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Ready Your Books for Tax Season
One of the most common bookkeeping mistakes business owners make is mixing business and personal finances. Addressing this issue before year end can simplify tax preparation, improve the accuracy of your financial records and help reduce the risk of IRS questions.
Business expenses generally must be “ordinary and necessary” to qualify for a tax deduction. If personal purchases are recorded as business expenses, you could overstate deductions. On the other hand, if legitimate business expenses are paid with personal funds but never recorded, you could miss valuable deductions.
Mixing business and personal transactions also can distort your financial statements, making it harder to measure profitability, manage cash flow and make informed business decisions. For corporations and limited liability companies, maintaining separate finances helps reinforce the legal distinction between the business and its owners. If you need guidance, contact the office.
Could Accessibility Upgrades Lower Your Tax Bill?
Improving accessibility at your business may come with a valuable tax break: Eligible small businesses can claim the Disabled Access Credit for certain costs related to improving accessibility for individuals with disabilities. A business may qualify if, in the prior tax year, it had gross receipts of $1 million or less or no more than 30 full-time employees.
The credit equals 50% of eligible expenses above $250 but not above $10,250. Examples of potentially eligible costs include providing interpreters for people with hearing impairments, providing readers for people with visual impairments, and acquiring or modifying equipment or devices. Contact the office if you need guidance on the credit.
Lending to Family or Friends? Know the Tax Rules
Are long-term care (LTC) insurance premiums tax-deductible? It depends. Qualified LTC policies are considered health insurance under federal income tax rules. So if you buy a policy, your premiums are treated as medical expenses for itemized deduction purposes.
But your total eligible medical expenses for the year must meet the 7.5% of adjusted gross income threshold before you can start deducting LTC premiums. And there are age limits on how much you can deduct — for example, $500 for individuals age 40 and under and $6,200 for those 70 and over. Other age groups’ 2026 maximums fall between these two. Contact the office for more information.
