If you’re a real estate developer or a small business owner who owns commercial real estate, you might be thinking about selling a property. If it has appreciated significantly, a Section 1031 like-kind exchange may allow you to defer tax on some or all of the gain. With this transaction, you exchange one property for another qualifying property rather than sell the property outright. You generally don’t pay tax on the gain on the relinquished property until you sell the replacement property.

You may be familiar with the basics of a Sec. 1031 exchange, but you might not understand all the rules and restrictions. Here are four common myths to be aware of so you can avoid missing planning opportunities or facing unexpected taxes.

Myth 1: The replacement property must be identical to the property you give up

The definition of like-kind property is surprisingly broad. To qualify for Sec. 1031 exchange treatment, you may exchange any real property held for investment or productive use in your trade or business (relinquished property) for like-kind investment, trade or business real property (replacement property).

For these purposes, most real property is considered like-kind with other real property. However, neither the relinquished property nor the replacement property can be real property held primarily for sale.

Myth 2: You never have to pay current-year tax in a like-kind exchange

A properly structured Sec. 1031 exchange can defer gain. But that doesn’t mean every exchange is completely tax-free.

If it’s a straight property-for-property exchange, you generally won’t have to recognize any gain from the exchange. You’ll take the same basis (your cost for tax purposes) in the replacement property that you had in the relinquished property. Even if you don’t have to recognize any gain on the exchange, you must report it on Form 8824, “Like-Kind Exchanges.”

However, the properties aren’t always equal in value. In these situations, some cash may be added to the deal. This cash is known as “boot.” If you receive boot, you’ll have to recognize gain up to the amount of boot received.

For example, let’s say you exchange a building with a basis of $100,000 for a building valued at $125,000, plus $10,000 in cash. Your realized gain on the exchange is $35,000 because you received $135,000 in value for an asset with a basis of $100,000. However, because it’s a Sec. 1031 exchange, you have to currently recognize (and pay tax on) only $10,000 of your gain — the amount of cash (boot) you received.

It’s also important to remember that no matter how much boot you receive, you’ll never recognize more than your actual realized gain on the exchange. In addition, your basis in the like-kind replacement property you receive equals the basis you had in the relinquished property reduced by the amount of boot you received but increased by the amount of any gain recognized.

Myth 3: Cash is the only type of boot

Boot can take forms other than cash. If the property you’re exchanging is subject to debt from which you’re being relieved, the amount of the debt is generally treated as boot. The reason is that if someone takes over your debt, it’s equivalent to that person giving you cash.

Of course, if the replacement property is also subject to debt, then you’re treated as receiving boot only to the extent of your net debt relief — the amount by which the debt you become free of exceeds the debt you pick up.

Myth 4: You must have the replacement property lined up immediately

It’s possible — but rare — to find someone who wants to simultaneously swap like-kind properties with you. Fortunately, you don’t have to acquire the replacement property from the same party you relinquish your property to. And you don’t have to acquire the replacement property on the same day you transfer the relinquished property.

In most Sec. 1031 exchanges, the relinquished property is sold first, and the taxpayer uses the exchange proceeds to acquire a replacement property. However, a qualified intermediary must hold the proceeds from the relinquished property until they’re transferred to acquire the replacement property. And deadlines apply: Generally, you must 1) identify a potential replacement property within 45 days after transferring the relinquished property, and 2) complete the acquisition of the replacement property within 180 days.

These deadlines are strictly enforced. Missing either one can cause the entire transaction to lose tax-deferred treatment. While you don’t need to have the replacement property lined up immediately, you do need a plan. Begin evaluating replacement property options as early as possible and work closely with your professional advisors throughout the process.

Don’t let misconceptions derail your Sec. 1031 exchange

Like-kind exchanges can be a tax-savvy way to dispose of investment or business real property — and retain working capital for your business or investment activities. But you’ll need to meet all the requirements. If you’re considering selling investment or business real estate, contact us to discuss this strategy further.

Many parents don’t know that the so-called “kiddie tax” exists. Others assume it affects only minor children. But it also can apply to full-time students through age 23 and 18-year-olds even if they aren’t full-time students. When it applies, most of the child’s unearned income may be taxed at the parent’s higher tax rate.

The purpose of the kiddie tax is to minimize the ability of parents to significantly reduce their family’s taxes by transferring income-producing assets to their children in lower tax brackets. If your child has investment income from custodial accounts or other assets, understanding these rules can help you avoid unexpected tax consequences.

Who it affects

The kiddie tax generally applies to most unearned income of individuals who, at the end of the tax year, are:

• Under age 18,
• Age 18 (unless they provide more than half of their own support from earned income), or
• At least age 19 but under age 24 and full-time students (unless they provide more than half of their own support from earned income).

So, for a student, the kiddie tax can be an issue until the year that he or she turns age 24. For that year and future years, even full-time students who are still supported by their parents are kiddie-tax-exempt.

How it works

Earned income from a job or self-employment is never subject to the kiddie tax. And the tax is assessed on a child’s (or young adult’s) unearned income only to the extent that it exceeds the applicable threshold, which is $2,700 for 2026.

Unearned income usually means interest, dividends and capital gains. These types of income often come from custodial accounts that parents and grandparents set up and fund for younger children.

For 2026, the first $1,350 of unearned income is taxed at 0%. The second $1,350 is taxed at the child’s (or young adult’s) rate. This might also be 0% for some or all of the second $1,350, depending on 1) how much of the unearned income is made up of long-term capital gains and qualified dividends, and 2) whether the child’s (or young adult’s) taxable income is low enough for him or her to qualify for the 0% rate.

Then the excess is taxed at the parent’s rate. This could be up to 20% on long-term capital gains and qualified dividends and as much as 37% on interest, short-term capital gains and nonqualified dividends — depending on the parent’s taxable income.

When it applies

For 2026, Form 8615, “Tax for Certain Children Who Have Unearned Income,” must be filed and kiddie tax paid for any child (or young adult) who:

• Has more than $2,700 of unearned income,
• Is required to file Form 1040,
• As of December 31, 2026, is under age 18, is age 18 and didn’t have earned income in excess of half of his or her support, or is age 19, 20, 21, 22 or 23 and a full-time student and didn’t have earned income in excess of half of his or her support,
• Has at least one living parent, and
• Isn’t married and filing a joint return for the year.

The kiddie tax threshold is annually adjusted for inflation, but generally only in increments of at least $100. So it doesn’t necessarily go up every year. It didn’t increase for 2026, so it may be more likely to increase for 2027.

Planning opportunities

The kiddie tax can increase a family’s overall tax liability if investment income is generated in a child’s name. In some situations, it may make sense to review the types of investments owned in custodial accounts and the timing of investment sales. For example, growth-oriented investments that generate little current income may help reduce exposure to the kiddie tax until your child is old enough that this tax no longer applies. At that time, appreciated investments can begin to be sold, with the gains taxed at your child’s own, potentially lower, rate.

If you’d like help evaluating your family’s situation, contact us. We can assess potential kiddie tax exposure and suggest tax-efficient investment strategies.

If you participate in a company 401(k) plan, you already know that you can make pre-tax contributions up to the annual elective deferral limit to a traditional, tax-deferred account. If your 401(k) plan offers a Roth option, you can use part or all of your limit to make after-tax contributions to a Roth account instead. But you may have a third option, if your 401(k) plan allows it: Make after-tax contributions to a traditional account.

Traditional vs. Roth deferrals

For 2026, 401(k) elective deferral contributions are generally limited to $24,500. If you’ll be 50 or older at year end, you can make additional elective deferral contributions, called “catch-up” contributions. The 2026 catch-up contribution limit is either $8,000 or $11,250, depending on your age. However, if your 2025 salary exceeded $150,000, any catch-up contributions must be made to a Roth 401(k) account.

When you make pre-tax elective deferrals to a traditional 401(k), the contributions aren’t included in your taxable income for the year, but they’re still subject to Social Security and Medicare taxes (collectively called FICA tax). The account funds can grow on a tax-deferred basis, and you’ll owe income taxes on distributions — both those attributable to contributions and those attributable to growth.

When you make after-tax Roth 401(k) elective deferrals, the contributions don’t reduce your taxable income. So, they’re subject to both income tax and FICA tax. The payoff is that earnings in your Roth 401(k) account are allowed to accumulate income-tax-free and you can take income-tax-free qualified withdrawals from the account once you meet the requirements. (Generally, qualified distributions are those after age 59½ if the account has been open at least five years.)

How after-tax contributions are different

If your 401(k) plan allows non-Roth after-tax contributions, they’re treated as part of your taxable wages. Therefore, these contributions are subject to income tax and FICA tax. You may owe state and local income taxes, too. Because they don’t go into a Roth account, they aren’t eligible for all the tax benefits Roth accounts offer.

So, you might be thinking, “why would I want to make after-tax contributions?” The answer is to get more money into your 401(k) account, where it can accumulate income and gains without being taxed until you start taking withdrawals. These contributions aren’t subject to the annual elective deferral limit. So you can make them after you’ve maxed out that limit, including catch-up contributions, if applicable.

However, there’s still a limit on total additions that can be made each year to your 401(k). Including your elective deferrals (except for any catch-up contributions), your after-tax contributions and any employer contributions, 2026 contributions can’t exceed the lesser of: 1) $72,000 or 2) 100% of your compensation.

Also, after-tax contributions create tax basis in your account, which means that the after-tax amount contributed can eventually be withdrawn tax-free. (But withdrawals attributable to growth on that amount will be taxable, a significant difference from qualified Roth distributions.)

After-tax contributions in action

To illustrate how these contributions work, here’s an example: Let’s say your employer sponsors a 401(k) plan with a 50% company match, your 2026 salary is $150,000 and you’re under age 50. The plan allows employees to make after-tax contributions. You max out your elective deferral limit by contributing $24,500 to your traditional 401(k) account. Your employer makes a matching contribution of $12,250. That means you’re allowed to make up to $35,250 in after-tax contributions ($72,000 – $24,500 – $12,250) this year. You decide to make $10,000 of after-tax contributions.

• Your $24,500 of elective deferral contributions aren’t included in your taxable wages for federal income tax purposes but they are subject to FICA tax withholding.
• Your employer’s $12,250 matching contribution is exempt from federal income tax and FICA tax.
• Your $10,000 after-tax contribution is included in your taxable income and is subject to federal income tax and FICA tax. But it creates $10,000 of tax basis in your 401(k) account, which can be withdrawn tax-free.

Be aware that 401(k) plans are subject to complicated nondiscrimination rules intended to prevent plans from operating in favor of highly compensated employees as opposed to rank-and-file workers. In most cases, nondiscrimination rules won’t impact the ability of an employee to make after-tax contributions, but there may be exceptions.

Beyond elective deferrals

If you’ve been maxing out your elective deferrals, after-tax 401(k) contributions can be a tax-efficient way to add to your retirement nest egg. We can review your situation and help you determine whether you might benefit.

Tax scammers continue to target taxpayers through email, text messages, phone calls and regular mail. They often try to create urgency or fear to trick victims into sharing sensitive information or sending money. The IRS warns taxpayers to remain cautious because scammers continually change tactics to steal personal and financial information.

IRS impersonation scams

First and foremost, know that the IRS will never contact you by email, text or social media channels about a tax bill or refund. Most IRS initial communications are sent through regular mail. So if you get a call or message saying it’s the IRS and asking for your Social Security number, it’s someone trying to steal your identity and defraud you. Remember that the IRS already has your Social Security number.

Here are some common impersonation-related schemes to be aware of:

Phone calls. AI-generated voices and spoofed caller IDs to impersonate IRS agents are becoming more common. Scammers may leave urgent messages threatening arrest, penalties or legal action unless immediate payment is made. The IRS stresses that it won’t demand immediate payment over the phone.

Text messages and emails. Scammers use text messages and emails containing fake IRS links or QR codes to direct taxpayers to fraudulent websites designed to steal personal or financial information. These messages often claim there’s a problem with a refund, tax return or IRS account to try to create panic and pressure taxpayers into responding quickly.

Fake IRS notices. One current scheme takes advantage of growing confusion about the IRS CP53E notice. This is a notice related to tax refunds and bank account information. As the IRS shifts from paper checks to direct deposit, it’s mailing these notices to taxpayers who may need to add or update their banking details. Unfortunately, the IRS is sometimes mistakenly sending the notices when a taxpayer has already provided this information, creating confusion. Now fraudsters are sending fake versions of the notice in an attempt to steal taxpayers’ sensitive information. If you receive an IRS CP53E notice, verify its authenticity before acting. Don’t click links or scan QR codes.

Malware. In scams to infect computers and phones with malicious software, a phony email claims to come from the IRS. The subject line often states that the message is a notice of underreported income or a refund. There may be an attachment or a link to a bogus web page with your “tax statement.” When you open the attachment or click on the link, malware is downloaded to your device. This malware can give criminals remote access to your device and allow them to search for passwords, banking information and other sensitive data to help them steal your assets or your identity.

Other tax scams

The IRS recommends that taxpayers create an account to securely access their tax information. The account lets you view your refund status, make payments, check your balance and more. But be cautious. Scammers may offer account setup “help” so they can collect your sensitive data. Or they may use stolen personal information to access your account without authorization. Once inside an account, they may attempt to redirect refunds, obtain tax records or use the information to commit additional identity theft. Create and always access your account directly through IRS.gov, don’t share your information with unsolicited third parties, and check your account regularly.

Also watch out for fake online tax deduction calculators. These digital tools are intended to steal personal information and money from unsuspecting users. They’re often accompanied by false promises about new or expanded tax credits and deductions. The IRS says you should use calculators only on sites that end in .gov (such as irs.gov) or of well-known tax software companies. Also, be wary of any calculator that guarantees its result. Legitimate calculators can only produce estimates. And, as always, be suspicious of claims that seem “too good to be true,” such as unusually large tax savings.

The IRS also warns taxpayers to avoid other schemes involving questionable refund claims or credits promoted online or through social media. Promoters may encourage taxpayers to file inaccurate forms or claim credits they don’t qualify for. Improper claims can lead to refund delays, audits, penalties and other enforcement actions.

Reporting fraud

The IRS has launched a “Report fraud” webpage to simplify confidential reporting of suspected tax fraud or scams. It consolidates multiple IRS fraud-reporting options into a single location, allowing taxpayers to report suspected scams, tax evasion or other tax-related misconduct in one place: irs.gov/help/report-fraud.

If you’ve been a victim of identity theft, consider obtaining an Identity Protection Personal Identification Number (IP PIN). Issued by the IRS, this unique six-digit number helps prevent criminals from filing a fraudulent tax return using your Social Security number. It’s valid for one year and is automatically replaced after expiration. You can expect to receive a new one each year in mid-December to early January. You can apply online or get one at a Taxpayer Assistance Center. Once you receive your IP PIN, be sure to safeguard it. Use it only on Forms 1040.

Stay alert

Tax-related scams continue to evolve, so it’s important to be cautious when receiving unexpected phone calls, messages or even letters involving taxes, refunds or financial information. If you receive a questionable communication related to a tax return we prepared, contact us before responding. We can also answer other questions you have about protecting yourself from tax-related fraud.

Although your business may seem big to you, you may wonder how the government classifies it for tax purposes. If your organization qualifies as a “small business,” you may enjoy several important tax advantages. But the rules for specific tax provisions vary. So, depending on your size, you might be eligible for some so-called small business breaks but not others. Here’s a closer look.

No universal definition

Under federal tax law, there’s no one definition of a small business. Instead, several definitions apply depending on the context, various criteria and certain thresholds. Criteria may include a business’s:

• Gross assets,
• Gross receipts, and
• Number of shareholders and employees.

Even if a criterion such as gross receipts is the same across definitions, different thresholds may apply. Also, for some purposes, the tax code might define a small business in more than one way. Depending on how your performance and operations change over time, you might meet the government’s definition of a small business one year but not the next year.

5 special breaks for certain small businesses

The Section 448(c) gross receipts test serves as a common eligibility standard for several tax provisions available to qualifying small businesses. Under this test, your business may qualify for five potential tax breaks if it had average annual gross receipts of $25 million or less for the prior three-year period. This threshold is adjusted for inflation — for 2026, businesses that had average gross receipts up to $32 million are eligible for:

1. Cash accounting.You’re generally permitted to use the cash method of accounting for tax purposes even if you have inventories or use the accrual method for financial reporting. With certain exceptions, larger businesses — particularly those that carry inventory — must use accrual accounting. Using the cash method will likely allow you to defer more taxable income than you could under the accrual method.
2. Inventory simplification.You’re generally exempt from complex inventory accounting rules and may account for inventories by:

• Treating them as nonincidental materials and supplies, or
• Conforming to the inventory method you use in your financial statements or books and records.

Treating inventories as nonincidental materials or supplies allows you to deduct their cost when they’re “used or consumed.” Final IRS regulations clarify that materials aren’t used and consumed until the inventory is sold. So businesses can’t treat raw materials as used and consumed when converted into work-in-progress or finished goods.

3. Relief from UNICAP rules.You’re exempt from the uniform capitalization (UNICAP) rules, which require taxpayers to capitalize certain direct and indirect production costs to inventory, rather than deduct them when incurred. Not only can these rules increase your tax liability, but they also make tax reporting more complex.
4. Exemption from the business interest deduction limitation.You’re not subject to the cap on business interest write-offs, which generally limits deductions of net business interest expense to 30% of adjusted taxable income.
5. The completed contract method.If your business is in construction, manufacturing or another industry where long-term contracts are common, you may use the completed contract method rather than the percentage-of-completion method to account for long-term contracts expected to be completed within two years. The completed contract method allows you to defer tax until the contract is substantially complete, while the percentage-of-completion method can accelerate the tax.

When determining your business’s gross receipts, you may need to include those earned by certain related entities, such as those with common control. Special rules apply to organizations in existence for less than three years. Also, tax shelters, including syndicates, don’t qualify for small business status, even if their gross receipts are below the threshold.

Sizing up your business

Of course, these five relief measures aren’t the only tax-saving opportunities for small business owners at the federal and state levels. And determining eligibility can be more complicated than it appears. We can help evaluate your eligibility for these breaks and others — and develop a long-term plan that’s tailored to your situation. Contact us to explore the potential tax benefits of small business status.

Whether you’re relocating for work, retirement, family or lifestyle reasons, state taxes can have a significant financial impact. Taxes vary widely from state to state. And establishing residency for tax purposes may be more complicated than you expect. Before moving, be sure you understand how changing states could affect your overall tax situation.

A variety of taxes to consider

It may seem like a tax-smart idea to simply move to a state with no personal income tax. But to make an informed decision, you must consider all taxes that can potentially apply to a state resident. In addition to income taxes, these may include property taxes, sales taxes and estate taxes.

If the state you’re considering has an income tax, look at the types of income it taxes. For example, some states offer tax breaks for pension payments, retirement plan distributions and Social Security payments.

Some states with low or no income tax have higher-than-average property tax rates or sales tax rates that could offset income tax savings. Even if you’re moving from one no-income-tax state to another, it’s important to look at how your potential property and sales tax expenses in each state compare.

When it comes to estate taxes, the federal estate tax doesn’t apply to many people these days. For 2026, the federal gift and estate tax exemption is $15 million per individual, or $30 million for a married couple (with proper planning). But some states that have an estate tax provide a much lower exemption. And some states have an inheritance tax in addition to (or in lieu of) an estate tax.

Effectively establishing domicile

If you make a permanent move to a new state and want to ensure you’re not taxed in the state you came from, be careful to establish legal domicile in the new location and terminate it in your old one. The definition of legal domicile varies from state to state. In general, domicile is your fixed and permanent home and the place where you plan to return, even after periods of residing elsewhere.

The more time that passes after you change states and the more steps you take to establish domicile in the new state, the harder it will be for your old state to claim that you’re still domiciled there for tax purposes. Five ways to help establish domicile in a new state are to:

Change your mailing address at the post office,
Change your address on insurance policies, will or living trust documents, and other important documents,
Buy or lease a home in the new state and sell your home in the old state (or rent it out at the market rate to an unrelated party),
Open and use bank accounts in the new state and close accounts in the old one, and
Register to vote, get a driver’s license and register your vehicle in the new state.

If you’re required to file an income tax return in the new state, file a resident return. And file a nonresident return or no return (whichever is appropriate) in the old state. We can help you make these decisions and file these returns.

Plan before you relocate

Moving to another state can affect your taxes in ways that aren’t always obvious. Before you relocate, contact us to review the potential income, property, sales and estate tax implications. We can help you minimize potential negative tax consequences and make the most of any tax advantages offered by the new state.

Businesses that own commercial real property may be sitting on an overlooked treasure chest of tax savings — and a cost segregation study can be the key to unlocking it. This is a strategic tool that combines accounting and engineering techniques to identify building costs that are properly allocable to tangible personal property rather than real property. A cost segregation study may allow you to accelerate depreciation deductions on certain items, thereby deferring taxes and boosting cash flow.

Timing counts when depreciating assets

Commercial rental properties and buildings used for business purposes are generally depreciated over 39 years under federal tax law. But such properties may include a wide range of components with much shorter depreciation recovery periods. These can include parts of various systems such as HVAC, plumbing, electrical, fire protection, alarm and security, as well as:

• Drywall,
• Doors,
• Fixtures,
• Data and communication ports,
• Flooring, and
• Cabinetry.

These assets could have useful lives of five, seven or 15 years — all significantly less than 39 years. By segregating such assets, you can claim greater depreciation deductions sooner. You’ll claim the same total amount of depreciation on the assets over time but reduce your tax bill in the short term, providing greater cash flow.

OBBBA changes add value

Recent tax law changes under the One Big Beautiful Bill Act (OBBBA) enhanced these benefits by increasing first-year depreciation write-offs. The two most widely relevant provisions relate to:

1. Bonus depreciation.The OBBBA restored 100% first-year bonus depreciation deductions for eligible assets acquired and placed in service after January 19, 2025. While commercial real properties aren’t eligible for first-year bonus depreciation, segregated building components with shorter recovery periods may be eligible. There are no phaseout limits for bonus depreciation, which is helpful for larger companies.
2. Section 179 expensing.For tax years beginning in 2025, the OBBBA increased the maximum amount of eligible assets you can immediately deduct under the Sec. 179 expensing election to $2.5 million. A phaseout reduces the maximum Sec. 179 deduction if, during the year, you place in service eligible assets in excess of $4 million. Both figures are adjusted annually for inflation. For 2026, they’re $2.56 million and $4.09 million, respectively. Again, commercial real properties aren’t eligible for Sec. 179 expensing, but segregated building components with shorter recovery periods may be eligible.

Additionally, if your business involves manufacturing or certain agricultural activities, you may be eligible for a new depreciation-related tax break. The OBBBA introduced a 100% deduction for the cost of qualified production property (QPP). To be eligible, among other requirements, a qualifying real property’s construction must begin after January 19, 2025, and before January 1, 2029, and it must be placed in service before 2031. This break allows eligible businesses to immediately deduct the cost of QPP that otherwise would be depreciable over 39 years.

The QPP deduction makes cost segregation studies less relevant for qualifying property. But it’s subject to several specific requirements and exceptions that may prevent you from claiming it.

Ready, set, save

A cost segregation study can significantly lower your taxes, but it isn’t a do-it-yourself project. Although this strategy has been consistently upheld in the courts, the IRS closely monitors deductions based on cost segregation studies. And the rules can be confusing.

So, it’s prudent to hire experienced professionals to help you identify various building components and break down write-off periods for them. Contact us to discuss whether a cost segregation study could potentially save you taxes. We can determine reasonable cost allocations to help withstand IRS scrutiny.

Large stock market gains in recent years, coupled with some significant volatility in 2026, have left many investors with portfolios that are out of balance with their desired asset allocation. If you haven’t rebalanced recently, it may be time to do so. But you also must consider the tax implications. Careful planning can minimize the tax cost of rebalancing.

What does rebalancing mean?

When you built your investment portfolio, you took several factors into account, such as your performance goals, risk tolerance and age, to arrive at an allocation across asset classes (such as money market funds, stocks and bonds) and subcategories (such as small-cap vs. mid-cap vs. large-cap U.S stocks and U.S. Treasury vs. municipal bonds). When one asset class (or subcategory) outperforms, it will become a larger portion of your portfolio than your original asset allocation. This situation can potentially increase your risk and cause your portfolio to no longer align with your goals.

To keep your asset allocation in alignment, monitor your portfolio regularly and rebalance it as needed. Rebalancing involves selling some investments in classes that have become overweighted, usually appreciated stocks and mutual fund shares. You then reinvest the proceeds in other asset classes to help achieve your desired allocation. But the gain you recognize from selling appreciated investments will be currently taxable — unless the investments are held in tax-advantaged retirement accounts, such as 401(k)s and IRAs.

Taxable brokerage accounts

When you file your tax return, your recognized capital gains for the year are netted against your recognized capital losses. If your gains in your taxable accounts exceed your losses, you have a net capital gain.

If a net capital gain is from investments held for more than a year, it will be taxed at the federal long-term gains rate. Most individuals will pay 15%, but, depending on your income, the rate could be 0% or 20%. Also depending on your income, you may owe the 3.8% net investment income tax (NIIT) on all or part of your net long-term gain. Depending on your state, you might owe state income tax, too.

If you have a net capital gain from investments held for one year or less, it will be taxed at the short-term gains rate. This is your ordinary federal income tax rate, which may be as high as 37%. You may also owe the NIIT on all or part of your net short-term gain. And, again, you might owe state income tax.

If losses in your taxable accounts for the year exceed your gains, you have a net capital loss. You can deduct the loss against up to $3,000 of ordinary income ($1,500 if you’re married and file separately). Any remaining net capital loss is carried over to next year.

Tax-advantaged retirement accounts

If you sell assets held in a tax-advantaged retirement account, the resulting gains and losses affect your account balance. But they have no tax impact until you start taking withdrawals.

If it’s a non-Roth account, the taxable portion of withdrawals (generally any amount attributable to appreciation or to contributions that were pretax or deductible) will be taxed at your ordinary federal income tax rate. Depending on your state, you may also owe state income tax.

If it’s a Roth account, qualified withdrawals will generally be income-tax-free for federal purposes. This includes withdrawals attributable to appreciation.

Tax-smart strategies

If you have both taxable and tax-advantaged accounts, consider them together when rebalancing your portfolio. For example, let’s say your overall portfolio across brokerage and retirement accounts has become overweighted in large-cap U.S. stocks. You can save taxes for the current year if you sell some of this appreciated stock from a retirement account because the gain won’t be taxed.

Sometimes selling appreciated assets in a taxable brokerage account will be necessary to achieve rebalancing goals. In this case, look to see if there are also assets in that account (or another taxable account) that you can sell at a loss. The recognized loss can offset some or all of your capital gains on the appreciated assets you sell. Remember that selling assets at a loss in your tax-advantaged retirement account won’t provide a current-year tax loss.

If you need to sell appreciated assets in a brokerage account and you won’t be able to recognize enough losses to offset your gains, try to sell assets you’ve held more than one year. That way, the gain will be taxed at your lower long-term gains rate.

Rebalancing involves not only selling assets in classes that have become overweighted but also using the proceeds to buy assets in classes that have become underweighted. As you invest in new assets, consider which assets make more sense to hold in taxable vs. tax-advantaged accounts.

It generally makes sense to hold the investments you think will generate the highest long-term returns in a Roth account, because you can eventually take the resulting income and gains out free of federal income taxes. And if you do a lot of short-term trading that would generate high-taxed short-term gains in a taxable brokerage firm account, it makes sense to do the trading in a tax-advantaged retirement account.

Look beyond current tax consequences

Despite the significant impact taxes can have, don’t make investment decisions — including those related to rebalancing your portfolio — based primarily on current-year tax consequences. You should also consider investment goals, time horizon, risk tolerance, investment-specific factors, fees and the long-term tax consequences. If you have questions or would like more information about investment portfolio rebalancing, contact us.

Yes, the April 15 tax deadline is now behind us. But there are also deadlines during the rest of the year that are important to be aware of. To help you not miss any, here’s when some key tax-related forms, payments and other actions are due. Keep in mind that this list isn’t all-inclusive. There may be additional deadlines that apply to you.

Please review the calendar and let us know if you have any questions about the deadlines or would like assistance in meeting them.

June 15

• File a 2025 individual income tax return (Form 1040 or Form 1040-SR) or file for a four-month extension (Form 4868) if you live outside the United States and Puerto Rico or you serve in the military outside those two locations. Pay any tax, interest and penalties due.
• Pay the second installment of 2026 estimated taxes (Form 1040-ES) if not paying income tax through withholding or not paying sufficient income tax through withholding.

September 15

• Pay the third installment of 2026 estimated taxes (Form 1040-ES) if not paying income tax through withholding or not paying sufficient income tax through withholding.

September 30

• If you’re the trustee of a trust or the executor of an estate, file an income tax return for the 2025 calendar year (Form 1041) if an automatic five-and-a-half-month extension was filed. Pay any tax, interest and penalties due.

October 15

• File a 2025 individual income tax return (Form 1040 or Form 1040-SR) if an automatic six-month extension was filed (or if an automatic four-month extension was filed by a taxpayer living outside the United States and Puerto Rico or serving in the military outside those two locations). Pay any tax, interest and penalties due.
• Make contributions for 2025 to certain retirement plans or establish a SEP for 2025 if an automatic six-month extension was filed.
• File a 2025 gift tax return (Form 709) if an automatic six-month extension was filed. Pay any tax, interest and penalties due.

December 31

• Make 2026 contributions to certain employer-sponsored retirement plans.
• Make 2026 annual exclusion gifts (up to $19,000 per recipient).
• Incur various expenses that potentially can be claimed as itemized deductions on your 2026 tax return. Examples include charitable donations, medical expenses and property tax payments.

After you’ve filed your 2025 tax return, what’s next? It’s easy to move on to other things, but taking a little time to address some tax-related items now can help you stay organized and avoid issues later. Here are a few to-dos.

Check your refund status

If you’re getting a tax refund and haven’t received it yet, the IRS offers a couple of ways to check the status. Begin by visiting irs.gov and going to “Where’s my refund?” If you’ve already set up an IRS account, you can sign in to check your refund. You also can request email notifications for status updates.

Alternatively, you can use the refund tracker. You’ll need your Social Security number or Individual Taxpayer Identification Number, filing status, and the exact refund amount on your return.

File an amended return if needed

Let’s say you find receipts for some deductible 2025 expenses you didn’t report on your return. You can file an amended return to claim those deductions and potentially increase your refund.

But there’s more to consider than just reporting the additional deductions. The change could affect other aspects of your return as well as your state return, if applicable. We can review the impact and assist you with properly filing an amended return.

In general, you can file an amended tax return on Form 1040-X and claim a refund within three years of the date you filed your original return or within two years of the date you paid the tax, whichever is later. So for a 2025 tax return that you file on April 15, 2026, your deadline for filing an amended return to claim a refund generally will be April 15, 2029.

However, in certain situations you’ll have more time to file an amended return. For example, the statute of limitations for bad debt deductions is longer than the usual three-year time limit for most items on your tax return. In general, you can amend your tax return to claim a bad debt for seven years from the due date of the tax return for the year that the debt became worthless.

Tidy up your tax records

After you’ve filed your 2025 return, be sure to store your return and all supporting documents in a secure place where you’ll easily be able to find them in the future if needed. Now is also a good time to tidy up previous years’ records. Although retaining the appropriate tax records is important, you don’t have to keep everything forever.

You should hold on to records related to your filing for as long as the IRS can audit your return or assess additional taxes. The statute of limitations is generally three years after you file your return. So you potentially can dispose of records related to your 2022 income tax return if you filed it by the April 2023 deadline. (Be aware that the statute of limitations extends to six years for taxpayers who understate their gross income by more than 25%.)

However, you should keep certain tax-related records longer. For example, keep copies of your tax returns and other proof of filing indefinitely to document that you filed. (There’s no statute of limitations for an audit if you didn’t file a return or you filed a fraudulent one.)

Retain records related to real estate or investments for as long as you own the asset, plus at least three years after you sell it and report the sale on your tax return. Similarly, keep records associated with a retirement account until you’ve depleted the account and reported the last withdrawal on your tax return, plus three years.

Turn your tax focus to 2026 planning

Once you’ve received your 2025 refund or filed an amended return (if applicable) and organized your tax records, it’s time to focus on 2026 planning. You can potentially maximize tax savings and minimize last-minute scrambling by planning now, rather than waiting until year end. We can help project your income, deductions and credits for the year and propose strategies you can implement in the coming months to reduce your taxes. Contact us to get started.