LIFE IN BALANCE
Tax Planning Insights
Tax Moves Worth Knowing Before Year-End
Tax law keeps moving, and this month's update covers seven areas where the details matter: ERC refunds, the Section 199A deduction, S corp health insurance, home offices, business vehicles, passive losses, and one common furniture-rental myth. Here's what to watch for and where to act.
Received an ERC Refund in 2026? Here's How to Protect It
If your business is receiving an Employee Retention Credit (ERC) refund in 2026 for 2020 or 2021 wages, there's a planning opportunity worth acting on.
Processing delays mean many refunds are only arriving now, years after the related returns were filed and the tax years technically closed. Current IRS guidance says to report the refund as taxable income in the year you receive it. Following that guidance now keeps you out of unnecessary disputes.
It also doesn't have to be the final word. Some practitioners expect the IRS's position to eventually be challenged and possibly overturned in court. If that happens, businesses that paid tax on their ERC refunds could be owed money back.
The way to protect that possibility: report the income on your 2026 return as the IRS requires, then file a protective refund claim behind it. You stay compliant today and keep the door open if the law shifts in your favor.
What's New in the 2026 Section 199A Deduction
The Section 199A qualified business income deduction is now permanent, effective 2026, for owners of pass-through entities. C corporations don't qualify.
Sole proprietors, partners, S corp owners, and owners of other pass-through businesses can deduct up to 20% of qualified business income. Two changes make 2026 more favorable: the deduction no longer sunsets after 2025, and the income phase-in ranges have widened, extending at least a partial deduction to more taxpayers. The 2026 thresholds are $201,775 for single filers and heads of household, and $403,500 for married couples filing jointly.
Below those thresholds, the deduction is generally straightforward and most pass-through business types qualify.
Above them, planning matters more. W-2 wages, qualified business property, retirement contributions, and business structure all factor into the calculation, and certain service businesses (law, health, accounting, consulting, financial services) face added limits at higher income. There's also a new $400 minimum deduction for taxpayers with at least $1,000 of qualified business income from an active trade or business.
S Corporation Owners: Get Your 2026 Health Insurance Deduction Right
If you own more than 2% of an S corporation, the rules for deducting your health insurance are unchanged for 2026. Get the mechanics right and you can still deduct coverage for yourself, your spouse, your dependents, and children under 27.
The corporation must pay or reimburse the premiums directly, then report that amount as wages in box 1 of your W-2, but not in boxes 3 or 5. From there, you claim the self-employed health insurance deduction on your personal return.
Watch the compensation trap: your deduction can't exceed your box 5 Medicare wages, so a low salary can quietly erase part or all of the benefit even though the premiums show up on your W-2.
Family attribution rules add another layer. Relatives working in the business can be treated as shareholders even without owning stock directly, which changes how their coverage is reported and deducted. And reimbursing non-owner employees for individually purchased health insurance outside an approved arrangement can trigger significant IRS penalties.
Your Home Office Doesn't Need to Be Big to Qualify
A home office doesn't need to be a full room to qualify. Any clearly defined space used exclusively and regularly for business, even just a few square feet, can support the deduction.
The bigger win often isn't the home-expense deduction itself. It's what a qualifying home office does to your commute: it can make your home your principal place of business, turning trips to other work locations from non-deductible commuting into deductible business mileage.
To qualify, the space must be used exclusively and regularly for administrative or management work, bookkeeping, billing, scheduling, ordering supplies, or preparing reports, and you can't have another fixed location where you do substantial administrative work. This is available in 2026 to self-employed individuals, partners, and S corp owners with a proper reimbursement arrangement. W-2 employees generally still don't qualify.
If you run a business from home, even occasionally, it's worth checking whether a small dedicated space could produce a meaningful deduction.
Using a Classic or Antique Car in Your Business? It May Still Depreciate
A classic or antique car used in business can be depreciated the same as a newer vehicle, as long as it meets the business-use test: it must be subject to wear, decline, or exhaustion, and actually used in your trade or business. Courts have upheld depreciation on valuable antique assets used this way, even when the asset was appreciating in value.
Current law treats new and used vehicles the same for depreciation purposes, so a 1972 Pontiac GTO used in business can qualify right alongside a 2026 Lexus IS.
The luxury-auto depreciation limits still apply to passenger automobiles, so for a vehicle placed in service in 2026 and eligible for bonus depreciation, the first-year deduction is capped. You won't write off the full purchase price in year one.
The real appeal is economic: a classic car may carry higher repair and operating costs, but it can also hold or gain value in ways a new vehicle typically doesn't.
How to Unlock Suspended Passive Losses on Rental Real Estate
Passive losses on rental real estate that have been suspended for years aren't gone. With the right planning, they can be unlocked and applied against your taxes.
Selling your entire interest in a rental activity is the most common way to free suspended losses, and once released, they can offset other income for real tax savings. But not every sale qualifies: selling to a family member or to a corporation you or your family control generally won't release the losses, and giving the property away can permanently reduce their value.
For 2026, factor in the excess business loss limitation. Even a sale that frees a large amount of suspended losses may still be capped on how much you can deduct this year, with the rest carried forward.
Because the outcome depends on how properties are grouped, who the buyer is, and timing, this is a case for planning ahead rather than after the fact.
Myth: Renting Furniture to Your Corporation Saves on Taxes
Buying office furniture personally and renting it to your S or C corporation sounds like a tax strategy. It generally isn't one.
The corporation gets essentially the same depreciation deduction whether it buys the furniture directly or rents it from you, since both new and used business furniture can qualify for 100% bonus depreciation. Personal ownership just adds friction: extra tax reporting, more record-keeping, potential self-employment tax exposure on the rental income, and added complexity if you try to layer in a Section 179 election.
For most owners, the simpler and more tax-efficient move is to have the corporation buy the furniture directly, taking the deduction without the paperwork or exposure that comes with a personal rental arrangement.