Strong portfolio performance can bring an unwelcome surprise: an additional 3.8% federal tax. The income thresholds for the net investment income tax (NIIT) aren’t annually adjusted for inflation and haven’t changed since the tax took effect in 2013. So the NIIT is hitting more taxpayers. If your income is near or above the applicable threshold, year-end planning may help reduce its impact.

When you’ll owe the NIIT

The NIIT applies to some or all net investment income once a taxpayer’s modified adjusted gross income (MAGI) exceeds certain levels. Net investment income generally includes taxable gains from stocks, bonds, mutual funds and investment real estate, as well as interest, dividends, nonqualified annuity income, royalties and rents. It also can include income from a passive trade or business and from a business that trades financial instruments or commodities.

You’ll generally owe the NIIT if you have net investment income and your MAGI exceeds:

• $200,000 if you’re a single or head-of-household filer,
• $250,000 if you’re married filing jointly, or
• $125,000 if you’re married filing separately.

The amount subject to the NIIT is the lesser of your net investment income or the amount by which your MAGI exceeds the applicable threshold.

Many types of income aren’t included in net investment income. Examples include tax-exempt interest, the excluded portion of a gain from the sale of your primary home, qualified retirement plan distributions, Social Security benefits, wages and self-employment income. However, taxable retirement plan distributions, wages and self-employment income can increase your MAGI and cause some or all of your net investment income to become subject to the NIIT.

Planning may therefore focus on managing your net investment income, your MAGI or both.

Adjust your investment mix

If your income is high enough to trigger the NIIT, shifting some income-producing investments to tax-exempt municipal bonds could reduce your exposure. Interest from qualifying tax-exempt municipal bonds generally isn’t included in MAGI or net investment income. Before making a change, consider the bonds’ risks and after-tax return as well as your broader investment objectives.

Qualified-dividend-paying stocks are taxed at the same rates as long-term capital gains: The maximum rate is 20%, but the rate becomes 23.8% with the NIIT. Generally, however, dividends are taxed in the year they’re paid, and you can’t control when they’re paid. Quarterly dividend payments are common.

As a result, you may want to consider rebalancing your investment portfolio to emphasize growth stocks over dividend-paying stocks. Although the capital gain from these investments will be included in net investment income and subject to capital gains tax and potentially the NIIT, this generally doesn’t happen until you recognize the gain by selling the stock — so you can control the timing. Also, recognized capital losses can offset capital gains. Investment and diversification considerations should drive any decision to rebalance, however.

Leverage retirement accounts

Tax-advantaged retirement accounts offer both opportunities and risks when it comes to the NIIT.

One opportunity relates to annual contributions. Deductible or pretax contributions to a tax-deferred retirement plan reduce current MAGI. So maximizing your contributions may help keep you below the NIIT threshold or reduce the amount of your income that’s subject to the NIIT, depending on your circumstances. Small business owners may have particular flexibility to establish or make large 2026 contributions to retirement plans — possibly even after December 31, 2026.

Retirement plan distributions come with both risks and opportunities. They generally aren’t included in net investment income, but taxable distributions can increase MAGI and trigger the NIIT on other income.

Your ability to control the timing of retirement plan distributions provides an opportunity. Consider the potential NIIT impact when timing discretionary distributions (or Roth IRA conversions, which also increase MAGI).

If you’re subject to annual required minimum distributions (RMDs), you must take your annual RMD by the deadline or face a penalty on the amount you should have withdrawn but didn’t. But if you’re charitably inclined, a qualified charitable distribution (QCD) directly from your IRA to charity can satisfy your RMD while excluding the distributed amount from your MAGI.

Review your options

Other year-end strategies that may reduce or eliminate NIIT liability include harvesting capital losses, timing investment gains, donating certain appreciated investments and reviewing passive activities or rental income. The NIIT consequences of any move will depend on both your net investment income and your MAGI. We can help you estimate your potential NIIT and evaluate possible strategies before year end, so contact us today with any questions.

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Our team has been serving clients across the state for 50 years, and we’ve made a lot of memories throughout that time. We’ve put together a photo gallery to share just a few of our team’s special moments from across the last half-decade.

Click Here to View the Gallery

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If your small business accepts, uses or invests in Bitcoin, Ethereum or other forms of cryptocurrency, accurate reporting and detailed records are critical for federal tax purposes. The IRS continues to scrutinize digital-asset transactions. Today, business tax returns include a question about digital assets, and brokers are now required to report certain transactions to taxpayers and the IRS on Form 1099-DA. Here’s what you need to know to help you comply with the current tax rules.

The basics

Unlike cash or credit cards, cryptocurrency still isn’t widely accepted by small businesses for routine transactions. However, some businesses may receive it from customers, use it to make purchases, pay workers with it or hold it as an investment.

Cryptocurrencies can be valued in U.S. dollars and digitally traded between users. They may also be purchased or exchanged through online platforms and stored in digital wallets. The IRS uses the broader term “digital assets,” which includes cryptocurrency, stablecoins (a type of cryptocurrency designed to maintain a consistent value) and nonfungible tokens.

Tax reporting

Buying cryptocurrency with U.S. dollars and holding it generally doesn’t produce taxable income. However, selling it, exchanging it for another digital asset, using it to make a purchase or receiving it as payment for goods or services sold generally creates a reportable transaction.

For federal tax purposes, the IRS treats cryptocurrency as property, not currency. As a result, businesses that accept cryptocurrency for goods or services must report gross income based on its fair market value (FMV) when received, measured in U.S. dollars. That amount generally becomes the business’s tax basis in the cryptocurrency.

When the business later sells, exchanges or spends the cryptocurrency, it generally recognizes a separate gain or loss for tax purposes. The gain or loss is based on the difference between the asset’s value when disposed of and its adjusted basis. (Adjustments might include additional acquisition costs or transaction fees, certain blockchain events that affect ownership, and other tax adjustments required under IRS rules.)

Here’s an overview of the tax treatment of some other common business cryptocurrency transactions:

Purchases. From the buyer’s perspective, a purchase made using cryptocurrency may result in a taxable gain if the FMV of the property or services received exceeds the buyer’s adjusted basis in the cryptocurrency. Conversely, a tax loss may result if the value received is less than the adjusted basis. In other words, paying a business expense with cryptocurrency can trigger tax consequences beyond the ones typically associated with a purchase (such as a deduction for the business expense).

Employee wages. For federal tax purposes, wages paid using cryptocurrency are taxable to employees and generally must be reported by employers on Form W-2. They’re subject to federal income tax withholding and payroll taxes based on their FMV on the payment date. Applicable federal and state wage-payment laws must also be considered.

Payments to contractors. Cryptocurrency payments to independent contractors and other service providers are also taxable. The usual self-employment tax and information-reporting rules apply, and the payer may need to issue Form 1099-NEC.

In addition, a business may have a taxable gain or loss from the appreciation or decline in the cryptocurrency’s FMV during the time it was held before it was paid to the employee or independent contractor. Assuming the payer isn’t in the trade or business of buying and selling virtual currencies, the gain and loss will be a capital gain or capital loss (short-term or long-term, depending on how long it was held).

Expanded information reporting

A digital-asset question now appears on federal returns including Forms 1065, 1120 and 1120-S. Businesses must answer it and report applicable transactions even if they don’t receive an information return for a transaction.

Beginning with transactions in 2025, certain custodial brokers must report gross proceeds from digital-asset sales and exchanges on Form 1099-DA. Starting in 2026, they must also report the basis for certain covered digital assets. However, basis generally won’t be reported for assets acquired before 2026 or transferred into the broker’s account. So, a Form 1099-DA doesn’t eliminate the need to maintain your own records.

The One Big Beautiful Bill Act didn’t change the basic tax treatment of digital assets. Its changes to Form 1099-K apply to third-party payment networks and don’t replace the separate Form 1099-DA rules.

Under the Infrastructure Investment and Jobs Act of 2021, businesses will eventually be required to report certain digital-asset receipts exceeding $10,000 on Form 8300. However, until the IRS issues regulations to implement the change, businesses aren’t required to file Form 8300 solely because they receive more than $10,000 in digital assets.

As a result of the expanded reporting requirements, the IRS now receives more third-party information about digital-asset transactions, making discrepancies easier to identify. Businesses that engage in crypto transactions should maintain records showing the date, number of units, dollar value, tax basis, transaction fees and business purpose of each transaction. Transfers between wallets should also be documented so they aren’t mistaken for taxable transactions.

Review your records

As year end approaches, review your 2026 digital-asset transactions and reconcile your records with statements from brokers and payment processors. Also keep in mind that Congress is considering bills that would change selected digital-asset tax rules. We can help you stay on top of any new developments. Contact us for assistance evaluating your transactions and meeting the current reporting requirements.

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We are proud to announce that Burkett Burkett & Burkett CPAs, P.A. has received two honors in The State’s Best 2026 competition. Our firm earned Silver in the Accounting Firm category and Bronze in the Tax Services category, recognizing our team among the many outstanding businesses competing throughout South Carolina.

We sincerely thank our clients, employees, friends, and families who took the time to nominate our firm and vote for us. We are honored to share these awards with everyone who helped make them possible. Thank you for your continued trust and support!

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Ordinary repair and maintenance costs are generally deductible in the year they’re paid or incurred, depending on your accounting method. Costs that improve property must be capitalized. However, under current tax law, capitalization doesn’t necessarily mean waiting years to recover the cost. The One Big Beautiful Bill Act (OBBBA) permanently restored 100% bonus depreciation for eligible property and increased the Section 179 expensing limit and phaseout threshold.

Still, these provisions don’t cover every improvement. And even when an improvement qualifies for one of these breaks, repair treatment may offer certain advantages. Here’s a closer look at why distinguishing repairs from improvements remains important — and why you should consider all available deduction options.

Improvement tests

Generally, repairs keep property in ordinarily efficient operating condition without adding significant value or substantially extending its useful life. Examples might include fixing a leak, replacing a small number of damaged roof shingles or servicing machinery. An expenditure generally must be treated as an improvement and, therefore, be capitalized if it results in a betterment, restoration or adaptation of the unit of property:

• Under the “betterment test,” you generally must capitalize amounts paid for work that’s reasonably expected to materially increase the productivity, efficiency, strength, quality or output of a unit of property or that’s a material addition to a unit of property.
• Under the “restoration test,” you generally must capitalize amounts paid to replace a part (or combination of parts) that’s a major component or a significant portion of the physical structure of a unit of property.
• Under the “adaptation test,” you generally must capitalize amounts paid to adapt a unit of property to a new or different use — one that isn’t consistent with your ordinary use of the unit of property at the time you originally placed it in service.

For a building, these tests generally apply separately to the building structure and designated systems, such as plumbing, electrical, HVAC, elevators, fire protection and security. Consequently, replacing an entire building system may be an improvement even if the work affects only a portion of the building.

Tangible property safe harbors

Several safe harbors may allow expenditures that might otherwise be capitalized to be deducted currently:

Routine maintenance safe harbor. Recurring work performed to keep property in ordinarily efficient operating condition may be deductible. At the time the property was placed in service, you must have reasonably expected to perform the activity more than once during a 10-year period for buildings or during the applicable class life (such as three years or seven years) for other property.

Safe harbor for small businesses. Businesses with average annual gross receipts of $10 million or less during the three preceding tax years may qualify for an annual election to currently deduct the cost of work on an eligible building with an unadjusted basis of $1 million or less. The total amount paid for repairs, maintenance and improvements during the year must be no more than the lesser of $10,000 or 2% of the building’s unadjusted basis.

De minimis safe harbor. Subject to accounting-policy and recordkeeping requirements, a business may elect to deduct qualifying expenditures up to $2,500 per invoice or item. The threshold is $5,000 for a business with an applicable financial statement, such as a qualifying audited financial statement.

These safe harbors have specific requirements, and some elections must be made annually on a timely filed tax return.

100% first-year deductions for capitalized costs

If an expenditure must be capitalized, you may still be able to deduct its full cost in the year the improvement is placed in service. The OBBBA permanently restored 100% bonus depreciation for eligible property acquired and placed in service after January 19, 2025. Qualifying property generally includes machinery, equipment and real estate qualified improvement property (QIP).

QIP generally consists of improvements made to the interior of an existing nonresidential building. However, expenditures attributable to enlarging a building, elevators or escalators, or the internal structural framework of a building don’t count as QIP and are usually depreciated over 39 years.

Sec. 179 may also cover machinery, equipment and QIP, as well as certain improvements to nonresidential real property, including roofs, HVAC systems, fire protection and alarm systems, and security systems. The OBBBA doubled the expensing limit for 2025 and also increased the phaseout threshold, but less significantly. These amounts are annually indexed for inflation. For 2026, businesses may deduct up to $2.56 million of eligible costs. The deduction begins to phase out when qualifying purchases in 2026 exceed $4.09 million and is limited by taxable income from the active conduct of a business.

Remember, eligible property generally must be placed in service — that is, ready and available for its intended use — by year end to qualify for bonus depreciation or a Sec. 179 expensing election for 2026. Merely purchasing, ordering or paying for property isn’t enough.

Benefits of repair treatment

Even when a capital improvement qualifies for a full first-year deduction, repair treatment isn’t interchangeable with bonus depreciation or Sec. 179 treatment. When an expenditure meets the requirements for repair treatment, properly classifying it as a deductible repair (rather than grouping it with capital improvements) may be advantageous for several reasons:

• Repair costs don’t have to meet the eligibility or placed-in-service requirements for bonus depreciation.
• Repair deductions aren’t subject to the Sec. 179 limits.
• Repair treatment generally avoids depreciation elections, related basis tracking and potential depreciation recapture consequences when the property is sold.

In addition, some states don’t fully conform to the federal bonus depreciation or Sec. 179 rules. So, when applicable, repair treatment may provide an earlier state tax deduction. If an improvement qualifies for neither bonus depreciation nor Sec. 179, you may have to depreciate its cost over the applicable recovery period, which could be as long as 39 years.

Year-end planning

Now is a good time to review your property-related expenditures in 2026 to determine whether they’ve been classified correctly and whether any safe harbors or immediate deduction provisions apply. You may also be considering additional purchases or improvements to reduce your current-year taxable income. Contact us for help classifying your 2026 expenditures and evaluating the potential tax benefits of planned purchases or improvements before year end.

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Working remotely may broaden your job options and make daily life easier. But working from a different state than your employer — or spending part of the year working from a second home in a different state than where you normally reside — can create state tax issues. Because the rules vary by state, work arrangements that cross state lines warrant a closer look.

Convenience-of-the-employer rule

If your employer is located in a state that applies a convenience-of-the-employer rule and you work remotely from a different state, you may need to file income tax returns in more than one state. Under such a rule, days worked from another state for your own convenience (rather than for the convenience of your employer) may be treated as days worked in your employer’s state.

This might occur if, say, you choose to work from home across the state border from the city where your employer has an office. Your employer doesn’t require you to work remotely, but you prefer to do so to save yourself the time and cost of commuting. So your employer allows you to work from home for your convenience.

A state with an income tax generally can tax all income of its residents and income earned within its borders by nonresidents. So if your employer’s state considers your days worked remotely to be days worked in that state because of the convenience-of-the-employer rule, you could be subject to taxes and filing requirements in both your employer’s state and your own.

Domicile and residency

Your state tax obligations can also be affected if you spend enough time working in two states that both consider you to be a resident. Residency rules vary, but many states consider your domicile, the days you spend in the state and whether you maintain a home there. Your domicile is generally your “true, fixed, permanent home” — the place you intend to return to. Some states also will treat you as a resident if you maintain a home and spend a specified number of days there.

It’s possible to be domiciled in one state and be a resident of another. For example, let’s say you have a permanent home in one state where your job is located and a vacation home in another state. Your employer allows employees to work remotely, so now you spend more than 200 days per year living and working at your vacation home.

The state where your permanent home is located considers you to be domiciled there, but the state where your vacation home is located might view you as a resident. So if both states have an income tax, you may be subject to taxes on the same income in both states. A credit for taxes paid to another state may reduce or eliminate double taxation, depending on the states’ rules. But your tax bill may still increase if, for example, the vacation home state’s income tax rate is higher than your permanent home state’s rate.

Employer obligations

From an employer’s perspective, allowing employees to work remotely may create obligations to withhold and remit income and payroll taxes in multiple states. (These requirements can also affect how much state income tax is withheld from an employee’s pay.)

Plus, having employees in other states may be sufficient to establish “nexus” with those states, potentially triggering liability for their income, franchise, gross receipts or sales and use tax. In addition to the expense of tax reporting in multiple states, this may increase an employer’s overall tax liability. There are other complications as well.

As a result, some employers may not allow remote employees to work for extended periods from other states. They also might prohibit remote employees from moving to a state where the employer doesn’t already have employees or nexus.

Review your arrangement

If you’re a remote employee, before changing where you work, check with your employer to make sure it will allow you to work from that state. Also find out how a move or extended stay could affect your state taxes and withholding. If you’ve already worked from more than one state during 2026, consider addressing the potential tax consequences before year end. Contact us to review your work arrangement and determine whether you may have tax obligations in more than one state.

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Burkett Burkett & Burkett CPAs, P.A. has been nominated as Best Certified Public Accounting Firm in the Columbia Metropolitan Magazine’s 2027 Best of Columbia competition! From September 1st to October 13th, you can vote for us at Columbia Metropolitan’s website. We are grateful to have been nominated and hope you will take the time to vote for us before the October 13th deadline.

Thank you to our amazing team for keeping Burkett Burkett & Burkett CPAs known as one of the region’s top accounting firms!

Vote Here

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From the founding of our firm in September 1976, Burkett Burkett & Burkett CPAs, P.A. has endeavored to deliver exceptional service to our clients. From everyday tax guidance to management of complex financial situations, our firm has been here to guide and assist our clients for five decades. From our founding to the present day, we have continued to grow and improve, and today Burkett Burkett & Burkett proudly serves clients across the state from our West Columbia and Rock Hill locations.

To our clients and team members, old and new, thank you for helping us to achieve this momentous milestone. Here’s to 50 more years of service!

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Many individuals invest in real estate to help diversify their portfolio, create an income stream for themselves from rental income and build net worth over time. Often, this is a side activity to a career in another field or running another type of business — not the individual’s primary source of income. Holdings might range from a condo or small house you rent out to a multifamily residential building or even a commercial property.

Whatever type of property you own, investment real estate comes with special tax considerations you need to be aware of. With proper planning, you can maximize your after-tax returns.

Rental activity rules

One important consideration is the tax treatment of income and losses from rental properties. They’re considered passive by definition — unless you’re a real estate professional. Even then, you generally must “materially participate” in a rental activity for it to be treated as nonpassive. Why is this important? Passive income may be subject to the 3.8% net investment income tax (NIIT) on top of any income tax otherwise due, and passive losses are deductible only against passive income, with the excess being carried forward.

For investors who have another primary occupation, qualifying as a real estate professional can be difficult. To qualify, you must annually perform:

• More than 50% of your personal services in real property trades or businesses in which you materially participate, and
• More than 750 hours of service in these businesses during the year.

Each year stands on its own, and there are other nuances to keep in mind.

To materially participate in an activity, generally you must participate more than 500 hours during the year or demonstrate that your involvement constitutes substantially all of the participation in the activity. But there are other ways to meet the material participation test.

Carefully track the time you spend on your real estate activities. If you own rental properties in addition to working in another business or profession, also carefully track the time spent on those non-real-estate activities, so you can see if you spend a small enough portion of your time on them vs. real-estate activities that you can pass the first real estate professional test.

Although your spouse’s hours can’t be counted toward the tests for qualifying as a real estate professional, special rules for spouses may help you meet the material participation test: Generally, your spouse’s participation can be counted when determining whether you materially participate.

Depreciation breaks

Buying an investment property may be only the beginning of your expenditures. If you renovate or improve a property, the tax treatment of those costs can vary depending on the type of property and improvement. Generally, residential real estate, including improvements, must be depreciated over 27.5 years and commercial real estate over 39 years. But three valuable depreciation-related breaks may be available to real estate investors:

1. Qualified improvement property (QIP) deduction. QIP is defined as an improvement to an interior portion of a nonresidential building placed in service after the building was initially put into use. So these rules can apply to qualifying improvements to commercial real estate, but not to improvements to a residential rental property. QIP has a 15-year Modified Accelerated Cost Recovery System (MACRS) recovery period and qualifies for bonus depreciation and Section 179 expensing.

However, expenditures attributable to the enlargement of a building, elevators or escalators, or the internal structural framework of a building don’t count as QIP. They usually must be depreciated over 39 years.

2. Bonus depreciation. This additional first-year depreciation allowance is available for qualified assets, including QIP. Bonus depreciation is 100% for eligible assets acquired and placed in service after January 19, 2025.

3. Section 179 expensing election. This allows you to currently deduct qualified property, subject to certain limits. This includes QIP, certain depreciable tangible personal property used predominantly to furnish lodging and for the following improvements to nonresidential real property: roofs, HVAC equipment, fire protection and alarm systems, and security systems For 2026, the maximum Sec. 179 deduction is $2.56 million. The deduction begins to phase out if the cost of qualifying property placed in service during the year exceeds $4.09 million.

Deferring gains

Eventually, you may decide to sell an appreciated rental or other investment property. You might be able to structure the transaction to defer some or all of the taxable gain. Such strategies may even help you keep your income low enough to avoid triggering the 3.8% NIIT and the 20% long-term capital gains rate.

One example is an installment sale. It allows you to defer gains by spreading them over several years as you receive the proceeds. But ordinary gain from certain depreciation recapture is recognized in the year of sale, even if you receive no cash.

Another option is a Section 1031 exchange. Also known as a “like-kind” exchange, this technique allows you to exchange one real estate investment property for another and defer paying tax on any gain until you sell the replacement property. If you receive cash or other non-like-kind property as part of the exchange, however, you generally must recognize gain to that extent.

These tax deferral strategies aren’t without risks. For example, if tax rates go up, you could ultimately end up paying more in taxes. They also have detailed requirements, so it’s important to consider the tax consequences before completing a sale or exchange.

Tax-smart decisions

Taxes can affect the economics of an investment property from the time you buy it through the time you sell it. Decisions about your involvement in rental activities, improvements to the property, and the timing and structure of a sale can all have tax consequences. Contact us to discuss tax planning related to your investment real estate. We can help you identify potential tax-saving opportunities and avoid tax pitfalls.

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Teachers and other educators often spend their own money on books, supplies, equipment and other classroom needs. For 2026, eligible educators may have two ways to deduct qualifying unreimbursed expenses. One deduction is available whether or not they itemize, and a new deduction under the One Big Beautiful Bill Act (OBBBA) is available to itemizers.

The long-time deduction for nonitemizers and itemizers

Eligible educators can deduct some of their unreimbursed out-of-pocket classroom costs under the educator expense deduction. This is an “above-the-line” deduction, which means you don’t have to itemize to claim it and it reduces your adjusted gross income (AGI), which has an added benefit: AGI-based limits affect a variety of tax breaks, so lowering your AGI might help you maximize your tax breaks overall.

To be eligible, taxpayers must be kindergarten through grade 12 teachers, instructors, counselors, principals or aides. Also, they must work at least 900 hours a school year in a school that provides elementary or secondary education as determined under state law.

For 2026, up to $350 of qualified expenses paid during the year that weren’t reimbursed can be deducted. (The deduction limit is $700 for married couples filing a joint return if both spouses are eligible educators, but they can’t deduct more than $350 each.) The limit is annually indexed for inflation and was $300 for 2025. But it typically doesn’t go up every year.

Examples of qualified expenses include books, classroom supplies, computer equipment (including software), other materials used in the classroom, and professional development courses. For courses in health and physical education, the costs for supplies are qualified expenses only if related to athletics.

The new deduction for itemizers

The OBBBA made permanent the Tax Cut and Jobs Act’s (TCJA’s) suspension of miscellaneous itemized deductions subject to the 2% of AGI floor. This had included unreimbursed employee business expenses such as teachers’ out-of-pocket classroom expenses. The suspension had been in place since 2018.

But the OBBBA created a new miscellaneous itemized deduction for educator expenses. And this deduction isn’t subject to the 2% of AGI floor or a specific dollar limit. The new deduction is available for eligible expenses incurred after December 31, 2025.

This is in addition to the $350 above-the-line deduction. So educators eligible for both deductions can first claim the above-the-line deduction and reap the benefits of reducing their AGI and, if they have eligible expenses in excess of $350, claim the itemized deduction for those excess expenses. (Educators can’t claim both deductions for the same expenses.)

Who is eligible and what expenses qualify are a little broader for the itemized deduction than for the above-the-line deduction. For example, interscholastic sports administrators and coaches are also eligible. And, for courses in health and physical education, the supplies don’t have to be related to athletics.

Before deciding to claim the itemized deduction, you need to determine whether itemizing makes sense for you overall. Taxpayers can choose to itemize this and certain other deductions (such as mortgage interest, property tax and charitable donations) or to take the standard deduction based on their filing status.

Itemizing deductions saves tax only when the total is greater than the standard deduction. The OBBBA made the nearly doubled standard deductions under the TCJA permanent, so fewer taxpayers benefit from itemizing. For 2026, the standard deduction is $16,100 for singles and married taxpayers filing separately, $24,150 for heads of household and $32,200 for married couples filing jointly.

Keeping good records

Do you expect to qualify for one or both of these deductions? Be sure to track your qualifying expenses carefully. Save your receipts to document the date and amount of each purchase, and note the purpose. Good records are especially important now that there are two educator deductions with differing rules. Contact us to discuss which educator expenses you can deduct and how the deductions may affect your 2026 taxes and planning strategies.

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