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Accounting, payroll, compliance, consulting and taxes. Federal & State as well as Business and Personal

10/22/2026

📣 FREEMAN SOLUTIONS TAX UPDATE: KNOW THE RULES BEFORE COUNTING ON THE TAX BREAK!

You’ve probably heard “no tax on tips,” “no tax on overtime,” and “tax relief for seniors.” These provisions have eligibility requirements, income limits, and documentation rules. They do not automatically make all of that income tax-free.

👵 ENHANCED SENIOR DEDUCTION

For tax years 2025–2028, eligible taxpayers age 65 or older may deduct up to $6,000 per person, or $12,000 for a married couple when both spouses qualify.

✅ This is a deduction that reduces taxable income—not a $6,000 tax credit or guaranteed refund.
✅ The deduction begins phasing out when modified adjusted gross income exceeds $75,000, or $150,000 for married couples filing jointly.
✅ Married taxpayers must file jointly to qualify.
✅ Eligible taxpayers can claim it whether they itemize or take the standard deduction.

Simply turning 65 does NOT guarantee the full deduction, and this provision does not automatically make Social Security benefits tax-free.

💵 TIPS: WHAT ACTUALLY QUALIFIES?

Eligible workers may deduct up to $25,000 per return in qualified tips for tax years 2025–2028.

• Your work must fall within an IRS qualifying tipped occupation.
• Qualifying tips generally include voluntary cash, credit card, and electronic tips, plus eligible employee tip-sharing amounts.
• Mandatory service charges and automatic gratuities required by the business do not qualify.
• Regular wages and ordinary business service fees are not deductible as tips.
• The deduction begins phasing out above $150,000 in modified adjusted gross income, or $300,000 for joint filers.

⚠️ SELF-EMPLOYED? YOUR REPORTING MATTERS.

Your qualified tips must be included on Form 1099-K, 1099-NEC, or 1099-MISC. If you do not receive a 1099-K, another qualifying 1099 may satisfy the requirement. Without qualifying information reporting, you may not qualify for the tip deduction—even if you kept your own tip log.

Your deduction also cannot exceed the eligible net income from the business where you earned those tips. All business income must still be reported, whether you receive a 1099 or not.

⏰ OVERTIME: ONLY THE QUALIFYING PREMIUM PORTION

For ordinary time-and-a-half pay, only the extra “half” required under the federal Fair Labor Standards Act potentially qualifies.

Example: Your regular rate is $20 per hour, and your overtime rate is $30. The potentially deductible portion is $10 per qualifying overtime hour—not the entire $30.

If you received $20,000 in total time-and-a-half overtime wages, the potentially qualifying premium would generally be about $6,667, assuming all those hours meet the federal requirements.

• Maximum annual deduction: $12,500, or $25,000 for joint filers.
• Phaseout begins above $150,000 in modified adjusted gross income, or $300,000 for joint filers.
• Extra pay required only by state law, an employer policy, or a contract does not automatically qualify.
• These deductions do not eliminate applicable Social Security, Medicare, or self-employment taxes.

📌 A deduction reduces taxable income. Your actual tax savings depend on your individual return.

At Freeman Solutions, we review your income, eligibility, and supporting records to determine what you can properly claim. Keep your tip records, payroll statements, W-2s, and 1099s so we can calculate your deductions accurately.

10/22/2026

🇺🇸 2026 CHILD TAX CREDIT: WHAT FAMILIES SHOULD KNOW

Raising children comes with plenty of expenses. The Child Tax Credit may help reduce your federal income tax bill!

💰 HOW MUCH IS THE CREDIT?

✅ Up to $2,200 per qualifying child for tax year 2026.
✅ Up to $1,700 of that amount may be refundable through the Additional Child Tax Credit—even if you owe no federal income tax.
✅ Your actual credit depends on your income, tax liability, and eligibility. The maximum refund is not automatic.

👨‍👩‍👧 WHO MAY QUALIFY?

Your child generally must:

• Be under age 17 on December 31, 2026.
• Meet the qualifying relationship requirements.
• Live with you for more than half the year, with certain exceptions.
• Be claimed as your dependent.
• Not provide more than half of their own support.
• Meet citizenship or residency requirements.

Valid employment-authorized Social Security numbers are required for the qualifying child and the taxpayer—or at least one spouse if filing jointly.

📊 INCOME LIMITS

The credit begins to phase out when modified adjusted gross income exceeds:

• $400,000 for married couples filing jointly.
• $200,000 for all other filing statuses.

📅 PLAN FOR FILING

Claim the 2026 credit on your 2026 federal income tax return, generally filed in 2027. The refundable portion depends on earned income and other requirements.

💼 Freeman Solutions can help you review your eligibility and claim the tax benefits available to your family.

10/19/2026

🏘️ REAL ESTATE PROFESSIONAL STATUS: DO YOU QUALIFY?
2026 Tax Planning | Freeman Solutions

Owning rental property or having a real estate license does not automatically make you a real estate professional for federal tax purposes. You must meet BOTH annual time tests:

⏱️ 1. MORE THAN 750 HOURS

You must perform more than 750 hours of services during the year in qualifying real property trades or businesses in which you materially participate.

Qualifying businesses can include property management, rentals and leasing, development, construction, acquisition, conversion, and real estate brokerage.

📊 2. MORE THAN HALF YOUR WORK TIME

More than 50% of your total personal service time in ALL trades or businesses must be spent in qualifying real estate businesses in which you materially participate.

Your other employment and business work count when calculating your total work time.

🧮 EXAMPLE

• Qualifying real estate work: 1,000 hours
• Other employment or business work: 800 hours
• Total work time: 1,800 hours

1,000 ÷ 1,800 = 55.6%

✅ More than 750 qualifying hours
✅ More than 50% of total work time

💡 WHY IT MATTERS

Qualifying may allow rental losses to be treated as nonpassive and potentially offset wages or other business income, subject to applicable deduction limits.

⚠️ THERE’S ANOTHER IMPORTANT STEP

You must also materially participate in the rental activity. Each rental is generally evaluated separately unless you make a valid election to combine your rental real estate interests.

📝 KEEP THESE DETAILS IN MIND

• Exactly 750 hours or exactly 50% does not satisfy the tests.
• On a joint return, one spouse must independently meet both time tests. Spouses cannot combine their hours to qualify.
• Employee real estate work generally counts toward qualifying hours only if you own more than 5% of the employer.
• Keep detailed records showing dates, tasks, properties, and time spent.

📌 Freeman Solutions can help you review your participation, documentation, and potential tax benefits before you claim this status.

10/19/2026

🏡 SELLING YOUR HOME? YOU MAY QUALIFY FOR A VALUABLE TAX BREAK!

Eligible homeowners may exclude up to $250,000 of gain from federal income tax—or $500,000 for qualifying married couples filing jointly.

💡 The exclusion applies to your gain, not the total selling price or the cash you receive at closing.

✅ WHO GENERALLY QUALIFIES?

During the 5 years before the sale, you generally must have:

• Owned the home for at least 2 years.
• Lived in it as your main home for at least 2 years.

Those years do not have to be consecutive. Generally, you also cannot have claimed the exclusion on another home sale within the previous 2 years.

For the full $500,000 joint exclusion, at least one spouse must meet the ownership test, both must meet the residency test, and neither can violate the 2-year exclusion rule.

💰 HOW IS YOUR GAIN CALCULATED?

Selling price − eligible selling expenses − adjusted tax basis = gain.

Your adjusted basis generally starts with your purchase price and includes qualifying improvements and other adjustments.

🧮 SIMPLE EXAMPLE

A qualifying married couple sells their home for $950,000. After selling expenses and adjusted basis, their gain is $550,000.

With the full $500,000 exclusion, $50,000 remains potentially taxable—not the entire sale price.

📁 KEEP YOUR RECORDS!

A new roof, room addition, and other qualifying improvements may increase your basis and reduce your gain. Routine maintenance generally does not.

⚠️ SPECIAL SITUATIONS MATTER

Rental or business use, depreciation, and periods when the property was not your main home can affect the tax calculation. Certain work moves, health reasons, or unforeseen circumstances may qualify you for a partial exclusion.

📌 Planning to sell? Contact Freeman Solutions to review your eligibility, records, and potential tax impact before closing.

: IRS Publication 523, Selling Your Home.

10/18/2026

🇺🇸 S-CORP OWNERS: ARE YOU PAYING YOURSELF PROPERLY IN 2026?

If you work in your S corporation and take money from the business, reasonable compensation needs to be part of your payroll planning.

💼 What is reasonable compensation?

It’s pay that reflects your work—including your responsibilities, hours, experience, and what comparable businesses pay for similar services.

There is no universal salary amount or automatic “60/40 rule” that works for every owner.

✅ Build a process you can support:

• Research comparable wages.
• Document your duties and time.
• Process wages through payroll.
• Keep wages and distributions recorded separately.
• Review your compensation as your business changes.

⚠️ Why does it matter?

Paying little or no salary while taking distributions can lead to those payments being reclassified as wages—with additional employment taxes, penalties, and interest.

📌 Taking distributions does not eliminate the requirement to pay reasonable compensation for your services.

At Freeman Solutions, we help business owners review owner compensation and establish consistent payroll practices. Reach out before year-end to review your 2026 payroll.

10/13/2026

🇺🇸 COMMON TAX FILING MISTAKES THAT CAN COST YOU

Small mistakes on your tax return can mean missed savings, refund delays, or an unexpected tax bill. At Freeman Solutions, we help taxpayers understand the details that matter.

🔎 Here are common mistakes to avoid:

❌ Overlooking deductions and credits
Missing tax benefits you qualify for could mean paying more than necessary.

❌ Choosing the wrong filing status
Your filing status affects your standard deduction, tax rates, and eligibility for certain credits.

❌ Leaving out taxable income
Wages, side jobs, interest, and other taxable income must be reported—even when you don’t receive a tax form.

❌ Claiming dependents incorrectly
Dependent eligibility follows specific tax rules. Incorrect or duplicate claims can delay processing and affect tax benefits.

❌ Missing filing or payment deadlines
Late filing and late payment can result in penalties when tax is owed, plus interest on unpaid taxes. An extension generally gives you more time to file—not more time to pay.

❌ Skipping the final review
Incorrect Social Security numbers, missing signatures, or wrong bank account information can cause avoidable problems.

✅ Set yourself up for a smoother tax season:

• Gather all tax documents before filing.
• Keep organized records of income and deductible expenses.
• Tell your tax professional about marriage, divorce, new dependents, or other life changes.
• Review your completed return before signing.
• Plan ahead for filing deadlines and any balance due.

💡 A refund isn’t the only measure of a successful tax return. Accuracy, claiming eligible tax benefits, and planning ahead all matter.

Freeman Solutions — Helping you understand your taxes and make informed decisions.

10/13/2026

🔎 BUSINESS TAXES: ARE YOUR RECORDS READY FOR IRS REVIEW?

An IRS audit doesn’t automatically mean you did something wrong. But incomplete records and reporting errors can create problems.

⚠️ Common areas that deserve extra attention:

• Unreported income: Report all business income—even if you don’t receive a 1099.

• Unsupported deductions: Travel, meals, vehicle expenses, and other deductions need records showing their business purpose.

• Repeated losses: Keep documentation showing you operate with the intent to make a profit.

• Cash sales: Cash income is taxable, too. Maintain complete sales and deposit records.

• Business-use claims: Vehicle deductions need mileage records. Home office deductions generally require regular and exclusive business use, with limited exceptions.

• Worker classification: Calling someone a contractor doesn’t automatically make them one.

• Foreign income and accounts: Additional reporting requirements may apply.

• Inconsistent records: Reconcile your accounting records, bank activity, and tax return. Document loans, transfers, and owner contributions so they aren’t confused with sales.

📬 Audits may be conducted by mail, at an IRS office, or through a field examination.

✅ Keep receipts and supporting records.
✅ Separate business and personal finances.
✅ Claim the deductions you qualify for.
✅ Address reporting questions before filing.

Good records don’t guarantee you won’t be audited—but they help you support your return.

At Freeman Solutions, we help business owners understand their tax responsibilities and prepare accurate returns.

10/12/2026

🏠 RENTAL INCOME & TAXES: WHAT PROPERTY OWNERS SHOULD KNOW

Collecting rent? Understanding how rental income is taxed can help you plan ahead and avoid surprises.

💰 You generally pay tax on your rental profit.

Rental income minus allowable expenses and depreciation equals your net rental income.

Example:

• Rental income: $12,000
• Allowable expenses, including depreciation: $4,000-example deduction amount
• Net rental income: $8,000

That $8,000 is income—not the amount of tax you owe!

📊 There is no single “rental income tax rate.”

For individual owners, net rental income is generally taxed at ordinary federal income tax rates. Your tax depends on your total taxable income, filing status, and other circumstances. State taxes may also apply.

Some taxpayers may also owe the additional 3.8% Net Investment Income Tax, depending on income and the rental activity.

🧾 Common deductible rental expenses include:

✅ Mortgage interest
✅ Property taxes
✅ Insurance
✅ Repairs and maintenance
✅ Property management fees
✅ Advertising
✅ Eligible professional fees
✅ Depreciation

💡 Your entire mortgage payment is not deductible. Principal payments do not qualify as a rental expense. Improvements generally must be capitalized and recovered over time rather than deducted immediately. Land cannot be depreciated.

📋 Reporting and recordkeeping matter.

Individual owners generally report rental real estate income and expenses on Schedule E, although different rules can apply when substantial services are provided to guests.

Keep records of rent received, receipts, repairs, improvements, and depreciation. Rental income generally must be reported even if you do not receive a Form 1099. Rental losses may be subject to limits.

📅 Plan for taxes throughout the year.

You may need estimated tax payments if you expect to owe $1,000 or more after withholding and credits, subject to applicable exceptions and safe-harbor rules. Increasing paycheck withholding may also help cover taxes on rental income.

🤝 Freeman Solutions helps property owners understand their reporting requirements, identify eligible deductions, and plan for their tax obligations.

Own a rental or thinking about purchasing one? Let’s discuss how it fits into your tax picture.

10/11/2026

💼 S-CORP SALARY & DISTRIBUTIONS: WHAT BUSINESS OWNERS SHOULD KNOW IN 2026

An S-Corporation may help eligible business owners reduce employment taxes—but paying yourself correctly is essential.

✅ SALARY: PAY YOURSELF FOR YOUR WORK

Owners who work in their S-Corp must receive reasonable compensation for their services before taking shareholder distributions.

Your salary should reflect your responsibilities, experience, hours worked, and what comparable businesses pay for similar work.

⚠️ There is no universal salary percentage that automatically satisfies IRS requirements.

✅ DISTRIBUTIONS: UNDERSTAND THE DIFFERENCE

Properly classified shareholder distributions generally are not subject to Social Security and Medicare taxes.

However, the business’s profit generally passes through to your personal tax return, whether you distribute the money or leave it in the business.

Avoiding payroll tax does not mean avoiding income tax!

💡 A SIMPLE EXAMPLE

Assume your S-Corp earns $120,000 before your salary and employer payroll taxes, and a $72,000 salary is reasonable for your work:

• Owner’s gross salary: $72,000
• Employer Social Security and Medicare taxes: $5,508
• Remaining profit: $42,492 before other payroll taxes, expenses, and adjustments

The remaining profit may be available for distributions, depending on cash flow, shareholder stock basis, and other requirements.

The $72,000 salary is an illustration—not a recommendation for every owner.

📌 2026 PAYROLL TAX FACTS

• Social Security: 6.2% each for the employee and employer, on wages up to $184,500.
• Medicare: 1.45% each for the employee and employer, with no wage cap.
• Additional Medicare Tax may apply to higher-income employees.

🔎 LOOK AT THE FULL PICTURE

Potential employment-tax savings should be weighed against payroll processing, additional tax returns, accounting costs, state taxes, and the effect on other tax benefits.

An S-Corp election does not automatically lower your overall tax bill.

At Freeman Solutions, we help business owners understand their tax obligations and evaluate strategies that fit their actual business.

📩 Contact Freeman Solutions to discuss reasonable compensation and whether S-Corp taxation makes sense for you.

10/10/2026

💼 PASS-THROUGH TAXATION: WHAT BUSINESS OWNERS SHOULD KNOW

Your business earns a profit—but who pays the income tax?

With pass-through taxation, business profits generally flow to the owners’ tax returns instead of being subject to federal income tax at the business level.

✅ Common examples include:

• Sole proprietorships
• Partnerships
• S corporations
• LLCs taxed as sole proprietorships, partnerships, or S corporations

📝 HOW IS IT REPORTED?

Sole proprietors generally report business income and expenses on Schedule C. Partnerships and S corporations generally file separate business returns and provide owners with Schedule K-1.

💰 SIMPLE EXAMPLE

A partnership earns $100,000 in profit. If two partners share that profit equally, each generally reports $50,000 on their own return.

🚨 KEEP THESE POINTS IN MIND

• You may owe tax on your share of profits even if you leave the money in the business.
• Pass-through taxation doesn’t eliminate self-employment taxes, payroll taxes, or applicable state and local taxes.
• An LLC’s tax treatment depends on its classification and elections.
• Your actual tax bill depends on your full tax situation.

💡 Business profit and owner withdrawals are different. Taking less money out doesn’t necessarily mean less taxable income!

Freeman Solutions helps business owners understand their tax responsibilities and plan ahead.

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1710 W Main Street Ste 121
Battle Ground, WA
98604

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