Sauder & Stoltzfus Blog

Preface: “I pay my income tax and the government gives back what I got coming. Lord, but it ain’t much.” — Merle Haggard

Social Security – How Earned Income is Taxed to Fund Social Security

The following is the fifth in a series of blog posts on the subject of Social Security. The first four installments, which can be found here, here, here, and here:

• • • Reviewed the history of the Social Security program
    • Explained how to claim Social Security retirement benefits
    • Explained how to claim Social Security survivor and family member benefits
    • Explained how Social Security benefits are taxed

This fifth installment will discuss:

• • • How earned income is taxed to fund Social Security

Future posts in this series will address:

• • • Estimating Social Security’s returns on investment

The Bi-Weekly Bite

If you look closely at your bi-weekly paycheck, you will see a large hole. This hole is the gap between gross pay and net pay. The teeth marks reveal the identity of the biters. One of the largest is almost always “OASDI” a.k.a. Social Security. It is equal to 6.2% of your gross. Another hungry mouth is Medicare at 1.45%. Together, these make up the 7.65% employee half of FICA. If your gross was $10,000, you paid $765 in employee FICA.

As noted in a previous post in this series, FICA stands for Federal Insurance Contributions Act. It was introduced to fund the Old Age, Survivors, and Disability Insurance (OASDI) benefits established by the Social Security Act of 1935. At the time of its creation, FICA was set at 2%, but is now 15.3% of wages and self-employed income.

“No problem,” you might be thinking, “I’ll get some of it back as a refund when I file my taxes, right?” WRONG. FICA is non-refundable. Regular income tax in excess of your tax liability is an easy refund. But FICA and regular income tax are two parallel but separate tax systems  computed under different rules.

If you have no income tax liability for the year, you will be refunded whatever was withheld for regular income tax purposes, $235 in the above example. If you have some income tax liability but less than your withholding, you will be refunded the difference. But this does not apply to FICA withholding because FICA is used to fund Social Security benefits, not to offset income tax liability.

Furthermore, many types of payroll deduction such as pensions and health savings accounts will reduce your income that is subject to income tax. But nothing will reduce your income subject to FICA:

Notice that deductions for your pension and other benefits reduce your wages subject to income tax, but do not reduce your wages subject to FICA. FICA is computed as a percentage of your gross pay before other deductions.

How the Other Half Bites

But that is only half the damage done by FICA. In the above examples, your employer paid the full $10,000 of employee gross pay and is allowed to deduct it as a business expense. However, your employer also paid the employer half of FICA and it is allowed to deduct that as well. In other words, for every $10,000 you see in gross pay, your employer had to pay that plus another $765 that that you don’t even see.

So, for every $10,765 your employer pays to employ you, the government gets $1,530 in FICA while $9,235 is left over for you. Out of this you must then pay your regular income tax on a wage base considered to be $10,000.

“No problem,” you might be thinking, “The employer half of FICA is my boss’s problem, not mine.” But from your employer’s point of view, this is money paid to employ you. It is effectively part of your compensation package. In the end, it is that much less money that is left over that can be offered to you as take-home pay or benefits.

How FICA is Collected from the Self-Employed

If you are self-employed, you must pay both the employee and the employer halves of FICA in the form of self-employment tax. You do get to deduct the employer half from the amount of your income that is subject to regular income tax.

For the self-employed, if you have at least $400 in self-employed income, you must file an income tax return for the year even if you are not otherwise required to file. This is because you must pay the self-employment tax even if you have no ordinary tax liability.

This is similar to how FICA withholding for employees is not refundable even when they have no regular income tax liability. Employees do not even get the $400 safe harbor. Even if you only earned $1 at your job, 15.3¢ is getting collected in FICA. It respects neither the standard deduction, itemized deductions, student loan interest, child tax credit, or section 11 bankruptcy.

You may not think the term “self-employed” will ever apply to you. But if you receive any payment for work you did as a non-employee, you are subject to self-employment tax. This could be anything from babysitting or mowing lawns or selling popcorn at a sports event, to consulting fees or contract labor.

What Happens to FICA after It Is Collected?

“No problem,” you might be thinking, “I’ll get all that FICA back when I retire and collect my Social Security benefits.”

Well, maybe. But first, you have to live long enough to collect it. Not everybody does.

Second, even though Social Security is described as a trust fund held to pay out benefits, it is important to understand what this means and what it doesn’t mean. The U.S. Supreme Court has ruled in Flemming v. Nestor (1960) that paying into Social Security does not mean you have a legal claim to benefits. In other words, it is illegal for the government to use FICA money for any other purpose than to pay Social Security benefits. But there is no legal requirement that they pay the benefits. As far as who gets the benefits, it is first come first served. And there is no reason to assume there will be enough left for you when the time comes, even if you do live that long.

Third, and this will be the topic of a future post in this series, how much are those benefits worth compared to what you paid in over the course of your working life?

Monthly and Quarterly Payments and Filing Requirements

In addition to the financial toll it imposes, FICA also places reporting and remittance burdens on employers and the self-employed that raise the barriers to doing business and are likely a significant inhibitor to business formation in the United States. Businesses that do get off the ground must continually devote time, effort, and resources to monitoring their own compliance or paying third parties to assume these responsibilities for them.

Since employees have their share of FICA taken out of their wages by their employer in each pay cycle, they are not required to make any additional FICA-related payments or reports.

Employers are required to remit both their half and their employees’ half of FICA to the government on at least a monthly basis and to report the totals on Form 941 on a quarterly basis. Penalties for failing to make the required payments and filings are severe. This applies to all employers from the largest mega-corporation down to the smallest food truck.

The self-employed are required on a quarterly basis to pay estimates towards their expected annual amount of self-employment tax. You will incur penalties for not paying sufficient estimates in a timely manner even if you do not end up owing any income tax. Penalties on the self-employed will be waived if the annual shortfall is less than $1,000, or less than 10% of annual tax liability, or if the total of the year’s estimated payments would have covered the prior year liability.

The damage done by FICA to employers, employees, and to the self-employed is real and cuts deep: 15.3% of income wiped out before income tax or other deductions are even considered, let alone money left to pay for food, housing, clothing, or personal savings. FICA eats away your ability to generate capital, buy a home, start your own businesses, and leave something to your children. Unlike regular income tax, it cannot be refunded or abated or challenged by appeal or in tax court.

Preface: “Time is your friend, impulse is your enemy.” — John C. Bogle, founder of Vanguard

Make 2026 Count: Tax Planning for Your Traditional and Roth IRA Contributions

Saving for retirement is one of the better financial decisions you can make, but understanding the tax rules can sometimes feel like navigating a maze. Fortunately, 2026 brings increased contribution limits and new opportunities to strengthen your retirement savings. Whether you’re a business owner, employee, or approaching retirement, knowing how to use Traditional and Roth IRAs effectively can make a meaningful difference in your financial future.

For 2026, the IRS increased the annual IRA contribution limit to $7,500, up from $7,000 in 2025. Individuals age 50 and older can contribute an additional $1,100, bringing their maximum to $8,600. These limits apply to combined Traditional and Roth IRA contributions and cannot exceed eligible compensation. While the increased limits are welcome news, the real opportunity is choosing the right strategy for your circumstances.  

Traditional or Roth IRA: Which Is Better?

Traditional and Roth IRAs offer different tax advantages. A Traditional IRA may provide a deduction today, with deductible contributions and investment earnings generally taxed upon withdrawal. Roth IRA contributions are not deductible, but qualified withdrawals, including accumulated earnings, are tax-free.  

Consider Maria, age 45, who expects to be in a lower tax bracket during retirement. A deductible Traditional IRA may be attractive because she receives a tax benefit today. Her younger brother, Luis, age 30, expects his earnings to increase substantially. A Roth IRA may make more sense because he can pay taxes at today’s potentially lower rates and enjoy tax-free qualified withdrawals later.

The best retirement strategy isn’t necessarily the one that saves the most taxes today. It’s the one that creates the greatest long-term after-tax benefit.

Understanding the 2026 Income Limits

One of the most misunderstood IRA rules involves income limitations. Although taxpayers with eligible compensation can generally contribute to Traditional IRAs, the ability to deduct those contributions depends on income and participation in workplace retirement plans.

For 2026, the Traditional IRA deduction phases out for single taxpayers covered by workplace retirement plans between $81,000 and $91,000 of modified adjusted gross income (MAGI). For married couples filing jointly, when the contributing spouse participates in a workplace plan, the phaseout range is $129,000 to $149,000.

Roth IRAs have separate income restrictions, regardless of workplace retirement plan participation. For 2026, direct Roth contributions phase out between $153,000 and $168,000 for single taxpayers and between $242,000 and $252,000 for married couples filing jointly.  

These thresholds are important because exceeding them can reduce or eliminate valuable tax benefits. Taxpayers above the Roth income limits may wish to discuss alternative strategies, including Roth conversions, with their CPA.

Married Couples: Don’t Overlook the Spousal IRA

Here’s an opportunity many families miss. A spouse who earns little or no income may still qualify to contribute to an IRA when the couple files jointly and has sufficient combined eligible compensation.

For example, suppose Dana works full-time while her spouse, Sam, stays home raising their children. Even without a paycheck, Sam may contribute to an IRA based on Dana’s compensation. If both spouses are under age 50, the couple could potentially contribute $15,000 combined for 2026. If both are age 50 or older, that amount increases to $17,200.

For a spouse who is not covered by a workplace retirement plan but whose spouse is covered, the Traditional IRA deduction phases out between $242,000 and $252,000 of joint MAGI in 2026.

You Have Until April 2027 to Contribute

Unlike many year-end tax planning decisions, IRA contributions generally do not need to be completed by December 31. For most taxpayers, 2026 contributions can be made through April 15, 2027, the original federal income tax filing deadline, excluding extensions.

This flexibility allows you to review your annual income, evaluate tax brackets, and determine the most advantageous contribution before filing your return. Remember to designate the correct tax year when making contributions.

Nondeductible Contributions: Keep Accurate Records

If your income exceeds the Traditional IRA deduction limits, you may still qualify to make a nondeductible contribution. However, these contributions require careful reporting.

Nondeductible Traditional IRA contributions are generally reported on IRS Form 8606, which tracks contributions made with after-tax dollars. Proper reporting helps prevent those amounts from being taxed again when withdrawn. If your IRA contains both deductible and nondeductible funds, special allocation rules apply to distributions.

For higher-income taxpayers, nondeductible contributions followed by Roth conversions may provide additional planning opportunities. However, existing pretax IRA balances can create unexpected tax consequences under the IRA aggregation and pro-rata rules.

Avoid the Costly 6% Excess Contribution Penalty

Contributing too much to an IRA can create an expensive mistake. Excess contributions generally trigger a 6% annual excise tax for each year the excess remains uncorrected, subject to statutory limitations. For example, Miriam, age 40, contributes $9,000 for 2026 despite having a $7,500 limit. Her $1,500 excess could result in a $90 excise tax each year until corrected.

Fortunately, the IRS provides correction procedures, including timely withdrawal of excess contributions and associated earnings when required. Reviewing contributions before filing your return can help avoid unnecessary penalties.  

The Bottom Line: Make Every Retirement Dollar Count

The increased 2026 IRA limits offer valuable opportunities to build retirement wealth, but successful planning involves more than maximizing contributions. Choosing between Traditional and Roth accounts, understanding income limitations, coordinating spousal contributions, and maintaining accurate tax records can significantly improve long-term financial outcomes.

For business owners and higher-income individuals, IRA decisions should also be coordinated with workplace retirement plans, projected tax brackets, cash flow, and broader financial goals. Before making your 2026 contributions, consider reviewing your retirement strategy with your CPA or financial advisor. A little planning today can create meaningful financial benefits for years to come. The goal isn’t simply to save more for retirement. It’s to keep more of what you save and make every retirement dollar count.

Preface: “There is nothing quite so useless as doing with great efficiency something that should not be done at all.” — Peter F. Drucker

Should You Buy Equipment Before Year-End to Save Taxes?

As the fourth quarter launches, an interesting phenomenon occurs in the business world. Equipment dealers get busy, business owners review their profits, and accountants begin hearing a familiar question: “Should I buy more equipment before year-end to save on taxes?” It is a reasonable question, especially after a profitable year. After all, nobody enjoys writing a large check to the IRS. But before purchasing that new truck, machine, or expensive piece of equipment, consider a more important question: Are you buying it because your business needs it, or because you want a tax deduction? The difference could be worth a lot.

The $100,000 Tax Deduction That Still Costs $70,000

Imagine your manufacturing business expects $400,000 in taxable income this year. Your equipment dealer offers a new $100,000 machine, and you learn that the entire purchase may qualify for an immediate tax deduction. Suddenly, spending $100,000 sounds like a wonderful way to save money!

But consider the mathematics. Assuming a combined federal and state marginal tax rate of 30%, a $100,000 deduction could save approximately $30,000 in income taxes. That sounds attractive until you remember that you still spent $100,000. Your business has effectively invested $70,000 after taxes.

If the equipment increases productivity, reduces labor costs, or creates additional revenue, it may be an excellent investment. But if it sits collecting dust, you haven’t saved $30,000. You’ve unnecessarily spent $70,000. A tax deduction makes a good investment better. It doesn’t make a bad investment good.

Section 179 and Bonus Depreciation: Two Valuable Opportunities

Fortunately, federal tax law provides generous incentives for businesses investing in equipment. Two important provisions are Section 179 expensing and bonus depreciation, which may allow businesses to deduct qualifying purchases immediately rather than depreciating them over several years.

For 2026, the federal Section 179 deduction limit is $2,560,000, with the deduction beginning to phase out when qualifying purchases exceed $4,090,000. Section 179 is also subject to a business taxable income limitation. Additionally, current federal law generally allows 100% bonus depreciation for qualifying property acquired and placed in service after January 19, 2025. Unlike Section 179, bonus depreciation can potentially create or increase a tax loss.

However, not every asset qualifies, and state tax treatment may differ from federal rules. Another important distinction is that purchasing equipment is not necessarily the same as placing it in service. Generally, equipment must be ready and available for its intended business use before year-end to qualify for that year’s depreciation deduction. Ordering equipment in December that doesn’t become operational until January may delay the deduction.

Can You Finance Equipment and Still Deduct the Purchase?

Here is an opportunity many business owners overlook. Qualifying financed equipment may generate depreciation deductions based on its eligible purchase price, not merely the cash paid upfront. Suppose your business purchases a $150,000 machine with a $30,000 down payment and finances the remaining $120,000. If the machine qualifies for 100% bonus depreciation, you may receive a $150,000 federal deduction despite paying only $30,000 initially.

That can be an attractive cash flow advantage. However, remember that loan payments continue long after the initial deduction. Loan principal repayments generally aren’t deductible, although qualifying interest may be. The lesson? Tax deductions can improve today’s cash flow, but financing decisions must make sense for the future.

The Question That Matters Most: What Will This Equipment Earn?

Consider a cabinet manufacturer purchasing a $120,000 automated machine. Management estimates annual labor savings of $25,000, material savings of $10,000, and another $15,000 in contribution margin from increased production. That’s potentially $50,000 in annual financial benefits before additional operating costs.

Now we’re talking about an investment that could substantially improve profitability. The equipment isn’t simply reducing taxes; it’s improving efficiency, strengthening competitiveness, and generating future cash flow.

Contrast that with purchasing a $90,000 truck when your existing vehicle works perfectly well. If the replacement creates little additional economic value, the deduction may not justify the expense.

Before purchasing equipment, ask: Will it increase revenue? Reduce costs? Improve quality? Strengthen productivity? And how quickly will the investment pay for itself?

Prudent business owners don’t purchase equipment merely to reduce taxable income. They purchase equipment to increase economic value.

Sometimes the Biggest Deduction Isn’t the Best Deduction

Here’s something that surprises business owners: Taking the largest possible deduction this year doesn’t always produce the greatest lifetime tax savings. Suppose your business experienced a slower 2026 but anticipates substantially higher profits in 2027 and 2028. Depending on your tax situation, spreading deductions into future years could produce greater overall savings if future income faces higher marginal tax rates.

Tax brackets, qualified business income deductions, business losses, state taxes, and future equipment sales can all influence the optimal strategy. Section 179 and bonus depreciation offer certain planning elections, making it worthwhile to compare alternatives before filing.

Effective tax planning isn’t simply about minimizing this year’s taxes. It’s about maximizing long-term after-tax financial results.

Don’t Save Taxes Today and Create a Cash Crisis Tomorrow

A business can be highly profitable and still struggle financially because too much cash is tied up in equipment, inventory, or receivables. Before making a major purchase, consider your upcoming payroll, debt obligations, inventory requirements, and working capital needs. Will the purchase leave sufficient financial flexibility for unexpected expenses or growth opportunities? There is little satisfaction in saving $25,000 in taxes if your business struggles to meet a $50,000 payroll obligation three months later.

This is why October and November are excellent months for tax projections and capital investment planning. Evaluating alternatives early allows time to arrange financing, confirm equipment availability, and determine whether a purchase genuinely supports your financial objectives.

The Bottom Line: Buy Equipment to Make Money, Not Just Save Taxes

The smartest business owners understand that tax savings are an important consideration, but rarely the primary reason for investing capital. A great equipment purchase improves productivity, strengthens profitability, generates cash flow, and builds long-term business value. The tax deduction is an added benefit. Before signing your next equipment purchase agreement, ask one powerful question: “If there were no tax deduction, would this still be a good investment for my business?”  If the answer is yes, the tax deduction may make an already excellent decision even better. If the answer is no, reconsider. After all, business success isn’t measured by how much tax you avoid. It’s measured by the wealth you create, the cash flow you generate, and the financial strength of the business you build.

Preface: “I don’t even like the term ownership. I like the term stewardship.”
— Ernie Hershberger

From the Chicken House to the Met: What Ernie Hershberger’s Journey Can Teach Us About Business and Life

There aren’t many obvious connections between a chicken house and the Metropolitan Museum of Art. One brings to mind work boots, dust, early mornings, and decidedly unglamorous work. The other sits along Fifth Avenue in New York City and houses some of the greatest treasures of human civilization.

Yet somehow, both became part of Ernie Hershberger’s remarkable journey.

Hershberger, an Ohio furniture maker and entrepreneur, got his start in a small furniture store housed in a former chicken house in Mount Hope, Ohio. What began there in 1990 grew into Homestead Furniture and, eventually, the luxury furniture brand Abner Henry. Decades later, that journey would lead to a collaboration with the Metropolitan Museum of Art, creating a collection inspired by works in the museum.

From a chicken house in rural Ohio to the Met in New York City is quite a distance—not simply in miles, but in circumstances.

And perhaps that unlikely journey tells us something important about business: we rarely know where today’s ordinary opportunity may eventually lead.

Hershberger’s story, told in his book Entrusted, is compelling because it isn’t simply a story about becoming successful. It raises a much bigger question:

What are we supposed to do with success once we achieve it?

That is a question worth considering whether you own a small construction company, manage a growing professional firm, operate a farm, or lead an organization with hundreds of employees.

Great Destinations Often Have Ordinary Beginnings

We love stories about entrepreneurs after they become successful. We see the beautiful office, thriving company, impressive customers, or financial success and assume there must have been some grand master plan behind it all.

Usually, there wasn’t.

There were opportunities. Problems that needed solving. Customers who needed serving. Relationships that needed developing. And countless decisions that probably seemed rather ordinary at the time.

No guidance counselor is likely to tell a young entrepreneur, “Start with a chicken house, work hard, remain faithful, and someday this may lead you to the Metropolitan Museum of Art.”

Careers simply don’t work that neatly. Entrepreneurs may love five-year plans; life occasionally seems amused by them. We often understand the significance of an opportunity only when looking backward.

That’s an encouraging thought for anyone building a business today. The customer who seems relatively unimportant might introduce you to your largest customer five years from now. The young employee you’re training might eventually become one of your company’s best leaders. The difficult project you’re struggling through might teach you the skill that creates your next competitive advantage.

Small opportunities have a peculiar habit of becoming important ones.

Excellence Has a Way of Compounding

One of the great lessons of entrepreneurial success is that reputation doesn’t appear overnight. It compounds.

Every time you return a phone call, meet a deadline, correct a mistake, deliver excellent work, or keep a promise when keeping it becomes inconvenient, you make a small deposit into something enormously valuable: trust.

There isn’t a line for trust on the balance sheet. Perhaps there should be.

A company’s equipment can be purchased. Buildings can be financed. Technology can be duplicated. Competitors can copy products and sometimes even recruit employees.

Trust is much harder to reproduce.

It accumulates slowly, through hundreds or thousands of interactions between ordinary people. And that is why some of the smallest decisions in business eventually become some of the most consequential.

Business Is Ultimately About People

Accounting statements make business look wonderfully mathematical.

Revenue minus expenses equals profit. Assets minus liabilities equals equity. Cash comes in. Cash goes out.

The equations are useful. But anyone who has spent much time in business knows there is another story behind the numbers:

People.

Behind revenue are customers who decided to trust you. Behind payroll are employees who chose to invest part of their careers in your organization. Behind accounts payable are vendors who supplied materials or services. Behind equity is capital someone worked to accumulate.

Business may be measured in dollars, but it operates through relationships.

That’s why successful entrepreneurship requires something beyond financial intelligence. It requires learning how to work with people, develop people, serve people, and earn their confidence.

A business owner can have an excellent strategy and still fail because people don’t trust him. Conversely, an entrepreneur with integrity, humility, persistence, and a willingness to learn can travel remarkably far from very ordinary beginnings.

Perhaps even from a chicken house to the Met.

From Ownership to Stewardship

This brings us to what may be the most interesting idea behind Entrusted.

Entrepreneurs naturally think like owners:

My business. My money. My customers. My property. My success.

There is nothing particularly strange about that. Legally and economically, those statements may be perfectly accurate.

But Hershberger’s story invites us to consider another perspective:

What if the things we own are also things we’ve been entrusted to manage?

That single change in perspective can profoundly affect how we approach business.

Consider an entrepreneur with 50 employees. He doesn’t merely have a payroll expense. Fifty people are investing an important portion of their lives in an organization under his leadership.

Consider a business owner who has accumulated substantial wealth. She doesn’t merely have a larger investment account. She now possesses resources capable of creating opportunities, helping people, supporting worthwhile causes, and strengthening future generations.

Success doesn’t decrease responsibility. It increases it.

And at some point, the question may begin to change from “How much can I accumulate?” to “What should I accomplish with what has been placed in my hands?”

Profit and Purpose Don’t Have to Be Enemies

Stewardship is sometimes misunderstood as an argument against ambition, wealth, or business growth. It doesn’t have to be.

A profitable company can accomplish things an unprofitable company simply cannot. Profit allows a business to hire people, increase wages, purchase equipment, develop employees, survive recessions, support communities, reward investors, serve customers, and give generously.

Financial strength creates capacity.

The real question isn’t whether a business should make money. Businesses need profit just as people need oxygen. The better question is what that profit makes possible.

That is where purpose enters the conversation.

Making money can be a worthwhile objective. Building something valuable can be enormously satisfying. But eventually, successful people often discover that accumulation alone is a surprisingly small destination.

There needs to be a why behind the more.

What Has Been Entrusted to You?

Perhaps the distance between a chicken house and the Metropolitan Museum of Art isn’t really measured in miles.

Maybe it’s measured in thousands of ordinary decisions:

Showing up. Keeping your word. Doing excellent work when nobody important seems to be watching. Learning from mistakes. Treating people well. Recognizing opportunities. Remaining humble enough to keep learning.

And being faithful with whatever happens to be in your hands today.

That is what makes Ernie Hershberger’s journey more than an interesting entrepreneurial success story. It leaves the rest of us with a question:

What has been entrusted to you?

Maybe it’s a business. Maybe it’s twenty employees. Maybe it’s a clean slate. Maybe it’s a particular talent, a reputation, a customer relationship, a piece of property, a million dollars, or simply an opportunity that doesn’t look particularly impressive today.

We can’t always know where those opportunities will lead. A chicken house certainly doesn’t look much like the beginning of a journey to the Metropolitan Museum of Art.

But that’s the interesting thing about beginnings: they rarely look like destinations.

Preface: “Success happens at the speed of a seed.” — Mark Batterson, Gradually, Then Suddenly

Book Report: Gradually, Then Suddenly by Mark Batterson

Mark Batterson’s Gradually, Then Suddenly is an encouraging book about faith, perseverance, patience, and the remarkable things that can happen when we remain faithful over time. The title itself captures one of the most important lessons of the book: many of life’s greatest accomplishments do not happen overnight. They develop little by little, often so slowly that we barely notice the progress. Then one day, what has been developing beneath the surface becomes visible. What appears to be a sudden breakthrough may actually be the result of years of preparation, prayer, learning, hard work, and faithfulness.

This idea is easy to understand when we think about how many things in nature develop. A seed planted in the ground does not become a tree the next morning. For a long time, almost nothing appears to be happening. Yet beneath the soil, roots are forming. Eventually a small plant emerges, but even then it takes years for that plant to become a mature tree. We see the same principle in our own lives. Character develops gradually. Wisdom develops gradually. Relationships develop gradually. Businesses develop gradually. Faith develops gradually. The visible results may eventually appear suddenly, but much of the important work happened when nobody was watching.

One of the most encouraging lessons from Batterson’s book is that we should not mistake slow progress for no progress. We live in a culture that loves immediate results. We want the promotion, the successful business, the answered prayer, the improved relationship, or the financial breakthrough as quickly as possible. When results take longer than expected, it is easy to become discouraged. Batterson challenges this way of thinking. A period of waiting does not necessarily mean that nothing is happening. Sometimes the waiting itself is part of the preparation.

The Bible contains many examples of this principle. Joseph dreamed about his future when he was young, but he did not immediately become a great leader. His journey included betrayal by his brothers, slavery, false accusations, and imprisonment. David was anointed to become king, yet years passed before he actually sat on the throne. Abraham received an extraordinary promise from God, but he and Sarah waited many years for Isaac. In each story, there was a considerable distance between the promise and its fulfillment. Looking backward, we can see that the waiting years were not wasted years. God was developing people who would need the character and faith necessary to handle what was coming.

This leads to an important question: What if God is more interested in preparing us for the answer than we are interested in being prepared? We naturally focus on what we want God to change around us, while God may also be working on something within us. We pray for greater opportunities, but greater opportunities require greater responsibility. We pray for influence, but influence requires character. We pray for success, but success without wisdom can become destructive. The gradual seasons of life may therefore have tremendous value because they develop the person who will eventually have to carry the responsibility of the breakthrough.

Another valuable idea in Gradually, Then Suddenly is the power of small actions repeated over long periods of time. We understand this principle financially as compounding, but compounding operates throughout life. Reading ten pages of a good book today will probably not transform someone’s life. Reading ten pages every day for twenty years almost certainly will. One conversation with an employee may not create a great leader, but years of coaching, encouragement, accountability, and opportunity can. One prayer may seem insignificant, but a lifetime of prayer can develop extraordinary faith and intimacy with God.

Our habits eventually become part of who we are. A person does not suddenly wake up one morning with great character. Character is built through hundreds of seemingly small decisions: telling the truth when dishonesty would be easier, keeping a commitment when it becomes inconvenient, treating people respectfully when frustrated, admitting a mistake, forgiving someone, remaining generous, and doing excellent work even when nobody is watching. These choices may seem insignificant individually, but together they create a life.

The same principle applies to leadership. Great leaders are rarely created by attending one seminar or reading one leadership book. Leadership develops gradually through experience. A person makes decisions, sometimes makes mistakes, accepts responsibility, learns from those mistakes, receives feedback, develops better judgment, and tries again. Over time, those experiences accumulate into wisdom. Eventually other people may look at that person and see an accomplished leader, but they do not necessarily see the thousands of experiences that produced the leader.

This is also how great organizational cultures are built. A business owner cannot give one inspiring speech about excellence, teamwork, integrity, or customer service and expect the organization to change immediately. Culture develops through repeated actions. Leaders communicate their values, model them, hire people who share them, recognize employees who demonstrate them, and address behavior that violates them. Eventually something fascinating begins to happen: employees start reinforcing those values even when senior leadership is not present. What began as the leader’s philosophy gradually becomes the organization’s culture.

Prayer is another area where the message of Gradually, Then Suddenly becomes especially meaningful. Prayer can sometimes be difficult because we cannot always see what is happening. We may pray today and wake up tomorrow to circumstances that look exactly the same. After weeks, months, or even years, we can begin wondering whether our prayers matter. Yet Scripture repeatedly encourages believers to persevere in prayer and not lose heart.

Persistent prayer does not mean that we can force God to give us whatever we want if we pray long enough. That would make prayer a formula rather than a relationship. Instead, prayer brings us into deeper dependence upon God. As we continue praying, God may change circumstances, but He also changes us. Our motives become clearer. Our faith grows stronger. Our dependence deepens. Sometimes our original request changes because we begin to understand God’s purposes differently.

This distinction is important because Gradually, Then Suddenly should not be understood as a promise that every dream will eventually come true if we simply refuse to quit. Christian faith is ultimately faith in God, not faith in a particular outcome. Sometimes God opens a door. Sometimes He closes one. Sometimes He asks us to persevere, and sometimes He redirects us. Wisdom involves learning the difference. True faith can say, “I do not know exactly what God is going to do, but I will remain faithful to what He has given me to do.”

Persistence, therefore, should not be confused with stubbornness. There are times when a strategy needs to change. A business may need a different approach. A leader may need to admit that an idea did not work. A relationship may require a different kind of conversation. Perseverance does not mean repeating the same mistake forever. We can remain committed to the mission while being willing to change the method. Some of life’s greatest breakthroughs may come because we were humble enough to learn and adjust while continuing forward.

The book’s message also provides an excellent way to think about success. Society tends to notice people after they become successful. We see the thriving company but not its difficult first years. We see the accomplished leader but not the early mistakes. We see the skilled musician but not the thousands of hours of practice. We see the mature Christian but not the years of prayer, Scripture reading, obedience, disappointment, repentance, and spiritual growth that developed that faith. What looks sudden from the outside may have been very gradual from the inside.

This principle should encourage us not to despise small beginnings. Small does not mean unimportant. An acorn is small, but it contains the potential for an enormous oak tree. A seemingly insignificant opportunity can become the beginning of something extraordinary. The better question is not always, “How big is this right now?” Sometimes we should ask, “What could this become if I faithfully cultivate it?”

There is also a valuable lesson here about reputation. Trust is built gradually. A person becomes respected because others observe consistency over time. They discover that his word can be trusted. They see how he treats people when circumstances become difficult. They watch whether his private actions match his public values. No single moment creates that kind of reputation. It compounds through hundreds of decisions. Eventually people say, “I trust this person,” but that conclusion was built gradually.

Perhaps one of the greatest dangers in life is quitting too soon. We cannot always know how close we are to an important opportunity or breakthrough. At the same time, we should avoid pretending that perseverance guarantees a specific result. Instead of constantly asking, “Why hasn’t this happened yet?” a more useful question may be, “What is God teaching and developing in me during this season?” That question changes our focus from simply escaping the process to learning from it.

My greatest takeaway from Gradually, Then Suddenly is that we should never underestimate what God can accomplish through ordinary faithfulness over a long period of time. We naturally admire extraordinary moments, but extraordinary lives are often constructed from ordinary days. The prayer nobody hears, the difficult conversation handled with grace, the employee patiently developed, the dollar wisely invested, the book carefully studied, the temptation resisted, the promise kept, and the responsibility handled well may not seem particularly impressive today. Yet repeated over many years, these actions can produce extraordinary results.

The message also causes me to think differently about success. Instead of constantly searching for the next breakthrough, perhaps we should pay more attention to becoming the kind of people who could wisely handle a breakthrough if God provided one. Greater opportunity without greater character is dangerous. Greater wealth without greater wisdom can become destructive. Greater influence without humility can lead to pride. Preparation is therefore not an inconvenience standing between us and success. Preparation may be one of God’s greatest gifts before success.

In conclusion, Mark Batterson’s Gradually, Then Suddenly offers a hopeful and practical message about faith, patience, perseverance, and personal growth. It reminds us that progress is not always visible and that waiting does not necessarily mean nothing is happening. Some of God’s most important work may occur beneath the surface, just as roots develop underground before a tree produces visible fruit. Our responsibility is to remain faithful, continue learning, keep praying, make wise adjustments, and trust God with the results.

The title ultimately provides a memorable way to think about much of life. Relationships are built gradually. Wisdom is gained gradually. Character is formed gradually. Leaders are developed gradually. Businesses are built gradually. Faith deepens gradually. And sometimes, after years of seemingly ordinary faithfulness, something extraordinary happens suddenly.

Perhaps the great lesson of the book is therefore not simply to believe in the “suddenly.” It is to learn to appreciate the “gradually.” Instead of wishing away the season we are presently experiencing, we can ask what God wants us to learn from it. The quiet years, difficult seasons, small beginnings, unanswered questions, and daily acts of faithfulness may not be interruptions to our story. They may be the very chapters God is using to prepare us for what comes next.

Preface: “The more things change, the more they stay the same.” — Jean-Baptiste Alphonse Karr, Les Guêpes (1849)

Act 21 of 2026: What Pennsylvania’s New Local Sales Tax Sourcing Rule Means for Your Business

If you do business in or around Philadelphia or Allegheny County, a provision buried inside Pennsylvania’s new budget-implementation law — Act 21 of 2026 (formerly Senate Bill 146), signed July 12, 2026 — is worth your attention. It changes how local sales tax is “sourced,” meaning which transactions owe Philadelphia’s or Allegheny County’s local sales tax and which don’t. The change applies to tax years beginning after December 31, 2025, and the Department of Revenue has indicated it will begin enforcing the new rule for sales made on or after October 1, 2026 — so businesses have a short window to get their systems ready.

A quick refresher: Pennsylvania’s state sales tax rate is 6%. On top of that, Philadelphia adds 2% (combined 8%) and Allegheny County adds 1% (combined 7%). No other city or county in the state imposes a local sales tax.

The rate hasn’t changed. Act 21 does not raise or lower any tax rate — Philadelphia is still 2%, Allegheny County is still 1%. What changed is the rule for deciding which sales those local rates apply to, not how much tax is owed once a sale is subject to them.

Before Act 21: tax followed the seller

Philadelphia and Allegheny County each had their own local sales tax rule, written separately from the state’s rule. In practice, both worked the same way: the tax followed the seller, not the customer. A business located in Philadelphia charged the 2% local tax on its sales no matter where the goods ended up, even if they were shipped out of the city. A business located outside Philadelphia generally didn’t have to charge that 2%, even if it shipped directly to a customer in Philadelphia. Allegheny County’s 1% tax worked the same way. This was different from how Pennsylvania’s regular 6% state sales tax already worked, which is based on where the customer receives the goods, not where the seller is located.

After Act 21: tax follows the customer

Act 21 fixes that mismatch. Now, Philadelphia’s and Allegheny County’s local sales tax follows the same rule as the state’s 6% tax: it’s based on where the customer receives the goods, not where the seller is located.

So the question is no longer “where is the seller located?” It’s “where does the customer receive the item, or where will it be used?” If that’s an address in Philadelphia, the 2% local tax applies. If it’s in Allegheny County, the 1% local tax applies. If it’s anywhere else in Pennsylvania, only the 6% state rate applies — no local add-on. That’s true even if the seller itself is based in Philadelphia or Allegheny County.

Practical steps to take now

• • • Verify customer addresses. The tax now turns on the delivery/use location, so your invoicing or e-commerce system needs an accurate ship-to or place-of-use address for every sale — not just a billing address. A stale address field is now a tax-rate risk.
    • Update your tax engine or POS settings. If you use a sales tax automation tool (Avalara, Vertex, TaxJar, or similar), or hard-code rates in your accounting platform, confirm the jurisdiction logic reflects the new rule for Philadelphia and Allegheny County.
    • Refresh exemption certificate files. Collect current, properly completed exemption certificates (Form REV-1220) from wholesale, resale, and exempt-organization customers, and confirm certificates on file haven’t expired.
    • Check your marketplace and platform settings. If you sell through a marketplace facilitator or a hosted e-commerce platform, confirm the platform’s tax settings have been updated to source Philadelphia and Allegheny County sales correctly — don’t assume the platform handled it automatically.
    • Spot-check recent transactions. Since the change applies to tax years beginning after December 31, 2025, it’s worth reviewing earlier-2026 transactions to confirm they were taxed correctly, especially anything invoiced before systems were updated.
    • Train the team. Make sure whoever handles invoicing, order entry, or customer service understands that the local tax now depends on the customer’s delivery address, not the business’s location — a common source of manual errors during the transition.

If you’re located in Philadelphia or Allegheny County

Don’t assume every sale you make still carries the local tax. Under the new rule, a sale you ship to a customer outside the city or county generally won’t carry the Philadelphia or Allegheny County add-on, even though your business sits inside that jurisdiction. You still charge the local rate on sales delivered within the jurisdiction, exactly as before — but the obligation now runs sale-by-sale, based on the delivery address, not on your storefront’s address as a blanket rule.

If you’re located outside those jurisdictions (including out-of-state sellers)

If you ship goods to customers in Philadelphia or Allegheny County and already collect Pennsylvania’s 6% state sales tax (because you have nexus in PA, physical or economic), you now need to evaluate whether each delivery address falls inside Philadelphia (add 2%) or Allegheny County (add 1%). Sourcing follows the customer’s location, not yours — being headquartered elsewhere doesn’t exempt you from the local add-on when that’s where the goods land.

Bottom line

This new law doesn’t change what you owe in tax dollars-and-cents terms — Philadelphia is still 2%, Allegheny County is still 1%. What it changes is the test for deciding when those local rates apply, shifting from the seller’s location to the customer’s delivery address, in line with the same destination-based rule already used for the state’s 6% tax.

Preface: “A teacher affects eternity; [they] can never tell where [their] influence stops.” —Henry Adams, The Education of Henry Adams (1907)

Back to School, Back to Tax Planning: A Teacher’s Guide to Financial Decisions

The pencils are sharpened, classroom decorations are going up, lesson plans are taking shape, and somewhere a teacher is wondering how several hundred dollars of classroom supplies somehow disappeared into one shopping cart. It must be back-to-school season.

Teachers understand preparation better than almost anyone. A successful school year rarely begins when students walk through the classroom door on the first morning. It begins weeks earlier with planning, organizing, purchasing supplies, preparing lessons, establishing goals, and thinking about what students will need to succeed. Yet when it comes to personal finances and taxes, many of us take exactly the opposite approach. We wait until tax season, gather whatever documents we can find, hand everything to the accountant, and hope for good news.

There is a fundamental difference between tax preparation and tax planning that is worth understanding. Tax preparation looks backward. Tax planning looks forward. Preparing a tax return tells us what happened last year. Planning gives us an opportunity to influence what happens next. A teacher would never wait until the last day of school to develop the year’s lesson plan, and taxpayers should not wait until April to begin thinking about financial decisions that may have needed to occur before December 31.

Back-to-school season therefore provides a surprisingly good opportunity for teachers to conduct a financial checkup. There are still several months remaining in the calendar year, which means there may still be time to adjust tax withholding, increase retirement savings, organize classroom expenses, address income from a side business, and consider other financial decisions before year-end.

Let’s begin with something nearly every teacher understands: classroom expenses. Imagine Sarah, an elementary school teacher who begins preparing her classroom in August. She purchases books, organizational materials, educational supplies, and other items she believes will help her students succeed. Before long, she has spent several hundred dollars of her own money. Like many teachers, Sarah thinks, “I’ll save the receipts and deduct everything on my tax return.”

Unfortunately, tax law is not always as generous as Sarah’s classroom.

Eligible educators can receive a federal above-the-line deduction for certain unreimbursed educator expenses, subject to an annual limitation and other requirements. Qualifying expenses can include certain books, supplies, equipment, and professional-development costs. However, teachers should understand the applicable limitations rather than assuming every dollar personally spent on their classrooms will produce an equivalent tax deduction.

There is also an important lesson here about reimbursements. If your school or employer offers an appropriate reimbursement arrangement for qualifying business expenses, don’t automatically assume that paying the expense personally and taking a tax deduction is the better option. A tax deduction generally saves only a percentage of the amount spent. An eligible tax-free reimbursement may put substantially more money back in your pocket.

In other words, never spend a dollar simply to save a fraction of a dollar in taxes.

And please keep your receipts. Telling your accountant, “I’m pretty sure I spent about $800,” is not quite the same thing as documentation. Teachers know that “I definitely turned in that assignment” does not always mean the assignment can actually be located. Tax records sometimes suffer from the same problem. A shoebox full of receipts may technically resemble a recordkeeping system, but your accountant would probably appreciate something a little more organized.

Classroom expenses, however, may be one of the smaller opportunities available to teachers. Retirement planning can potentially have a much greater impact on long-term financial success.

Depending on their employer and individual circumstances, educators may have access to pensions, 403(b) plans, 457(b) plans, IRAs, or other retirement savings opportunities. The rules surrounding these accounts can be complex, but the underlying principle is simple: small financial decisions made consistently over long periods can become very large financial decisions.

Consider a 40-year-old teacher who decides to increase retirement savings by $200 per month. Assuming a hypothetical 7% annual return, those additional contributions could grow to approximately $162,000 by age 65. Investment returns are never guaranteed, but the illustration demonstrates the power of time and compounding. Finding another small tax deduction may feel satisfying today, but building a disciplined retirement strategy can influence financial security for decades.

This is an important distinction because tax planning should not become a treasure hunt for deductions. The goal is not simply to pay the least possible tax this year. The goal is to make wise financial decisions that improve your long-term position while appropriately considering the tax consequences.

Withholding is another area teachers should review before year-end. Perhaps you got married. Maybe your spouse changed jobs or received a significant raise. Perhaps you welcomed a child, began receiving investment income, or started earning money outside the classroom. These changes can affect your overall tax situation even when your regular teaching paycheck looks almost exactly the same.

August or September is a much better time to discover a withholding problem than the following April. There may still be time to make adjustments during the remaining pay periods of the year. April is a wonderful month for warmer weather, baseball, and spring flowers. It is considerably less enjoyable when it includes discovering an unexpected tax bill that could have been anticipated months earlier.

Side income deserves particular attention because many teachers are also entrepreneurs without necessarily thinking of themselves that way. A teacher might tutor students after school, coach, teach summer programs, provide consulting services, sell educational materials online, or operate an entirely separate business. Once someone begins earning income independently, the tax picture can change considerably.

Unlike regular wages, independent business income may not have taxes withheld automatically. Self-employment taxes, estimated income tax payments, business expenses, recordkeeping requirements, and potentially even additional retirement planning opportunities can enter the conversation. A teacher earning $10,000 from tutoring does not necessarily have $10,000 available to spend. Some of that money may eventually belong to the government.

The good news is that a legitimate business may also have legitimate deductible expenses. The important word is legitimate. Good tax planning means understanding which costs are truly business-related, maintaining appropriate records, and discussing the activity with your tax advisor before tax season rather than attempting to reconstruct an entire year of business activity afterward.

Continuing education is another area worth considering. Teachers frequently pursue graduate degrees, certifications, conferences, continuing education, and professional-development programs. Depending on the circumstances, various tax rules, employer reimbursements, or education-related provisions may apply. Rather than assuming an expense is deductible—or assuming it isn’t—keep the documentation. Save tuition statements, reimbursement records, receipts, and information describing the program. Your tax professional can then evaluate the facts under the applicable rules.

Charitable giving and classroom generosity can create similar questions. Teachers are generous people. Many purchase items for students, contribute to school-related programs, participate in fundraisers, or support charitable organizations within their communities. But generosity alone does not automatically make an expenditure tax deductible. A personal expenditure for a student, an eligible educator expense, an employer-reimbursed expense, and a charitable contribution can receive very different tax treatment. Documentation and understanding the nature of the payment matter.

Teachers should also consider whether anything significant has changed in their lives during the year. Did you purchase or sell a home? Welcome a child? Get married or divorced? Receive an inheritance? Begin graduate school? Start a business? Make a significant charitable gift? Experience a substantial change in household income? These events can have tax and financial consequences, and waiting until tax-return preparation season may eliminate planning opportunities that were available earlier.

This leads to perhaps the most useful tax-planning question of all. Instead of asking, “What can I deduct?” consider asking, “What financial decisions should I make before December 31?”

That question changes the conversation. Maybe the answer is increasing retirement contributions. Perhaps it is correcting withholding. Maybe it involves making estimated tax payments on side income, improving your recordkeeping, evaluating charitable giving, or simply organizing documents so that tax season becomes easier. In some situations, the best tax-planning decision may have little to do with obtaining another deduction and everything to do with building a stronger financial future.

So, as students return to school, perhaps teachers deserve a little homework of their own. Pull out last year’s tax return and look at it before next April. Review your most recent pay stub and determine whether your withholding still makes sense. Organize receipts for classroom expenses. Review how much you are contributing toward retirement. Make a list of any income you earn outside your teaching position. Gather documentation for continuing education. Think about major changes that have occurred in your family or finances. If something significant has changed, consider talking with your tax advisor while there is still time to do something about it.

And unlike some homework assignments, waiting until the night before this one is due really can cost you money. Perhaps the greatest financial lesson teachers can borrow from their own classrooms is the value of preparation. Great teachers establish goals, develop a plan, monitor progress, make adjustments, and occasionally rewrite the lesson when circumstances change. Successful financial planning works much the same way. We cannot predict everything that will happen during the year, but we can prepare thoughtfully and adjust when life changes.

Teachers dedicate an extraordinary amount of their time and energy to preparing students for the future. This back-to-school season, consider spending a little time preparing your own financial future as well. You don’t need to become a tax expert, memorize the Internal Revenue Code, or understand every retirement-plan rule. You simply need to ask good questions while there is still time to act.

Because whether we’re talking about the classroom, retirement, or next year’s tax return, a little preparation today can prevent a lot of homework tomorrow.