loss isn’t deductible for federal income tax purposes under the regular rules.

To calculate the casualty loss deduction for personal-use property in an area declared a federal disaster, you must:

• Subtract any insurance proceeds.
• Subtract $100 per casualty event.
• Subtract 10% of your adjusted gross income (AGI) for the year you claim the loss deduction. 

AGI includes all taxable income items and is reduced by certain deductions, such as the ones for student loan interest, health savings account contributions, and deductible contributions to IRAs and self-employed retirement plans. You can potentially claim an itemized deduction for the remaining loss after these subtractions.

These are the rules for personal casualty losses. Business casualty losses generally offer more favorable tax deduction terms compared to personal casualty losses, as they’re not subject to the same limitations.

Important: If you incur a disaster-area loss, you can elect to claim the loss on the tax return for the year before the year of the event to obtain faster tax relief. Therefore, you may deduct a loss suffered in early 2025 on your 2024 return that’s due by April 15, 2025.

3. Student Loan Interest

Generally, you can’t deduct any personal interest paid during the year for such items as credit card debt or car loans. But you may write off up to $2,500 of student loan interest as an above-the-line adjustment on your personal return whether you itemize or not.

This deduction is available only to the person legally obligated to repay the loan. Examples of qualified expenses include:

• Tuition and fees,
• Room and board, and
• Books, supplies and equipment.

However, the deduction is phased out based on modified adjusted gross income (MAGI), and the amounts aren’t that high. For 2024, the phaseout begins at $75,000 for single filers and $155,000 for married couples who file jointly.

4. State Sales Tax

The TCJA caps the annual deduction for state and local tax (SALT) payments at $10,000 for 2018 through 2025. Accordingly, many taxpayers residing in states with high property or income tax rates may lose some tax benefit from their SALT payments.

The SALT deduction covers the following items:

• Property taxes, and
• Income taxes or sales taxes.

If you live somewhere with low or no state income tax, you might opt to deduct state sales tax, rather than state income tax. The state sales tax deduction equals:

• Actual sales tax paid in this tax year supported by records, or
• A flat amount from a simplified IRS table based on the state and your family size (plus the sales tax paid on certain large purchases, such as cars and boats).

It often makes sense to retain your sales tax receipts for the year to determine which method will provide the higher SALT deduction.

5. Medical Expense Deductions

If you itemize, your deduction for unreimbursed medical expenses is limited to the excess above 7.5% of your AGI. Depending on your situation, this is a difficult — but not impossible — tax hurdle to clear. Make sure to add up all your qualified expenses, including amounts you paid for a relative you support. For instance, if you pay an aide to care for an elderly parent who qualifies as your dependent, the cost counts toward the medical deduction, even if the caretaker isn’t a licensed professional.

Annual medical expenses can add up, especially if you’re older, have a serious medical condition or support several dependents. Examples of some commonly encountered costs that count as medical expenses for itemized deduction purposes are:

• Acupuncture,
• Ambulance,
• Artificial limb,
• Artificial teeth,
• Bandages,
• Braille books and magazines,
• Car (cost of special equipment so a disabled person can drive),
• Chiropractor,
• Contact lenses plus wetting and cleaning solutions,
• Crutches,
• Dental care,
• Diagnostic devices,
• Drugs (prescription only except for insulin),
• Eyeglasses,
• Eye surgery,
• Guide dog,
• Hearing aid,
• Home improvements for medical purposes (to the extent they don’t add to the value of your home),
• Hospitalization,
• Insulin,
• Insurance premiums for health coverage, including age-based premiums for qualified long-term care insurance,
• Laboratory fees,
• Long-term care services,
• Meals (while staying in hospital or similar facility),
• Medicare insurance premiums,
• Nursing home,
• Nursing services,
• Operations,
• Optometrist,
• Osteopath,
• Oxygen,
• Psychiatric care,
• Psychoanalysis,
• Stop-smoking program,
• Therapy,
• Transplant,
• Weight-loss program (if part of treatment for a specific disease or condition, such as obesity),
• Wheelchair,
• Wig (if hair is lost due to medical condition or treatment), and
• X-rays.

Transportation to receive medical care also may be included at a rate of 21 cents per mile for 2024 and 2025.

6. Home Improvements

Under the TCJA, you currently can deduct mortgage interest on the first $750,000 of acquisition debt, down from $1 million under prior law. The TCJA also suspends any deduction for mortgage interest paid on home equity debt for 2018 through 2025. Previously, you could deduct interest on the first $100,000 of home equity debt. 

Acquisition debt refers to loan proceeds used to “buy, build or substantially improve” a qualified residence. Thus, if you took out a home equity loan in 2024 to, say, install an in-ground pool at your home, the interest may qualify as deductible acquisition debt interest (if it’s within applicable limits).      

7. Points Paid on a Home Mortgage

If you acquired a home last year, you may have paid the lender one or more “points” for a more favorable interest rate. Each point is equal to 1% of the mortgage principal. For example, two points on a $500,000 loan is $10,000 (2% of $500,000). Points are generally deductible as acquisition debt.

However, if you refinance an existing acquisition debt instead of taking out a new loan, you must amortize points paid on the refinanced mortgage over the life of the loan. So, if you paid $10,000 in points to refinance a 10-year loan in 2024, you can deduct only $1,000 per year for the 2024 through 2033 tax years.

8. Jury Duty Deductions

In some cases, an employer may pay an employee’s regular salary or offer leave pay while he or she is on jury duty but then require the employee to turn over any payments received from the courts. As usual, the salary is taxable to the employee and jury-duty payments to the employer are deductible.

But the amount you give to your employer is reported as an adjustment to income on your tax return. In addition, any reimbursements received for transportation, parking fees and meals are tax-exempt. (If you’re not employed or don’t turn over jury duty payments to an employer, the amount earned from jury duty is taxable income and must be reported on your tax return.)

Maximize Your Deductions

The IRS began accepting 2024 federal income tax returns on January 27, 2025, and the deadline to file or extend your 2024 return is April 15, 2025. Contact your tax advisor to discuss strategies to minimize your tax burden by claiming all the deductions you’re entitled to under the law.

Whether you’re filing your taxes on your own or with professional assistance, having the right
documents ready is crucial. Below is a detailed guide to help you gather everything you need for
a smooth filing process:

Personal Information

• Your Social Security number (SSN) or Taxpayer Identification Number (TIN)
• Spouse’s full name and SSN/TIN, if applicable
• Valid photo identification for both you and your spouse

Details for Dependents

• Birth dates and SSNs/TINs for dependents
• Records from childcare providers, including their Tax ID number, if applicable
• Form 8332 (if a custodial parent allows a noncustodial parent to claim the child)

Income Documents

For Employees

• Wage and income statements (W-2 forms)

For Those Receiving Unemployment

• Unemployment income documentation (1099-G)

For The Self-Employed

• Income statements like 1099-NEC or 1099-K
• Evidence of expenses (receipts, statements, and other records)
• Details on assets used for business, including costs and purchase dates
• Information about home office use, if applicable

Rental Income

• Income and expense records for rental properties
• Asset details for depreciation purposes (cost, purchase date, etc.)

Retirement Income

• Documents for pensions, annuities, and IRAs (1099-R forms)
• Records of previous IRA contributions already taxed (Form 8606)
• Social Security or Railroad Retirement income (Forms SSA-1099 or RRB-1099)

Investment and Cryptocurrency Income

• Forms showing interest or dividends (e.g., 1099-INT, 1099-DIV, or 1099-OID)
• Statements for sold investments (1099-B or 1099-S) and details of original purchase price (cost basis)
• Documentation of expenses tied to investments
• Records of cryptocurrency and NFT transactions, including sales and costs

Other Income Sources

• Refunds from state taxes (1099-G)
• Income reported on K-1 forms for investments or partnerships
• Gambling winnings and related expenses (W-2G or other records)
• Payments for jury duty, hobbies, or prizes
• Trust or royalty income (1099-MISC)
• Any other miscellaneous income forms

Deductions and Credits

Estimated Federal and State Tax Payments

• Record of quarterly estimated federal tax payments (Form 1040-ES)
• Record of quarterly estimated state tax payments

For Homeowners

• Mortgage interest (Form 1098)
• Real estate and property tax payment records

Charitable Giving

• Proof of monetary donations (receipts or acknowledgments)
• Documentation of non-cash contributions
• Mileage logs for charity-related travel

Medical and Health Expenses

• Records of healthcare premiums and medical expenses (e.g., doctor visits, dental work)
• Health Savings Account Distributions (Form 1099-SA)
• Travel expenses for medical care (mileage, lodging, etc.)

Education-Related Expenses

• Tuition payments (Form 1098-T)
• Receipts for qualified education costs (Form 1099-Q)
• Proof of scholarships, fellowships, or student loan interest paid (Form 1098-E)

Childcare Costs

• Records of daycare payments for children under 13
• Documentation of payments to babysitters or caregivers

State, Local, and Sales Taxs

• Details of state and local taxes paid outside of wage withholding
• Receipts for significant purchases (e.g., vehicles or boats)
• Real estate and personal property tax payment records

Retirement and Savings Contributions

• Contribution statements for HSAs (Form 5498-SA) and IRAs (Form 5498)
• Other applicable forms in the 5498 series

Disaster Relief

• Records of property damage or losses due to federally declared disasters
• Costs of repairs or cleanup
• Insurance claims or reimbursements received
• Information on FEMA assistance

This checklist is designed to help you gather all necessary information and documents, reducing the risk of errors or missed deductions. If you have any questions or need assistance, contact your tax advisor for guidance.

We are thrilled to announce a well-deserved promotion for one of our valued BHCB team members!

Kimberly Stofko has been promoted to Manager. Kim joined our firm in 2021 and is a proud graduate of Stonehill College in Massachusetts.

Please join us in congratulating Kim on this outstanding achievement!