The Retirement Plan Startup Credit (Form 8881) provides a tax credit for small businesses that establish a new qualified retirement plan (401(k), SEP-IRA, SIMPLE IRA, or defined benefit plan). Under SECURE 2.0, businesses with 50 or fewer employees can claim 100% of eligible startup costs up to $5,000/year for the first 3 years — a maximum of $15,000 in total credits.

Eligible startup costs include: plan setup and administration fees, employee education and enrollment costs, and costs to set up payroll integration. The credit covers 100% of these costs for businesses with 50 or fewer employees, and 50% for businesses with 51-100 employees. Businesses with more than 100 employees do not qualify.

Yes — SECURE 2.0 added a $500/year credit for plans that include automatic enrollment features. This credit is available for the first 3 years of the plan and stacks on top of the startup cost credit. A plan with automatic enrollment can generate up to $16,500 in total credits over 3 years ($15,000 startup + $1,500 auto-enrollment).

No — the startup credit is only available for new plans. If you already have a retirement plan and want to add features (like automatic enrollment), you may qualify for the auto-enrollment credit but not the startup cost credit. The plan must be established for the first time to qualify for the startup credit.

The best plan depends on your goals: a Safe Harbor 401(k) avoids discrimination testing and allows maximum contributions for owner-employees; a SIMPLE IRA is easier to administer but has lower contribution limits; a SEP-IRA is easy to set up but requires proportional contributions for all eligible employees. Uncle Kam can model the contribution and tax savings for each option based on your payroll.

The personal Clean Vehicle Credit (§30D) for new EVs was repealed under the OBBBA for vehicles purchased after December 31, 2025. However, the Commercial Clean Vehicle Credit (§45W, Form 8936) for business-use EVs remains available at up to $7,500 for vehicles under 14,000 lbs. If you are buying an EV for business use, the commercial credit still applies. Book a call to confirm eligibility for your specific vehicle and use case.

To qualify for the full $7,500 credit, the vehicle must be a new plug-in electric vehicle with a battery capacity of at least 7 kWh, have a final assembly in North America, meet critical mineral and battery component sourcing requirements, and fall within MSRP limits ($55,000 for cars, $80,000 for SUVs and trucks). The IRS maintains a current list of qualifying vehicles at fueleconomy.gov.

Yes — starting in 2024, you can transfer the Clean Vehicle Credit to the dealer at the point of sale, effectively receiving the credit as a discount on the purchase price. This is beneficial if your tax liability is less than $7,500 or if you want the benefit immediately rather than waiting until you file your return. The dealer then claims the credit from the IRS.

Businesses can claim the Commercial Clean Vehicle Credit (Form 8936) for EVs used in business, which provides up to $7,500 for vehicles under 14,000 lbs GVWR and up to $40,000 for larger commercial vehicles. Unlike the personal credit, the commercial credit has no income limits and no MSRP caps. Businesses can also combine the credit with Section 179 expensing and bonus depreciation.

The personal Clean Vehicle Credit is non-refundable — it can reduce your tax liability to zero but cannot generate a refund. However, if you transfer the credit to the dealer at purchase, you receive the full benefit regardless of your tax liability. The Commercial Clean Vehicle Credit for businesses is also non-refundable but can be carried back 1 year or forward 20 years.

The ERC was a refundable payroll tax credit for businesses that retained employees during COVID-19 disruptions in 2020 and 2021. The credit was worth up to $5,000 per employee in 2020 and $21,000 per employee in 2021. The ERC program ended in September 2021, but businesses can still claim credits for 2020 and 2021 by filing amended payroll tax returns (Form 941-X). The statute of limitations for 2020 claims closed April 15, 2024; 2021 claims can still be filed through April 15, 2025.

Yes — after the Consolidated Appropriations Act of 2021, businesses can claim both PPP loan forgiveness and the ERC. However, you cannot use the same wages for both benefits. PPP forgiveness is based on payroll costs; the ERC is based on qualified wages not used for PPP forgiveness. Proper allocation of wages between the two programs is critical to maximizing both benefits.

There are two qualification tests: (1) the revenue decline test — a significant decline in gross receipts compared to the same quarter in 2019 (50% decline for 2020; 20% decline for 2021); or (2) the full or partial suspension test — a government order that fully or partially suspended your business operations due to COVID-19 (capacity restrictions, supply chain disruptions, etc.). You only need to meet one test per quarter.

For 2020: 50% of qualified wages up to $10,000 per employee for the year = maximum $5,000 per employee. For 2021 (Q1-Q3): 70% of qualified wages up to $10,000 per employee per quarter = maximum $21,000 per employee for the year. A business with 10 employees could potentially claim $210,000 in 2021 ERC credits alone.

In September 2023, the IRS announced a moratorium on processing new ERC claims due to concerns about fraudulent claims promoted by aggressive ERC mills. The IRS has since resumed processing but is conducting enhanced scrutiny of all claims. Legitimate businesses with valid ERC claims should work with a qualified tax professional to document their eligibility and file properly. The IRS has also offered a Voluntary Disclosure Program for businesses that received improper ERC payments.

The WOTC is a federal tax credit of $2,400–$9,600 per qualifying new hire for employers who hire individuals from certain target groups, including veterans, long-term unemployment recipients, SNAP recipients, ex-felons, and vocational rehabilitation referrals. The credit is a dollar-for-dollar reduction in federal income taxes.

To claim WOTC, you must submit IRS Form 8850 (Pre-Screening Notice) to your state workforce agency within 28 days of the employee's start date. The state agency certifies eligibility. You then claim the credit on IRS Form 5884 with your tax return.

Qualifying target groups include: veterans (especially disabled veterans), long-term TANF recipients, SNAP (food stamp) recipients, designated community residents, vocational rehabilitation referrals, ex-felons, SSI recipients, long-term unemployment recipients (27+ weeks), and summer youth employees in empowerment zones.

The standard WOTC credit is 40% of first-year wages up to $6,000 ($2,400 maximum). For long-term TANF recipients, the credit extends to the second year (total up to $9,000). For disabled veterans, the credit can reach $9,600. The employee must work at least 400 hours to qualify for the full credit.

Yes. There is no minimum size requirement — any employer that hires qualifying individuals and files the required forms is eligible. The WOTC is one of the most underutilized credits for small businesses, particularly in industries with high turnover like restaurants, retail, and hospitality.

The Residential Clean Energy Credit (formerly the Investment Tax Credit) allows homeowners to claim 30% of the cost of a solar panel system as a federal tax credit. The 30% rate applies to systems installed through 2032, stepping down to 26% in 2033 and 22% in 2034. The credit covers the cost of panels, inverters, mounting hardware, wiring, and installation labor.

No — the Residential Clean Energy Credit is non-refundable, meaning it can reduce your tax liability to zero but cannot generate a refund. However, any unused credit carries forward to future tax years indefinitely until fully used. If your tax liability is less than the credit amount, you will use the remainder in subsequent years.

The Residential Clean Energy Credit applies to your primary or secondary residence. For rental properties, the Investment Tax Credit (ITC) applies instead, which also provides a 30% credit but is claimed as a business credit. Rental property solar installations can also be depreciated, generating additional deductions beyond the credit.

In addition to solar, the Residential Clean Energy Credit covers wind turbines, geothermal heat pumps, battery storage systems (10 kWh minimum), and fuel cells. The Energy Efficient Home Improvement Credit (25C) provides separate credits for insulation, windows, doors, heat pumps, and electric panel upgrades — up to $3,200/year.

Yes — standalone battery storage systems with a capacity of at least 10 kWh qualify for the 30% Residential Clean Energy Credit starting in 2023, even if not paired with solar panels. This is a significant expansion from prior law, which required battery storage to be charged by solar to qualify.

The Energy Efficient Home Improvement Credit (Section 25C) provides a 30% credit for qualifying energy efficiency improvements to your primary residence. The annual credit limit is $3,200 total, with sub-limits: $2,000 for heat pumps and biomass stoves, $1,200 for insulation, windows, doors, and energy audits (with further per-item limits). The credit resets each year through 2032.

Qualifying improvements include: heat pumps (air-source and geothermal), heat pump water heaters, biomass stoves and boilers, exterior windows and skylights (must meet Energy Star Most Efficient criteria), exterior doors (must meet Energy Star requirements), insulation and air sealing materials, and home energy audits. Central air conditioners and gas furnaces may also qualify if they meet efficiency thresholds.

Yes — unlike the old Nonbusiness Energy Property Credit which had a lifetime limit, the new Section 25C credit has an annual limit that resets each year. You can claim up to $3,200 in credits per year through 2032, allowing you to spread energy upgrades across multiple years and maximize the total credits claimed.

No — the Section 25C credit applies only to your primary residence. Rental properties do not qualify for this credit. However, energy efficiency improvements to rental properties can be depreciated as capital improvements, and in some cases may qualify for bonus depreciation or Section 179 expensing if the property is used in a trade or business.

Yes — the Section 25C (Energy Efficient Home Improvement Credit) and the Section 25D (Residential Clean Energy Credit for solar) are separate credits with separate limits. You can claim both in the same year. For example, installing solar ($10,500 credit) and a heat pump ($2,000 credit) in the same year would generate $12,500 in total federal tax credits.

A net operating loss occurs when your allowable tax deductions exceed your taxable income for the year. The excess loss can be carried forward to future tax years to offset up to 80% of taxable income in each future year. NOLs generated after 2017 can be carried forward indefinitely.

Under current law, most NOLs generated after 2017 cannot be carried back — they can only be carried forward. However, farming losses and certain insurance company losses are exceptions. During COVID (2020-2021), special 5-year carryback rules applied.

NOL carryforwards can offset up to 80% of taxable income in any given year. This means if you have $500,000 in taxable income, an NOL can reduce it to no less than $100,000 in that year. The remaining NOL continues to carry forward.

Yes — and this is a legitimate tax planning strategy. By timing large deductions (bonus depreciation, Section 179, cost segregation) in a high-income year, a business can intentionally generate an NOL that offsets income in future years when the business is more profitable.

NOL carryforwards generally do not transfer to the buyer in an asset sale. In a stock sale, the NOLs remain with the corporation but are subject to severe limitations under IRC §382 if there is a change in ownership of more than 50%. Proper planning before a sale is essential to preserve the value of NOL carryforwards.

As a sole proprietor, you pay 15.3% self-employment tax on all net profits. As an S-Corp owner, you pay yourself a reasonable salary (subject to payroll taxes) and take the remaining profit as a distribution — which is not subject to self-employment tax. On $150,000 in profit, this can save $10,000–$20,000/year.

The IRS requires S-Corp owner-employees to pay themselves a "reasonable compensation" — roughly what you would pay a third party to do your job. The IRS looks at industry benchmarks, the services you provide, and the profitability of the business. Underpaying yourself is a major audit trigger.

The S-Corp election typically makes financial sense when your net self-employment income exceeds $50,000–$60,000/year. Below that threshold, the administrative costs (payroll processing, additional tax filings) often exceed the SE tax savings.

Yes. An LLC can elect to be taxed as an S-Corp by filing IRS Form 2553. The LLC retains its legal structure while being treated as an S-Corp for tax purposes. This is one of the most common and effective tax elections for small business owners.

S-Corps require running payroll, filing quarterly payroll tax returns, and paying additional accounting fees. They also have restrictions: no more than 100 shareholders, all shareholders must be US citizens or residents, and only one class of stock is allowed. For most small businesses, the tax savings far outweigh these administrative requirements.

An HRA is an employer-funded account that reimburses employees for qualifying medical expenses and health insurance premiums tax-free. The employer deducts the reimbursements as a business expense; the employee receives them tax-free. There are several types: the Qualified Small Employer HRA (QSEHRA) for businesses with fewer than 50 employees, the Individual Coverage HRA (ICHRA) with no size limit, and the traditional group health plan HRA.

A QSEHRA (Qualified Small Employer HRA) is available to businesses with fewer than 50 full-time employees that do not offer a group health plan. Contribution limits apply (approximately $6,350 for self-only coverage, $12,800 for family coverage in 2026). An ICHRA (Individual Coverage HRA) has no size limit and no contribution limits, but employees must be enrolled in individual health insurance (not a group plan) to participate.

S-Corp owners who own more than 2% of the company are treated as self-employed for health insurance purposes and cannot participate in a QSEHRA on a tax-free basis. However, they can participate in an ICHRA if the S-Corp includes the HRA reimbursements in their W-2 wages, and then deduct the premiums as a self-employed health insurance deduction on Schedule 1. The net result is a deduction for the full cost of health insurance.

Yes — HRAs can reimburse any qualifying medical expense under IRS Publication 502, which includes dental care, vision care, prescription drugs, mental health services, and many other out-of-pocket medical costs. The specific expenses covered depend on the HRA plan document, which the employer controls.

An HSA (Health Savings Account) is owned by the employee, funded by both the employer and employee, and requires enrollment in a High-Deductible Health Plan (HDHP). An HRA is funded solely by the employer, does not require an HDHP, and is not portable (funds generally do not follow the employee if they leave). HSAs offer a triple tax advantage (pre-tax contributions, tax-free growth, tax-free withdrawals for medical expenses); HRAs offer a double tax advantage (employer deduction, employee tax-free reimbursement).

A Health Savings Account (HSA) offers three tax benefits: (1) contributions are tax-deductible, (2) the balance grows tax-free, and (3) withdrawals for qualified medical expenses are tax-free. No other account offers all three benefits simultaneously. After age 65, HSA funds can be withdrawn for any purpose (taxed as ordinary income, like a Traditional IRA).

The 2026 HSA contribution limits are $4,400 for self-only coverage and $8,750 for family coverage. Individuals age 55 or older can contribute an additional $1,000 catch-up contribution. The OBBBA also expanded HSA eligibility to include bronze and catastrophic health plans starting in 2026.

In 2026, an HDHP must have a minimum deductible of approximately $1,700 (self-only) or $3,400 (family) and maximum out-of-pocket limits of approximately $8,500 (self-only) or $17,000 (family). The OBBBA also expanded eligibility to bronze and catastrophic ACA plans starting in 2026 — check with your plan administrator.

Yes — and this is the most powerful HSA strategy. Instead of leaving HSA funds in a low-interest cash account, invest them in index funds or ETFs for tax-free growth. Many HSA providers (Fidelity, Lively, HSA Bank) offer investment options. Paying current medical expenses out of pocket and letting the HSA grow invested is the optimal long-term approach.

Before age 65, non-medical HSA withdrawals are subject to income tax plus a 20% penalty. After age 65, non-medical withdrawals are taxed as ordinary income (like a Traditional IRA) with no penalty. This makes the HSA a powerful retirement account that also covers medical expenses tax-free.

Yes — if your children perform genuine, documented work for your business, you can pay them a reasonable wage and deduct it as a business expense. The work must be real (not fabricated), the compensation must be reasonable for the work performed, and you must follow proper payroll procedures. Children as young as 7 or 8 can perform legitimate tasks like filing, cleaning, modeling for product photos, or helping with social media.

It depends on the business structure. For a sole proprietorship or single-member LLC (disregarded entity), wages paid to children under 18 are exempt from Social Security and Medicare taxes (FICA) and federal unemployment tax (FUTA). For an S-Corp or C-Corp, wages paid to children are subject to FICA taxes regardless of age. This FICA exemption is a significant advantage of operating as a sole proprietorship or partnership when employing children.

In 2026, the standard deduction for a single filer is $15,750. If your child's total earned income is below $15,750, they owe zero federal income tax. Wages from your business count as earned income. Paying each child up to $15,750/year maximizes the deduction for your business while generating zero tax for the child. Income above $15,750 is taxed at the child's rate (typically 10-12%), which is still much lower than your rate.

Yes — children can contribute to a Roth IRA as long as they have earned income. The contribution limit is the lesser of $7,500 (2026) or their total earned income. A child who earns $7,500 working in your business can contribute the full $7,500 to a Roth IRA, where it grows completely tax-free for decades. Starting Roth IRA contributions at age 14 instead of 25 can result in hundreds of thousands of dollars more at retirement due to compounding.

You need: (1) a written job description with specific duties, (2) time records or work logs showing hours worked and tasks completed, (3) payment records (checks or bank transfers — never cash), (4) W-2 issuance at year-end, and (5) evidence that the compensation is reasonable for the work performed. The IRS scrutinizes family employment arrangements, so documentation is critical. Keep records as if you were hiring an unrelated employee.

A Solo 401(k) is a retirement plan for self-employed individuals with no full-time employees other than a spouse. It allows contributions in two capacities: as an employee (up to $24,500 in 2026, plus $7,500 catch-up if 50+) and as an employer (up to 25% of net self-employment income), with a combined limit of approximately $70,000 in 2026.

The total Solo 401(k) contribution limit is approximately $70,000 in 2026 ($77,500 if age 50 or older). This includes up to $24,500 in employee deferrals plus employer profit-sharing contributions of up to 25% of net self-employment income (after the SE tax deduction).

A Solo 401(k) must be established by December 31 of the tax year for which you want to make contributions. Employee deferrals must also be made by December 31. Employer profit-sharing contributions can be made up to the tax filing deadline (including extensions).

Yes, but the employee deferral limit ($24,500 in 2026) applies across all 401(k) plans combined. If you contribute $24,500 to your employer's 401(k), you cannot make additional employee deferrals to your Solo 401(k). However, you can still make employer profit-sharing contributions to the Solo 401(k).

A Solo 401(k) generally allows higher contributions for most self-employed individuals because it includes both employee deferrals and employer contributions. A SEP-IRA is limited to 25% of net self-employment income (no employee deferral component). For someone earning $100,000 net, a Solo 401(k) allows $46,000 vs. $18,587 for a SEP-IRA.

Section 179 allows businesses to immediately deduct the full cost of qualifying equipment, vehicles, and software in the year of purchase instead of depreciating it over multiple years. The 2026 deduction limit is $1,250,000, phasing out dollar-for-dollar above $3,130,000 in total equipment purchases.

Qualifying property includes machinery, equipment, computers, office furniture, software, and certain vehicles. The property must be used more than 50% for business purposes. Improvements to commercial buildings (HVAC, roofing, security systems) also qualify under Section 179.

Yes, but passenger vehicles have annual deduction limits (approximately $13,200 in 2026 for cars). However, heavy SUVs and trucks with a GVWR over 6,000 lbs have a much higher Section 179 limit ($31,300 in 2026), and with 100% bonus depreciation restored under the OBBBA, heavy vehicles over 6,000 lbs can be fully expensed with no cap.

Section 179 is limited to your business's taxable income (you cannot create a loss with it), while bonus depreciation can create or increase a net operating loss. Section 179 gives you more control over which assets to expense, while bonus depreciation applies automatically to all qualifying assets unless you elect out.

Section 179 is limited to your business's net taxable income — it cannot create a loss. Any unused Section 179 deduction carries forward to future years. If you need to create a loss, bonus depreciation is the better tool since it has no income limitation.