“I’m driving to see clients constantly. I think I actually need a car for the business.”

Maybe you’re visiting customers, traveling between job sites, meeting prospects, hauling equipment, or simply putting a ridiculous number of miles on your personal vehicle for work.

And then the questions start.

• Can the business buy the vehicle?
• Can you take out the auto loan through the business?
• Does the loan have to be in your personal name?
• Can the business make the payments?
• What happens if you use the vehicle for personal trips, too?
• And does forming an LLC or S corporation somehow change the answer?

The short version is: yes, a business can generally own or finance a vehicle, but the tax treatment depends on how the vehicle is owned, how it’s used, and how your business is structured.

And there’s an important distinction between who legally owns the vehicle, who borrows the money, who makes the payments, and how much of the vehicle is actually used for business.

Those aren’t necessarily the same thing.

First: Does the Vehicle Actually Need to Be a “Business Vehicle”?

Here’s the misconception to get out of the way first:

You don’t necessarily need to buy a vehicle in your company’s name for the business to receive a tax deduction for business driving.

If you personally own a vehicle and use it for your business, you may be able to deduct the business portion of your vehicle expenses.

The IRS generally gives qualifying taxpayers two ways to calculate business vehicle expenses: the standard mileage method or the actual expense method.

For 2026, the standard business mileage rate is 72.5 cents per mile.

So before you walk into a dealership and announce that your LLC needs a new SUV, ask a more fundamental question:

• Is buying a vehicle through the business actually the best option for you?

Sometimes it is.

Sometimes keeping the vehicle personally owned and deducting or reimbursing legitimate business use is cleaner.

Business Ownership vs. Personal Ownership

There are essentially two broad approaches.

Option 1: You own the vehicle personally

You buy and finance the vehicle in your own name, then account for the business use separately.

This can make sense when you use the vehicle for both personal and business purposes.

Depending on your business structure, the business may reimburse you for qualifying business mileage or you may claim the appropriate business-use deduction.

Option 2: The business owns the vehicle

The business purchases or finances the vehicle in the business’s name.

The business then generally pays the vehicle’s expenses and accounts for the business and personal use of the vehicle.

This can make sense when the vehicle is primarily or exclusively used for business, particularly when the business is operating as a separate legal entity.

But here’s the part entrepreneurs sometimes miss:

Putting the vehicle in the company’s name doesn’t magically turn personal driving into a business deduction.

If you use the company’s vehicle to drive to the grocery store, take your kids to school, or go on vacation, that personal use is still personal use.

The tax rules don’t care what logo is on the side of the vehicle.

Can You Take the Auto Loan Through Your Business?

Potentially, yes.

A business can borrow money to purchase business assets, including vehicles. SBA-backed financing can also be used for long-term fixed assets and other business purposes, although a standard auto loan through a bank, credit union, or dealer may be more appropriate depending on the situation.

But there’s an important difference between being legally able to finance a vehicle through your business and a lender being willing to give your business the loan.

A lender may look at:

• How long you’ve been in business
• Business revenue and cash flow
• Business credit
• Your personal credit
• The vehicle
• Your down payment
• Existing business debt
• Your personal guarantee

For a new business, the lender may have very little business financial history to evaluate.

That can mean the lender relies much more heavily on your personal credit and personal guarantee.

The SBA specifically notes that small-business owners may be required to provide personal guarantees on business loans.

So don’t be surprised if the paperwork says “business loan” while the bank still wants your Social Security number, personal credit history, and signature.

What If Your Business Is Brand New?

This is where things can get interesting.

If you formed your LLC three months ago and have $15,000 in revenue, a lender doesn’t necessarily look at that business the same way it would look at a company that’s been operating profitably for five years.

A newer business generally has less financial history for a lender to evaluate.

That doesn’t mean you can’t get financing.

It means the lender may put more weight on your personal creditworthiness, income, assets, down payment, and personal guarantee.

Business credit also doesn’t appear overnight. The SBA recommends establishing and maintaining business credit as part of building a stronger business financial profile.

For a brand-new business, it may therefore be perfectly normal for the vehicle financing to involve you personally even if the vehicle is being purchased for legitimate business purposes.

The tax question and the financing question are related, but they’re not the same question.

What If You’ve Been in Business for Several Years?

A business with two, three, five, or more years of consistent revenue has something a startup doesn’t:

• a track record.

A lender can potentially evaluate your business’s financial statements, bank statements, tax returns, cash flow, and existing credit history.

That may make it easier to qualify for business financing or obtain better terms.

But again, there is no universal rule saying:

• “Once you’ve been in business for two years, you can get a business car loan.”

Lenders have their own underwriting requirements.

Your business structure also doesn’t guarantee approval.

An established sole proprietorship, LLC, or S corporation can still be evaluated differently depending on the lender and the owner’s financial situation.

What About a Sole Proprietor?

A sole proprietorship is the simplest case because, for federal income-tax purposes, the business and owner generally aren’t separate taxpayers.

If you are a sole proprietor and buy a vehicle personally, you may be able to deduct the business portion of its use.

You may also be able to use the actual-expense method, depending on the circumstances.

The important thing is keeping good records of your business mileage and expenses.

For example, suppose you drive:

• 18,000 total miles during the year
• 11,000 miles for legitimate business purposes
• 7,000 miles for personal purposes

You don’t get to deduct 100% of the vehicle simply because you are a business owner.

You need to account for the business portion.

And remember that commuting between your home and regular place of business is generally considered personal commuting, not business mileage.

Driving from your office to a client meeting is a very different situation from driving from your home to your regular workplace.

What About an LLC?

“LLC” doesn’t tell you enough about the tax treatment.

That’s because an LLC is a legal structure, but it can have different federal tax classifications.

A single-member LLC may be taxed as a disregarded entity by default.

A multi-member LLC is generally taxed as a partnership unless it elects otherwise.

An LLC can also elect to be taxed as an S corporation or C corporation if it qualifies.

So when someone says, “I have an LLC. Can my LLC buy the car?” the next question should be:

How is the LLC taxed?

From a practical standpoint, an LLC can own a vehicle, finance one, or have the owner personally own the vehicle and have the business account for legitimate business use.

Which approach makes the most sense depends on the business’s tax classification, how much the vehicle is used for business, and how the business handles reimbursements and expenses.

What About an S Corporation?

This is where you want to be more deliberate.

An S corporation is a separate tax entity from its owner, and the mechanics of paying for a personally owned vehicle are different from simply putting everything on the owner’s personal return.

If you personally own the vehicle but use it for your S corporation’s business, the corporation can potentially reimburse you for qualifying business expenses under an appropriately structured accountable plan.

That can allow the corporation to deduct qualifying business expenses while keeping the reimbursement from simply becoming additional taxable wages, assuming the applicable requirements are satisfied.

Alternatively, the S corporation can own or lease a vehicle.

But if you use a company-owned vehicle personally, the personal-use portion generally needs to be accounted for appropriately. The IRS requires business and personal use to be separated when a vehicle has mixed use.

This is one reason S corporation owners should talk to their CPA before buying the vehicle rather than trying to clean everything up at tax time.

How Do You Draw the Line Between Personal and Business Driving?

This is probably the most important part of the entire discussion.

• Keep a mileage log.

Don’t try to reconstruct your driving six months later from memory.

Your records should make it possible to determine:

• Date of the trip
• Starting point
• Destination
• Business purpose
• Business miles
• Total mileage

You don’t need to turn your car into a government surveillance vehicle.

But you do need enough documentation to substantiate the business use.

The IRS specifically emphasizes recordkeeping for vehicle deductions.

A mileage-tracking app can make this substantially easier.

And if you use the vehicle for both business and personal purposes, the IRS generally requires you to allocate expenses based on actual business use.

Business driving might include:

• Driving from your office to a client meeting.
• Traveling between client locations.
• Driving to a temporary work location for business.
• Traveling to a supplier, job site, or business event.
• Driving to pick up business supplies.

Personal driving might include:

• Driving home from your regular workplace.
• Taking the family on vacation.
• Running personal errands.
• Driving to the grocery store.
• Taking your kids to school.
• Driving to a personal appointment.

The fact that you’re thinking about business while you’re driving doesn’t make the mileage business mileage.

Unfortunately, the IRS does not recognize “I was brainstorming my quarterly strategy at Target” as a tax category.

Can the Business Pay the Car Payment If You Bought the Vehicle Personally?

This is where you want to be careful.

If you personally own the vehicle and personally borrowed the money, don’t simply start paying your personal auto loan from the business checking account and assume the entire payment is a business expense.

That can create messy bookkeeping and potentially incorrect tax treatment.

Instead, the business should use the appropriate reimbursement or expense-accounting method for the business use of the vehicle.

For an S corporation in particular, this is an area where having a properly documented accountable plan can be important.

And even when the business owns the vehicle, you still need to distinguish legitimate business expenses from personal use.

The fact that money came out of the business account doesn’t determine whether the expense is deductible.

The underlying facts do.

What About the Actual Car Payment?

Another common misconception is:

“If my company pays a $700 monthly car payment, can I deduct $700?”

Not necessarily.

The tax deduction isn’t simply “whatever came out of the checking account.”

Depending on how the vehicle is owned and which deduction method applies, the tax treatment can involve depreciation, operating expenses, lease payments, interest, or the standard mileage method.

For example, if you use the standard mileage method, you generally don’t also deduct gasoline, maintenance, insurance, depreciation, and other operating expenses separately. However, business-related parking and tolls may generally be deducted separately, and the IRS says interest on a car loan may still be deductible in certain circumstances.

If you use the actual-expense method, the calculation works differently.

That’s why it’s worth running the numbers before you buy the vehicle.

What If the Vehicle Is Used Almost Entirely for Business?

If the vehicle is genuinely used almost exclusively for business, having the business purchase and own the vehicle may make more sense.

But “almost exclusively” should mean exactly what it sounds like.

If you buy a pickup truck for your contracting company and it spends Monday through Friday hauling equipment and traveling to job sites, but you take it on a two-week family road trip every summer, you have mixed use.

That doesn’t necessarily destroy the business deduction.

It means you need to account for the personal use correctly.

And the higher the percentage of business use, the more important accurate records become.

Don’t Buy a $70,000 Car Just Because Someone Said It’s a Tax Write-Off

This deserves its own section because it is one of the most expensive pieces of bad business advice floating around.

A tax deduction doesn’t make a vehicle free.

If you spend $60,000 on a vehicle and receive a $60,000 deduction, you haven’t magically made $60,000 appear in your bank account.

You’ve potentially reduced taxable income, subject to the applicable depreciation, vehicle, business-use, and other rules.

You still spent the money.

The right question isn’t:

• “How big of a vehicle can I deduct?”

It’s:

• “What vehicle actually makes sense for my business, and what tax treatment applies to it?”

Sometimes that means buying the expensive truck.

Sometimes it means buying a $30,000 used vehicle.

And sometimes it means keeping your existing personal car and tracking business mileage.

A Simple Decision Framework

If you’re sitting at your desk wondering what to do, start here.

If you’re a sole proprietor: consider whether personal ownership plus the appropriate business-use deduction is simpler than putting the vehicle into the business.

If you’re a single-member LLC: first determine how the LLC is taxed. Don’t assume “LLC” automatically determines the answer.

If you’re an S corporation: talk to your CPA about whether the corporation should own the vehicle or reimburse you for business use under an accountable plan.

If the business is brand new: expect the lender to potentially rely heavily on your personal credit and guarantee because the business has limited financial history.

If the business has been operating successfully for several years: gather business tax returns, financial statements, bank statements, and other documentation before applying. Your established history may give the lender more information to work with.

And regardless of structure:

Track your mileage from day one.

Before You Buy the Vehicle

Before signing the paperwork at the dealership, have a conversation with your CPA.

Give them the actual numbers:

• Purchase price
• Down payment
• Proposed loan terms
• Expected annual business mileage
• Expected personal mileage
• Whether you or the business will own the vehicle
• Whether you expect to keep the vehicle long term
• Your business structure and tax classification

Then have them compare the potential tax treatment.

You may discover that putting the vehicle in the business is the best option.

You may discover that personally owning it and having the business reimburse you is cleaner.

And you may discover that the difference isn’t large enough to justify making your bookkeeping substantially more complicated.

The Bottom Line

Yes, your business can potentially purchase or finance a vehicle.

But “Can my business buy a car?” and “Should my business buy my car?” are two different questions.

A business can potentially finance a vehicle directly, but a lender may still require you to personally guarantee the loan—especially if the business is new or doesn’t have an extensive credit history.

From a tax perspective, what matters is not simply whose name appears on the title or whose bank account makes the payment.

It is how the vehicle is owned, how it is used, how the expenses are handled, and whether you can document the business use.

For a sole proprietor, personally owning the vehicle and deducting legitimate business use may be perfectly reasonable.

For an LLC, you need to consider how the LLC is taxed before deciding how to structure the vehicle.

For an S corporation, reimbursement and accountable-plan rules can become particularly important if you personally own the vehicle.

And whether your company is two months old or five years old can make a meaningful difference when you’re talking to a lender, even though it doesn’t fundamentally change the IRS rules governing business vehicle deductions.

The best time to figure all of this out isn’t when you’re sitting in the finance office being asked whether you want the extended warranty.

It’s before you buy the car.

The post Can Your Business Buy a Car? How Entrepreneurs Should Finance and Deduct a Business Vehicle appeared first on Huddleston Tax CPAs | Accounting Firm In Seattle.

But there’s an important misconception worth clearing up: receiving a 1099-K does not automatically mean all of the money reported on it is taxable income.

And if you’ve heard that payment apps automatically issue a 1099-K once you receive $600, that is no longer the federal rule.

Here’s what you need to know.

What Is Form 1099-K?

Form 1099-K, Payment Card and Third Party Network Transactions, is an information return used to report certain payments you receive through payment cards, online marketplaces, and third-party payment networks.

You might receive one if you’re using an online platform to:

• Sell products
• Provide services
• Run a freelance or gig business
• Sell goods through an online marketplace
• Accept credit or debit card payments from customers

The form reports the gross amount of payments processed through the platform. It doesn’t necessarily represent your actual taxable profit.

For example, if your business receives $20,000 through an online payment platform but you spent $8,000 on deductible business expenses, your taxable business income isn’t automatically $20,000. You still need to account for the underlying expenses and other tax rules.

The $600 1099-K Rule Is No Longer the Rule

This is one of the biggest changes to understand.

You may have seen older articles warning that starting in 2022, payment platforms would issue Form 1099-K once you received more than $600 in payments.

That rule was never fully implemented as originally anticipated.

For third-party settlement organizations, the federal reporting threshold was ultimately restored to the older standard: for 2025 and later years, a payment platform generally must issue a 1099-K when you receive more than $20,000 in payments AND more than 200 transactions for goods or services.

For example, someone who received $15,000 through an online marketplace in 2025 generally would not receive a 1099-K based solely on those transactions because the $20,000 threshold wasn’t reached.

However, there’s an important catch: not receiving a 1099-K doesn’t mean the income isn’t taxable.

If you earned money selling products or providing services, you generally need to report that income whether or not you receive an information return from the payment platform.

Payment Cards Are Different

The $20,000-and-200-transactions threshold applies to third-party network transactions.

Payment card transactions work differently.

Payment card processors generally report payment card transactions on Form 1099-K regardless of the amount. So if you’re accepting credit or debit card payments from customers, you shouldn’t assume you won’t receive a 1099-K simply because your total revenue is below $20,000.

That’s one reason it’s important to understand how you received the money, rather than treating every payment platform the same way.

Not Everything on a 1099-K Is Taxable

This is where people can get into trouble.

Form 1099-K reports payments. It doesn’t make a determination about whether those payments are taxable income.

Suppose you sell an old television for $200 through an online marketplace. You originally paid $500 for it.

You may receive a 1099-K showing $200 of gross payments, but you didn’t make $200 of taxable profit. You actually sold the personal item at a $300 loss.

Personal-use losses generally aren’t deductible, but you also don’t have to pay income tax on money you received from selling the item for less than you paid for it. The IRS provides procedures for properly accounting for personal items sold at a loss when they appear on a 1099-K.

The same basic principle applies to other transactions that aren’t actually income.

What About Venmo, Zelle, and Friends and Family Payments?

This is another common source of confusion.

If your roommate sends you $1,000 to reimburse you for rent, that’s generally not business income.

If your friends send you money to reimburse you for a dinner, that’s generally not taxable income.

If a family member sends you a gift, that’s not automatically taxable income to you either.

The IRS specifically says that personal payments between friends and family for gifts and reimbursements should not be reported as Form 1099-K transactions.

The important distinction is why the money was sent.

If someone sends you $1,000 through Venmo for a website you built for them, that’s a very different situation from someone sending you $1,000 to reimburse you for their share of the rent.

Make Sure You Classify Payments Correctly

Payment apps and online marketplaces have their own systems for determining whether transactions are personal or related to goods and services.

Whenever possible, make sure you’re selecting the appropriate payment type when sending or receiving money.

If you’re receiving money from friends or family for personal reimbursements, don’t mischaracterize those transactions as business payments.

And if you’re actually selling goods or providing services, don’t assume that labeling the transaction “friends and family” makes taxable business income disappear.

The IRS recommends keeping track of what payments were for and properly designating transactions when the payment platform allows it.

How to Avoid Overpaying Taxes on a 1099-K

If you receive a 1099-K, don’t panic when you see the gross amount.

Instead, compare it with your own records.

For a business, that means reconciling the 1099-K against your sales records, bank statements, payment processor reports, refunds, fees, and business expenses.

For personal sales, keep records showing what you originally paid for items and what you eventually sold them for.

For personal reimbursements, keep documentation showing what the payment was actually for.

Good records are particularly important because Form 1099-K reports gross payments, which may not match the amount you actually earned after refunds, fees, expenses, or other adjustments.

What If Your 1099-K Is Wrong?

It happens.

You might receive a 1099-K that includes personal payments, transactions belonging to someone else, or an amount that doesn’t match your records.

Start by reviewing the transaction history with the payment platform and comparing it against your own records.

If the form contains incorrect information, contact the payment platform and request a correction.

You should also retain documentation explaining why the amount reported on the form doesn’t represent taxable income.

The IRS specifically recommends checking the form against your records and taking steps to correct inaccurate information.

Do You Have to Report Income If You Never Receive a 1099-K?

Yes.

This is probably the most important takeaway.

The 1099-K is an information-reporting document. It doesn’t determine whether income is taxable.

If you earned $5,000 providing freelance services and your clients paid you through cash, checks, Venmo, or another platform that didn’t issue a 1099-K, you still generally have to report that $5,000 of business income.

The same applies to taxable sales and other forms of income.

In other words:

No 1099-K doesn’t mean no tax.

And receiving a 1099-K doesn’t necessarily mean every dollar shown on the form is taxable.

Should You Stop Using Payment Apps for Personal Transactions?

Probably not.

The original version of this article suggested using cash or checks for personal payments to avoid potential 1099-K complications.

That’s generally unnecessary.

There’s nothing inherently wrong with using Venmo, PayPal, Zelle, or another payment service to split a restaurant bill or reimburse a roommate.

The better strategy is to use the payment platform’s personal-payment features correctly and maintain reasonable records.

The IRS specifically notes that personal payments such as gifts and reimbursements aren’t supposed to be reported as 1099-K income.

Switching back to cash simply because you’re worried about a 1099-K isn’t a particularly useful tax strategy.

What Small Business Owners Should Do

If you’re using payment apps or online marketplaces for your business, keep your business and personal transactions as separate as possible.

Ideally, use dedicated business accounts and payment profiles, reconcile your payment platforms regularly, and maintain records of both income and expenses.

Don’t wait until tax season to figure out why your Stripe, PayPal, Venmo, eBay, or other platform’s numbers don’t match your bookkeeping.

A little reconciliation throughout the year can save a considerable amount of time when you file your return.

The Bottom Line

Form 1099-K isn’t a new tax. It’s an information-reporting form designed to help the IRS track certain payments made through payment cards and third-party payment networks.

For 2025 and later years, the federal reporting threshold for third-party network transactions is generally more than $20,000 and more than 200 transactions, although a platform can issue a 1099-K even when those thresholds aren’t met. Payment card transactions have different reporting rules.

The important thing is to remember that the taxability of a payment depends on what the payment actually represents — not simply whether you received a 1099-K.

If you’re running a business, selling online, freelancing, or receiving a 1099-K that doesn’t seem to match your records, don’t simply report the form’s gross amount as taxable income and move on.

Reconcile the transactions, document what the payments represent, account for legitimate expenses and losses where appropriate, and make sure your tax return reflects what you actually earned.

The post 1099-K Forms: What you Need to Know about Online Payments appeared first on Huddleston Tax CPAs | Accounting Firm In Seattle.

Several tax changes passed by the Washington Legislature in 2025 are now in effect, including changes to the state’s Business & Occupation (B&O) tax, a new surcharge on very large businesses, and an expansion of Washington’s retail sales tax to cover certain services that previously weren’t subject to sales tax.

For small business owners, the most important thing isn’t simply knowing that “taxes went up.” It’s understanding which changes actually apply to your business and whether you need to change how you price, invoice, collect sales tax, or plan for your tax liability.

What Changed With Washington’s B&O Tax?

Washington’s B&O tax is unusual because it is generally based on gross receipts rather than profit.

That means a business can owe B&O tax even when its profit margin is relatively small or when it has an otherwise unprofitable year.

In 2025, Washington enacted legislation modifying B&O tax rates for a number of business activities. One of the more significant changes affects businesses reporting under the Service and Other Activities classification.

Beginning October 1, 2025, that classification was divided into three tiers based on the business’s taxable income from the prior calendar year:

• Less than $1 million: 1.5%
• $1 million to less than $5 million: 1.75%
• $5 million or more: 2.1%

Certain businesses, including hospitals and real estate brokers, are excluded from the higher tiers.

The important point for a small business owner is that the applicable rate can depend on what your business does and how much taxable income it had in the prior year.

So don’t assume that another business’s B&O rate is the same as yours.

There’s Also a New Tax for Very Large Businesses

Washington also created a 0.5% surcharge on certain Washington taxable income above $250 million.

The surcharge began January 1, 2026 and is scheduled to expire December 31, 2029.

For the overwhelming majority of small businesses, this isn’t something to worry about.

The threshold is extremely high. But it’s worth mentioning because it is part of the broader B&O changes and demonstrates that Washington’s 2025 tax legislation wasn’t limited to small-business rate changes.

There are also specific exemptions and exclusions from the surcharge, so even businesses above the threshold need to determine whether particular income is subject to it.

Washington Now Taxes Certain Services

For many businesses, this is potentially the bigger practical change.

Effective October 1, 2025, Washington expanded the definition of taxable retail sales to include a number of services that previously weren’t subject to retail sales tax.

The newly taxable categories include services such as:

• Information technology services
• Custom website development
• Custom software and software customization
• Advertising and marketing services
• Certain live presentations
• Temporary staffing
• Security and investigation services

The Washington Department of Revenue estimates that the change affects more than 90,000 businesses.

For a service business that has never collected sales tax before, this can represent a significant change to how invoices and accounting systems need to work.

IT and Website Businesses Need to Pay Attention

Technology businesses are one of the groups that need to look particularly closely at the new rules.

Washington now generally treats a wide range of IT services, custom website development, and certain software services as retail sales subject to retail sales tax.

Examples can include technical support, help desk services, network support, implementation services, custom website development, custom software, and customization of prewritten software.

The rules can get complicated when a business provides multiple types of services on the same engagement.

For example, a company might provide consulting, software implementation, ongoing support, and custom development under one contract. Whether and how each component is taxed can depend on exactly what is being provided.

If your business provides technology services, don’t simply assume that “we’re a consulting company” means you don’t need to collect sales tax.

Advertising and Marketing Services Are Now Taxable, Too

Advertising services were also brought into Washington’s retail sales tax system beginning October 1, 2025.

The state’s definition is broad. It can include activities such as advertising strategy, search engine marketing, online referrals, lead-generation optimization, campaign planning, acquisition of advertising space, and evaluating website traffic to measure advertising effectiveness.

That means some businesses that have historically invoiced clients without sales tax may now need to add it.

For agencies and marketing firms, this can be especially important because a single client engagement may contain several different types of services.

Washington’s Department of Revenue is also currently involved in legal proceedings concerning certain advertising services, but the department says it must enforce the law as enacted while those issues are being considered.

Sales Tax Isn’t the Same as Your Business’s Income

One important distinction for business owners is that sales tax you collect from customers isn’t revenue that belongs to you.

If you charge a customer $10,000 for a taxable service and collect $1,000 in sales tax, you’re generally collecting that $1,000 on behalf of the state.

Don’t treat the entire $11,000 as business revenue available to spend.

This sounds obvious, but businesses that are new to collecting sales tax can accidentally create cash-flow problems by spending money they’ve collected for the state.

Your accounting system should make it clear how much you’ve collected and how much you owe.

Will These Taxes Increase Prices?

Possibly.

Businesses have several ways to respond to higher taxes and new collection requirements.

A business might absorb some of the cost, raise prices, reduce other expenses, adjust its service mix, or pass some or all of the additional cost on to customers.

There’s no universal answer.

A business with strong margins may be able to absorb a modest increase. A business operating on thin margins may have very little room to do so.

The important thing is to understand your actual numbers before making the decision.

If your costs increase but your pricing doesn’t, make sure you know exactly what that does to your gross margin and profitability.

What Should Seattle Small Business Owners Do?

The changes apply throughout Washington, so this isn’t strictly a Seattle tax issue.

However, Seattle-area businesses are likely to encounter the same statewide B&O and sales-tax changes as businesses elsewhere in Washington.

The first step is to determine which tax classifications apply to your business.

Don’t assume that because you haven’t collected sales tax historically, you don’t need to start now.

If your business provides IT, website development, advertising, software, staffing, security, or another newly taxable service, review the applicable Washington Department of Revenue guidance and determine whether your invoices need to change.

Review Your Invoices and Contracts

If your services became subject to sales tax on October 1, 2025, your billing process may need to change.

That means reviewing:

• Client invoices
• Accounting software
• Sales tax settings
• Contracts and service agreements
• Pricing
• Customer communications
• Bookkeeping procedures

Existing contracts can create additional questions. Washington has issued specific guidance addressing contracts that existed before October 1, 2025, so businesses shouldn’t assume every existing agreement is treated identically to a new engagement.

If you’re still billing clients the same way you did before October 2025, it’s worth taking a second look.

Don’t Forget About B&O Tax When Looking at Profit

One of the biggest mistakes a Washington business owner can make is looking only at federal income tax.

A business might have a relatively modest federal taxable income while still owing Washington B&O tax because the B&O system generally looks at gross business income rather than net profit.

That makes margin management particularly important.

Imagine two businesses each generate $1 million in revenue.

One has $700,000 in expenses.

The other has $950,000 in expenses.

Their federal income-tax situations could look dramatically different, but both can still have Washington B&O obligations based on their applicable tax classification.

This is one reason Washington business owners need to look at state tax planning separately from federal income tax planning.

What About Individuals Moving to Washington?

Washington doesn’t impose a traditional individual state income tax on wages, which remains an important consideration for people evaluating where to live and work.

But that doesn’t mean Washington residents are completely insulated from state and local taxes.

Sales taxes, property taxes, business taxes, capital gains taxes for qualifying long-term capital gains, and other taxes and fees can all affect an individual’s overall financial picture.

For someone considering a move to Washington, the better question isn’t simply:

“Does Washington have an income tax?”

It’s:

“What will my total tax and cost-of-living picture look like after I move?”

That answer can vary considerably depending on income, home ownership, investments, business ownership, and spending patterns.

What Business Owners Should Do Now

You don’t necessarily need to overhaul your entire business because Washington changed its tax rules.

But you should know how the changes affect your particular business.

Start by reviewing your B&O tax classification and applicable rate. If you provide services that became taxable under ESSB 5814, verify that you’re correctly collecting and remitting sales tax. Review your invoices and accounting software. And make sure your bookkeeping separates sales tax collected from actual business revenue.

It’s also worth reviewing pricing.

If a service is now subject to sales tax, the sales tax itself isn’t necessarily a reason to raise your underlying price. But if your business is absorbing additional administrative costs or higher B&O obligations, that may be a good reason to revisit your pricing strategy.

The Bottom Line

Washington’s 2025 tax legislation represents a meaningful change for businesses, particularly service businesses that previously operated outside the state’s retail sales tax system.

B&O tax rates changed, a new high-grossing business surcharge began in 2026, and Washington expanded sales tax to a number of services including IT, custom website development, advertising, certain software services, temporary staffing, and security services.

For small business owners, the takeaway isn’t simply that “Washington raised taxes.”

It’s that the rules governing how you calculate, collect, and report state taxes may have changed.

If you haven’t reviewed your Washington tax situation since these changes took effect, now is a good time to do it. A review of your B&O classification, sales-tax obligations, pricing, contracts, and bookkeeping can help you avoid an unpleasant surprise — particularly if your business provides services that became taxable beginning October 1, 2025.

And as always with Washington’s tax system, the details matter. Two businesses with the same revenue can have very different tax obligations depending on what they sell, how they sell it, and where their customers are located.

The post The Largest Tax Package in Washington History appeared first on Huddleston Tax CPAs | Accounting Firm In Seattle.

Getting that same customer to buy from you again is often much more valuable.

Businesses can spend a significant amount of money on advertising, promotions, salespeople, and other customer-acquisition efforts just to convince someone to make their first purchase. If that customer disappears afterward, you’re constantly starting from zero.

Repeat customers are different. They already know your business. They’ve already decided they trust you enough to buy. And if you give them a good reason to come back, the second purchase can be considerably easier to generate than the first.

The question is: How do you turn a one-time customer into a regular customer?

Turn Consumable Products Into Subscriptions

One of the easiest ways to create repeat purchases is to identify products customers naturally run out of.

If someone buys something they need to replace every 30, 60, or 90 days, you may have an opportunity to turn that purchase into a subscription.

Think about products such as:

• Coffee
• Skincare
• Pet food
• Supplements
• Cleaning products
• Office supplies
• Shaving products
• Household essentials

Instead of asking customers to remember to reorder, you can offer to automatically send the product on a schedule.

The customer gets convenience, while the business gets predictable recurring revenue.

You don’t necessarily need to offer a huge discount, either. Sometimes the real value proposition is simply:

“We’ll make sure you never run out.”

Give Customers a Reason to Come Back

Sometimes repeat purchases don’t happen because customers don’t like your product. They simply forget about you.

That’s particularly common when your product isn’t something they purchase every week.

A customer might genuinely love what you sell and still go six months without thinking about your company.

This is where email marketing can be extremely useful.

After someone makes a purchase, don’t let the relationship end with the receipt.

Send a follow-up email.

Ask how they liked it.

Provide instructions for getting the most out of the product.

Recommend something related.

Remind them when they might need to reorder.

And, occasionally, simply give them something useful or interesting.

The goal isn’t to bombard customers with “BUY NOW!” emails. It’s to stay relevant enough that when they are ready to purchase again, your business is the one they remember.

Build a Loyalty Program

Loyalty programs work because they give customers a reason to consolidate their purchases with you.

A basic program might offer:

• Points for purchases
• A discount after a certain number of purchases
• Exclusive products
• Early access
• Free shipping
• Birthday rewards
• VIP pricing

The important thing is to make the program easy to understand.

If customers need a spreadsheet to figure out whether they’ve earned a free coffee, you’ve probably overcomplicated it.

A good loyalty program should make customers think:

“I’m already going to buy this. I might as well buy it here because I’m getting rewarded for it.”

Create Bundles

Bundling can accomplish two things at once: increase the size of the current purchase and create a reason for customers to return.

For example, instead of selling three products separately, you might create a “starter bundle” or “monthly essentials” package.

You can also create bundles based on customer behavior.

If customers frequently buy Product A and Product B together, consider packaging them.

If someone purchases a particular item, recommend the product that naturally goes with it.

This isn’t just about increasing the average order value. Bundles can also help customers discover products they might eventually purchase on their own.

Ask for Feedback After the Purchase

One of the most underused retention strategies is simply asking customers what they think.

A few days after the purchase, send an email asking:

“How did everything go?”

Give them an easy way to respond.

This accomplishes several things.

First, customers appreciate feeling heard.

Second, you can discover problems before they become bad reviews.

Third, you can identify opportunities to improve your product.

And fourth, you’re creating another interaction with the customer.

That last point matters.

A purchase shouldn’t be the end of the customer relationship. It should be the beginning of the next one.

Follow Up When Something Goes Wrong

Customer retention isn’t just about rewards and discounts.

Sometimes the best retention strategy is handling a problem exceptionally well.

If an order arrives late, something breaks, or a customer complains, don’t make them fight through five layers of customer service to get help.

Fix the problem.

Follow up afterward.

Ask whether everything was resolved.

A customer who has a problem that gets handled exceptionally well can sometimes become more loyal than a customer who never had a problem at all.

Use Email to Create a Repeat-Purchase Cycle

Email doesn’t have to be complicated.

A simple post-purchase sequence might look like this:

• Day 0: Order confirmation.
• Day 3: “How’s everything going?”
• Day 10: Tips for using the product.
• Day 30: Related product recommendation.
• Day 60: Reorder reminder.
• Day 75: Loyalty offer or incentive.

The timing obviously depends on what you’re selling.

Someone buying a refrigerator doesn’t need a reorder email 60 days later.

Someone buying a 30-day supply of a consumable product probably does.

The important thing is to build communication around the customer’s actual buying cycle.

Personalize Recommendations

You already have information about what your customers purchased.

Use it.

If someone bought a particular product, don’t send them the exact same generic email newsletter you’re sending everyone else.

Recommend something relevant to their purchase.

A customer who bought running shoes might be interested in running socks.

Someone who bought a camera might need memory cards.

Someone who purchased a particular skincare product might be interested in the corresponding moisturizer.

Personalization doesn’t need to be creepy or complicated.

Sometimes simply saying:

“Since you bought X, you might also like Y.”

is enough.

Create Reasons to Buy More Frequently

You can also encourage customers to increase their purchase frequency.

Consider:

• Limited-time collections
• Seasonal products
• Refills
• New flavors or variations
• Product upgrades
• Monthly specials
• Members-only releases

The goal isn’t to manufacture fake urgency.

It’s to give existing customers legitimate reasons to check back in.

Don’t Make Every Interaction a Sales Pitch

This is an important distinction.

If every email says:

BUY SOMETHING NOW.

people will eventually stop opening your emails.

Instead, mix promotional content with things customers actually find useful.

Teach them something.

Give them tips.

Show them how other customers use your product.

Share interesting information.

Ask for their opinion.

Then occasionally make the offer.

The businesses with the strongest retention often aren’t the businesses that communicate the most.

They’re the businesses that communicate the most usefully.

Measure Retention (Not Just Revenue)

Revenue tells you how much money you’re making.

It doesn’t necessarily tell you whether you’re building a durable customer base.

Start tracking metrics such as:

• Repeat purchase rate
• Customer retention rate
• Average order value
• Purchase frequency
• Customer lifetime value
• Subscription cancellation rate
• Loyalty program participation

These numbers can tell you whether your business is actually getting better at keeping customers.

For example, imagine you increase annual revenue by 20%, but your repeat purchase rate falls significantly.

That might indicate you’re spending more and more money acquiring new customers to replace customers who aren’t coming back.

That’s a very different business from one where customers continue purchasing year after year.

Make the Second Purchase Easier Than the First

Ultimately, the best retention strategy is often surprisingly simple:

• Make it easy to buy from you again.
• Save customer preferences.
• Make reordering simple.
• Offer subscriptions where they make sense.
• Send reminders.
• Remember what customers bought.
• Offer relevant recommendations.
• Reward loyalty.
• Respond quickly when something goes wrong.
• And stay in touch.

You don’t need a massive loyalty platform or an elaborate marketing department to accomplish this.

The Bottom Line

Customer acquisition gets a lot of attention because it’s exciting. New customers mean growth.

But retention is where many businesses build their most valuable revenue.

A customer who buys from you once is a transaction.

A customer who comes back every month is a relationship.

Look for products that can become subscriptions. Create thoughtful loyalty programs. Bundle products that naturally belong together. Follow up after purchases. Ask for feedback. Use email to remind customers you exist. And, most importantly, give people a reason to choose you again.

The easiest customer to sell to may be the one who already bought from you.

The post How to Increase Customer Retention and Get More Repeat Purchases appeared first on Huddleston Tax CPAs | Accounting Firm In Seattle.

But caring for your business is about more than maximizing this quarter’s profit.

It’s about building something that works for the people who depend on it, serves customers well, adapts when circumstances change, and remains healthy enough to succeed years from now.

Sometimes, taking better care of your business means making decisions that don’t produce an immediate financial payoff. In the long run, those decisions can be some of the most valuable ones you make.

1. Nurture Your Vision: Why Does Your Business Exist?

At the heart of caring for a business is understanding why it exists in the first place.

Maybe you started the company because you saw a problem nobody else was solving. Maybe you wanted more independence. Maybe you wanted to build something you could eventually pass on to your children. Or maybe you simply knew you could do the job better than the people you were working for.

Whatever the original reason, it’s worth revisiting.

And if you’re sitting there thinking, I honestly don’t remember why I started this company anymore, that’s okay, too.

The day-to-day grind of running a business can easily bury the original motivation. Instead of trying to recreate the past, look at what’s happening around you now.

Look at your customers. What problems are you solving for them? Why do they choose you instead of someone else? What would happen if your business disappeared tomorrow?

Look at your employees. What brings people to work for you? What are they learning? How does the company affect their lives and careers?

Look at your community. Does your business create jobs, provide an important service, support other local businesses, or contribute to something larger than itself?

Your purpose doesn’t have to be grandiose. A business doesn’t need to “change the world” to have value.

Sometimes providing a great service, employing good people, and making customers’ lives a little easier is more than enough.

2. Invest in Your People

Your employees aren’t simply an expense on the income statement. They’re the people who interact with your customers, solve problems, create your products, and keep the business operating when you’re not in the room.

That makes employee retention and development a business investment.

Competitive compensation matters, but so do things like reasonable workloads, flexibility, professional development, clear expectations, and opportunities to take on greater responsibility.

Good employees also want to know that their work matters.

You don’t need an elaborate corporate culture program to accomplish this. Sometimes it means giving someone the autonomy to solve a problem instead of requiring approval for every tiny decision. Sometimes it means actually listening when an employee tells you something isn’t working.

And sometimes it means recognizing that an employee who has been doing an excellent job for three years probably deserves more than a pizza party.

3. Build Meaningful Customer Relationships

A customer isn’t just a transaction.

The businesses that build lasting relationships tend to understand what their customers actually need rather than constantly looking for the next opportunity to sell them something.

That can mean following up after a purchase, responding quickly when something goes wrong, asking for honest feedback, or simply remembering that there’s a human being on the other end of the email.

Customer relationships also give you something incredibly valuable: information.

Pay attention to what customers repeatedly ask for. Notice which products or services they buy together. Listen to their complaints instead of immediately becoming defensive.

Sometimes the best business ideas come from a customer saying, “Why don’t you guys also do this?”

Not every request is a new revenue opportunity, of course. But patterns in customer feedback can tell you a lot about where your business should go next.

4. Be Responsible With Your Resources

Caring about your business also means caring about the resources it consumes.

That includes obvious things like electricity, equipment, inventory, office space, and supplies. But it also includes less obvious resources like your employees’ time, your own attention, and your company’s cash.

Sustainability can be part of this conversation, but it doesn’t have to mean turning your company into an environmental nonprofit.

Replacing inefficient equipment can reduce operating costs. Reducing unnecessary waste can improve margins. Remote or hybrid work may reduce office expenses where appropriate. Better inventory management can prevent money from sitting on shelves.

And when you make investments in energy efficiency, renewable energy, or qualifying business property, there may also be federal, state, or local tax incentives available, depending on the project and when it is placed in service.

Those incentives change frequently, so don’t make a major purchase simply because someone promises you a tax credit.

Instead, look at the economics of the project first.

If a more efficient HVAC system saves your business money over several years and qualifies for an applicable tax incentive, that’s a nice bonus. If the only reason the project makes financial sense is a tax credit that may not apply to you, that’s a different story.

A tax deduction or credit should generally be part of the decision — not the entire reason for making it.

5. Keep Learning and Adapt

The business landscape doesn’t sit still.

Your competitors change. Customer expectations change. Technology changes. Regulations change. Entire industries can be disrupted by something that didn’t exist five years earlier.

Caring for your business means accepting that what worked yesterday may not work tomorrow.

That doesn’t mean chasing every trend.

You don’t need to add AI to your website because everyone else is talking about AI. You don’t need to launch a podcast because your competitor did. And you certainly don’t need to adopt every new piece of software that promises to “revolutionize” your business.

Instead, stay curious.

Pay attention to what is changing in your industry. Talk to customers. Ask employees what could be improved. Look at your numbers. Experiment on a manageable scale.

The goal isn’t to constantly reinvent the business.

It’s to make sure the business doesn’t become obsolete while you’re busy running it.

6. Know Your Numbers

This may sound like the least sentimental part of an article about caring for your business, but it’s one of the most important.

You can’t properly care for something you don’t understand.

Revenue is important, but revenue alone doesn’t tell you whether the business is healthy.

Know your margins. Understand your cash flow. Keep track of accounts receivable. Know what your largest expenses are and how they’re changing. Understand how much cash the business needs to operate.

And don’t confuse money in the bank with profit.

A business can have plenty of cash and still be losing money. It can also be profitable on paper and struggle to pay its bills because customers aren’t paying quickly enough.

Good bookkeeping and timely financial reporting aren’t just administrative chores. They’re tools for making better decisions.

If your financial statements are six months behind, you’re not really running the business with financial information. You’re running it with historical trivia.

7. Build a Business That Doesn’t Depend Entirely on You

One of the clearest signs of a healthy business is that it can function when the owner steps away.

If every customer relationship, approval, decision, and operational process runs through you, you’ve created a job for yourself — not necessarily a business that can operate independently.

Start documenting important processes. Delegate meaningful responsibilities. Train people to make decisions rather than simply waiting for instructions.

This can feel uncomfortable, particularly when you built the company yourself and know exactly how everything is supposed to work.

But the goal isn’t to make yourself irrelevant.

The goal is to make the business less fragile.

That matters whether you’re planning to sell the company someday, bring in a partner, hand it down to your children, or simply take a two-week vacation without checking your phone every seven minutes.

8. Celebrate Wins and Show Appreciation

Running a business can create a strange psychological trap: you’re constantly focused on the next problem.

The new customer needs attention.

• Payroll is coming.
• A vendor messed something up.
• Sales are down this month.
• The website broke.
• Someone quit.

Then, once you solve all of those problems, you immediately find five more.

That’s business.

But if you never stop to recognize what’s going right, it’s easy for your employees — and you — to feel like nothing is ever good enough.

Celebrate milestones. Thank people who did exceptional work. Share good news with the team. Recognize progress even when the larger goal hasn’t been reached yet.

Appreciation doesn’t have to be expensive.

Often, being specific and sincere is worth more than another generic “Great job, team!” email.

9. Take Care of Yourself

This one gets overlooked constantly.

As the owner, your health and energy are business resources whether you like it or not.

If you’re exhausted, overwhelmed, or constantly operating in crisis mode, your decision-making eventually suffers. You become more reactive. Small problems feel enormous. Strategic thinking gets replaced by putting out fires.

Taking time away from the business isn’t necessarily a sign that you aren’t committed to it.

Sometimes it’s evidence that you are.

Take vacations. Exercise. Get enough sleep. Spend time with your family. Maintain relationships outside the business. Find people you can talk to who aren’t employees or customers.

And if you don’t know how to step away because the company falls apart whenever you do, go back to the previous section.

That’s a business problem worth solving.

10. Plan for the Future — Even If You’re Not Ready to Leave

Caring for your business also means thinking about what happens eventually.

You may intend to run the company for another 20 years. That’s perfectly fine.

But circumstances change. You could become sick, want to retire, receive an offer to sell, decide to bring in a partner, or realize your children aren’t interested in taking over.

You don’t need to have a detailed exit plan tomorrow.

You should, however, understand what the business would be worth, how ownership is structured, what your financial statements look like, and what would happen if you suddenly couldn’t run the company.

This is also where your CPA, attorney, financial advisor, and other professional advisors can become particularly valuable.

Business planning isn’t only about reducing this year’s tax bill. It’s about making sure today’s decisions don’t create unnecessary problems five or ten years from now.

Caring for Your Business Is a Long-Term Strategy

Caring for a business doesn’t mean ignoring profit.

Quite the opposite.

A profitable business has more resources to invest in employees, serve customers, replace outdated equipment, withstand economic downturns, and pursue new opportunities.

The point is that profit is a measure of business health — not the entire definition of it.

Take care of your people. Take care of your customers. Understand your numbers. Protect your cash flow. Invest thoughtfully. Keep learning. Build systems that make the company stronger. And take care of yourself along the way.

Sometimes the smartest business decision isn’t the one that produces the biggest immediate return.

It’s the one that makes sure your business is still healthy, useful, and valuable years from now.

The post Beyond Profits: Cultivating Care for Your Business and Bottom Line appeared first on Huddleston Tax CPAs | Accounting Firm In Seattle.

If you’ve seen older articles promising a $7,500 federal tax credit for a new EV or a $4,000 credit for a used EV, there’s an important catch: those federal consumer credits are no longer available for vehicles acquired after September 30, 2025.

The rules changed under the 2025 One Big Beautiful Bill Act, which accelerated the expiration of several clean vehicle incentives.

So if you’re shopping for an EV today, don’t assume that an older article, dealership advertisement, or calculator is giving you current tax information.

What Happened to the $7,500 EV Tax Credit?

The federal New Clean Vehicle Credit, which could provide up to $7,500 for qualifying new electric vehicles and fuel-cell vehicles, is no longer available for vehicles acquired after September 30, 2025.

That doesn’t mean every EV purchased around that date suddenly lost its eligibility.

For vehicles acquired on or before September 30, 2025, the credit may still be available if the other requirements are satisfied. The IRS considers a vehicle acquired when there is a binding written contract and a payment has been made. If the vehicle was acquired by the deadline but wasn’t placed in service until later, it may still qualify under the applicable rules.

For vehicles acquired after September 30, 2025, however, the federal New Clean Vehicle Credit is no longer available.

What About the $4,000 Used EV Credit?

The federal Previously-Owned Clean Vehicle Credit was another major part of the Inflation Reduction Act.

For qualifying purchases made before the deadline, the credit could equal 30% of the vehicle’s sale price, up to $4,000. The vehicle generally had to be purchased from a licensed dealer, cost $25,000 or less, and satisfy other requirements.

But just like the new-vehicle credit, the federal used EV credit was terminated for vehicles acquired after September 30, 2025.

So if you’re buying a used EV today, don’t assume the federal government is going to knock $4,000 off your tax bill.

Was the EV Tax Credit Ever Refundable?

This is another area where older EV articles can be confusing.

Under the Inflation Reduction Act rules, the clean vehicle credit itself was generally nonrefundable when claimed on your tax return. That meant the credit could reduce your federal income tax liability, but you generally couldn’t receive a refund of unused credit simply because the credit was larger than the tax you owed.

Beginning in 2024, eligible buyers could instead choose to transfer the credit to a registered dealer at the time of purchase, effectively turning the credit into an upfront reduction in the vehicle’s purchase price rather than waiting until filing a tax return.

That distinction mattered because someone who didn’t have enough federal tax liability to use the entire nonrefundable credit could still benefit from transferring an eligible credit at the dealership, subject to the applicable rules.

Of course, that option only applies to vehicles that actually qualify under the now-expired clean vehicle credit rules.

What Were the Income and Vehicle Requirements?

The old federal EV credits weren’t simply “$7,500 for anyone who buys an electric car.”

There were income limitations, vehicle price limitations, battery requirements, and manufacturing and sourcing requirements.

For example, qualifying new vehicles generally had to meet requirements involving final assembly in North America, vehicle price limits, battery capacity, and critical mineral and battery component sourcing. Buyers also had to fall below applicable modified adjusted gross income thresholds.

Those rules were intentionally designed to encourage both consumer EV adoption and domestic manufacturing.

They’re still relevant if you’re researching a vehicle purchased before the September 30, 2025 deadline, but they shouldn’t be treated as current incentives for a new purchase.

What About EV Charging Stations?

The expiration of the federal vehicle purchase credits doesn’t mean every EV-related tax incentive disappeared.

One important example is the federal Alternative Fuel Vehicle Refueling Property Credit, which can apply to qualifying EV charging equipment and installation.

Under the 2025 legislation, this credit is scheduled to end for property placed in service after June 30, 2026.

There are also specific location and eligibility requirements for charging equipment, so homeowners and businesses should check the rules before assuming an installation qualifies.

What About Businesses That Buy EVs?

Businesses have a separate set of considerations.

The federal Qualified Commercial Clean Vehicle Credit could provide a credit for qualifying vehicles used by businesses and tax-exempt organizations. However, that credit was also terminated for vehicles acquired after September 30, 2025.

For eligible vehicles acquired before the deadline, the credit could be worth up to $7,500 for certain smaller vehicles and up to $40,000 for larger vehicles, subject to the applicable rules and limitations.

Businesses should also remember that an EV can have tax consequences beyond a specific clean vehicle credit. Depending on how the vehicle is purchased and used, businesses may need to consider depreciation, business-use percentages, vehicle basis, and other rules.

In other words, “it’s an EV” isn’t itself a tax strategy.

Don’t Forget State and Local Incentives

The federal EV credits have gotten most of the attention, but state and local incentives can be just as important — and they vary considerably.

Some states offer rebates, tax incentives, registration benefits, charging incentives, or other programs for EV owners. Utilities may also offer rebates for installing charging equipment.

These programs change frequently, so don’t assume that an incentive you saw advertised two years ago is still available.

Before purchasing an EV, check the incentives available in the state where you live and whether your utility offers any EV or charging programs.

What Does This Mean If You’re Buying an EV Now?

If you’re purchasing an EV in 2026, the biggest takeaway is simple:

Don’t build your budget around the old $7,500 federal EV tax credit.

For vehicles acquired after September 30, 2025, the federal New Clean Vehicle Credit and Previously-Owned Clean Vehicle Credit are no longer available. The federal commercial clean vehicle credit also ended for vehicles acquired after that date.

That doesn’t necessarily make an EV a bad financial decision. EVs can still offer lower fuel and maintenance costs, and there may be state, local, utility, or manufacturer incentives available.

But the tax calculation needs to start with the incentives that actually exist today.

The Bottom Line

The federal EV tax credit was a major part of the government’s effort to encourage electric vehicle adoption and domestic EV manufacturing. The Inflation Reduction Act expanded those incentives substantially, including the creation of a federal credit for qualifying used EVs.

But those consumer credits have now expired for new purchases.

If you’re researching an older vehicle purchase, the original $7,500 new-vehicle and $4,000 used-vehicle credits may still be relevant depending on when the vehicle was acquired and whether all requirements were satisfied.

If you’re buying an EV today, however, you’ll need to look beyond the old federal tax credit. State and local incentives, charging credits, vehicle operating costs, business-use deductions, and the overall economics of the vehicle may still make an EV attractive.

Tax laws surrounding clean energy and vehicles have changed quickly in recent years. Before making a major purchase based on a tax incentive, it’s worth checking the current rules rather than relying on an article written when the Inflation Reduction Act was brand new.

The post EV Tax Credit: A Green Light for Electric Vehicles appeared first on Huddleston Tax CPAs | Accounting Firm In Seattle.

“Do you guys also do ______?”

Sometimes the answer is easy: “No, that’s not what we do.”

But eventually, you hear the question enough times that you start wondering whether you’re leaving money on the table.

Should you add the service now? Wait until customers are demanding it? Test whether they’ll actually pay for it? Hire someone? Train your existing team? Create an entirely new department?

There isn’t one magic revenue number that tells you when it’s time to expand. The better question is whether the new service has enough demand, profitability, capacity, and strategic fit to justify adding complexity to your business.

Don’t Wait for Customers to Demand It

Customer requests are one of the best signals that a new service might make sense—but they’re not necessarily the trigger for launching it.

If five customers have independently asked whether you offer a particular service, that’s worth paying attention to.

If 50 customers have asked, you probably have a market signal.

But there’s a catch: customers asking for something and customers paying for something are two very different things.

People will happily tell you they’d love to have something added to your business.

Their willingness to actually pay $500, $1,000, or $5,000 for it is much more valuable information.

Find Out What Customers Will Actually Pay

Before investing heavily in a new service, test the market.

You don’t necessarily need to build the entire offering first.

Talk to existing customers. Ask what they’re currently doing, what they’re paying for it, and what they dislike about their current solution.

Even better, offer a small pilot.

For example, suppose you’re an accounting firm and clients keep asking whether you provide financial forecasting.

Instead of immediately hiring a full-time financial analyst, building a new department, and spending thousands on software, you could offer a limited forecasting package to five existing clients.

Now you can learn:

• Do customers actually buy it?
• What are they willing to pay?
• How much time does it take?
• What expertise is required?
• Is it profitable?
• Do clients come back for it?

That’s substantially better information than a survey where everyone says, “Yeah, I’d totally buy that.”

Look for the “Natural Next Purchase”

Some services make much more sense because they’re a natural extension of what you already sell.

• A landscaping company might add seasonal cleanup.
• A CPA firm might add bookkeeping or payroll.
• A marketing agency might add paid advertising.
• A construction company might add maintenance services.
• A web designer might add ongoing website management.

These extensions can be particularly attractive because you’re selling to people who already trust you.

You aren’t starting from zero.

The customer acquisition cost can be dramatically lower because you’re introducing an additional service to an existing relationship.

Don’t Add a Service Just Because You Can

This is where business owners can get themselves into trouble.

A customer asks for something. You think, “We could probably do that.”

Then suddenly you’re offering 17 services, your website looks like a menu at a Cheesecake Factory, nobody knows what you actually specialize in, and your employees are constantly jumping between unrelated projects.

More services don’t automatically mean more money.

Every new offering creates overhead:

• Training.
• Software.
• Sales materials.
• Management.
• Quality control.
• Customer support.
• Insurance considerations.
• Potential hiring.
• Accounting and reporting.

The more complicated your business becomes, the more expensive it can be to operate.

Watch Your Existing Team’s Capacity

Before adding another service, look at what your team is actually doing.

If everyone is already operating at 90–100% capacity, adding a new service could create more revenue while simultaneously destroying your margins.

You might find yourself hiring immediately just to fulfill demand.

Instead, ask whether you have productive capacity available.

If your team has 20% unused capacity and a new service can fill it profitably, that’s a very different situation from needing to hire five people before you can sell the first dollar of the service.

Is There a Revenue Number for Expansion?

Not really.

There isn’t a universal rule saying:

“Once you hit $1 million in revenue, add another service.”

A $1 million consulting firm might be ready to expand.

A $1 million restaurant might not be.

A $250,000 specialized business with extremely high margins might have more resources available for expansion than a $2 million business with razor-thin margins.

Instead of looking at revenue alone, look at:

Demand + margin + capacity + cash flow + strategic fit.

Those five things will tell you considerably more than your annual revenue.

Calculate the Incremental Profit

One of the most important questions is:

How much additional profit will this service actually generate?

Suppose you expect a new service to produce $100,000 in annual revenue.

Sounds great.

But then you discover you need:

• $35,000 in labor
• $15,000 in software and equipment
• $10,000 in marketing
• $15,000 in additional overhead

Suddenly your $100,000 service is producing only $25,000 before considering other costs.

That’s not necessarily a bad business decision—but you should know the economics before launching.

Consider the Cost of NOT Offering It

There’s another side to the calculation.

Sometimes the question isn’t simply:

“Will this new service make money?”

It’s:

“How much business are we losing because we don’t offer it?”

Imagine a customer spends $10,000 a year with your company but spends another $15,000 with a competitor for a service you don’t provide.

Adding that service might allow you to capture significantly more of the customer’s total spending.

This is sometimes called share of wallet.

You don’t necessarily need more customers. You may simply need to provide more value to the customers you already have.

Should You Get Ahead of Demand?

Sometimes.

The best businesses aren’t always reacting to what customers are asking for today. They’re anticipating what customers will need tomorrow.

Technology is a good example.

A business that waits until every customer demands an AI-related service may already be behind competitors who started building that capability two years earlier.

The trick is distinguishing between emerging demand and something you personally think is cool.

Business owners are particularly vulnerable to this.

“I think our customers are going to want this” isn’t the same as “our customers are demonstrating that they want this.”

Ideally, you want some combination of both.

What About Enterprise Resource Planning?

As businesses grow, another question often appears:

“Do we need an ERP?”

Enterprise resource planning systems essentially bring major parts of a business into a connected system.

Depending on the company, that might include:

• Accounting
• Inventory
• Purchasing
• Sales
• Customer information
• Human resources
• Manufacturing
• Project management
• Reporting

The benefit is that information can flow between departments instead of living in 14 different spreadsheets.

But ERP systems can be expensive and complicated.

A five-person company probably doesn’t need an enormous enterprise software implementation simply because it wants better reporting.

An ERP becomes more compelling when the business has enough operational complexity that disconnected systems are creating real problems.

Don’t Confuse Growth With Complexity

This may be the most important consideration.

Your goal isn’t to have the most services.

Your goal is to build a business that produces sustainable profit while delivering something customers genuinely value.

Sometimes that means adding services.

Sometimes it means eliminating services.

Sometimes it means charging more for what you already do.

And sometimes the smartest growth strategy is becoming exceptionally good at one thing instead of becoming mediocre at ten things.

A Simple Framework for Deciding

Before launching a new service, ask yourself six questions:

1. Are customers asking for it?

Look for repeated requests rather than one-off comments.

2. Will they actually pay for it?

Test pricing before making a major investment.

3. Do we have the capacity to deliver it?

Don’t create a new revenue stream that immediately overwhelms your business.

4. Is it profitable?

Calculate the actual incremental costs—not just the revenue.

5. Does it fit our existing business?

The easiest services to sell are often adjacent to what you already do.

6. Does it make the business better?

Consider customer retention, competitive positioning, recurring revenue, and your long-term strategy.

If you can answer “yes” to most of those questions, you’ve probably got something worth testing.

Start Small Before You Go Big

You don’t have to announce an entirely new division on Monday.

Start with a pilot.

Offer the service to a handful of existing customers. Establish a price. Track how long it takes to deliver. Record every cost. Ask for feedback.

Then look at the numbers.

If customers love it, margins are healthy, and demand continues to grow, you have evidence that it’s time to invest further.

If nobody buys it, you’ve learned something valuable without spending six figures discovering it.

The Bottom Line

The right time to add another business service isn’t necessarily when customers start begging for it—or when your business reaches a particular revenue milestone.

It’s when you’ve identified real demand, a profitable price, the capacity to deliver it, and a compelling reason for the service to exist within your business.

The smartest small-business owners don’t simply chase every new revenue opportunity.

They test opportunities, measure the economics, and expand when the numbers—and the customers—give them a reason to.

The post When Should Your Small Business Add Another Service? appeared first on Huddleston Tax CPAs | Accounting Firm In Seattle.

The answer is: sometimes — but it depends on your overall tax situation.

And there’s an important update homeowners need to know: the federal SALT deduction limit is no longer the $10,000 cap many people remember from recent years. For 2025, the limit increased to $40,000, with inflation adjustments beginning in 2026. For 2026, the limit is $40,400. Higher-income taxpayers can face additional limitations.

So, does prepaying your property taxes make sense? Let’s look at when it can help — and when you’re basically just giving the government your money a little earlier than necessary.

How the Property Tax Deduction Works

Property taxes on your personal residence are generally deductible on your federal return only if you itemize deductions on Schedule A.

Property taxes fall under the broader state and local tax (SALT) deduction, along with certain state and local income or sales taxes.

For 2025, the combined SALT deduction limit is generally $40,000 ($20,000 for married couples filing separately). The limit is subject to an income-based reduction for taxpayers with modified adjusted gross income above $500,000, although the limitation can’t reduce the deduction below $10,000 ($5,000 for married filing separately).

For 2026, the general limit increases to $40,400 ($20,200 for married filing separately), again subject to the applicable income limitation.

That means the old advice — “Don’t bother prepaying because you’re already stuck at the $10,000 SALT cap” — is no longer automatically true.

When Prepaying Property Taxes Might Help

Prepaying property taxes can make sense when you’re trying to shift a deductible expense from one tax year into another.

For example, suppose you’re already planning to itemize this year and expect your deductible SALT taxes to come in at $35,000. If you’re eligible to deduct up to $40,000 and you can legally prepay an additional $3,000 of assessed property taxes before year-end, that could potentially increase your itemized deduction.

The strategy can also make sense if you’re close to the point where itemizing becomes more valuable than taking the standard deduction.

Another situation is bunching deductions. If your itemized deductions are close to the standard deduction, you may be able to concentrate certain deductible expenses into one year, itemize that year, and take the standard deduction the following year.

The idea isn’t necessarily to pay more taxes. It’s to time deductible expenses so they provide the greatest possible tax benefit.

But You Can’t Necessarily Prepay Whatever You Want

This is where property-tax prepayment gets misunderstood.

For federal purposes, simply sending your county or municipality a check for next year’s estimated property tax doesn’t automatically mean you’ve created a current-year deduction.

The IRS says that for taxpayers deducting property taxes on Schedule A, next year’s property taxes generally must have been assessed before the end of the current year to be deductible. State and local law determines when a property tax is considered assessed — generally, when you’re legally liable for the tax.

In other words, you generally can’t just call the county in December and say, “I’d like to pay my 2027 property taxes now for the deduction.”

If the tax hasn’t actually been assessed, paying it early may not give you the deduction you’re expecting.

What Counts as “Paid”?

There’s another wrinkle: homeowners sometimes assume that money they’ve put into their mortgage escrow account counts as a property tax payment.

It doesn’t necessarily.

If your mortgage company collects money from you each month for property taxes, you generally deduct the amount the lender actually paid to the taxing authority, not simply the amount sitting in your escrow account.

That distinction can matter when you’re trying to calculate whether an additional property tax payment would actually increase your deduction.

When Prepaying Probably Won’t Help

There are still plenty of situations where prepaying property taxes won’t make much difference.

The biggest is if you take the standard deduction. If you don’t itemize, your personal property taxes generally don’t produce a separate federal deduction.

It may also provide little or no benefit if you’re already at your applicable SALT limitation.

For example, if your deductible state and local taxes already put you at your $40,000 limit, paying another $5,000 in property taxes early won’t create another $5,000 federal deduction.

And remember: the SALT limit applies to the combined deduction. Property taxes don’t get their own $40,000 bucket.

What About High-Income Taxpayers?

This is another reason not to assume that everyone gets the full SALT limit.

For 2025, the $40,000 SALT limitation begins to phase down when modified adjusted gross income exceeds $500,000 for most taxpayers ($250,000 for married filing separately). The limitation can reduce the allowable deduction, although it won’t push the limit below $10,000 ($5,000 for married filing separately).

So if you’re a higher-income homeowner, simply looking at your property tax bill and seeing that you have “room” under $40,000 isn’t enough. Your income may affect how much SALT you can actually deduct.

Does Prepaying Save You Hundreds or Thousands?

This is where it’s important to distinguish between a deduction and actual tax savings.

Suppose you can legitimately increase your itemized deduction by $3,000 by paying property taxes in the current year.

If that additional deduction falls entirely into a 24% marginal federal tax bracket, the federal tax savings would be roughly $720.

That’s useful. But you’re not getting $3,000 back.

You’re spending $3,000 earlier in exchange for potentially reducing your federal tax bill by $720.

And if the payment doesn’t actually increase your deductible amount — because you’re taking the standard deduction, you’ve hit your SALT limit, or the tax wasn’t yet assessed — the tax savings could be zero.

Don’t Forget the Standard Deduction

This is the other half of the equation.

For 2025, the standard deduction is $31,500 for married couples filing jointly, $23,625 for heads of household, and $15,750 for single filers and married couples filing separately.

For 2026, those amounts increase to $32,200 for married filing jointly, $24,150 for heads of household, and $16,100 for single and married filing separately taxpayers.

Your property taxes are only one piece of the itemization puzzle. You may also have deductible mortgage interest, charitable contributions, and other qualifying expenses.

The real question isn’t:

“How much property tax can I prepay?”

It’s:

“Will paying these taxes this year increase my total deductible expenses enough to make itemizing worthwhile?”

That’s a much better question.

Prepaying Can Be Part of a Bigger Tax Strategy

For some taxpayers, property tax prepayment is one piece of a broader year-end tax-planning strategy.

You might look at property taxes, charitable contributions, mortgage interest, medical expenses, and other deductions together to determine whether it makes sense to itemize this year or next.

That can also make bunching deductions useful. Rather than trying to maximize deductions every single year, you may be able to strategically concentrate deductible expenses into one year, itemize, and then take the standard deduction in another year.

The right strategy depends on your income, filing status, other deductions, property taxes, and expected tax situation in future years.

What If You Own a Rental Property?

If you’re talking about property taxes on a rental property, the analysis can be different.

Property taxes associated with a rental property are generally treated as a rental expense rather than simply being subject to the personal SALT deduction rules.

That means you shouldn’t automatically apply the same prepayment strategy to a rental property that you would use for your personal residence.

Rental income, passive activity rules, the property’s use, and your overall tax situation can all affect the result.

So, Should You Prepay Your Property Taxes?

Maybe.

The increased SALT deduction limit means prepaying property taxes deserves a second look for some homeowners — particularly people who itemize and aren’t already at their applicable SALT limit.

But prepaying isn’t automatically a tax-saving strategy.

Before sending thousands of dollars to your county or municipality, check three things:

First, are the taxes actually assessed? Paying an estimated future tax bill doesn’t necessarily make it deductible in the current year.

Second, will the payment actually increase your itemized deduction? If you’re taking the standard deduction or are already at your SALT limit, the answer may be no.

Third, what is the actual tax savings? A $5,000 deduction isn’t a $5,000 tax savings. Your actual benefit depends on your marginal tax rate and whether the deduction changes your taxable income.

The best move isn’t always to pay your taxes early. Sometimes it’s to keep the cash, take the standard deduction, and move on with your life.

But if you’re close to the line between taking the standard deduction and itemizing, or you expect your income and deductions to change significantly from one year to the next, a year-end tax projection can show whether prepaying actually puts money back in your pocket.

That’s a much better approach than paying a big tax bill early simply because someone told you it was a “tax write-off.”

The post Should You Prepay Property Taxes to Get an Itemized Deduction? appeared first on Huddleston Tax CPAs | Accounting Firm In Seattle.

For certain real estate investors, a cost segregation study combined with accelerated depreciation and bonus depreciation can significantly increase deductions in the early years of property ownership. That can mean lower taxable income and more cash available for reinvestment, improvements, debt reduction, or additional properties.

The important thing to understand is that these aren’t three completely separate tax strategies. Cost segregation identifies assets that may qualify for shorter depreciation periods, while accelerated depreciation methods and bonus depreciation can allow those assets to be deducted more quickly.

And the rules have changed significantly in recent years. In particular, legislation enacted in 2025 restored 100% bonus depreciation for qualifying property acquired and placed in service after January 19, 2025.

Here’s how these strategies work and what property owners should know before using them.

What Is Cost Segregation?

Normally, the building portion of a commercial property is depreciated over 39 years, while residential rental property generally uses a 27.5-year recovery period. Certain components of the property, however, may qualify for significantly shorter recovery periods.

A cost segregation study analyzes the property and identifies qualifying components that may be treated as shorter-lived property.

Depending on the property, these components can include items such as carpeting, certain lighting, cabinetry, appliances, landscaping, parking areas, and other building-related assets.

Some components may fall into 5-, 7-, or 15-year property classifications rather than being depreciated over the full building life. The exact classification depends on the asset and applicable tax rules.

The result can be a significantly larger depreciation deduction in the early years of ownership.

Why Does Accelerated Depreciation Matter?

Accelerated depreciation means you’re recovering the cost of qualifying property faster than you would under a straight-line approach.

That doesn’t necessarily mean you’re receiving a larger total depreciation deduction over the entire life of the property. Rather, you’re moving deductions toward the beginning of the property’s recovery period.

For a growing real estate investor, timing can matter enormously.

A $100,000 tax deduction today may be considerably more valuable than receiving that same $100,000 in deductions spread over the next 20 or 30 years.

That’s because the cash you save on taxes today can potentially be reinvested today.

Bonus Depreciation Has Changed

This is where the current tax rules are particularly important.

Under the rules that applied before the 2025 changes, bonus depreciation had been scheduled to phase down. That led many articles and tax-planning discussions to reference 80%, 60%, and subsequent declining percentages.

That information is now outdated for qualifying property acquired and placed in service after January 19, 2025.

The One Big Beautiful Bill Act restored a 100% additional first-year depreciation deduction for qualifying property acquired and placed in service after January 19, 2025. The IRS describes this as a permanent provision rather than another temporary phaseout.

That makes cost segregation particularly interesting for qualifying property placed in service under the new rules.

How Cost Segregation and Bonus Depreciation Work Together

Imagine you purchase a $2 million commercial property.

After allocating the appropriate portion to land and performing a cost segregation study, suppose $500,000 is identified as qualifying shorter-lived property.

If that property meets the requirements for 100% bonus depreciation, the eligible amount could potentially be deducted in the first year rather than being spread over its normal recovery period.

That doesn’t mean every $500,000 identified in a cost segregation study automatically becomes a $500,000 deduction.

Eligibility depends on the specific assets, acquisition dates, placed-in-service dates, elections, and other tax rules.

But it illustrates why the combination can be powerful.

A Bigger First-Year Deduction Can Mean More Cash Flow

Suppose a property produces strong rental income but also requires substantial capital investment.

Without accelerated deductions, much of the property’s depreciable basis may be recovered over many years.

With appropriate planning, some qualifying components may generate substantially larger deductions earlier.

That can reduce taxable income in the near term.

The resulting tax savings aren’t necessarily “free money.” You’re generally accelerating deductions that otherwise would have occurred later.

But from a cash-flow perspective, getting the tax benefit sooner can be extremely valuable.

Cost Segregation Can Be Useful Beyond a New Purchase

Cost segregation isn’t necessarily limited to the day you purchase a property.

It can also be relevant when you’ve made significant improvements or renovations.

For example, an investor might purchase an older building and spend hundreds of thousands of dollars renovating it.

Some of those improvements may qualify for shorter recovery periods depending on what was purchased and how it is used.

A cost segregation study can help identify the appropriate treatment rather than treating the entire renovation as one long-lived asset.

Who Should Consider Cost Segregation?

Cost segregation tends to be most interesting for owners of properties with significant depreciable basis and sufficient taxable income to benefit from accelerated deductions.

It may be worth investigating if you:

• Own commercial real estate
• Own apartment buildings or other residential rental properties
• Recently purchased a substantial investment property
• Completed a major renovation
• Own multiple rental properties
• Are planning a significant real estate acquisition
• Have substantial taxable income that could potentially be offset

The larger and more complex the property, the more potential there may be for a detailed study to uncover meaningful differences in depreciation treatment.

What About Passive Activity Rules?

There’s another important consideration: having a large depreciation deduction doesn’t automatically mean you can use all of it against your W-2 income or other non-real-estate income.

Rental real estate is generally subject to the passive activity rules, and those rules can limit when losses are deductible.

Real estate professionals and taxpayers who meet other applicable requirements may have additional opportunities, but eligibility depends on the taxpayer’s specific facts and circumstances.

This is one reason a cost segregation study should be considered as part of a broader tax plan rather than as an isolated deduction strategy.

Don’t Forget Depreciation Recapture

There is an important tradeoff to accelerated depreciation.

Depreciation reduces your taxable income today, but selling the property later can result in depreciation-related tax consequences.

Certain depreciation-related gains may be subject to special recapture rules and rates.

That doesn’t necessarily make accelerated depreciation a bad strategy.

In fact, deferring taxes for years while keeping the money invested can be very valuable.

But you should consider the potential future tax consequences before assuming that the biggest possible deduction today is automatically the best answer.

A 1031 Exchange May Be Part of the Bigger Picture

Investors also sometimes combine depreciation planning with a future 1031 exchange.

A properly structured 1031 exchange may allow an investor to defer recognition of qualifying gain when exchanging one investment property for another.

That can become particularly interesting for investors who want to continue building a real estate portfolio rather than cashing out.

However, a 1031 exchange has its own requirements and deadlines. It isn’t something to decide after you’ve already sold the property and deposited the proceeds into your personal account.

Your CPA, tax attorney, and qualified intermediary should be involved before the transaction is completed.

Don’t Assume You Should Take the Maximum Deduction

One of the biggest misconceptions about depreciation planning is that more deduction always equals better tax planning.

Not necessarily.

A business owner with very little taxable income may not benefit from accelerating a huge amount of depreciation today.

Another investor may have substantial income this year and find accelerated depreciation extremely valuable.

Someone else may be planning to sell the property soon.

The optimal strategy depends on your current income, expected future income, passive activity status, other investments, financing, exit strategy, and overall tax picture.

Sometimes the smartest move is to accelerate as much depreciation as possible.

Sometimes spreading deductions over multiple years makes more sense.

What Does a Cost Segregation Study Cost?

A professional cost segregation study has a cost, and that cost varies depending on the property’s size and complexity.

But the relevant question isn’t simply:

“How much does the study cost?”

The better question is:

“How much additional tax savings could the study potentially create, and when can I use those deductions?”

If a study costs several thousand dollars but identifies hundreds of thousands of dollars of qualifying shorter-lived property, it may be worth serious consideration.

Your CPA can help model the potential tax impact before you commission the study.

The Bottom Line

Cost segregation, accelerated depreciation, and bonus depreciation can be powerful tools for real estate investors—but they work together rather than functioning as three completely independent deductions.

Cost segregation identifies qualifying components that may have shorter recovery periods. Accelerated depreciation methods can allow those assets to be recovered faster. And under current federal rules, qualifying property acquired and placed in service after January 19, 2025 may be eligible for 100% bonus depreciation.

For investors in high-value real estate markets such as Seattle, Bellevue, Tacoma, and other parts of Washington, the potential cash-flow impact can be significant.

But the right strategy isn’t necessarily to take the largest deduction possible.

The goal is to put the tax deduction in the year when it provides you with the greatest overall financial benefit.

If you’re purchasing a property, completing a major renovation, or considering a cost segregation study, talk with your CPA before the transaction is complete. Good depreciation planning is most valuable when it’s done proactively—not after the tax return is already sitting on your desk.

The post Real Estate Tax Strategy: Cost Segregation, Accelerated & Bonus Depreciation appeared first on Huddleston Tax CPAs | Accounting Firm In Seattle.

Then comes the less exciting part: the tax bill.

Depending on how long you owned the property, how you used it, your original cost basis, depreciation, and what you do with the proceeds, a property sale can create a surprisingly large tax liability.

The good news is that there are legitimate strategies that may reduce, defer, or sometimes eliminate some of the tax associated with a sale. The important thing is that most of these strategies need to be considered before the sale happens.

Once the property has already sold and the proceeds are sitting in your bank account, your options can become much more limited.

Here are some of the strategies worth discussing with your CPA or tax advisor.

First, Figure Out What You’re Actually Going to Owe

Before looking for ways to reduce your tax bill, you need to know what the potential gain actually is.

Your taxable gain generally isn’t simply:

Sale price − what you originally paid

You need to account for your adjusted basis, which can include qualifying improvements and other adjustments. If you’ve rented the property or used it for business, depreciation can also significantly affect the calculation.

For example, imagine you bought an investment property for $400,000 and eventually sell it for $700,000. At first glance, it looks like you have a $300,000 gain.

But if you made $50,000 of qualifying improvements and claimed $80,000 of depreciation, the calculation can look very different.

This is one reason it’s worth having your CPA calculate the gain before closing, rather than discovering the tax consequences when you file your return.

Strategy #1: Consider a 1031 Exchange

If you’re selling an investment or business property and want to continue investing in real estate, a Section 1031 exchange may be one of the most powerful tools available.

Instead of selling one investment property, paying tax on the gain, and then buying another property, a properly structured 1031 exchange can allow you to defer recognition of the gain by exchanging the property for qualifying replacement real estate.

There are important rules and deadlines. You generally can’t sell the property, put the money in your personal checking account, and then decide later that you’d like to do a 1031 exchange.

A qualified intermediary generally needs to be involved, and the transaction must be structured properly from the beginning.

Also, 1031 treatment now applies to real property, rather than the broader range of property that historically qualified.

The key word here is defer.

A 1031 exchange generally doesn’t make the gain disappear. Instead, the tax is pushed into the future, potentially allowing you to keep more money invested.

Strategy #2: Consider a Delaware Statutory Trust

You’ve probably heard of a DST, or Delaware Statutory Trust, if you’ve been researching 1031 exchanges.

A DST can potentially allow an investor to exchange out of an investment property and into an interest in professionally managed real estate while maintaining 1031 eligibility, assuming the particular structure and transaction meet the applicable requirements.

This can be attractive to someone who says:

“I want out of being a landlord, but I don’t want to trigger a huge tax bill.”

Instead of buying another rental property and dealing with tenants, maintenance, and management, an investor may be able to invest in a fractional interest in institutional real estate through a DST.

But a DST isn’t a magic tax shelter. It’s an investment with its own risks, fees, liquidity limitations, and potential returns.

The tax strategy should never be the only reason you make the investment.

Strategy #3: Look at Opportunity Zones

Opportunity Zones can also come up when you’re trying to figure out what to do with a capital gain.

The basic concept is that certain eligible gains can potentially be invested into a Qualified Opportunity Fund (QOF), which invests in qualifying Opportunity Zone businesses or property.

Historically, the program offered the ability to defer eligible capital gains and potentially exclude appreciation on a qualifying Opportunity Zone investment if the investment was held long enough.

However, Opportunity Zone rules are changing, and 2026 is particularly important because some of the original program’s deferred gains reach their inclusion deadline. Current federal law and transitional guidance need to be considered before assuming an Opportunity Zone strategy will work for a particular sale.

In other words, don’t take someone’s five-year-old Opportunity Zone advice and assume it applies today.

This is absolutely an area where you want your CPA involved before moving money.

Strategy #4: Take Advantage of the Section 121 Exclusion

If the property you’re selling is your primary residence, you may have a much simpler tax-saving opportunity.

Section 121 can allow qualifying homeowners to exclude up to $250,000 of gain for a single taxpayer or $500,000 for certain married couples filing jointly, assuming the applicable requirements are met.

Generally, you need to have owned and used the property as your principal residence for at least two years during the five-year period ending on the sale date.

This can be an enormous difference.

Imagine you bought your home for $350,000 and eventually sell it for $750,000. You have a $400,000 gain before considering other adjustments.

If you’re eligible for the full $500,000 married-filing-jointly exclusion, you may be able to exclude the entire gain.

There are additional rules for situations involving rental use, depreciation, previous exclusions, and properties acquired through a 1031 exchange, so don’t assume every gain on a former home qualifies.

The IRS specifically notes that depreciation-related gain generally cannot be excluded under Section 121.

Strategy #5: Make Sure You Know Whether Your Gain Is Long-Term or Short-Term

How long you owned the property matters.

Generally, property held for more than one year produces a long-term capital gain, while property held for one year or less produces a short-term gain.

Why does that matter?

Long-term capital gains generally receive more favorable federal tax treatment than short-term gains, which are generally taxed at ordinary income rates.

So if you’re contemplating selling a property shortly before reaching the one-year mark, the timing could have significant tax consequences.

That doesn’t mean you should hold a bad investment simply to get a better tax rate. But if you’re already deciding between selling in December or January, or you’re just a few weeks away from crossing the one-year threshold, it’s worth running the numbers first.

Strategy #6: Don’t Forget Capital Losses

Here’s where selling another investment at a loss can sometimes become useful.

Suppose you sell your property and generate a $200,000 capital gain. You also have investments sitting in your portfolio that you’ve been considering selling.

If some of those investments have genuine unrealized losses, selling them may generate capital losses that can offset capital gains.

The IRS generally nets capital gains and losses when determining your overall capital gain or loss for the year.

But there’s an important distinction:

Selling an investment at a loss doesn’t mean you get a dollar-for-dollar tax deduction against your income.

The loss generally offsets capital gains first. If your net capital loss exceeds your capital gains, individuals can generally deduct up to $3,000 against ordinary income in a year, with unused losses carried forward.

And if you’re talking about selling your personal residence at a loss, that’s different: losses on the sale of personal-use property generally aren’t deductible.

Strategy #7: Look at Pass-Through Entity Tax

If the property is owned through a partnership, S corporation, or other pass-through structure, your CPA may also want to consider whether a pass-through entity tax (PTET) election is available.

This is particularly relevant for owners in states that impose individual income taxes and have enacted PTET regimes.

The basic idea is that, under qualifying state rules, the business may pay certain state income taxes at the entity level, potentially producing a federal deduction that wouldn’t otherwise be available to the individual owner because of the federal SALT deduction limitations.

But PTET is highly state-specific and isn’t automatically beneficial for every business or every property sale.

For that reason, this is a “run the numbers first” strategy—not something you elect simply because you heard another business owner did it.

Strategy #8: Don’t Forget Depreciation Recapture

This is one of the biggest surprises for people selling rental property.

You may have spent years claiming depreciation deductions and reducing your taxable income.

When you sell, however, some of that depreciation can come back into the tax calculation.

Certain depreciation-related gain on real property can be subject to the special unrecaptured Section 1250 gain rate, which can be as high as 25% federally.

This is why a property that looks like it generated a relatively modest capital gain can still produce a larger-than-expected tax bill.

Your CPA should be looking at your depreciation history—not just your purchase price and sale price.

What If You Already Sold the Property?

This is where things get more difficult.

Some strategies need to be established before or as part of the sale.

A 1031 exchange, for example, isn’t something you can generally decide to do months after you’ve completed the transaction.

That doesn’t necessarily mean you’re out of options.

Your CPA can still look at:

• Your adjusted basis
• Capital losses
• Other gains and losses
• The property’s use
• Depreciation
• Your filing status
• Your overall taxable income
• Available deductions and credits
• Potential installment-sale treatment, when applicable

The right strategy depends heavily on the facts.

Don’t Let the Tax Tail Wag the Investment Dog

Here’s perhaps the most important advice.

Don’t spend $100,000 on an investment you don’t actually want simply to avoid paying $20,000 in taxes.

If you have a $200,000 gain and face a $40,000 tax bill, spending $200,000 on a terrible investment doesn’t make you wealthier.

It makes you the proud owner of a terrible investment.

Tax planning should fit into your overall financial strategy—not dictate every financial decision you make.

The Bottom Line

Selling property can create a substantial tax bill, but you don’t necessarily have to accept the first number your tax software spits out.

Depending on your situation, you may want to investigate a 1031 exchange, DST, Opportunity Zone investment, Section 121 exclusion, capital-loss harvesting, long-term capital-gain treatment, or pass-through entity tax.

And sometimes the best strategy is simply making sure your basis, depreciation, and expenses have been calculated correctly.

The biggest mistake is waiting until tax season to ask what you could have done differently.

The post How to Reduce Taxes After Selling an Investment Property appeared first on Huddleston Tax CPAs | Accounting Firm In Seattle.