Articles From Lumsden McCormick

As we approach year end, it's time for individuals, business owners and family offices to review their 2024 and 2025 tax situations and identify opportunities for reducing, deferring, or accelerating their tax obligations. With rising interest rates, inflation and continuing market volatility, tax planning is as essential as ever for taxpayers looking to manage cash flow while paying the least amount of taxes possible over time. 

Corporations are responsible for a wide range of distinct tax regulations and challenges. It's important to consider key developments as corporations wrap up the 2024 tax year and move into 2025.

A well-crafted, up-to-date will is essential for an effective estate plan, helping to ease the burden on your family during difficult times. Key elements to include are an introductory clause, provisions for debt repayment, specific bequests, and the appointment of an executor. Ensuring compliance with federal and state laws is crucial for the validity of your will.

The election of Donald Trump and the Republican control of Congress are expected to bring significant changes to the not-for-profit sector. Key issues include potential legislation to revoke the tax-exempt status of organizations deemed to support terrorism, anticipated spending cuts affecting federal grants, and possible tax law changes that could impact charitable giving. Nonprofits should plan ahead to navigate these challenges and explore new funding opportunities.

State and local taxation is complex. Tax rules can vary by jurisdiction, and across counties and states, each tax type comes with different rules that require different levels of attention. 

The IRS has issued final regulations for the Section 45X advanced manufacturing production credit, which supports manufacturers producing clean energy equipment in the U.S. between 2022 and 2032. The regulations clarify eligibility, production costs, and the interplay with other credits, while also introducing substantiation requirements for material costs. Despite the clarity provided, compliance remains complex, and the credit’s future is uncertain under the incoming administration.

Health Savings Accounts (HSAs) offer small business owners a tax-advantaged way to manage health care costs for themselves and their employees. With updated contribution limits for 2025, HSAs provide significant tax benefits, including deductible contributions, tax-free earnings, and tax-free distributions for qualified medical expenses. Employers can also benefit from payroll tax savings on HSA contributions.

The annual gift tax exclusion allows you to reduce your taxable estate with minimal effort. While filing a gift tax return is generally not required, it becomes necessary or advisable in certain situations, such as when making split gifts or exceeding the annual exclusion amount. Filing can also provide audit protection and establish asset values for tax purposes.

To ensure your nonprofit’s special events are safe and successful, create a crisis management plan to address potential risks like bad weather, technology failures, and attendee needs. Review insurance policies and vendor contracts for adequate coverage and liabilities. Plan for travel delays by providing emergency contact information and maintaining a comprehensive contact list for all event participants. In case of a crisis, refer to your plan, communicate openly with attendees, and seek support from staff and board members. If your fundraiser falls short, explore ways to adjust for budget shortfalls.

Business-related meal deductions can still offer valuable tax savings, but recent law changes have tightened what qualifies. Generally, meals are 50% deductible if they meet specific criteria, while certain exceptions allow for 100% deductions. Contact us to clarify the rules and optimize your deductions.