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Retirement may seem far off, but smart saving now can make all the difference—and a 401(k) is one of the best ways to do that. If your employer offers a 401(k) or Roth 401(k), contributing as much as you can in 2025 is a smart way to build your nest egg.

If you’re not already contributing the maximum allowed, this might be the year to bump your contributions. Thanks to tax-deferred compounding (or tax-free for Roth accounts) growth, even small increases can make a big difference in your retirement savings.

With a 401(k), you choose to set aside a certain amount of your paycheck, and your employer contributes it to your retirement plan. Contribution limits are adjusted for inflation annually with a modest increase in 2025. The limit will be $23,500 (up from $23,000 in 2024).

Employees who are 50 or older by year-end can also make an additional $7,500 in “catch-up” contributions, allowing them to save up to $31,000 in 2025 (up from $30,500 in 2024).

Starting in 2025, a new law allows certain 401(k) plan participants to contribute even more. Those who are 60, 61, 62 or 63 in 2025 can make catch-up contributions of $11,250.

Note: These contribution amounts also apply to 403(b)s and 457 plans.

Traditional 401(k)s

A traditional 401(k) has several benefits, including:

• Pretax contributions. These can lower your modified adjusted gross income (MAGI) and may even help you reduce or avoid the 3.8% net investment income tax.
• Tax-deferred growth. This means you won’t pay income tax on the earnings until you take distributions.
• Employer matching. The option allows your employer to contribute pretax funds, potentially matching some or all of your contributions.

If you already have a 401(k) plan, take some time to review your contributions and consider increasing your contribution rate to get as close to the $23,500 limit (plus any eligible catch-up amount) as your budget will allow. Since the contributions are pretax, you’ll also see a reduction in taxable income on your paycheck.

Roth 401(k)s

If your employer also offers a Roth option in its 401(k) plans, you can choose to make some or all of your contributions as Roth contributions. While these won’t reduce your current MAGI, qualified distributions will be tax-free.

Roth 401(k) contributions can be particularly beneficial for higher-income earners who aren’t eligible to contribute to a Roth IRA. This is because the ability to contribute to a Roth IRA is reduced or phased out once your adjusted gross income (AGI) exceeds certain amounts.

Planning for the future

If you have questions about how much to contribute or how to best balance traditional and Roth 401(k) contributions, reach out to your Smolin advisor.  We’re also here to help you explore additional tax and retirement-saving strategies that might fit your needs.

With nationwide gas prices higher than a year ago, it’s good news that the 2025 optional standard mileage rate for business vehicle use has increased too. The IRS recently announced that the cents-per-mile rate for operating a car, van, pickup, or panel truck will be 70 cents in 2025, up from 67 cents per mile in 2024. This rate applies to all types of vehicles, including gasoline, diesel-powered, electric, and hybrid-electric models.

The process of calculating rates

The 3-cent increase from the 2024 rate aligns with recent trends in gas prices. On January 17, 2025, the national average for regular gas was $3.11 per gallon, up from $3.08 last year, according to AAA Fuel Prices. But the standard mileage rate takes into account all vehicle-related costs, not just the price of gas.

The business cents-per-mile rate is actually updated annually based on an IRS study that examines the fixed and variable costs of operating a vehicle, including gas, maintenance, repairs, and depreciation. When gas prices significantly change, the IRS may adjust the rate midyear.

Standard rate or real expenses

Businesses can deduct the direct costs tied to using a vehicle for business such as gas, oil, tires, insurance, repairs, and registration fees. Vehicle depreciation can also be claimed, but certain limits apply to vehicle depreciation that don’t apply to other types of business assets.

The cents-per-mile rate is an excellent option if you prefer not to track every vehicle-related expense. With this method, instead of itemizing all actual expenses, you only need to log key details, like mileage, date, and destination for business trips.

Businesses that reimburse employees for using their personal vehicles for work often favor the cents-per-mile rate. This approach can help attract and retain employees who frequently drive for business since, under current law, employees can’t deduct unreimbursed business mileage on their own tax returns.

If you choose the cents-per-mile rate, just be sure to follow all the necessary rules. If you fail to do so, the reimbursements could be classified as taxable wages for your employees.

When you can’t use the standard rate

There are situations where the cents-per-mile rate doesn’t apply. It partly depends on how you’ve claimed deductions for the same vehicle in the past. But in other situations, it depends on whether the vehicle is new to your business this year or if you want to claim first-year depreciation tax benefits.With many factors in play, deciding whether to use the standard mileage rate for vehicle expenses can be tricky. If you have questions about claiming these expenses for 2025, or on your 2024 tax return, reach out to your Smolin advisor for help.

An advance health care directive allows you to outline your medical preferences in case you are ever incapacitated or unable to make decisions. These directives are often part of a comprehensive estate plan and might be called by different legal names depending on where you live.

Here’s a breakdown of some healthcare directives you should add to your estate plan.

Healthcare power of attorney

Similar to how a durable power of attorney gives your chosen agent authority to manage your finances if you are unable to do so, a health care power of attorney (or medical power of attorney) allows a trusted person to make personal medical decisions on your behalf. Some states call this a healthcare proxy.

Selecting the right agent is crucial. Since you can’t predict every medical situation that might arise, it’s essential to choose someone who knows you well, understands your values, and can be trusted to honor your wishes. This designated agent is often a family member, close friend or trusted professional. It’s also wise to name an alternate agent in case your first choice is unavailable.

Living will

A living will is a legal document that outlines what medical treatments you do or don’t wish to receive should you be unable to communicate such decisions. It provides clear guidance on what life-extending medical treatment you wish to have or decline in the event of a terminal illness or incapacitation.

This document only takes effect if you become incapacitated, usually after a physician has certified that you’re facing a terminal illness or are permanently unconscious. In your living will, be sure to outline your wishes for end-of-life care, which may include consultation with a doctor.

Since requirements for a living will vary from state to state, it’s a good idea to have an attorney familiar with local laws help prepare your living will.

DNR and DNI orders

It’s a common misconception that you need to have a living will or advance health care directive on file to implement a “do not resuscitate” (DNR) or “do not intubate” (DNI) order.  To establish a DNR or DNI order, all you need to do is discuss your wishes with your physician and have them prepare the necessary paperwork. The order can then be added to your medical file.

Even if your living will covers your preferences about resuscitation and intubation, it’s a good idea to request DNR or DNI orders when you’re admitted to a new hospital or facility to clarify your wishes for loved ones.

Put your directive into action

To make your advance healthcare directive official, it must be in writing. Each state has its own forms and requirements for creating these legal documents. You may need forms signed by a witness or notarized, depending on where you live. If you’re unsure about the requirements or the process, it’s a good idea to consult an attorney for help.

Keep in mind that health care directives are flexible—you can update them anytime. Just make sure to follow your state’s specific guidelines when making changes.

Contact your Smolin advisor for help drafting an advance health care directive and adding the necessary documents to your estate plan.

Medicare health insurance premiums can be a significant expense—especially for high-income earners and married couples paying separately for coverage. Here’s what you need to know about how taxes factor in.

Medicare Part B: what it covers and who pays

Medicare Part B, often called Medicare medical insurance, helps cover doctors’ visits and outpatient services. Most people age 65 and older qualify, but it’s also available to some people with disabilities, ALS (known as Lou Gehrig’s disease), and end-stage renal disease. Unlike Medicare Part A, Part B plans require monthly premiums, which can add up.

Your monthly Part B premium is based on your modified adjusted gross income (MAGI) from two years prior (as reported on your Form 1040. MAGI is your adjusted gross income (AGI) plus any tax-exempt interest.

In 2025, most individuals will pay a base monthly premium of $185 per person for Part B coverage.

Higher-income individuals pay an additional surcharge on top of the standard premium. In 2025, this surcharge applies if your 2023 MAGI was over $106,000 as a single filer or over $212,000 for joint filers. You can find a breakdown of 2025 Part B premiums and their applicable surcharges here.

Part B premiums, including any surcharges, are automatically deducted from your Social Security benefit payments and appear on the annual Form SSA-1099 from the Social Security Administration (SSA).

Part D prescription drug coverage premiums

Medicare Part D provides private prescription drug coverage, with base premiums that vary by plan. Higher-income individuals are subject to an additional surcharge on top of the base premium.

For 2025, this surcharge applies if you:

• Filed as an unmarried individual for 2023 with a MAGI above $106,000
• Filed jointly for 2023 with a reported MAGI over $212,000.

You can find each covered person’s 2025 monthly Part D surcharges here.

You’ll pay the base Part D premium directly to your chosen private insurance provider. If you owe a surcharge, it will be deducted from your Social Security benefits and shown on your annual Form SSA-1099 from the SSA.

Deducting Medicare premiums

Medicare premiums can be combined with other eligible healthcare expenses to claim an itemized medical expense deduction. You can deduct the portion of total qualifying expenses that exceed 7.5% of your adjusted gross income (AGI).

Your 2024 tax return and 2026 Medicare premiums

The income reported on your 2024 Form 1040 will influence your 2024 MAGI, which will determine your 2026 Medicare premiums. If you’re self-employed or own a pass-through business (LLC, partnership, or S corporation), you have more flexibility to manage your MAGI through deductible retirement contributions or depreciation strategies.

Maximize savings on Medicare costs

Medicare premiums can add up quickly, and your 2024 tax decisions may directly impact what you pay in 2026. And, while 2026 may seem far off, smart planning now can help you avoid unexpected premium increases in the future.

Reach out to your Smolin advisor to discuss your options to minimize costs and optimize your financial situation.

If you own a growing, unincorporated small business, high self-employment (SE) tax bills might already be on your radar. The SE tax covers your contributions to Social Security and Medicare as a self-employed individual.

SE tax basics

The 15.3% SE tax rate applies to the first $168,600 of your 2024 net self-employment income. This rate includes 12.4% for Social Security and 2.9% for Medicare. In 2025, the rate will apply to the first $176,100 of your net income.

Beyond those thresholds, the 12.4% Social Security tax component of the SE tax drops off, but the 2.9% Medicare tax still applies to all income.

How high can your SE tax bill climb? Higher than you might think. The main driver is the 12.4% Social Security tax, because the Social Security tax ceiling increases every year.

To calculate your SE tax, start with your taxable self-employed income (usually from Schedule C of Form 1040) and multiply by 0.9235 to get your net SE income. For 2024, if your net SE income is $168,600 or less, multiply the amount by 15.3% to find your SE tax. If it’s more than $168,600, multiply $168,600 by 12.4% and the total by 2.9%, then add them together.

Example: If your net SE income for 2024 is $200,000, your SE tax bill will be $26,706 (12.4% × $168,600) + (2.9% × $200,000)., totaling $26,706. That’s a hefty tax bill!

Projected tax ceilings for 2026–2033

The current Social Security tax on your net SE income may seem steep, but it will likely get worse. As your business income grows, the Social Security tax ceiling will continue to rise with inflation.

Here are the latest projections from the Social Security Administration (SSA) for the tax ceilings from 2026–2033:

• 2026 – $181,800
• 2027 – $188,100
• 2028 – $195,900
• 2029 – $204,000
• 2030 – $213,600
• 2031 – $222,900
• 2032 – $232,500
• 2033 – $242,700

Could these projections be too low? Definitely. The SSA’s estimates often come in lower than the final numbers. For example, the 2025 ceiling was initially projected to be $174,900 but ended up at $176,100. But if the projected ceiling holds, by 2033, the SE tax on $242,700 of net SE income will be a whopping $37,133 (15.3% × $242,700).

Disconnect between tax ceiling and benefit increases

While it may seem logical that the Social Security tax ceiling would rise at the same rate as Social Security benefits, they don’t. For example, the 2024 Social Security tax ceiling is up 5.24% from 2023, but benefits for Social Security recipients increased by just 3.2%. Similarly, the 2025 Social Security tax ceiling will rise by 4.45%, but the benefits are only going up by 2.5%

This discrepancy is due to different inflation measures being used. The Social Security tax ceiling rises with average wage increases while benefits are adjusted based on general inflation.

S corporation strategy

While your SE tax bills are steep and likely to rise, there are ways to reduce them to more manageable levels. One strategy is to start running your business as an S corporation.

You could pay yourself a reasonable salary and distribute the remaining income as dividends. Only your salary would be subject to Social Security and Medicare taxes, potentially saving you money.

Reach out to your Smolin advisor to explore strategies for managing your SE tax.

The clock is ticking on the federal gift and estate tax exemption ($13.61 million for 2024). Unless Congress steps in, the amount will drop to an inflation-adjusted $5 million in 2026. Now’s the time to make impactful gifts to loved ones and shrink your taxable estate before the window closes.

Certain hard-to-value gifts, like interests in a closely held business or family limited partnership (FLP), can trigger IRS scrutiny. If the IRS determines that a gift was undervalued, you could face gift tax, interest, and penalties. To avoid such unexpected outcomes, consider making a defined-value gift instead.

Formula vs. savings clauses

A defined-value gift involves transferring assets valued at a set dollar amount, rather than a fixed number of stock shares, FLP units, or percentage of a business. When structured properly, defined-value gifts prevent future gift tax assessments.

The key is to draft the transfer document with a “formula” clause rather than a “savings” clause. A formula clause transfers a fixed dollar amount, adjusting the number of shares to match that amount based on a final valuation of the shares for federal gift and estate tax purposes. A savings clause, on the other hand, allows for part of the gift to be returned to the donor if it is later determined to be taxable.

Precise language matters

For a defined-value gift to be effective, they must have precise language in the transfer documents. In one case, the U.S. Tax Court rejected a defined-value gift of FLP interests, siding with the IRS’s gift tax assessment based on percentage interests. The issue was that the documents stated the transfer of FLP interests should be valued “as determined by a qualified appraiser” within a specific time after the transfer, which lacked clarity necessary for the gift to qualify as defined value.

The court ruled that the transfer documents did not meet the requirements of a defined-value gift because an appraiser determined the fair market value. The documents lacked provisions to adjust the number of FLP units if their value was ultimately determined to exceed the specified amount for federal gift tax purposes.

The bottom line: Before making a gift to a loved one, reach out to your Smolin advisor to ensure your gift’s transfer documents are properly worded to meet IRS requirements. We’re here to help!

Patents, trademarks, copyrights and goodwill, are vital intangible assets in modern businesses. While their tax treatment can be complex, businesses need to have an understanding of the issues involved.

Here are answers to some common questions about these assets.

What are intangible assets?

The term “intangibles” covers a wide range of items and determining whether an acquired or created asset qualifies as intangible isn’t always straightforward. Examples include debt instruments, prepaid expenses, non-functional currencies, financial derivatives (such as options, futures, and foreign currency contracts), leases, licenses, memberships, patents, copyrights, franchises, trademarks, trade names, goodwill, annuity contracts, insurance contracts, endowment agreements, customer lists, and ownership interests in entities like corporations, partnerships, LLCs, trusts and estates.

Other rights, assets, instruments and agreements may also fall under this category.

What are the expenses?

Expenses associated with acquiring or creating intangible assets that fall under capitalization rules include payments made for:

• Obtaining, renewing, renegotiating or upgrading business or professional licenses
• Modifying contract rights like lease agreements
• Defending or securing title to intangible property like patents
• Terminating agreements, including, leases of tangible property, exclusive licenses for your property, and certain non-competition agreements

According to IRS regulations, payments to “facilitate” the acquisition or creation of an intangible are those incurred in the process of investigating or pursuing a transaction. These facilitation rules apply broadly, impacting businesses and everyday transactions. Examples of facilitation costs include payments made to:

• Legal counsel to draft and negotiate lease agreements
• Attorneys, accountants, and appraisers to assess a corporation’s stock value during a minority shareholder buyout
• Consultants to research competitors when preparing a contract bid
• Legal counsel for preparing and filing trademark, copyright, and license applications.

Why are intangibles so complex?

The IRS requires businesses to capitalize costs that:

• Acquire or create an intangible asset
• Develop or enhance a separate and distinct intangible asset
• Establish or enhance a “future benefit” identified as capitalizable under IRS guidelines
• Facilitate the acquisition or creation of an intangible asset

Capitalized costs can’t be deducted in the year they were paid or incurred. If they are deductible, they must spread out over the asset’s lifespan or over a time period specified by the tax code. However, costs under $5,000 and those paid to create or facilitate the creation of a right or benefit that expires within 12 months or by the end of the following tax year do not require capitalization.

Are there any exceptions to the rules?

Yes, there are exceptions. Taxpayers can choose to capitalize items that aren’t typically required to be capitalized. The lists of examples provided above are not exhaustive.

Due to  the complexity of the regulations, it’s important to scrutinize transactions involving intangibles and the related costs to understand the full tax implications.

Need support with intangible assets?

For businesses to take full advantage of potential tax benefits and stay compliant with regulations, the tax treatment of these intangible assets need to be properly managed. Contact your Smolin advisor to discuss the capitalization rules and determine if costs you’ve incurred need to be capitalized. We can also help identify potential transactions your business has engaged in that might trigger these rules to keep your business compliant.

Choosing the right business structure is a pivotal decision, and a C corporation is one option that comes with its own set of advantages and disadvantages. This structure can have a notable impact on how your business operates and its financial health.

Let’s break down the key benefits and drawbacks of operating as a C corporation.

Tax implications

A C corporation is treated as a separate legal entity, which is taxed separately from you as the principal owner. With a corporate tax rate currently set at 21%, this can be lower than the top individual tax rate of 37%.

However, one of the notable drawbacks of a C corporation is the potential for double taxation. Profits are taxed first at the corporate level, and then dividends distributed to shareholders are taxed again at the individual level. This structure can result in a higher overall tax burden compared to other business entities.

But, if most of the corporate earnings are tied to your role as an employee, the impact of double taxation may be reduced since the corporation can fully deduct any reasonable salary it pays you.

Since a C corporation is taxed as a separate entity, all income, credits, losses, and deductions are calculated at the corporate level to determine taxable income or loss. One potential downside for a new business is that losses are confined to the corporation and generally cannot be deducted by the owners. However, if you anticipate turning a profit in the first year, this might not be an issue.

Liability protection

One key advantage of a C corporation is the limited liability protection it provides. Shareholders are not personally responsible for the corporation’s debts or liabilities, meaning their personal assets are typically shielded if the business encounters legal troubles or bankruptcy.

Complying with requirements

To maintain a corporation’s status as a separate entity, it’s important to follow certain formalities as set by your state, including:

• Filing articles of incorporation
• Adopting bylaws
• Electing a board of directors
• Holding organizational meetings
• Keeping minutes of meetings

Adhering to these requirements and maintaining a solid capital structure will help protect you from unintentionally assuming personal liability for the corporation’s debts.

Fringe benefits

A C corporation can also offer fringe benefits and fund qualified pension plans with tax advantages. The corporation can deduct the costs of benefits like health insurance and group life insurance, within certain limits, without triggering negative tax consequences for you. Similarly, contributions to qualified pension plans are typically deductible by the corporation but are not taxed to you at the time of contribution.

Raising capital

A C corporation offers significant flexibility in raising capital from outside investors. It can issue multiple classes of stock, each with distinct rights and preferences, tailored to meet your needs and those of potential investors. Also, if you choose to raise capital through debt, the interest paid by the corporation is deductible.

The right fit

While a C corporation might be the right structure for your business now,  you can opt to convert it to an S corporation if that better suits your needs. This change is typically tax-free, but any built-in gains on the corporate assets could be taxed if the assets are sold within 10 years of the change.

This is a high-level overview of the benefits and drawbacks of a C corporation. Contact your Smolin advisor with specific questions or to explore which business entity is best for you.