Sauder & Stoltzfus Blog

Preface: “Agriculture is our wisest pursuit, because it will in the end contribute most to real wealth, good morals, and happiness.” – Thomas Jefferson

New Tax Option for Selling Farmland Under the OBBB Act

On July 4, 2025, President Trump signed the One Big Beautiful Bill (OBBB) Act into law. Among its many changes, the OBBB Act includes a new tax break for farmers and landowners: if you sell qualified farmland to a qualified farmer, you can now choose to spread your tax payments over four years instead of paying the full amount all at once.

What This Means

If you qualify, you can pay the taxes from the sale in four equal annual installments—making it easier to manage cash flow after selling your farmland. This applies to sales or exchanges that happen in tax years starting after July 4, 2025.

How It Works

1. 1. You make an election on your tax return for the year you sell the land.
   2. The installment option only applies to the part of your tax bill related to the gain from the sale.
   3. The first payment is due on the normal due date of your return for that year (no extensions).
   4. The other three payments are due on the regular tax return due dates for the next three years.

What Counts as “Qualified Farmland”

The land must:

• • Be located in the United States.
  • Have been used by you for farming—or leased by you to a farmer—for almost all of the last 10 years before the sale.
  • Come with a legal agreement that it will stay as farmland for at least 10 years after the sale.
  • Tip: This election must be made when you file your return for the year of the sale—if you miss it, you can’t go back and choose it later. If you’re thinking about selling farmland, talk with your tax advisor well before the sale to see if you qualify and to plan ahead.

Who is a “Qualified Farmer”

• The buyer must be an individual who is actively engaged in farming.

Selling farmland can lead to a large tax bill in one year for farming land owners. This new legislation lets you spread out that tax cost, giving you more flexibility to reinvest, save, or manage your cash flows.

Preface: “To compel a man to furnish funds for the propagation of ideas he disbelieves and abhors is sinful and tyrannical.” – Thomas Jefferson

Qualified Business Income Deduction Changes Under the OBBB Act

On July 4, 2025, President Trump signed the One Big Beautiful Bill (OBBB) Act into law. One major change in the bill is that it makes the Qualified Business Income (QBI) deduction permanent. The bill also adjusts how the wage and investment limitation and the “specified service trade or business” (SSTB) limitation phase in, changes how the threshold amount is calculated, and—starting in 2026—adds a new inflation-adjusted minimum deduction.

Background

The QBI deduction was first created under the Tax Cuts and Jobs Act (TCJA) for tax years starting after December 31, 2017, and ending before January 1, 2026. It allows certain individuals, trusts, and estates to deduct 20% of qualified business income from:

• • A partnership
  • An S corporation
  • A sole proprietorship

It also applies to 20% of qualified REIT dividends and qualified publicly traded partnership income. Special rules apply for specified agricultural or horticultural cooperatives.

This deduction:

• • Is taken when calculating taxable income, not adjusted gross income.
  • Is available whether or not you itemize deductions.
  • Cannot exceed 20% of taxable income (reduced by net capital gains).

Limitations

There are income thresholds where limits begin to phase in:

• • For 2025 joint filers: threshold is $394,600; phase-in ceiling is $544,600.
  • For 2025 married filing separately: threshold is $197,300; ceiling is $247,300.
  • For 2025 single and head of household: threshold is $197,300; ceiling is $247,300.

Limits are based on W-2 wages paid and capital investment amounts. There is also a gradual phase-out for SSTB income over the thresholds.

Changes Under the OBBB Act

• • QBI deduction is now permanent—it will not expire in 2026 as originally planned.
  • The phase-in range for the W-2 wage and investment limit is increased:
    • Non-joint returns: from $50,000 to $75,000.
    • Joint returns: from $100,000 to $150,000.
  • New Minimum Deduction:
    • Starting with tax years after December 31, 2025, taxpayers with at least $1,000 in qualified business income from one or more active businesses they materially participate in will receive a minimum $400 QBI deduction (indexed for inflation in future years).

Qualified Business Income Deduction — Old Law vs. OBBB Act

Feature	TCJA Rules (Pre-OBBB)	OBBB Act Changes (Effective 2025)
Expiration Date	Set to expire after 2025	Permanent — no sunset date
Base Deduction Rate	20% of qualified business income	20% rate retained
Phase-In Range for Wage & Investment Limit	$50,000 for non-joint filers, $100,000 for joint filers	$75,000 for non-joint filers, $150,000 for joint filers
Threshold Amounts (2025)	Joint: $394,600 Single/HOH: $197,300 MFS: $197,300	Same thresholds retained
Specified Service Trade or Business (SSTB) Phase-Out	Begins above threshold + $50k/$100k range	Begins above threshold + $75k/$150k range
Minimum Deduction	None	$400 minimum deduction (indexed for inflation) for taxpayers with $1,000+ QBI and material participation
Applies to	Sole proprietors, partnerships, S corps, certain trusts & estates	Same coverage — plus permanent certainty for long-term planning

Example — Joint Filers with $200,000 QBI

Scenario	Old TCJA Rule (Pre-OBBB)	OBBB Act Rule (2025 onward)
Qualified Business Income	$200,000	$200,000
Deduction Rate	20%	20%
Deduction Amount	$40,000	$40,000 (same rate, but now permanent)
Phase-In Impact	No change below threshold	No change below threshold — but higher phase-in range helps higher earners

Key Takeaways for Business Owners

1. 1. 1. Long-term certainty — The deduction no longer expires, allowing stable multi-year tax planning.
      2. Higher phase-in ranges — Helps more high-income taxpayers avoid full deduction phase-outs.
      3. New minimum deduction — Ensures small business owners with modest QBI still get a benefit.

Action Steps for Business Owners

• • • Review Entity Structure — Ensure you’re maximizing eligibility for the QBI deduction.
    • Plan for Income Management — Stay within favorable phase-in thresholds when possible.
    • Document Material Participation — Especially for small business owners relying on the minimum deduction.

Bottom Line: The OBBB Act cements the QBI deduction as a powerful tax savings tool for qualified business owners, providing stability and improved access for both small and high-income earners.

Preface; “For a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.”–Winston Churchill

What You Need to Know About the Child Tax Credit Changes in the OBBB Act

On July 4, 2025, President Trump signed the One Big Beautiful Bill (OBBB) Act into law. This new law includes many updates to the tax code for both individuals and businesses. One of the major changes in the bill is how it affects the Child Tax Credit (CTC) — including how much you can claim and who qualifies.

Let’s simplify it.

What Is the Child Tax Credit?

The Child Tax Credit is a tax break given to families with children. If you have a qualifying child under age 17, you can reduce your tax bill by claiming this credit.

• • Before 2025, you could claim up to $2,000 per child.
  • After 2025, that amount was going to drop to $1,000.
  • Under the OBBB Act, this has increased to $2,200.

There are 2 parts to the CTC, one is refundable and the other isn’t. The refundable portion has risen to $1,700 for 2025. In addition, there is a separate $500 credit for other dependents (like an elderly parent or college student you support). This second credit is non-refundable.

To qualify, the child must be a U.S. citizen, national, or resident, and you must list their Social Security number on your tax return.

Who Can Claim the Credit?

There are income limits that determine whether you can claim the full credit:

• • For 2025, the credit starts to phase out (gradually decrease) when your adjusted gross income (AGI) is over:
    • $400,000 for married couples filing jointly
    • $200,000 for all other taxpayers

These income limits are now permanent under the OBBB Act.

What’s Changed Under the OBBB Act?

Here’s how the Child Tax Credit has changed with the new law:

1. Bigger Credit

• • • The credit goes up to $2,200 per child starting in 2025.
    • This amount will increase over time to keep up with inflation.

2. Refundable Portion (ACTC)

• • • If the credit is more than what you owe in taxes, part of it can be refunded to you as a check from the IRS. This is called the Additional Child Tax Credit (ACTC).
    • The refundable portion is $1,700 in 2025 and will increase with inflation beginning in 2026.
    • To qualify for the ACTC, you need to have at least $2,500 in earned income.

3. Other Dependent Credit (ODC)

• • The $500 credit for non-child dependents (such as aging parents or students over 17) stays in place, but it does not increase with inflation.

Important Reminder: Social Security Numbers Are Required

You must include valid Social Security numbers (SSNs) for your child (and for yourself or at least one spouse if filing jointly) to claim the child tax credit. These SSNs must be employment-eligible.

Summary

Feature	Old Rule	OBBB Act Update
Max Child Tax Credit	$2,000	$2,200 (2025, inflation-adjusted)
ACTC Refundable Amount	$1,400	$1,700 in 2025 and growing with inflation
Other Dependent Credit	$500	$500 (no change, not inflation-adjusted)
Income Phaseout	$400,000 (MFJ), $200,000 (others)	Made permanent
SSN Requirement	Yes	Continues to apply

Final Thoughts

The OBBB Act provides families with additional support starting in 2025 by increasing the Child Tax Credit and maintaining some generous income limits. But like all tax benefits, you’ll need to meet certain rules — like listing SSNs and filing correctly — to take full advantage.

If you’re unsure whether you qualify or how much of a credit you might get, talk to your tax advisor. Planning ahead can make a big difference in your refund or tax bill.

Let us know if you’d like help with tax planning for your family in light of these new rules!

Preface: “As in all successful ventures, the foundation of a good retirement is planning.” – Earl Nightingale

History of the Retirement Plan, Part II

The following is the second in a series of blog posts on the subject of retirement plans. The first installment, which can be found here:

• • Briefly reviewed the history of government-defined retirement models in the United States,
  • Introduced the tax-deferred model, and
  • Explained the difference between Qualified plans and Individual Retirement Accounts (IRAs).

This second installment will discuss:

• • Limits to deductibility of retirement contributions, and
  • Tax treatment of non-deductible contributions.

Future posts in this series will address:

• • The Roth model.

Non-Deductible Contributions to IRAs

Within a decade after the creation of the Individual Retirement Account (IRA) in 1974, the government began having second thoughts about letting individuals deduct the entirety of their IRA contributions from taxable income. They were especially concerned with higher-income employees who already had generous qualified retirement plans through their jobs. If you or your spouse could already exclude five figures worth of your wages from your taxable income, why should you also be allowed to deduct your IRA contributions?

The Tax Reform Act of 1986 introduced income limits on deductibility for individuals who were covered by Qualified plans at work and for their spouses, even if the spouse is not covered by a qualified plan.

The dollar amount limits set forth in 1986 are increased every year or so for inflation, but the basic three-tiered system introduced in 1986 is still with us. Here are the 2025 income limits for married filers:

MFJ, neither covered by Qualified plan	MFJ, covered by Qualified plan	MFJ, not covered by Qualified plan but spouse is
All of IRA contribution is deductible with no income limit.	All of IRA contribution is deductible if combined AGI is less than $126,000	All of IRA contribution is deductible if combined AGI is less than $236,000.
	None of IRA contribution is deductible if combined AGI is more than $146,000.	None of IRA contribution is deductible if combined AGI is more than $246,000.

And for single filers:

Single, not covered by Qualified plan	Single, covered by Qualified plan
All of IRA contribution is deductible with no income limit.	All of IRA contribution is deductible if combined AGI is less than $79,000
	None of IRA contribution is deductible if combined AGI is more than $89,000.

Under this system, not all money in all IRAs is tax-deferred. Individuals who are limited from deducting their contributions in whole or in part must pay tax on those amounts in the current year. Therefore, some of the money in their IRAs going forward is after-tax money.

This is bad because it means you have to pay tax on it this year. However, it is also beneficial, as you will never have to pay any tax on it again. And the earnings from the after-tax portion of the contribution will have the same tax-deferred status as the earnings from the pre-tax portion.

An IRA is Worth More Than Just Its Deduction

People will sometimes say that they don’t want to contribute anything to an IRA that they cannot deduct on their current year tax return. But consider that if you don’t take the deduction on a contribution now, you will not have to pay tax on it when it is withdrawn. You are in effect taking the deduction after you retire instead of taking it now. Of course, if you expect to be in a lower tax bracket in retirement, the deduction now is worth more than it will be then. But if you cannot take the deduction now, you can still get it later. It is not lost forever. And by contributing the maximum today, you still get the maximum amount of earnings growing tax-deferred.

Example: You contribute $1,000 to your IRA. Of this, you are only able to deduct $500. Over the years, your IRA grows in value to $4,000. After reaching retirement age, you withdraw the $4,000. The $500 you could not deduct is withdrawn tax-free, since tax has already been paid on it. The remaining $3,500 is taxed as ordinary income upon withdrawal.

If you are in a lower tax bracket when you retire, you might feel bad that you had to pay tax on $500 of the contribution back in the day when you were in a higher tax bracket. However, the $3,000 of earnings is still all taxed at the lower rate, even though the non-deducted portion of the contribution generated half of it.

Imagine you had not contributed that $500 because you couldn’t deduct it, but had invested it instead in a taxable brokerage account. Then the $1,500 of earnings it generated would be taxed when you earned it, at the rates you were subject to at the time.

Here is a schematic view of the differences:

	IRA – deducted on contribution	IRA – not deducted	Taxable account
Contributions	Taxed on withdrawal (lower rate)	Taxed on contribution (higher rate)	Taxed on contribution (higher rate)
Earnings	Taxed on withdrawal (lower rate)	Taxed on withdrawal (lower rate)	Taxed as earned (higher rate)

Unless your time remaining to retirement is very short, the value of your IRA during retirement resulting from this year’s contribution will likely be more than twice the amount of the contribution. So unless you have reason to think you will not be in a lower tax bracket after you retire, the value of contributing to an IRA is likely greater than the value of your current year deduction. So it is likely still worth contributing the maximum each year, even if you can’t deduct all of it.

Tax Treatment of Withdrawals from Mixed-Status IRAs

If you ever make a contribution to your IRA that is not completely deductible, you are supposed to file Form 8606 every year with your tax return to track the after-tax amount in your IRA from year to year. If you do not track the after-tax portion throughout the life of the IRA, you may have to pay tax on the entirety of your withdrawals.

When you attain retirement age and make a withdrawal, you are supposed to prorate the taxable amount of the withdrawal. The calculation is likewise done on Form 8606.

Example: You contribute $1,000 to your IRA. Of this, you are only able to deduct $500. Over the years, your IRA grows in value to $4,000. After reaching retirement age, you withdraw the $4,000. You have dutifully filed Form 8606 each year of your working life so you can prove that exactly $500 has an after-tax status. The $500 you could not deduct is withdrawn tax-free. The remaining $3,500 is taxed as ordinary income upon withdrawal.

But wait! Let’s say you don’t want to withdraw the entire $4,000. Let’s say you only want to withdraw $1,000. You might think: “I will withdraw the $500 that is after-tax and $500 of the pre-tax money. That way, I will only have to pay tax on half of my withdrawal.”

Unfortunately, that is not how the IRS will see things. Any amount you withdraw from a mixed-status IRA needs to be prorated based on the ratio of total after-tax holdings to the total IRA value. Therefore, only 12.5% ($500/$4,000) (which is to say $125) of your $1,000 withdrawal is tax-free. The other $875 is taxable. You then reduce the after-tax amount of your IRA by the $125 you withdrew and carry the result to next year’s Form 8606

The taxable ratio is computed based on the total pre-tax holdings in all your IRA accounts over the total value of all your IRA accounts. This includes all SEP-IRA and SIMPLE-IRA accounts, but not qualified plans. So you cannot manipulate the taxable proportion of your withdrawals by keeping separate IRA accounts and making withdrawals from the one with the desired taxable proportion.

There are, however, several ways to increase the after-tax proportion of an IRA. One of these is the Qualified Charitable Distribution (QCD).

Strategy #1 for Increasing the After-Tax Proportion of an IRA: Introducing the QCD

The QCD is available to owners of IRAs who are at least 70 years old. They must be made to tax-deductible charitable organizations, and the transfer must be made directly from the IRA. You cannot just write a check to your favorite charity and declare it a QCD. A properly made QCD is entirely pre-tax and cannot be used as an itemized deduction. It is excluded income, which is why none of it can have an after-tax status.

A QCD can be used to fulfill a Required Minimum distribution.

Example: You have $4,000 in your IRA and you have attained retirement age. You have dutifully filed Form 8606 each year of your working life so you can prove that exactly $500 has an after-tax status. The company that administers your IRA informs you that in the current year, you must make a required minimum distribution of $500 to avoid penalties.

You direct your IRA administrator to send a QCD of $500 to your favorite charity. This distribution will not be taxable to you. Furthermore, it reduces the pre-tax part of your IRA by $500 without reducing the after-tax part. After this QCD is made, you are left with a balance of $3,500 in your IRA, $500 of which remains after tax, just as before. You have effectively increased the after-tax proportion of your IRA.

Strategy #2 for Increasing the After-Tax Proportion of an IRA: Rollover to a Qualified Plan

Another way to increase the after-tax portion of your IRA is to make a rollover to a qualified plan. A rollover is simply a transfer of funds from one account to another account with a similar tax status. Because a Qualified plan is pre-tax, all rollover amounts to a Qualified plan must also be pre-tax.

A rollover is not a distribution and cannot be used to fulfill a Required Minimum distribution.

Example: You have $4,000 in your IRA and you have attained retirement age. You have dutifully filed Form 8606 each year of your working life so you can prove that exactly $500 has an after-tax status. The company that administers your IRA informs you that in the current year, you must make a required minimum distribution of $500 to avoid penalties.

You decide that first you will roll over some of the IRA into a Qualified plan you have from a job. The rollover to the Qualified plan can only be from the pre-tax part of the IRA, so you will not be able to roll over more than $3,500. Any amount you do roll over will increase to proportion of the IRA that is after-tax.

If you roll over the entire $3,500, only the $500 of after-tax money will remain in the IRA. This can then be withdrawn to fulfill the RMD, and it is now 100% tax-free. The $3,500 that you rolled over retains its pre-tax status within the Qualified plan, so the rollover is itself a tax-free event.

If you are aware of any alternative methods to increase the after-tax portion of an IRA beyond a QCD or a rollover to a qualified plan, please contact me at bgelbart@saudercpa.com and let me know.

Preface: “The chief business of the American people is business. They are profoundly concerned with producing, buying, selling, investing, and prospering in the world.” – Calvin Coolidge, January 25, 1925

Big Tax Changes Ahead: What You Should Know About the One Big Beautiful Bill (OBBB) and Bonus Depreciation

On July 4, 2025, President Trump signed a major new tax law called the One Big Beautiful Bill Act (OBBB). This law updates the U.S. tax code in big ways. It retains some tax breaks from past laws, ends or modifies others—especially green energy incentives—and introduces new benefits for both individuals and businesses.

One of the biggest changes affects bonus depreciation, a rule that allows businesses to immediately deduct the full cost of certain types of property and equipment. Let’s break down what bonus depreciation is, what’s changed under the OBBB, and how it may benefit you or your business.

What Is Bonus Depreciation?

Bonus depreciation allows a business to write off the full cost of certain assets in the year they are placed into use, rather than spreading the deduction over several years.

You can use bonus depreciation for:

• • Equipment and machinery (like trucks, tools, and factory machines)
  • Computers and software
  • Certain plants and trees
  • Water utility property

Both new and used property may qualify, as long as it was bought and put into service after September 27, 2017.

Under the older Tax Cuts and Jobs Act (TCJA), the bonus depreciation was:

• • 100% from 2017–2022
  • Then dropping by 20% each year until it reached 0% in 2027

What Did the OBBB Change?

The OBBB reverses the phase-out and makes 100% bonus depreciation permanent—but only for property bought after January 19, 2025.

That means if you buy and start using qualified property after that date, you can deduct the full cost right away, saving money on taxes upfront.

Here’s a quick summary of changes:

Property Type	Old Rate (2025)	New OBBB Rate
Regular Property	40%	100%
Long Production Property (like aircraft)	60%	100%

Transition Option for 2025

If you buy property in your first tax year after January 19, 2025, you can choose to use the older lower rate (like 40% or 60%) instead of the new 100% rate. This might be helpful if you want to spread out deductions or if you’ve already planned your taxes using the older rates.

Special Expensing for Sound Recordings 

The OBBB also adds a new tax break for music and audio production.

If you record music or sound in the U.S., you can now deduct up to $150,000 of those costs immediately.

But there’s a catch: this benefit expires after December 31, 2025. Also, if you claim the deduction but don’t start production before that date, the IRS may take the deduction back.

Tip: To be safe, make sure your sound recording starts before the end of 2025.

What About Qualified Production Property?

The OBBB creates another bonus depreciation option for something called qualified production property—basically, certain types of commercial real estate used for manufacturing.

Here’s how it works:

• • The building must be constructed after January 19, 2025, and before January 1, 2029
  • It must be placed in service by December 31, 2030
  • You must use the building yourself (you can’t rent it out and still claim this benefit)
  • The property must be used for manufacturing, refining, or producing physical products

Offices, software development, sales buildings, and parking garages do not qualify. But a new facility used to build furniture, machine parts, or packaged food would qualify.

If a natural disaster (an “Act of God”) delays your building, you may be allowed a little more time to place it in service.

Planning Tips

Here’s what all this means in simpler terms:

1. 1. Buy smart after January 19, 2025: If you’re thinking about buying new machinery, tools, or equipment, doing it after this date could mean a 100% tax deduction up front.
   2. Think beyond equipment: If you’re in the music industry, you could deduct up to $150,000 in sound recording costs—but you must act before 2026.
   3. Build for manufacturing: If you’re planning to build a new factory or production facility, this is a golden opportunity. You can write off the entire cost much faster, boosting cash flow.
   4. Watch the deadlines: The rules are strict about when property must be built and placed in service. Missing a date can cost you thousands in tax savings.

Final Thoughts

The One Big Beautiful Bill Act is full of significant changes, and bonus depreciation is one of the most effective tools businesses can use to lower their taxes.

Whether you run a construction company, own a factory, or produce music in a studio, this law could help you save money, but only if you plan ahead.

As always, consult a tax professional before making significant financial decisions. The new rules can be complex, and a CPA can help you determine what qualifies and how to report it accurately.

Want to explore whether your equipment, sound recordings, or new building project qualifies? Contact our office today to schedule a tax planning consultation.

Preface: “Personality is how you respond on a typical day, character is how you show up on a hard day.” ― Adam M. Grant, Hidden Potential: The Science of Achieving Greater Things

Book Report: Hidden Potential by Adam Grant

In Hidden Potential: The Science of Achieving Greater Things, organizational psychologist and bestselling author Adam Grant tackles a vital question: What does it take to unlock our fullest potential? In typical Grant fashion, the book is rich with psychological research, real-world examples, and storytelling that challenges long-standing assumptions about talent, intelligence, and success.

At the heart of Grant’s argument is the belief that greatness isn’t born—it’s grown. And one of the most overlooked yet essential ingredients in this growth is character.

Skills of Character: The Core Idea

Grant defines character not as a fixed trait or moral superiority, but as “your capacity to prioritize your values over your instincts.” It’s what enables a person to do the hard thing when the easy thing feels more natural. The good news, according to Grant, is that character is not innate—it’s malleable and can be intentionally developed.

Rather than placing success solely on intelligence or natural talent, Hidden Potential makes a compelling case that it’s the internal skills of character—like the ability to seek discomfort, persevere through awkwardness, and take initiative in unfamiliar territory—that truly set high achievers apart.

Embracing Discomfort

One of the standout messages of the book is that discomfort is essential for growth. Grant states, “The best way to accelerate growth is to embrace, seek, and amplify discomfort.”

He references situations where people voluntarily put themselves in uncomfortable environments—be it athletes training at higher altitudes or students grappling with unfamiliar topics—not because it’s pleasant, but because it stretches their capacity. This aligns with the psychological concept of “desirable difficulty”, where learning is deeper and more lasting when it feels hard.

This theme comes through most vividly when Grant quotes the fictional coach Ted Lasso: “If you’re comfortable, you’re doing it wrong.” In other words, comfort may be the enemy of growth.

The Myth of Learning Styles

Another crucial insight Grant explores is the myth of learning styles. Though widely accepted in popular culture and education, the idea that people learn best in their preferred mode (visual, auditory, kinesthetic, etc.) doesn’t hold up under scientific scrutiny.

According to Grant, people may have learning preferences, but those preferences do not correlate with better outcomes. Often, they are simply a reflection of what feels most comfortable. Grant argues that learning effectively often requires doing what is uncomfortable, which circles back to his core message.

He encourages readers to challenge their assumptions about how they best absorb knowledge and to experiment with unfamiliar modes of learning. For example, a person who thinks they are a visual learner may actually retain more by teaching others or engaging in active discussion.

Procrastination: A Matter of Emotion, Not Laziness

In a clear take on procrastination, Grant challenges the common misconception that it stems from laziness or poor time management. Instead, he frames procrastination as an emotional avoidance strategy—a way to sidestep the discomfort tied to a task.

This builds on psychologist Tim Pychyl’s research that suggests we don’t procrastinate to avoid work—we do it to avoid negative emotions like anxiety, self-doubt, or boredom. The implication: if we want to stop procrastinating, we need to stop avoiding discomfort and start embracing it.

Again, this aligns with Grant’s broader argument: the ability to tolerate and even seek out discomfort is a cornerstone of character development and long-term achievement.

From Theory to Practice

Grant’s ideas are more than theoretical. Throughout the book, he backs up his points with practical strategies, stories of real people who overcame odds by building character-based skills, and guidance on how readers can do the same.

For example, he recommends:

• • Deliberate discomfort: Put yourself in situations that stretch your limits.
  • Reflective journaling: Document moments when you acted against your values—and how to improve next time.
  • Accountability partnerships: Surround yourself with people who remind you of your values when instincts push you elsewhere.

Conclusion

Hidden Potential is a powerful reminder that who we become is less about who we are now and more about how we choose to grow. Through his discussion of character as a set of learnable skills, Grant offers an optimistic and evidence-based path to self-improvement.

In a world obsessed with talent and quick wins, Grant shifts the focus to the slow, often uncomfortable work of building the inner skills that sustain true success. For students, professionals, and lifelong learners alike, this book offers a clear and deeply motivating lens through which to understand growth, challenge, and the pursuit of excellence.

The Big Beautiful Bill Act (BBB): What Taxpayers Should Know

Welcome to our latest tax blog post, where we delve into the “One Big Beautiful Bill Act” (OBBBA), signed into law on July 4, 2025. This legislation introduces significant changes to the U.S. tax code, particularly affecting individual taxpayers and businesses. Building upon the 2017 Tax Cuts and Jobs Act (TCJA), the OBBBA makes several tax provisions permanent and introduces new tax benefits. Now let’s explore the key tax provisions and their implications.

Key Tax Provisions for Individual Taxpayers:

Permanent Extension of 2017 Tax Cuts: The OBBBA solidifies the individual tax rates established under the TCJA, which were previously set to expire at the end of 2025. This includes maintaining lower marginal tax rates and increasing standard deduction amounts, providing long-term tax planning certainty for individuals.

Increased Standard Deduction: For tax years beginning after 2024, the standard deduction amounts are increased to:

• • $15,750 for single filers
  • $23,625 for heads of household
  • $31,500 for married individuals filing jointly.

These amounts will be adjusted for inflation in subsequent years, simplifying tax filing for many and potentially reducing taxable income.

Social Security Taxation: While the OBBBA does not eliminate federal income taxes on Social Security benefits, it introduces a new tax deduction specifically for seniors

A deduction amount of $6,000 for individuals aged 65 and older; $12,000 for married couples filing jointly.  Available to individuals with a modified adjusted gross income (MAGI) up to $75,000, and married couples with MAGI up to $150,000, the deduction phases out for individuals with MAGI between $75,000 and $175,000, and for married couples between $150,000 and $250,000 and applies to tax years 2025 through 2028.

This deduction is designed to reduce or eliminate the tax liability on Social Security benefits for approximately 88% of recipients, particularly benefiting middle-income seniors.

Many low-income seniors already do not pay federal income taxes on their Social Security benefits. Therefore, the new deduction is likely to have a minimal impact on this group. Seniors with incomes above the phase-out thresholds will not benefit from the new deduction and will continue to pay taxes on their Social Security benefits as they do now.

The senior tax deduction is set to expire after the 2028 tax year. Unless Congress enacts further legislation to extend or make this provision permanent, the tax treatment of Social Security benefits will revert to the previous law starting in 2029.

Tax planning considerations: First, senior taxpayers should assess their income levels to determine eligibility for the new deduction and plan accordingly to maximize tax benefits during the effective years. Secondly, given the temporary nature of the deduction, staying informed about potential legislative extensions or modifications is crucial for long-term financial planning. Finally, engaging with tax advisors can help seniors navigate the complexities of the new provisions and optimize their tax situations.

Enhanced Child Tax Credit: Beginning in tax year 2025, the child tax credit increases to $2,200 (non-refundable) per qualifying child, with the refundable portion set at $1,700. (This is reduced from the House-passed credit of $2500.) These amounts will be adjusted for inflation, beginning in 2026. The income phaseout thresholds are set at $200,000 for single filers and $400,000 for joint filers.

Temporary Increase in SALT Deduction Cap: The state and local tax (SALT) deduction cap is temporarily increased to $40,000 for taxpayers with modified adjusted gross income (MAGI) under $500,000, effective through 2029. The cap will revert to $10,000 starting in 2030.

Deductions for Tips and Overtime Pay: A temporary deduction introduced for qualified tips and overtime compensation received by individuals earning less than $150,000 annually:

• • Tips: up to $25,000 (unchanged)
  • Overtime: up to $12,500 (single) / $25,000 (MFJ)

This provision is set to expire in 2028 and aims to provide tax relief to workers in industries where tips and overtime are significant components of their income.

Auto Loan Interest Deduction: Buyers of U.S.-assembled vehicles can deduct up to $10,000 per year in auto loan interest for purchases made between 2025 and 2028. The deduction phases out for individuals earning over $100,000 or couples earning over $200,000, encouraging domestic vehicle purchases.

Introduction of “Trump Accounts” for Children: The OBBBA establishes “Trump Accounts,” allowing parents to create tax-deferred accounts for their children. Each account receives a one-time $1,000 credit per child, with annual contribution limits set at $5,000 per child. These accounts are designed to promote long-term savings for children’s future expenses.

Above-the-Line Charitable Deductions: Beginning in 2026, non-itemizing taxpayers can claim an above-the-line deduction for charitable contributions. The deduction amounts are:

1. • Up to $1,000 for single filers
   • Up to $2,000 for married couples filing jointly

This provision aims to encourage charitable giving among taxpayers who do not itemize their deductions.

The OBBBA also introduces a temporary, nonrefundable tax credit for donations to organizations that primarily grant scholarships to private or religious elementary and secondary schools. The credit is for 100% of the gift, up to the lesser of $5,000 or 10% of the taxpayer’s adjusted gross income (AGI). This provision is effective until 2029.

The above-the-line deduction provides a direct tax benefit to non-itemizers, potentially encouraging more taxpayers to make charitable contributions. This tax credit for scholarship contributions is designed to bolster funding for private and religious schools, aligning with certain educational policy objectives. While these provisions offer new opportunities for tax savings, they also add complexity to tax planning. Taxpayers should carefully document their contributions and consult with tax professionals to maximize benefits and ensure compliance.

Charitable deductions of Itemizers must meet a floor of 0.5% of AGI to qualify.

Residential Solar Tax Credit Changes:

Accelerated Phase-Out of the 30% Residential Clean Energy Credit: The OBBBA accelerates the expiration of the 30% Residential Clean Energy Credit for solar installations. Previously extended through 2034 under the IRA, this credit will now expire on December 31, 2025. Homeowners must install and place their solar systems in service by this date to qualify.

Elimination of Tax Credits for Leased Solar Systems: The legislation removes eligibility for tax credits on leased residential solar systems, beginning in 2028. This change affects homeowners who opt for leasing arrangements, a common financing method that previously allowed access to tax benefits without upfront costs. Leased and PPA solar systems remain eligible for the credit if installed and in service by December 31, 2027.

Impact on Battery Storage Incentives: Tax credits for residential battery storage systems, which were previously eligible under the IRA, are also set to expire at the end of 2025. This affects homeowners looking to enhance energy resilience through storage solutions. Commercial/grid-scale battery storage remains eligible if in service by December 31, 2027.

Commercial Solar and Clean Energy Incentives:

Revised Timelines for Investment and Production Tax Credits: Commercial solar projects must now begin construction within 60 days of the bill’s enactment and be placed in service by December 31, 2028, to qualify for the Investment Tax Credit (ITC) and Production Tax Credit (PTC). This accelerates the timeline compared to previous provisions.

Restrictions on Foreign Entities of Concern (FEOCs): The OBBBA introduces limitations on projects involving materials or components sourced from entities identified as FEOCs, particularly those from China. Projects utilizing such components may be disqualified from receiving tax credits, which could impact supply chains and project planning.

Changes to Transferability of Tax Credits: The bill restricts, but does not repeal, the ability to transfer certain clean energy tax credits. The timelines are now shorter and there are FEOC-related exclusions.

Implications and Considerations:

• • • For Homeowners:
      • To benefit from existing tax credits, homeowners should aim to complete solar installations by the end of 2025.
      • Those considering leasing options should be aware that the associated tax benefits are being eliminated after 2027.

• • • For Businesses:
      • Commercial entities planning solar projects need to adhere to the new construction and service timelines to qualify for tax incentives.
      • Supply chain assessments are crucial to ensure compliance with FEOC-related restrictions.

Key Tax Provisions for Business Taxpayers:

Qualified Business Income (QBI) Deduction Made Permanent:  The BBB tax bill makes permanent the 20% §199A deduction for eligible pass-through businesses such as sole proprietorships, partnerships, S corporations, and some trusts and estates. It also expands the SSTB phase-out band to $75,000 (single)/ $150,000 (joint), indexed.

1. • Example: If you operate an LLC generating $200,000 in qualified business income, your deduction of $40,000 is now available permanently.

Bonus Depreciation Reinstated to 100%: The BBB bill reinstates 100% bonus depreciation for qualified property acquired and placed in service between January 20, 2025, and January 1, 2030. This allows businesses to immediately expense the entire cost of new (and eligible used) equipment, technology, and machinery in the year they’re placed in service.

1. • Example: If your business purchases $500,000 in machinery in 2025, you can write off the full amount that year, rather than depreciating it over 5 to 7 years.

Immediate Expensing of Research & Experimental (R&E) Costs: The BBB bill repeals the requirement to amortize R&E expenses over 5 years—a rule that began in 2022 under prior law—and allows immediate expensing of such costs for a temporary period.

1. • Benefits for Innovative Businesses: Boosts cash flow for businesses heavily engaged in R&D, encourages innovation by reducing the after-tax cost of experimentation and development, and is a critical win for startups, software firms, biotech companies, and engineering-driven industries.

Paid Family and Medical Leave Credit Made Permanent: The Section 45S tax credit, originally temporary, is now permanent under the BBB bill. This provision allows employers to receive a credit of up to 25% of wages paid during periods of qualified family and medical leave.

1. • Why This Matters: Encourages businesses to offer or continue offering paid leave programs, helps employers compete in tight labor markets with family-friendly policies, and reduces the effective cost of paid leave benefits.

Expanded Employer-Provided Child Care Credit: The BBB bill significantly expands the tax credit for employer-sponsored childcare.

1. • Credit rate increased from 25% to 40%.
   • Maximum credit raised from $150,000 to $500,000 for general businesses, and up to $600,000 for eligible small businesses.
   • Indexed for inflation in future years.
   • Benefits: Supports working parents, especially in dual-income households, positions companies as family-focused employers, and offers significant relief in industries hit hardest by the childcare shortage.

Final Thoughts: Strategy and Compliance: The BBB Tax Bill presents business taxpayers with significant opportunities, but these opportunities also come with corresponding responsibilities.

Key Action Steps:

• • Tax Planning: Review your depreciation strategies and capital expenditure plans to align with the return of 100% bonus depreciation.
  • Entity Review: Reassess whether your business structure is optimized to benefit from the enhanced QBI deduction.
  • R&D Audit: Document all eligible research expenses carefully to ensure full expensing and IRS compliance.
  • HR Policies: Update leave and childcare policies to ensure they qualify for new and enhanced credits.
  • Long-Term Investment: Evaluate manufacturing and infrastructure projects to benefit from the new 35% credit.

As always, consult your tax advisor to help tailor a proactive strategy that aligns your business goals with the latest federal tax benefits.

Bottom Line: The BBB Tax Bill is a powerful package of incentives for American businesses. Whether you’re a startup innovator, an established manufacturer, or a small service-based S corporation, the time to plan is now.

Preface: “The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States” – US Constitution art. I, §8, cl.1

History of the Retirement Plan, Part I

The following is the first in a series of blog posts on the subject of retirement plans. This first installment:

• • • Briefly reviews the history of government-defined retirement models in the United States,
    • Introduces the tax-deferred model, and
    • Explains the difference between Qualified plans and Individual Retirement Accounts (IRAs).

Future posts in this series will address:

• • • Limits to deductibility of retirement contributions,
    • Tax treatment of non-deductible contributions, and
    • The Roth model.

A Brief History of Government-Defined Retirement

Most Americans do not save enough for retirement. Over the years, the government has established several tax-advantaged financial models to encourage saving for retirement.

The oldest of these is Social Security, which was introduced in 1935 and is administered by the government itself. It is implemented by employers and by the self-employed. It is mandatory. Employers who do not remit payroll tax on behalf of their employees and self-employed people who do not pay self-employment tax will face stiff penalties. These additional taxes are collected by the government, which then pays benefits to individuals when they become eligible.

Tax-Deferred Plans

The next major governmental push to help Americans save for retirement was the Employee Retirement Income Security Act (ERISA) of 1974. This legislation introduced the tax-deferred model of retirement saving. This type of account is not run by the government, and it is not mandatory.

As the name itself suggests, the money in a tax-deferred account is not permanently spared from taxation; it is taxed later rather than sooner. Contributions to a tax-deferred account are not included in current-year taxable income. Furthermore, investment earnings on the contributions are not included in taxable income in the year they are earned. Rather, both contributions and investment earnings are taxed as a single income source when you withdraw money from the account after you retire.

For tax-deferred accounts, 59½ is the magic age at which you may begin making withdrawals without incurring penalties.

Example: You have $10,000 in taxable earned income. However, if you contribute $1,000 of it to a tax-deferred account, then only the remaining $9,000 is taxable in the current year.

Additionally, unlike a standard brokerage account, you do not need to worry about reporting portfolio income generated within your retirement account as it grows.

Example: You invest $1,000 in a brokerage account.

You buy $500 worth of government bonds and use the other $500 to buy stock in your favorite publicly traded corporation. The bonds pay $20 worth of interest and mature with $4 of original issue discount. The stock pays a $15 dividend. You then sell the stock for $600, resulting in a $100 capital gain.

You now have $139 of taxable income in the form of interest, OID income, dividends, and capital gains, which all need to be reported separately on your tax return.

OR

When you open the brokerage account, you check the box that says “IRA”. This makes the account tax-deferred. You then buy exactly the same stocks and bonds as above that yield $139 of the same types and amounts of income. However, since the account is tax-deferred, none of the earnings are taxable in the current year, and you don’t even need to report any of them.

When you retire and eventually withdraw money from the account, each withdrawal you make will be taxed as ordinary income. You will never have to report how much was earned from stocks vs. bonds, interest vs. dividends, etc.

The logic behind this legislation was that most people will be in their highest tax bracket during their working years and in a lower tax bracket during their retirement years. So it would be to their advantage to defer tax on some of their income and their portfolio earnings until after they retire. So, for many, if not most, people, this story will have a relatively happy ending.

Example: You invest $1,000 in a brokerage account. Over the course of your working years, it grows to a total value of $4,000.

You retire and cash out your retirement account. You now owe tax on the entire $4,000. During your working years, you earned a sizable salary and were consistently in the 22% tax bracket or above. Now that you are retired and living off your retirement earnings and Social Security, you are in the 10% tax bracket. So you pay less than half as much tax on the $4,000 as you would have during your working years.

Qualified Plans vs. Individual Retirement Accounts

ERISA defines two types of tax-deferred accounts, although they both offer the same type of tax advantage. The difference between them is who is responsible for establishing them and how much can be contributed to them.

Qualified plans are implemented by employers and have a relatively high contribution limit. Contribution limits are increased for inflation every year or so. For 2025, the limit for taxpayers under 50 is $23,500. This limit applies to all Qualified plans you participated in within the year.

The term “Qualified plan” may sound a bit vague, but this is the technical term for several types of plans you have undoubtedly heard of. The most familiar is probably the 401(k) plan made available by large private-sector employers. There are similar plans offered by state employers, such as 401(a) and 403(b).

Example: You worked one job early in 2025 and deferred $20,000 of wages to the Qualified plan offered by that employer. Later in the year, you get another job that offers a different qualified plan. Any deferral you make to the second plan beyond $3,500 will be considered an excess contribution and will incur penalties.

Deferrals to Qualified plans are taken out of your paycheck, so people don’t always think of them as “contributions”. And you don’t get to take a tax deduction on them, because the amount of the deferral is left out of the taxable income as reported by your employer. However, while the paperwork is slightly different, the result is the same as if you had included the amount in your taxable income and then deducted it.

Individual Retirement Plans (IRAs) are implemented by the individual taxpayer. IRAs have a much lower contribution limit than Qualified plans. For 2025, the limit for taxpayers under 50 is $7,000. This limit applies to the sum of contributions to all IRAs owned by an individual. Contributions to Qualified plans are subject to a separate limit and so are not considered towards the limit on contributions to IRAs.

Example: You have already maxed out your deferrals to the Qualified plans offered by the employers you worked for during 2025. You may still open an IRA and contribute the maximum of $7,000. Opening a second IRA will not allow you to circumvent this limit on IRA contributions. The limit applies to the total amount of contributions to all your IRAs.

When you contribute to an IRA, you are generally allowed to deduct the amount of your contribution from your taxable income. From a tax perspective, this has the same effect as excluding a deferral from your paycheck.

Another thing Qualified plans and IRAs have in common is that you cannot contribute more than your earned income for the year. So, if you only earned $20,000 during the year, you cannot contribute more than $20,000 to your qualified plan even if the limit is $23,500. Similarly, if you only earned $6,000 during the year, you cannot contribute more than $6,000 to your IRA, even if the limit is $7,000. This earned income contribution limit cannot be circumvented by non-earned income. So, if you win the lottery or make a lot of gains in the stock market, this does not increase your ability to contribute to a Qualified plan or IRA.

For IRAs, but not for Qualified plans, the limits can be combined for married couples. Both spouses can contribute to their respective IRAs up to the limit of their combined earned income. If a couple’s combined earned income is at least $14,000, they can each contribute $7,000. This is true even if only one spouse had earned income.

Required Minimum Distributions

Tax-deferred accounts can generally be inherited and have the same status for heirs as they had for the original owners. Meanwhile, the amount of money in the account continues to grow, and no tax is being paid on it. To reduce the amount of time that money can be rolled forward like this tax-free, the government requires that you begin distributing the money to yourself (and paying tax on it) when you reach a certain age.

This is known as a Required Minimum Distribution (RMD). The rules of RMDs are complex. They generally must be taken starting in the year in which you turn 73. The administrator of your Qualified plan or brokerage for your IRA should contact you before the year is over and tell you the least amount you must withdraw to avoid a penalty.

Preface: “Cell phones are so convenient that they’re an inconvenience.”— Haruki Murakami

Managing Employee Cell Phone Use: A Guide for Business Owners

In today’s mobile-centric work environment, providing employees with cell phones or compensating them for work-related mobile use is increasingly common. Employers typically choose between three primary approaches: (A) issuing company-owned phones, (B) offering monthly stipends, or (C) reimbursing employees for business-related use of their personal devices. Each method has distinct tax implications and operational considerations.

Company-Issued Phones

If the mobile phone is provided primarily for non-compensatory business reasons—such as the need to contact employees during work-related emergencies—the value of the phone is generally excluded from the employee’s income. Occasional personal use is treated as a de minimis fringe benefit and is also nontaxable. 

Benefits of company-issued phones include enhanced security as employers can enforce security protocols and manage devices centrally. Uniform hardware and software across the organization simplify IT support. Bulk purchasing and corporate plans may reduce per-unit costs.

Disadvantages include employees being reluctant to carry two devices, and managing inventory, repairs, and replacements adds to the IT workload.

Cell Phone Stipends

Stipends are generally considered nontaxable if they are provided for substantial non-compensatory business reasons and are not a substitute for wages. 

Reasons for cell phone stipends include simplicity as fixed monthly payments are easy to administer. Employees can choose their preferred devices and plans.

Reasons not to use cell phone stipends include potential tax risks. If stipends are not properly documented as business-related, they may be considered taxable income. Additionally, employers have limited oversight over device security and usage.

Reimbursement for Personal Phone Use

Reimbursements are nontaxable if they are for business use, are reasonably calculated not to exceed actual expenses, and are not a substitute for wages. 

Employers appreciate reimbursements for personal phone use for several reasons. Firstly, they only pay for actual business-related expenses, which can help contain costs. Additionally, allowing employees to use their personal devices reduces the company’s need to provide equipment.

However, there are also drawbacks to this approach. A significant concern is the administrative burden, as employees are required to submit detailed expense reports and receipts. Moreover, some employees may be hesitant to share information about their phone usage.

Best Practices for Employers

• • Establish Clear Policies: Define eligibility, usage expectations, and reimbursement procedures.
  • Document Business Necessity: Maintain records demonstrating the business reasons for providing stipends or reimbursements.
  • Monitor Compliance: Regularly review policies and practices to ensure they align with IRS guidelines.

Conclusion

Selecting the appropriate method for employee cell phone use depends on your organization’s specific needs, budget, and operational considerations. By understanding the tax implications and weighing the pros and cons of each approach, business owners can make informed decisions that support both business objectives and employee satisfaction.

Preface: “Happy is a man who can make a living by his hobby. “– George Bernard Shaw

Why Your Business Must Be More Than Just a Hobby

If you’re deducting losses from your business activities, it’s critical to ensure the IRS recognizes them as valid business expenses, not just costs from a hobby. Here’s what you need to know — and why it matters.

Under IRC Section 183, if the IRS determines your activity isn’t profit-driven, you can only deduct expenses up to the income generated by that activity, meaning losses can’t offset other income like wages or investment gains.

Since the Tax Cuts and Jobs Act (2017), miscellaneous deductions—including hobby losses—have been eliminated through 2025, making this distinction even more crucial.

A simple rule of thumb exists: if you show a profit in at least three of the last five years, the IRS assumes you’re operating with a profit motive, or two of seven years for horse-related activities.

The Weighting Factors Test

The IRS examines whether your activity resembles a business by weighing factors such as :

1. 1. Businesslike operations: Do you maintain separate books and records?
   2. Expertise: Have you studied the trade or consulted professionals?
   3. Time & effort: Is this a casual pastime or your primary focus?
   4. Profit history & potential: Have you turned a profit occasionally? Can you realistically expect future gains?
   5. Financial dependence: Do you rely on this activity for income?
   6. Personal enjoyment: Is this driven by passion or profit?

No single factor decides—it’s the overall picture that matters.

Example 1: A self-published novelist who alternates between profitable years and losses faces red flags. To preserve deductions, she must show businesslike behavior—marketing efforts, separate accounts, advertising expenses—and document a genuine plan to earn a profit.

Example 2: A hobby photographer who deducts significant equipment expenses but reports minimal income may have those deductions disallowed. If audited, the IRS can reclassify the activity as a hobby and only allow deductions up to the income earned.

Steps to demonstrate profit intent to strengthen your position:

• • • Structure your operation professionally – maintain clean financial records and business accounts.
    • Develop a formal business plan – document goals, marketing strategies, and profitability milestones.
    • Make proactive changes – adjust pricing, marketing, or operations if losses persist.
    • Invest in growth – continue professional development or hire skilled advisors.
    • Track time and expenses diligently – show you’re treating this as a serious enterprise, not a pastime

Why Does This Matter?

Legitimate business losses can offset other income. Clear documentation and professional conduct reduce IRS scrutiny. A plan demonstrates to lenders, investors, or partners that your operation is serious and sustainable.

Operating a business with a clear profit motive benefits not only your taxes but also your credibility and growth potential.

Entering into the hobby trap limits your deductions and increases audit risk. If you’ve claimed losses but your activity hasn’t consistently turned a profit, or your record-keeping could be stronger, now’s the time to tighten up. Need help documenting your profit intent and ensuring compliance? Schedule a consultation—we’re here to help you.