Why this matters

During the COVID-19 declared emergency, special disaster-relief rules postponed certain tax deadlines. In Kwong, taxpayers who paid certain penalties and interest – or still have unpaid assessed amounts from that period – may want to review whether relief is available. This issue may apply to a wide range of taxpayers, including individuals, businesses and trusts/estates.

Items worth reviewing

• Failure to file and pay penalties
• Certain estimated tax penalties and interest

Important reminders 

• There may be a limited‑time opportunity to recover penalties and interest paid during the pandemic.
• The IRS will not issue refunds automatically
• Action is required by July 10, 2026, but in some situations the deadline could be earlier.
• We can help determine eligibility and file protective claims or claims for refund or abatement of penalties and interest where appropriate.

Let JMF help you

Contact your JMF accountant if you paid significant interest and/or penalties during the COVID period and have any questions. As always, planning ahead can help you maximize your financial situation and position you for greater success.

The post You might be eligible for tax relief from COVID-era IRS penalties appeared first on JMF.

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They join ten other shareholders at one of the state’s top certified public accounting and advisory firms. JMF is headquartered in Tuscaloosa and has been since 1920.

“Andrea, Reed, and Todd have each earned the respect of their colleagues, the trust of their clients, and the confidence of our leadership team,” said Goldsmith. “Their experience, integrity, and commitment to excellence align perfectly with JMF’s values, and we are proud to welcome them into the shareholder group.”

Andrea Armstrong

Andrea Armstrong is a certified public accountant with over 15 years of experience in tax and audit. She joined the Firm in 2011 as an intern. Andrea works in the Firm’s tax and audit practices, providing a wide range of services to small and middle market businesses. Andrea is also a graduate of the ASCPA Leadership Academy and a recipient of the 2017 Outstanding Young CPA Award from the Alabama Society of Certified Public Accountants.

“As a 20-year-old accounting student, I couldn’t have imagined where I am and what my life is today. God truly answered my prayer and opened the perfect door for me. I have been blessed to work with some of the best CPAs in the state of Alabama and for a firm with a 100+ year old legacy of being good and trustworthy people,” Mrs. Armstrong said.

Andrea received a floral arrangement from the other female shareholders, which is a long-standing tradition at the Firm.  The late B. Jean Hunt, JMF’s first female partner and one of the first 15 female CPAs in Alabama, started the tradition when other females made partner.  JMF has a legacy of hiring and promoting women, including the first female CPA in Tuscaloosa, the late Doris Grammas.  Six of the current (now) thirteen shareholders are female.

Andrea holds both a Bachelor of Science in Accounting and a Master of Accounting from The University of Alabama.

Reed Lightsey

Reed Lightsey is a member of the Firm’s Accounting & Audit Department and has been with JamisonMoneyFarmer PC since 2011. He has extensive experience providing audit and accounting services to clients in the manufacturing and service industries, as well as performing employee benefit plan audits and other assurance engagements.

Reed is a Certified Public Accountant licensed in Alabama and holds a Bachelor of Science in Business Administration from The University of Alabama, along with a Master of Accountancy from the University of Mississippi.

In addition to his professional responsibilities, Reed is active in the community, serving as a board member of Tuscaloosa’s One Place, a children’s advocacy organization.

“I am grateful for the opportunity to become a shareholder of a firm that values both professional excellence and community involvement,” Lightsey said. “I look forward to continuing to support our clients and the Firm for many years to come.”

Todd Turner

Todd Turner works in the Firm’s Accounting & Audit Department and brings more than 17 years of public accounting experience to his role. He manages a variety of audit engagements, with concentrations in manufacturing, hospitality, non‑profit organizations, and employee benefit plans.

Todd started at JMF as a staff accountant in 2008, and rejoined JamisonMoneyFarmer PC in 2019 after serving as an audit manager with a Big Four accounting firm in Birmingham. He is a Certified Public Accountant licensed in Alabama and holds both a Bachelor of Science in Business Administration, summa cum laude, and a Master of Accountancy from The University of Alabama.

Todd is also a graduate of the ASCPA Leadership Academy and is actively involved in professional and civic organizations.

“Becoming a shareholder at JMF is an incredible honor,” Turner said. “I appreciate the trust the Firm has placed in me and look forward to continuing our mission of delivering high‑quality service to our clients.”

About JamisonMoneyFarmer PC

JamisonMoneyFarmer PC was founded in 1920 by the late Carl C. Jamison, one of the first Certified Public Accountants in the state. JMF serves privately-held businesses and their owners, government and not-for-profit organizations, and individuals in Alabama and throughout the southeast with a full range of accounting, tax, and consulting services. JMF is recognized by the American Institute of Certified Public Accountants as one of the 400 largest firms in the United States. The Firm’s knowledgeable, innovative and client-focused professionals are committed to providing tailored services across a wide range of tax, audit, accounting and advisory needs to achieve each client’s unique financial goals. Within our family of related companies, we also provide technology managed service solutions and wealth management services.

For more information about JMF, visit http://www.jmf.com. You can also find JamisonMoneyFarmer on:

• JMF Advisors Show (https://www.youtube.com/channel/UCwrS6kH6DmmY0YZDzkye6fw)
• Facebook (http://www.facebook.com/JamisonMoneyFarmer),
• LinkedIn (https://www.linkedin.com/company/jamisonmoneyfarmer-pc)
• Instagram (https://www.instagram.com/jmfcpas), and
• X (http://x.com/JMFCPAs).

The post JamisonMoneyFarmer PC Welcomes Three New Shareholders appeared first on JMF.

The end of the year is often an optimal time for tax planning for both individuals and small business owners. Traditionally, the conventional tax wisdom is to accelerate tax deductions into the current year and defer taxable income until the next year. However, new tax legislation enacted in 2025 significantly complicates matters.

The One Big Beautiful Bill Act (OBBBA)—signed on the Fourth of July—is a follow-up to the Tax Cuts and Jobs Act (TCJA) enacted during President Trump’s first term. Many of the provisions included in the TCJA, particularly those affecting individuals and families, went into effect in 2018 and were scheduled to expire after 2025. The OBBBA extends most of those tax provisions, with certain modifications, and often makes them a permanent part of the tax code.

In addition, the new law creates brand-new tax-saving opportunities, while also posing potential tax pitfalls for the unwary. In some cases, the OBBBA provisions are effective in 2025, but others do not kick in until 2026 or a later date.

Finally, year-end tax planning should consider other recent legislation—including the law commonly known as “SECURE 2.0”—as well as key rulings and regulations issued by the IRS. It is difficult to navigate through this maze of complex rules without expert guidance.

There are other steps you can take to prepare for your tax return filing for next year. Our firm has taken measures to ensure that we can provide you with quality service while efficiently working to prepare your income tax return. You can partner with us by making sure you provide your documents to us early.

For business returns, we request that you provide us with your documents by February 15, 2026 in order to file timely.  For individual returns, we request that you provide us with your documents by March 18, 2026 in order for us to file timely. We will request an extension for you if your documents arrive after the dates above, and we will put your return in line for preparation soon after the deadlines pass.

For a print-friendly version, please click JMF Year-End Tax Letter 2025.

Keeping all that in mind, we have prepared the following 2025 Year-End Tax Letter. For your convenience, the letter is divided into three sections:

• Individual Tax Planning
• Business Tax Planning
• Financial Tax Planning
• Alabama State Tax Planning

Be aware that the concepts discussed in this letter are intended to provide only a general overview of year-end tax planning. It is recommended that you review your personal situation with a tax professional.

INDIVIDUAL TAX PLANNING

Itemized Deductions

The TCJA suspended several itemized deductions for 2018 through 2025 while boosting the standard deduction. The OBBBA generally extends these rules with some modifications.

YEAR-END MOVE: If you expect to itemize deductions on your 2025 tax return, take advantage of several key deductions that can lower your tax bill. Consider the following:

• Donate cash or property to a qualified charitable organization (see more below).
• Pay deductible mortgage interest if it makes sense for your situation. This includes interest on acquisition debt up to $750,000 for your principal residence and one other home.
• Make state and local tax (SALT) payments up to the annual deduction limit. Under the OBBBA, the SALT cap is quadrupled from $10,000 to $40,000 for 2025, subject to a phase-out for high-income taxpayers. The cap increases by 1% annually through 2029 before expiring.
• Do home improvements that qualify for mortgage interest deductions as acquisition debt. This includes loans made to substantially improve a qualified residence.
• Schedule non-emergency physician or dentist visits like exams or cleanings in 2025 if you expect to qualify for a medical deduction this year. Only unreimbursed expenses above 7.5% of your adjusted gross income (AGI) are deductible.

Tip: Conversely, if you do not expect to qualify for a medical deduction in 2025, absent other circumstances you might as well delay non-emergency expenses to 2026 when they might do you some tax good.

Charitable Donations

The tax law allows you to deduct charitable donations within generous limits if you meet certain recordkeeping requirements. But the OBBBA adds several tax complications.

YEAR-END MOVE: Bunch charitable donations in a year in which you expect to itemize. For instance, if you are itemizing in 2025, you may step up charitable gift-giving before January 1. As long as you make a donation this year, it is deductible in 2025—even if you charge it in December 2025 and pay it in 2026.

For the first time ever, the OBBBA imposes a floor of 0.5% of AGI and limits the deduction for charitable contributions to the excess over the floor, effective in 2026. This new rule may be especially important if you are planning to donate appreciated long-term gain property that would qualify for a deduction equal to the property’s fair market value (FMV). The deduction for property is limited to 30% of AGI, but any excess may be carried over for up to five years.

Tip: The OBBBA also allows a deduction of up to $1,000 for non-itemizers, beginning in 2026. The maximum deduction is doubled to $2,000 on a joint return.

Home Energy Credits

If you own your principal residence, you may benefit from two types of “home energy” tax credits on your 2025 return.

YEAR-END MOVE: Make energy-saving installations before the end of the year to secure credits for qualified improvements. Under the OBBBA, both credits will expire after 2025 and are not expected to be renewed. So, it is now or never!

The two credits still available before 2026 are as follows:

• Energy Efficient Home Improvement Credit: This is a 30% credit for qualified expenses like insulation, central air conditioners, water heaters, furnaces, heat pumps, biomass stoves and boilers and home energy audits, up to a maximum of $3,200.
• Residential Clean Energy Credit: This is a 30% credit for the cost of new qualified clean energy property like solar electric panels, solar water heaters, wind turbines, geothermal heat pumps, fuel cells and battery storage technology.

Tip: Other special rules and limits may apply to certain qualified expenses. Obtain confirmation of tax breaks before making any commitments.

Alternative Minimum Tax

The alternative minimum tax (AMT) calculation features technical adjustments, inclusion of “tax preference items” and subtraction of an exemption amount, subject to a phase-out. After comparing AMT liability to regular tax liability, you effectively pay the higher of the two.

YEAR-END MOVE: Have your tax professional assess your AMT status. When it makes sense, you may shift certain income items to 2026 to reduce AMT liability for 2025. For instance, you might postpone the exercise of incentive stock options (ISOs) that count as tax preference items.

Due to changes in the TCJA and other legislative modifications, the exemption amounts for the AMT have increased steadily in recent years, as shown below.

The OBBBA permanently establishes a favorable exemption phase-out threshold of $500,000 for single filers and $1 million for joint filers, with inflation indexing, beginning in 2026. However, the new law also doubles the rate for phasing out exemptions.

Tip: The AMT has only two tax rates: 26% and 28%. If you are sure that you will have to pay the AMT in 2025 and your top AMT rate is lower than your top regular rate—for example, the highest rate of 37%—-you might accelerate income into 2025.

Family Tax Breaks

If you are a parent with young children, you may be entitled to several tax breaks designed to reduce your family’s tax burden.

YEAR-END MOVE: Maximize the tax benefits for your situation This may comprise one or more of the following tax provisions generally enhanced by the OBBBA.

• For 2025, parents may claim a Child Tax Credit (CTC) of $2,200 for each qualifying child, subject to a phase-out beginning at $200,000 for single filers and $400,000 for joint filers.
• The dependent care credit is enhanced for certain taxpayers with a modified adjusted gross income (MAGI) below specified levels. For high-income taxpayers, the maximum credit remains $600 for one child and $1,200 for two or more children.
• Previously, the adoption credit was 100% nonrefundable. Beginning in 2025, the new law provides that up to $5,000 of the credit is refundable, indexed for inflation in the future.
• Under the TCJA, parents could withdraw up to $10,000 tax-free from a Section 529 plan for higher education to pay a child’s tuition at a qualified elementary or secondary school. The OBBBA doubles the cap to $20,000, beginning in 2026.

Tip: The maximum annual amount that can be contributed to a flexible spending account (FSA) for dependent care expenses increases from $5,000 to $7,500, beginning in 2026.

Miscellaneous

• Finance the purchase of a qualified new vehicle. The OBBBA allows annual deductions of up to $10,000 of interest on loans for qualified vehicles for 2025 through 2028, subject to a phase-out beginning at $100,000 of MAGI for single filers and $200,000 for joint filers.
• Pay tuition in 2025 for a child’s semester beginning in early 2026 if you can claim one of two higher education credits. However, both credits are subject to phase-outs based on MAGI.
• Avoid an estimated tax penalty with a safe-harbor exception. Generally, a penalty will not be imposed if you pay 90% of your current year’s tax liability or 100% of your prior year’s tax liability (110% if your AGI exceeded $150,000).
• Empty out FSAs for health care or dependent care expenses if you will forfeit unused funds under the “use-it-or-lose it” rule. However, your employer’s plan may provide a carryover to 2026 of up to $660 of unused funds or a 2½-month grace period.
• If you own property damaged in a federal disaster area in 2025, you may elect to obtain fast tax relief by filing an amended 2024 return. The TCJA suspended the deduction for casualty losses for 2018 through 2025 but retained a current deduction for federal disaster-area losses. The OBBBA extends this tax break and allows deductions for losses in state-declared disaster areas, beginning in 2026.

BUSINESS TAX PLANNING

Depreciation-Based Deductions

A business may benefit from one of two depreciation-related tax breaks, or both, for qualified property placed in service. The OBBBA enhances those tax breaks, beginning in 2025.

YEAR-END MOVE: Ensure that qualified property is placed in service before the end of the year. Otherwise, your business does not qualify for either tax break on its 2025 return.

1. Section 179 deduction: Section 179 allows a business to currently deduct the cost of qualified property up to an annual limit, subject to a phase-out. The TCJA doubled the limit to $1 million in 2018, with indexing (shown below). Now the OBBBA permanently hikes the limit to $2.5 million and the phase-out threshold to $4 million in 2025, with future indexing.

Be aware that the Section 179 deduction cannot exceed the taxable income from all your business activities this year. This rule could limit your deduction for 2025.

2. First-year bonus depreciation: The TCJA authorized 100% first-year bonus depreciation subject to a phase-out over a five-year period. The applicable percentage for 2025 was scheduled to be only 40%, but the OBBBA permanently restores the 100% deduction, retroactive to January 20, 2025.

Tip: Regular depreciation deductions may be claimed for any remainder. However, other special rules may apply, such as a separate set of limits on vehicles.

Qualified Small Business Stock

Currently, if certain requirements are met, you may exclude from tax 100% of the gain from the sale of “qualified small business stock” (QSBS) if it is held at least five years.

YEAR-END MOVE: Have your company issue QSBS to inject fresh capital into the business. The OBBBA provides more leeway to entrepreneurs, beginning in 2026.

To qualify for the exclusion, the amount of gain considered for a QSBS sale in a particular year was limited to $10 million and could not exceed ten times the basis of QSBS sold during the year. Also, the corporation could not have more than $50 million in assets when the stock was issued.

The OBBBA provides the following:

• A partial exclusion of 50% is allowed for stock held at least three years and 75% for stock held at least four years.
• The $10 million cap is increased to $15 million.
• The threshold for “small business” assets is increased from $50 million to $75 million (indexed for inflation after 2026).

Tip: The taxable portion of a QSBS sale may qualify as long-term capital gain eligible for favorable tax treatment (more on this later).

Work Opportunity Tax Credit

If your business becomes busier than usual during the holiday season, it may add to the existing staff. Consider all the relevant factors, including tax incentives, in your hiring decisions.

YEAR-END MOVE: When appropriate, hire workers eligible for the Work Opportunity Tax Credit (WOTC). The credit is available if a worker falls into a designated “target” group.

Generally, the WOTC is 40% of the first-year wages of up to $6,000 per employee, for a maximum of $2,400. For certain qualified veterans, the credit may be claimed for up to $24,000 of wages, for a $9,600 maximum. There is no limit on the number of credits per business.

Tip: The WOTC has expired and then been revived multiple times in the past but is not expected to be renewed again after 2025. This is probably the last chance for this credit.

Employee Compensation

Generally, compensation is taxable to employees and deductible by businesses. But the OBBBA carves out a brand-new tax break for “overtime pay” received from 2025 through 2028.

YEAR-END MOVE: Manage your company’s compensation system accordingly. This may require shifting hours to benefit employees without any downside to the company.

Under the new law, employees can annually deduct part of overtime pay, up to $12,500 for single filers and $25,000 for joint filers, retroactive to January 1, 2025. But the deduction is only available for the “premium” part of overtime pay based on the “time-and-a-half rate” mandated by the Fair Labor Standards Act (FLSA).

In addition, the deduction is phased out based on MAGI. The phase-out begins at $150,000 of MAGI for single filers and $300,000 for joint filers.

Tip: Similarly, the OBBBA creates a new deduction for up to $25,000 of tips received by an employee in a services industry from 2025 through 2028, subject to a phase-out above $150,000 of MAGI for single filers and $300,000 for joint filers.

Research & Experimental Expenses

In this competitive business environment, it is often important for small businesses to stay ahead of the curve.

YEAR-END MOVE: When warranted, ramp up research and experimental (R&E) activities. The OBBBA restores a faster write-off for qualified expenses.

Previously, the tax law permitted a company to fully deduct domestic R&E expenses in the year in which they were incurred. But the TCJA required costs incurred after 2021 to be capitalized and amortized over 60 months.

Now the new law reinstates the prior rules, retroactive to January 1, 2025. (Alternatively, a business can still elect to amortize the expenses over 60 months.) Due to special transitional rules for expenses incurred in 2022 through 2024, it may be beneficial to file amended returns for these years. Note: The amortization period for foreign R&E expenses remains at 15 years.

Tip: A business may also qualify for a research and development (R&D) credit, but the same expenses cannot be claimed for both the R&E deduction and the R&D credit.

Miscellaneous

• Stock up on routine supplies (especially if you expect prices to rise soon). If you buy the supplies in 2025, they are deductible this year even if they are not used until 2026.
• The OBBBA imposes a 1% “floor”, similar to the 0.5% floor for individuals previously discussed, on deductions for charitable donations by C corporations, beginning in 2026. A corporation may increase its donations late in 2025 to avoid the upcoming floor on deductions.
• Owners of pass-through business entities like S corporations and partnerships may adopt SALT “workarounds” to qualify for state deductions or credits. The entities make the payments and then tax benefits are passed through to individuals on their personal tax returns.
• Maximize the qualified business income (QBI) deduction of up to 20% for pass-through entities and self-employed individuals. Note that special rules apply if you are in a “specified service trade or business” (SSTB). The OBBBA extends this tax break and makes it permanent.
• Keep records of collection efforts (e.g., phone calls, emails and dunning letters) to prove debts are worthless. This may allow you to claim a bad debt deduction.
• Open a new business. Instead of amortizing start-up costs over 60 months, your business can currently deduct up to $5,000 of qualified expenses, subject to a phase-out above $50,000.
• Delay bonuses to 2026 if your business is an accrual-basis company. The bonuses generally are deductible on its 2025 return as long as they are paid by March 16, 2026. Bonuses received by employees in 2026 are taxable in 2026. Caveat: This technique does not apply to bonuses paid to majority owners of a C corporation or certain owners of an S corporation or a personal service corporation.

FINANCIAL TAX PLANNING

Capital Gains and Losses

Investors can manage sales of assets like securities at year-end to maximize tax benefits. First, capital gains and losses offset each other. If you show an excess loss for the year, you can offset up to $3,000 of ordinary income before any remainder is carried over to next year. Long-term capital gains from sales of securities owned longer than one year are taxed at a maximum rate of 15% or 20% for high-income investors. Conversely, short-term capital gains are taxed at ordinary income rates reaching 37%. The OBBBA preserves these tax rates for 2026 and beyond.

YEAR-END MOVE: Review your portfolio. Depending on your situation, you may “harvest” capital losses to offset gains, especially high-taxed short-term gains, or realize capital gains that will be partially or wholly absorbed by losses.

Be aware of even more favorable tax treatment for certain long-term capital gains. Notably, a 0% rate applies to taxpayers below certain income levels, such as young children. Furthermore, some taxpayers who ultimately pay ordinary income tax at higher rates due to their investments may qualify for the 0% tax rate on a portion of their long-term capital gains.

However, watch out for the “wash sale rule.” If you sell securities at a loss and reacquire substantially identical securities within 30 days of the sale, the tax loss is disallowed. One way to avoid this adverse result is to wait at least 31 days to reacquire substantially identical securities.

Note: A disallowed loss increases your basis for the securities you acquire and could reduce taxable gain on a future sale.

Tip: The preferential tax rates for long-term capital gains also apply to qualified dividends. These are most dividends paid by U.S. companies or qualified foreign companies.

Net Investment Income Tax

When you review your portfolio (see above), do not forget to account for the 3.8% “net investment income tax” (NIIT). The NIIT applies to the lesser of “net investment income” (NII) or the amount by which MAGI for the year exceeds $200,000 for single filers or $250,000 for joint filers. (These thresholds are not indexed for inflation.) The definition of NII includes interest, dividends, capital gains and income from passive activities, but not Social Security benefits, tax-exempt interest and distributions from qualified retirement plans and IRAs.

YEAR-END MOVE: Have an estimate made of your potential liability for 2025. Depending on the results, you may be able to reduce the tax on NII or avoid it altogether.

For example, you may invest in municipal bonds (“munis”). The interest income from munis does not count as NII, nor is it included in the MAGI calculation. Similarly, if you turn a passive activity into an active business, the resulting income may be exempt from the NIIT.

Tip: When you add the NIIT to your regular tax, your effective overall tax rate could exceed 40%—50% for residents in some states. Factor this into your investment decisions.

Required Minimum Distributions

Generally, you must begin taking “required minimum distributions” (RMDs) from qualified retirement plans, like 401(k) plans, and IRAs after a specified age. Under SECURE 2.0, the age threshold has been raised to 73 (scheduled to increase to 75 in 2033). The amount of the RMD is based on IRS life expectancy tables and your account balance at the end of last year.

YEAR-END MOVE: Assess your obligations. If you can postpone RMDs longer, you can continue to benefit from tax-deferred growth. Otherwise, plan to receive RMDs before January 1, 2026, to avoid any penalties.

Conversely, if you are still working and do not own 5% or more of a business with a qualified plan, you can postpone RMDs from that plan until your retirement. This “still working exception” does not apply to RMDs from IRAs or qualified plans of other employers.

Previously, the penalty for failing to take timely RMDs was equal to 50% of the shortfall. SECURE 2.0 cuts the penalty in half to 25% (10% if corrected in a timely fashion).

Tip: Beneficiaries of qualified plans and IRAs must also comply with RMD rules. If you are a nonspouse beneficiary, you are generally required to empty out the account over ten years.

Consider a qualified charitable distribution (QCD). If you are age 70½ or older, you can transfer up to $108,000 of IRA funds directly to a charity in 2025. SECURE 2.0 authorizes a one-time transfer of up to $54,000 to a charitable remainder trust (CRT) or charitable gift annuity (CGA) as part of a QCD. Although the contribution is not deductible, the QCD is exempt from tax. This is a popular option if you have to make a required minimum distribution from a Traditional IRA and do not have enough itemized deductions to receive a tax benefit from making charitable contributions. This tax planning strategy may improve your overall tax picture. Consult your JMF tax advisor for proper execution of a QCD.

401(k) Plan Savings

Contributions to a 401(k) plan are made by employees on a pre-tax basis and can earn tax-deferred income until withdrawals are made. Plus, your company may provide “matching contributions” based on a percentage of salary.

YEAR-END MOVE: Step up contributions to feather your 401(k) nest egg. In fact, if you have cleared the Social Security wage base of $176,100 in 2025, you can allocate some or all of the payroll tax savings to extra 401(k) contributions without reducing take-home pay.

For 2025, the regular contribution limit is $23,500, but if you are 50 or older you can add a “catch-up contribution” of $7,500 for a total of $31,000. Even better: Under SECURE 2.0, those age 60 through 63 can make a “super catch-up contribution” of $11,250 for a total of $34,750.

Beginning in 2026, if individuals age 50 and over earned more than $145,000 in the prior year, any of their 401(k) catch-up contributions must be made to a Roth-type account.

Tip: The Roth version of the 401(k) imposes tax on amounts contributed in 2025, but future payments are generally exempt from tax.

Estate and Gift Tax

Due to a series of laws ending with the TCJA, the federal estate and gift tax exemption has gradually increased from $1 million to $10 million, indexed for inflation. For decedents dying in 2025, it is $13.99 million. However, the exclusion was scheduled to revert to $5 million, plus indexing, in 2026. Now the OBBBA has permanently increased the exclusion to $15 million in 2026 with indexing. The exclusion amounts dating back to the TCJA are shown below.

YEAR-END MOVE: Adjust your estate plan as needed. For instance, your plan may involve various techniques, including trusts, that maximize the benefits of the estate tax exemption.

Furthermore, you can reduce the size of your taxable estate through lifetime gifts. Thanks to the annual gift tax exclusion, you can give each recipient up to $19,000 in 2025 without any gift tax liability. Thus, a couple can effectively give tax-exempt gifts up to $38,000 per recipient.

Tip: You may “double up” by giving gifts in both December and January that qualify for the annual gift tax exclusion for 2025 and 2026, respectively.

Miscellaneous

• Minimize “kiddie tax” problems by having your child invest in tax-deferred or tax-exempt securities. For 2025, unearned income above $2,700 that is received by a dependent child under age 18 (or under age 24 if a full-time student) is taxed at the top tax rate of the parents.
• If you rent out your vacation home, keep your personal use within the tax law limits. No loss deduction is allowed if your personal use exceeds the greater of 14 days or 10% of the rental period.
• From a tax perspective, it is often beneficial to sell mutual fund shares before the fund declares dividends (the ex-dividend date) and buy shares after the date dividends are declared.
• Sell real estate on an installment basis. For payments over two years or more, you can defer tax on a portion of the sales price. Also, this may effectively reduce your overall tax liability.
• Weigh the benefits of a Roth IRA conversion, especially if this will be a low-tax year. Although the conversion is subject to current tax, you generally can receive tax-free distributions in retirement, unlike taxable distributions from a traditional IRA.

Alabama State Taxes

Year-end tax projections are especially important for state taxes. Just like the IRS, states generally impose withholding and estimated tax requirements. States also charge underpayment penalties if sufficient payments are not made during the year.

Alabama passed the Pass-Through Entity Act that affects owners of pass-through entities.  This allows S-Corporations and Partnerships to pay state tax at the entity level.  If paid prior to December 31^st (for cash basis taxpayers) or elected and paid with the 2025 pass-through return (for accrual taxpayers), the owner can avoid the $10,000 state tax limit (increasing to $40,000 in 2025 for some taxpayers) on itemized deductions on the federal return.  Estimates are required.  You should discuss electing to pay the PTE tax with your JMF professional.

State taxes are deductible in computing federal income tax, up to the limit of $40,000 subject to phaseouts, and the timing of payments may be important. A tax planning strategy is to prepay by December 31, 2025 the state tax estimates that are due January 2026, and prepay projected balances due on April 15, 2026 to accelerate deductions into 2025.

However, this strategy is not beneficial for a year in which you are paying the alternative minimum tax since the AMT does not allow deductions for taxes, including state income taxes. If this sounds complicated, that’s because it is complicated. A tax projection by your JMF tax professional is the best way to approach this issue.

It is also important to note that the federal 20% deduction for “qualified business income” will not be an applicable deduction on the Alabama return.

However, Alabama law actually provides several deductions not allowed by federal law. These include:

• Individuals who are age 65 or older may treat the first $6,000 of taxable retirement income as exempt from Alabama income tax.
• Taxpayers may deduct up to $5,000 for a single filer and $10,000 for a joint filer for contributions to an Alabama Section 529 college savings plan.
• Even though the TCJA removed personal exemptions for federal purposes, Alabama law still allows for deductions for personal and dependent exemptions on the Alabama return.
• Like federal law, Alabama allows a deduction for insurance premiums paid for a qualified long-term care policy. But, for Alabama purposes, the premiums are not subject to the limitations for out-of-pocket medical expenses like they are for federal purposes.
• Even though disallowed for federal purposes, miscellaneous itemized deductions are still allowed for the Alabama return.
• Alabama law allows a deduction for the lesser of $3,000 or 50% of the costs to retrofit a new or existing home with a storm shelter to prevent damages associated with windstorm events or floods.
• The parent of a student enrolled in or assigned to attend a failing school qualifies for a refundable Alabama credit for the cost of transferring the student to a non-failing public school or private school of the parent’s choice. The credit equals 80 percent of the average annual state cost of attendance for a public K-12 student during the applicable tax year or the actual cost of attending a non-failing public school or private school, whichever is less. Private schools must participate in the scholarship contribution credit program to be eligible to participate in the failing schools credit program. A parent is allowed a credit against income tax for each taxable year. However, parents of current private school students, including those living in an area zoned for a failing school, do not qualify for the credit.
• In addition to the regular Alabama income tax deduction for medical expenses that a qualifying employee may be entitled to with respect to the payment of health insurance premiums, qualifying employees are also allowed to deduct from Alabama gross income an additional 100 percent of the amounts they pay as health insurance premiums as part of an employer provided health insurance plan provided by a qualifying employer. The qualifying employer is also allowed to deduct an additional 100% of the health insurance premiums they pay for qualifying employees.  For more information on these tax deductions, please consult your JMF tax professional.

CONCLUSION

This year-end tax planning letter is based on the prevailing federal tax laws, rules and regulations. Of course, it is subject to change, especially if additional tax legislation is enacted by Congress before the end of the year.

Finally, remember that this letter is intended to serve only as a general guideline. Your personal circumstances will likely require careful examination. We would be glad to schedule a meeting with you to assist with all your tax planning needs.

For a print-friendly version, please click JMF Year-End Tax Letter 2025.

This year-end tax planning letter is published for our clients, friends and professional associates. It is designed to provide accurate and authoritative information with respect to the subject matter covered. The information contained in this letter is not intended or written to be used for the purpose of avoiding any penalties that may be imposed under federal tax law and cannot be used by you or any other taxpayer for the purpose of avoiding such penalties. Before any action is taken based on this information, it is essential that competent, individual, professional advice be obtained.

The post 2025 Client Year-End Tax Planning Letter appeared first on JMF.

1. Charitable donations: If you itemize deductions, you can boost your charitable write-off by donating to qualified charitable organizations at year-end. For 2025, the current deduction for monetary gifts is limited to 60% of your adjusted gross income (AGI). New rules: Under the OBBBA, you must first clear a floor of 0.5% of adjusted gross income (AGI), beginning in 2026. But the new law also authorizes a deduction in 2026 of up to $1,000 for single filers who do not itemize and $2,000 for joint filers. Plan accordingly.
2. Capital gains and losses: Frequently, investors are able to use capital gains and losses to offset each other. For example, you might realize capital gains late in the year from sales of securities to absorb capital losses from earlier in the year or realize losses to offset capital gains plus up to $3,000 of ordinary income in 2025. Note: The maximum tax rate on long-term capital gain for assets held longer than a year is 15% (20% for certain high-income taxpayers).
3. Auto loan interest: Personal interest, like interest paid on most credit card debt, is nondeductible. But the OBBBA creates a brand-new deduction for some car buyers. For 2025 through 2028, you can deduct up to $10,000 of annual interest paid on auto loans. This tax break is retroactive to January 1, 2025, and is available whether or not you itemize. Caveat: The deduction of auto loan interest begins to phase out for single filers with a modified adjusted gross income (MAGI) above $100,000 and $200,000 of MAGI for joint filers.
4. Home energy credits: Recent legislation expanded two residential energy credits. Generally, you may qualify for a 30% “residential clean energy credit” for installing solar panels or other equipment to harness renewable energy this year. Also, a 30% “energy efficient home improvement credit” of up to $1,200 is available for the cost of qualified energy-efficient improvements, subject to certain dollar caps. Warning: The OBBBA eliminates these credits after 2025—act now or never!
5. Alternative minimum tax: Taxpayers may have to pay the “alternative minimum tax” (AMT) instead of their regular tax liability. The AMT calculation involves certain “tax preference” items, tax adjustments and an exemption amount subject to a phase-out. Now the OBBBA permanently establishes favorable exemption amounts of $500,000 for single filers and $1 million for joint filers for 2026 and thereafter, with future indexing, but phases out the exemption twice as fast as before. Have your AMT exposure assessed to determine the best moves for your situation.
6. Medical expenses: An itemizer can deduct unreimbursed medical expenses above an annual threshold of 7.5% of AGI. Thus, if you are close to or are already over this threshold for 2025, you might accelerate non-emergency expenses, such as medical check-ups or dental cleanings, from 2026 into 2025. Note that qualified expenses paid on behalf a dependent relative may count toward the 7.5%-of-AGI threshold.
7. Required minimum distributions: Under current law, if you have reached age 73 (increasing to age 75 in 2033) you must take annual required minimum distributions (RMDs) from traditional IRAs and qualified plans like a 401(k). Otherwise, you may be hit with a 25% tax penalty in addition to regular income tax liability (10% if corrected promptly). Be aware that other special rules apply to non-spouse IRA and qualified plan beneficiaries.

Of course, these are just seven potential tax ideas to consider as the year draws to a close. Contact your JMF professional advisor regarding your personal situation.

The post Seven Year-End Personal Tax Tips appeared first on JMF.

Individual extenders: The new law extends many individual tax provisions in the Tax Cuts and Jobs Act (TCJA) passed during Trump’s first term that were scheduled to expire after 2025. This includes:

• Current tax rate brackets featuring a bottom rate of 10% and a top rate of 37%.
• Elimination of personal exemptions.
• Higher exemption and threshold amounts for the alternative minimum tax (AMT) calculation.
• Lower deduction threshold for mortgage interest and elimination of write-offs for home equity debt.
• Elimination of most casualty loss deductions (except for certain disaster-area losses).
• Elimination of miscellaneous expense deductions.
• Elimination of moving expense deductions (except for active-duty military personnel).

The new law makes these provisions permanent with certain modifications.

Standard deduction: The TCJA essentially doubled the previous standard deduction amounts, with inflation indexing, from 2018 through 2025. Now the new law increases the standard deduction for 2025 to $15,750 for single filers and $31,500 for joint filers, subject to indexing after 2025.

Senior citizen deductions: The new law provides a $6,000 deduction for each qualified filer age 65 or older ($12,000 on a joint return if each spouse qualifies). The deduction is available from 2025 through 2028 in addition to the usual deduction for seniors 65 or older, but it is phased out for single filers with a modified adjusted gross income (MAGI) above $75,000 and $150,000 for joint filers. Note: Social Security benefits remain taxable.

SALT deductions: The TCJA established a $10,000 cap on annual deductions for state and local tax (SALT) payments. Under the new law, this deduction limit for itemizers is increased to $40,000 in 2025, with a 1% increase in each succeeding year until it reverts to $10,000 in 2030. The cap is reduced by 30% of the amount by which MAGI exceeds $500,000, with a 1% increase in the threshold each year through 2029.

Child Tax Credit: After several temporary enhancements, the new law permanently raises the Child Tax Credit (CTC). The maximum credit, which was scheduled to drop from $2,000 to $1,000 in 2026, is set at $2,200, subject to higher phase-outs of $200,000 for single filers and $400,000 for joint filers. Beginning in 2026, the maximum CTC will be indexed for inflation. The refundable portion of the credit is capped at $1,700 for 2025.

Charitable deductions: Beginning in 2026, the charitable deduction claimed by itemizers is limited to contributions in excess of 0.5% of taxable income (1% for corporations), thereby creating a new “floor” for deductions. Single filers who do not itemize can deduct up to $1,000; $2,000 for joint filers.

Auto loan interest: Previously, interest paid on auto loans was treated as nondeductible personal interest. The OBBBA creates a new deduction of up to $10,000 from 2025 through 2028 for interest paid on a vehicle assembled in the U.S. and purchased after 2024.

Tips: The new law does not exempt tips received by workers in service industries from tax, but instead provides an annual deduction limited to $25,000 for each qualified worker from 2025 through 2028. The deduction begins to phase out at MAGI of $150,000 for single filers and $300,000 for joint filers.

Overtime pay: As with tips, overtime pay will not be exempt from tax, but a single filer can annually deduct up to $12,500 a year, or $25,000 for joint filers, subject to a phase-out beginning at $150,000 of MAGI for single filers and $300,000 for joint filers. This deduction begins in 2025 and expires after 2028.

Section 179 limit: The limit on the Section179 “expensing” deduction for qualified property placed in service jumps from $1 million to $2.5 million, beginning in 2025. In conjunction, the phase-out threshold is raised from $2.5 million to $4 million. As before, these limits will be indexed for inflation.

Bonus depreciation: Although the TCJA authorized 100% “bonus depreciation” for qualified property placed in service, the deduction was being gradually reduced over a five-year period. The new law reinstates 100% first-year bonus depreciation for qualified property acquired and placed in service after January 19, 2025.

R&E expenses: Previously, research and experimentation expenses were currently deductible, but then had to be amortized over five years. The OBBBA restores the current deduction for qualified costs incurred after 2024 for taxpayers that choose to claim it. Icing on the cake: A small business with average annual receipts of $31 million or less in the prior three years can claim the deduction retroactive to 2022.

QBI deduction: The TCJA created a brand-new deduction of up to 20% of the qualified business income (QBI) received by passthrough entities and self-employed individuals, subject to phase-outs. Unlike most business provisions in the TCJA, the QBI deduction was set to expire after 2025, but the new law makes it permanent, with certain modifications.

Estate and gift taxes: The $10 million estate and gift tax exemption, scheduled to revert to $5 million after 2025, is upped to $15 million, beginning in 2026. As before, this amount will be indexed for inflation.

And there is much more. Among other items, the OBBBA provides the following:

• Creation of tax-favored “Trump accounts” for newborns with “seed money” of $1,000 per child. The Trump accounts, which will operate like IRAs, are available for children born from 2025 through 2028.
• Revisions to the reinstated “Pease rule” that reduces itemized deductions for those in the top 37% tax bracket, beginning in 2026.
• An increase in the annual limit for contributions to flexible spending accounts (FSAs) for dependent care expenses from $5,000 to $7,500, beginning in 2026.
• Tax credits for contributions to scholarship-granting organizations.
• Expansion of use of 529 plans for elementary, secondary and home-schooling expenses.
• Enhancements in family and medical leave credits
• New restrictions on employee retention credit (ERC) claims.
• Expansion of qualified small business stock (QSBS) benefits.
• Numerous revisions in laws relating to taxation of foreign and international income.
• Termination of certain provisions for “going green”—including credits for electric vehicles (EVs) and residential home improvements —generally beginning after 2025 (after September 30, 2025 for EV credits).

More to come: This brief article only covers some of the highlights of the new law. We will provide more details in future issues.

The post Key Tax Provisions of the One Big Beautiful Bill Act of 2025 appeared first on JMF.

Here’s the link to the AL Department of Revenue announcement.

Intuit, the company behind QuickBooks, has been working to ensure its software reflects this change and provides accurate tax calculations for employers.

For those using QuickBooks Desktop Payroll:  Intuit has made a payroll update available that will start calculating Alabama withholding tax on the overtime payroll items after July 1^st.  Employers MUST complete the payroll update and ensure you are using tax table version 22512 after that date.  Navigate to Employees > Get Payroll Updates to verify the tax table being used.

For those using QuickBooks Online Payroll: Please do not use the “Add Exempt Pay” feature for any overtime worked on or after July 1^st.

If you have any questions, please feel free to reach out at (205) 345-8440 or email us at jmfclientservices@jmf.com.

The post Alabama Overtime Wages Are Taxable Again appeared first on JMF.

The IRS has started to issue refunds of underpayment penalties due to the hurricane relief that Alabama received. This follows along with what the IRS said originally – those with an address in Alabama would receive relief automatically. It is typical for the IRS to issue a refund check before sending a letter explaining the adjustment, but you can go online to your IRS account and retrieve the letter before it comes in the mail.

If you already filed your 2024 tax return, you may get one of those refunds.  If your return was extended, we recommend that you pay the full amount calculated with the understanding that a refund will come after the return is filed.

If you have any other questions, please reach out to your JMF tax adviser.

The post Hurricane Helene Tax Relief Refunds Started for Alabama Taxpayers appeared first on JMF.

You can just come to this blog post or go to the Pay My Taxes tab at the top of each page.

IRS Direct Pay with Bank Account

https://www.irs.gov/payments/direct-pay-with-bank-account

You can pay individual or business tax balances due, estimated taxes, extension payments, and other federal taxes with your bank account.  No login is required.

IRS Direct Pay with Debit or Credit Card

https://www.irs.gov/payments/pay-your-taxes-by-debit-or-credit-card

You can pay individual or business tax balances due, estimated taxes, extension payments, and other federal taxes with a debit card, credit card, or digital wallet. There are dollar amount limitations and fees can apply.  No login is required.

My Alabama Taxes

https://myalabamataxes.alabama.gov/tap/_/

You can pay Alabama taxes, estimates, and extensions using a bank account.  No login is required. Click on Make a Payment in the Payments section.

IRS Where’s My Refund

https://www.irs.gov/wheres-my-refund

Alabama Where’s My Refund

https://myalabamataxes.alabama.gov/tap/_/

The post JMF’s Pay My Taxes Information appeared first on JMF.

The post 2024 Year-End Tax Planning Letter to Clients and Friends appeared first on JMF.