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Noelle Merwin

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Can you turn business losses into tax relief?
Can you turn business losses into tax relief? 1200 1200 Noelle Merwin

Even well-run companies experience down years. The federal tax code may allow a bright strategy to lighten the impact. Certain losses, within limits, may be used to reduce taxable income in later years.

Who qualifies?

The net operating loss (NOL) deduction levels the playing field between businesses with steady income and those with income that rises and falls. It lets businesses with fluctuating income to average their income and losses over the years and pay tax accordingly.

You may be eligible for the NOL deduction if your deductions for the tax year are greater than your income. The loss generally must be caused by deductions related to your:

  • Business (Schedules C and F losses, or Schedule K-1 losses from partnerships or S corporations),
  • Casualty and theft losses from a federally declared disaster, or
  • Rental property (Schedule E).

The following generally aren’t allowed when determining your NOL:

  • Capital losses that exceed capital gains,
  • The exclusion for gains from the sale or exchange of qualified small business stock,
  • Nonbusiness deductions that exceed nonbusiness income,
  • The NOL deduction itself, and
  • The Section 199A qualified business income deduction.

Individuals and C corporations are eligible to claim the NOL deduction. Partnerships and S corporations generally aren’t eligible, but partners and shareholders can use their separate shares of the business’s income and deductions to calculate individual NOLs.

What are the changes and limits?

Before the Tax Cuts and Jobs Act (TCJA), NOLs could be carried back two years, forward 20 years, and offset up to 100% of taxable income. The TCJA changed the landscape:

  • Carrybacks are eliminated (except certain farm losses).
  • Carryforwards are allowed indefinitely.
  • The deduction is capped at 80% of taxable income for the year.

If an NOL carryforward exceeds your taxable income of the target year, the unused balance may become an NOL carryover. Multiple NOLs must be applied in the order they were incurred.

What’s the excess business loss limitation?

The TCJA established an “excess business loss” limitation, which took effect in 2021. For partnerships and S corporations, this limitation is applied at the partner or shareholder level, after the outside basis, at-risk and passive activity loss limitations have been applied.

Under the rule, noncorporate taxpayers’ business losses can offset only business-related income or gain, plus an inflation-adjusted threshold. For 2025, that threshold is $313,000 ($626,000 if married filing jointly). Remaining losses are treated as an NOL carryforward to the next tax year. In other words, you can’t fully deduct them because they become subject to the 80% income limitation on NOLs, reducing their tax value.

Important: Under the Inflation Reduction Act, the excess business loss limitation applies to tax years through 2028. Under the TCJA, it had been scheduled to expire after December 31, 2026.

Plan proactively

Navigating NOLs and the related restrictions is complex, especially when coordinating with other deductions and credits. Thoughtful planning can maximize the benefit of past losses. Please consult with your Smolin advisor about how to proceed in your situation.

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Still have tax questions? You’re not alone
Still have tax questions? You’re not alone 1200 1200 Noelle Merwin

Even after your 2024 federal return is submitted, a few nagging questions often remain. Below are quick answers to five of the most common questions we hear each spring.

1. When will my refund show up?

Use the IRS’s “Where’s My Refund?” tracker at IRS.gov. Have these three details ready:

  • Social Security number,
  • Filing status, and
  • Exact refund amount.

Enter them, and the tool will tell you whether your refund is received, approved or on the way.

2. Which tax records can I toss?

At a minimum, keep tax records related to your return for as long as the IRS can audit your return or assess additional taxes. In general, the statute of limitations is three years after you file your return.

So you can generally get rid of most records related to tax returns for 2021 and earlier years. (If you filed an extension for your 2021 return, hold on to your records until at least three years from when you filed the extended return.)

However, the statute of limitations extends to six years for taxpayers who understate their gross income by more than 25%.

You should hang on to certain tax-related records longer. For example, keep the actual tax returns indefinitely, so you can prove to the IRS that you filed legitimate returns. (There’s no statute of limitations for an audit if you didn’t file a return or you filed a fraudulent one.)

When it comes to retirement accounts, keep records associated with them until you’ve depleted the account and reported the last withdrawal on your tax return, plus three (or six) years. And retain records related to real estate or investments for as long as you own the asset, plus at least three years after you sell it and report the sale on your tax return. (You can keep these records for six years to be on the safe side.)

3. I missed a credit or deduction. Can I still get a refund?

Yes. You can generally file Form 1040-X (amended return) within:

  • Three years of the original filing date, or
  • Two years of paying the tax — whichever is later.

In a few instances, you have more time. For instance, you have up to seven years from the due date of the return to claim a bad debt deduction.

4. What if the IRS contacts me about the tax return?

It’s possible the IRS could have a problem with your return. If so, the tax agency will only contact you by mail — not phone, email or text. Be cautious about scams!

If the IRS needs additional information or adjusts your return, it will send a letter explaining the issue. Contact us about how to proceed if we prepared your tax return.

5. What if I move after filing?

You can notify the IRS of your new address by filling out Form 8822. That way, you won’t miss important correspondence.

Year-round support

Questions about tax returns don’t stop after April 15 — and neither do we. Reach out to your Smolin advisor anytime for guidance.

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Members of the “sandwich generation” face unique estate planning circumstances
Members of the “sandwich generation” face unique estate planning circumstances 1200 1200 Noelle Merwin

Members of the sandwich generation — those who find themselves simultaneously caring for aging parents while supporting their own children — face unique financial and emotional pressures. One critical yet often overlooked task amid this juggling act is estate planning.

How can you best handle your parents’ financial affairs in the later stages of life? Consider incorporating their needs into your estate plan while tweaking, when necessary, the arrangements they’ve already made. Let’s take a closer look at four critical steps.

  1. Make cash gifts to your parents and pay their medical expenses

One of the simplest ways to help your parents is to make cash gifts to them. If gift and estate taxes are a concern, you can take advantage of the annual gift tax exclusion. For 2025, you can give each parent up to $19,000 without triggering gift taxes or using your lifetime gift and estate tax exemption. The exemption amount for 2025 is $13.99 million.

Plus, payments to medical providers aren’t considered gifts, so you can make such payments on your parents’ behalf without using any of your annual exclusion or lifetime exemption amounts.

  1. Set up trusts

There are many trust-based strategies you can use to assist your parents. For example, if you predecease your parents, your estate plan might establish a trust for their benefit, with any remaining assets passing to your children when your parents die.

Another option is to set up trusts during your lifetime that leverage your $13.99 million gift and estate tax exemption. Properly designed, these trusts can remove assets — together with all future appreciation in their value — from your taxable estate. They can provide income to your parents during their lives, eventually passing to your children free of gift and estate taxes.

  1. Buy your parents’ home

If your parents have built up significant equity in their home, consider buying it and leasing it back to them. This arrangement allows your parents to tap their home’s equity without moving out while providing you with valuable tax deductions for mortgage interest, depreciation, maintenance and other expenses.

To avoid negative tax consequences, pay a fair price for the home (supported by a qualified appraisal) and charge your parents fair-market rent.

  1. Plan for long-term care expenses

The annual cost of long-term care (LTC) can easily reach six figures. Expenses can include assisted living facilities, nursing homes and home health care.

These expenses aren’t covered by traditional health insurance policies or Social Security, and Medicare provides little, if any, assistance. To prevent LTC expenses from devouring your parents’ resources, work with them to develop a plan for funding their health care needs through LTC insurance or other investments.

Don’t forget about your needs

As part of the sandwich generation, it’s easy to lose sight of yourself. After addressing your parents’ needs, focus on your own. Are you saving enough for your children’s college education and your own retirement? Do you have a will and power of attorney in place for you and your spouse?

With proper planning, you’ll make things less complex for your children so they might avoid some of the turmoil that you could be going through.

If you have questions about estate planning strategies tailored to the needs of the sandwich generation, reach out to your Smolin advisor.

  • Noelle Merwin
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What 2025 Business Tax Changes Mean for You
What 2025 Business Tax Changes Mean for You 1200 1200 Noelle Merwin

Every year, tax-related limits for businesses are adjusted for inflation, and for 2025, many of these limits have increased. However, with inflation cooling down, the increases aren’t as significant as they’ve been in recent years. Here’s a rundown of the changes that might impact you and your business.

2025 deductions compared with 2024

  • Section 179 expensing
    • Limit: $1.25 million (up from $1.22 million)
    • Phaseout: $3.13 million (up from $3.05 million)
    • For certain heavy vehicles: $31,300 (up from $30,500)
  • Standard mileage rate for business driving. 70 cents per mile up from 67 cents
  • Income-based phaseouts for certain limits on the Sec. 199A qualified business income deduction begin at:
    • Married filing jointly: $394,600 (up from $383,900)
    • Other filers: $197,300 (up from $191,950)

Retirement plans in 2025 vs. 2024

401(k) contributions

  • Employee Contributions: $23,500 (up from $23,000)
  • Catch-Up Contributions: $7,500 (unchanged)
  • Catch-Up for Ages 60–63: $11,250 (new for 2025)

Employee contributions to SIMPLEs

  • Employee contributions: $16,500 (up from $16,000)
  • Catch-Up contributions: $3,500 (unchanged)
  • Catch-Up for ages 60–63: $5,250 (new for 2025)

Defined contribution plans

  • Combined employer/employee contributions: $70,000 (up from $69,000)
  • Maximum compensation used: $350,000 (up from $345,000)

Defined benefit plans

  • Annual benefit: $280,000 (up from $275,000)

Compensation limits for highly compensated or key employees

  • Highly compensated: $160,000 (up from $155,000)
  • Key employee: $230,000 (up from $220,000)

These increases mean more opportunities for contributions and potential tax savings in 2025.

Social Security tax in 2025 vs. 2024 

Cap on earnings subject to tax: $176,100 (up from $168,600 in 2024)

Qualified transportation fringe benefits: $325/month (up from $315)

Health Savings Account contributions:

  • Individual coverage: $4,300 (up from $4,150)
  • Family coverage: $8,550 (up from $8,300)
  • Catch-up contribution: $1,000 (unchanged)

Flexible Spending Account contributions:

  • Health Care FSA: $3,300 (up from $3,200)
  • Health Care FSA rollover: $660 (up from $640, if plan allows)
  • Dependent Care FSA: $5,000 (unchanged)

Potential upcoming tax changes

These are just a few of the tax limits and deductions that might affect your business in 2025. But there’s more to watch out for. With President Trump back in office and Republicans controlling Congress, several proposed tax changes could be on the horizon.

For example, Trump has suggested lowering the corporate tax rate (currently at 21%) and eliminating taxes on overtime pay, tips, and Social Security benefits. These and other potential changes could have significant impacts on both businesses and individuals.

It’s important to stay informed and reach out to your Smolin advisor to find out how these changes might affect you.

  • Noelle Merwin
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Which Financing Option is Right for Your Small Business?
Which Financing Option is Right for Your Small Business? 1200 1200 Noelle Merwin

Most small businesses need cash infusions at some point, and how you secure the funding can make all the difference between whether your business succeeds or struggles. To help determine which is best for your business, let’s break down the three primary types of funding available: debt, equity and hybrid financing.

Debt: Borrowing to grow

Debt financing involves borrowing money and repaying it with interest over time. This includes traditional options like bank loans, lines of credit, and Small Business Administration (SBA) loans.

The main benefit of these options is that you retain full ownership of your business, though loan payments can put a strain on cash flow. Also, lenders often require collateral—like equipment, real estate or other assets. If payments are missed, creditors can seize the collateral and, in some cases, pursue legal action against the business or owners.

This option works best for businesses that have stable revenue and are able to make timely payments. And since you retain ownership, you preserve control over decision-making. However, if your cash flow can’t sustain the regular loan payments, debt financing is not a workable option.

Equity: Trading ownership for capital

Equity financing means selling a portion of your business to investors in exchange for capital. Common sources of equity funding include:

  • Angel investors
  • Venture capital firms
  • Crowdfunding platforms

Unlike debt financing, equity financing doesn’t require repayment, but it does mean giving up some ownership and potentially sharing future profits.

This option is often best for start-ups or high-growth businesses that may not qualify for traditional loans due to limited profitability or lack of a solid credit history. While equity investors can offer valuable guidance, expertise, and networking opportunities, it’s important to consider the trade-offs like shared decision-making and less control over the direction of your business.

Hybrid financing: Combining debt and equity

Hybrid financing combines elements of both debt and equity financing. Examples include convertible notes, where debt is converted into equity under certain conditions, and revenue-based financing, where repayments are based on a percentage of future revenue. These options offer more flexibility by aligning payment terms with your business’s performance.

Hybrid financing is a good choice for business owners looking for tailored funding solutions. It allows you to leverage the benefits of debt and equity, but the terms can be complex and require careful negotiation to ensure they fit the needs of your business.

Financial statements matter

Accurate financial statements are essential when seeking funding for your business. Lenders and investors will want to see a detailed and comprehensive financial package that includes:

  • Income statements, which show revenue, costs, and profits
  • Balance sheets, which summarize your assets and liabilities
  • Statements of cash flows, which detail how money flows in and out of your business

Additionally, you might be asked to provide supporting reports like accounts receivable aging, detailed expense breakdowns, and information about owners and key employees. These documents provide a clear picture of your business’s financial health and operations, so potential funders can evaluate the risks and potential rewards of their investment.

Most lenders and investors will expect to see at least two to three years of historical financial data, along with projections for the next two to three years. These reports should tell a clear, compelling story about your business’s financial stability and growth potential.

What’s right for your business?

Choosing the right way to fund your business comes down to your business model, growth stage, goals, and how much risk you’re willing to tolerate. As your business’s needs evolve, you might end up using a combination of debt, equity and hybrid financing.

Your Smolin advisor can help you keep your financial records in check and walk you through the pros and cons of each option. Reach out and let’s talk about how to fund the next phase of your business’s growth.

  • Noelle Merwin
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S Corporation vs. Partnership: What’s Best for Your Business?
S Corporation vs. Partnership: What’s Best for Your Business? 1200 1200 Noelle Merwin

Starting a business with partners and not sure which entity to choose? An S corporation could be the perfect fit for your new venture.

One benefit of an S corporation

One big perk of an S corporation is that shareholders aren’t personally liable for the company’s debts. To keep that protection intact, make sure you:

  • Properly fund the corporation
  • Keep it separate from personal finances
  • Follow state requirements (like filing articles of incorporation, adopting bylaws, electing a board of directors, and holding organizational meetings).

Handling losses

If you expect early losses, an S corporation offers a better tax advantage than a C corporation.

While C corp shareholders don’t get tax benefits from losses, S corp shareholders can deduct their share of losses on personal tax returns—up to the amount they’ve invested in the business. Losses that exceed your basis can be carried forward to offset future profits when there’s sufficient basis.

Profits and taxes

Once the S corporation starts earning profits, the income is taxed directly to you, regardless of whether it’s distributed. This income is reported on your personal tax return and combined with your other earnings.

Your share of the S corporation’s income isn’t hit with self-employment tax, but your wages are subject to Social Security taxes. If the income qualifies as qualified business income (QBI), you can take a 20% pass-through deduction, subject to certain limitations.

Note: The QBI deduction is set to expire after 2025 unless Congress extends it. However, there’s a good chance it will be extended—and possibly even made permanent—under ongoing Tax Cuts and Jobs Act negotiations.

Fringe benefits

If you’re offering fringe benefits like health and life insurance, keep in mind that while the company can deduct the cost for shareholders owning more than 2%, the benefits will be taxable to the recipient.

Protecting S status

Be careful about transferring stock to ineligible shareholders (like another corporation, a partnership or a nonresident alien), as it could terminate your S election, turning the corporation into a taxable entity.

To avoid this risk, have shareholders sign an agreement to prevent transfers that would jeopardize the S status. Also, remember that an S corporation can’t have more than 100 shareholders.

Final steps

Before settling on your business entity, reach out to your Smolin advisor to discuss your options. We’re here to answer your questions and help set your new venture up for success.

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