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In The Headlines
- How will the “sell America” trade impact U.S.-centric investments? President Trump’s moves to take over Greenland and to impose higher tariffs on eight European nations is garnering pushback. After Trump announced 10% tariffs on Denmark, Finland, France, Germany, the Netherlands, Norway, Sweden, and the U.K., the global market reacted. U.S. stocks took a hit as investors sought to reduce their reliance on America as a trading partner. The U.S. Dollar Index fell by almost 1% while the euro went up by 0.7%. This marked the biggest drop since Trump’s first tariff rollout last April. Analysts have expressed concerns that European investors will continue abandoning U.S. stocks and even enact counter-tariffs and other forms of retaliation. In his announcement, Trump set the 10% tariff start-date as February 1st and indicated plans to raise these tariffs to 25% on June 1st.
- Netflix offers to “pay cash” for Warner Bros. Discovery’s streaming services and studios. This latest move comes after months of a Hollywood showdown between Netflix and Paramount as both look to expand their entertainment empires. Netflix updated its $83 billion offer to acquire parts of Warner Bros. Discovery in an attempt to outbid Paramount. The streaming giant shifted from a cash-and-stock deal to cash only, hoping to appeal to stockholders by offering greater financial certainty. Meanwhile, Paramount’s last offer was rejected. Paramount revised the terms of its offer but did not increase the purchase price—$108 billion to purchase the whole company. The ultimate decision will fall to Warner Bros. shareholders. If Warner Bros. Discovery does keep part of its business, the company plans to shift its cable business into a separate publicly traded company, which would include channels like CNN and TNT.
- World leaders agree that their biggest concern with A.I. is security. The World Economic Forum meets annually in Davos, Switzerland, bringing together thousands of business leaders and politicians from across the globe. While some economists have focused on the fallout that could come from the formation of an “A.I. bubble”, numerous members of the forum felt that there was not enough discussion about A.I. security issues. Especially named was the problem of data access. A.I. agents do not have their own “identity,” so compared to a human or even a computer system, it becomes hard to track what data they have accessed. Global leaders spoke to the need for industrial-level security for AI agents. Another red flag was raised about quantum computing and its ability to break encryption. Ironically, many have suggested that the key to improving A.I. security may be to develop more A.I. dedicated to that task.
What's New In The Tax World?
Has your state resolved to lower individual income taxes in 2026?
Each year, state legislatures debate the pros and cons of cutting income tax rates. Those on the “pro” side believe tax cuts will lead to economic growth and attract more businesses and new residents to their state. Those on the “con” side argue that eliminating state income tax negatively impacts public services including education. So where does your state stand at the start of the new year?
A total of nine states are enacting lower income taxes as of January 1st. The most significant cuts occurred in Kentucky and Nebraska. Kentucky’s will drop from 4% to 3.5% based on a 2022 bill. The bill requires an incremental income tax reduction as long as the state’s revenue, spending, and budget reserve trust fund meet certain thresholds. Nebraska’s income tax rate will fall from 5.2% to 4.55% this year, but the cuts won’t stop there. The Cornhusker State plans to slowly reduce their income tax rate until it reaches 3.99% by 2027. However, the current $432 million gap in Nebraska’s budget could put future tax cuts on hold.
Nebraska is not the only state planning multi-year tax cuts. Georgia’s tax rate was just reduced from 5.19% to 5.09%, and the tax rate will drop by another 0.10% next year. This might not be the end—some Georgia legislators are advocating to eliminate the state income tax entirely. In Indiana, the state’s flat income tax rate will fall from 3% to 2.95% this year and then to 2.9% in 2027.
In Mississippi, income tax has been reduced from 4.4% to 4%. Under a new piece of legislation, the Magnolia State’s tax rate will continue to be reduced yearly until it reaches 3% in 2030. The new bill also approves ongoing cuts until the state income tax is eliminated completely. Montana is the final state planning multiple cuts: its highest marginal rate will go from 5.9% to 5.65% in 2026 and then down to 5.4% in 2027. Montana also expanded eligibility for its lowest tax bracket.
The final three states are North Carolina, Ohio, and Oklahoma. North Carolina’s flat income tax rate dropped from 4.25% to 3.99% this year. Ohio is shifting to a flat rate for all nonbusiness income over $26,050. This change took the tax rate down from 3.125% to 2.75%. Lastly, Oklahoma saw a reduction in its top marginal income tax rate—from 4.75% to 4.5%. Oklahoma lawmakers also recently consolidated the state’s individual income tax brackets from six to three.
State-By-State Updates
- Alabama cities filed a lawsuit against the internet sales tax—now the legislature is pushing back. The Simplified Sellers Use Tax (SSUT) program flows into Alabama’s General Fund. Before the tax was introduced, General Fund revenue remained stagnant for years, while most of the state’s income and sales tax revenue went to the Education Trust Fund for public education. So what’s the problem with the SSUT? The cities of Montgomery, Mountain Brook, and Tuscaloosa, along with the Alabama Education Association, filed a lawsuit stating that the Simplified Sellers Use Tax is unconstitutional. The plaintiffs say that the program allows companies that pay the SSUT to enjoy reduced taxes compared to a traditional sales tax. The lawsuit aims to disqualify several larger companies from the program. The chair of the Alabama Senate committee responded by introducing two bills that could pressure the cities to drop their lawsuit. The first allows those living outside a city to petition for refunds on sales and use taxes on purchases made in the city. The second prevents local governments from levying sales and use tax on purchases if the consumer traveled to the area to shop.
- Missouri’s governor makes a stand for expanded tax cuts. In his annual address, Governor Mike Kehoe proposed a five-year phaseout of the state’s individual income tax. The governor characterized Missouri’s economic growth over the past decade as “average at best.” The proposed tax cut is intended to draw more people and more business into the state. Over the past ten years, Missouri has made cuts to income and corporate taxes and also eliminated its franchise and capital gains taxes. Opponents of this proposal worry that eliminating individual income tax will mean increasing taxes in other areas, like state sales tax. Kehoe noted in his speech that he would not extend sales taxes to agriculture, health care, or real estate. A constitutional amendment has now been presented to the Missouri House that would allow state and local sales and use taxes to be levied on “transactions involving any goods and services,” with the aim of increasing overall tax revenue and paving the way to nix the state’s individual income tax.
- New York could extend its corporate tax to fund child care and health care. Governor Kathy Hochul recently announced a $260 billion state budget—an increase over last year’s $254 billion budget. This includes a long-promised $1 billion child care program for New York City parents with 2-year-olds. To generate the needed revenue, the plan is to extend a tax on corporations that net over $5 million in profits. Originally, the tax was set to sunset on April 1st of this year, but under the new proposal, it would extend through fiscal year 2029. The extension is expected to generate $1.6 billion annually. Hochul’s budget also introduces a 75% tax on tobacco-free nicotine pouch products. The $54 million per year generated by this new tax would go toward the state’s $38.2 billion health care budget. Part of the goal is to offset rising Medicare costs. Around 450,000 New Yorkers will likely lose coverage under the Essential Plan this year.
- Tennessee weighs a new tax on public EV charging stations. This proposal could impact half of Tennessee electric vehicle owners and state visitors. Many states already levy a gas tax, typically taken on top of fuel purchases to pay for state transportation projects. The new tax has a similar purpose—to collect money from electric vehicle owners who use Tennessee roadway systems. A new $0.03 per kilowatt-hour tax would be levied on public EV charging stations using DC fast chargers, which have a charging capacity of 20 kilowatts or more. Smaller chargers, including residential chargers, would be exempt. Estimates by the U.S. Department of Energy suggest that 80% of EV charging happens at home. The state already introduced an annual extra vehicle registration fee in 2024. EV owners must pay a $200 fee, and hybrid or plug-in hybrid EV owners pay $100. Those who oppose the registration fee say it penalizes residents for purchasing electric vehicles. Data collected in September 2025 estimated that Tennessee had 64,910 electric vehicles on the roads.
Tax Planning Tips
2026 could be the year you reap maximum benefits from homeowner tax deductions
If you are a homeowner looking for a tax break, a number of federal provisions could be available to you. Perhaps the best known is the mortgage interest deduction, but fewer people have claimed it since the 2017 Tax Cuts and Jobs Act. Why? The act nearly doubled the standard deduction and made itemizing deductions a less attractive option. Those who still itemize deductions may be eligible to write off up to $750,000 of their mortgage debt (or $375,000 for married couples filing separately).
If you recently invested in certain home improvements, you may be eligible for the home equity loan and home equity line of credit (HELOC) interest deduction. Starting in 2017, financing obtained to buy, build, or substantially improve a residence can receive this benefit. Both first and second homes can qualify. To be eligible, your total mortgage debt cannot exceed $750,000.
Self-employed individuals who work from home may also be eligible to deduct home office expenses. You must be able to demonstrate that these expenses are specific to your business, but this can include rent, utilities, and real estate taxes spent on an office space.
Gig work has taken the 2020s by storm—what does that mean for your taxes?
DoorDash, GrubHub, Instacart, or Uber: No matter which you use, they are all key parts of the gig economy. From a tax perspective, drivers are treated as independent contractors and typically receive 1099 forms from these companies. However, gig work is not limited to delivery drivers. Anyone who does contract work has specific steps they will need to take on their tax returns.
What you need to know before tax season comes? First, pull together any records related to your gig work income and expenses. Second, collect your 1099-K forms for “Payment Card and Third Party Network Transactions.” Third, make sure you have paid any estimated taxes owed. Most gig work is a form of self-employment work, so you will need to calculate and pay self-employment taxes. This step may include filing a W-2, a 1099-MISC (for miscellaneous income), or a 1099-NEC (for nonemployee compensation).
Lastly, conduct your usual preparation to file your yearly tax return and refer to the IRS’ gig work website for any questions.
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CURRENT EDITION
Tackling Taxes On an Inherited HSA
The Health Savings Account (HSA) is a first line of defense tax strategy. Contributions are deductible and earnings are tax-free if used for qualified medical expenses. There are numerous features to the HSA that secure maximum tax benefits. Structured properly, an HSA can provide serious tax-free money to beneficiaries as well as the account holder. Before we review the implications of inheriting an HSA, let’s review some of the powerful features an HSA has that increases the value of the account.
Kadau v. Commissioner and the Line Between Effective and Broken Captives
Captive insurance remains one of the most closely examined tax planning strategies in use today, not because it is inherently flawed, but because small missteps can carry outsized consequences. Many taxpayers assume that careful formation and proper documentation are enough to protect the intended tax outcome. A recent Tax Court decision, Kadau v. Commissioner, serves as a reminder that those assumptions deserve closer scrutiny. The court’s analysis did not hinge on whether captive insurance can work, but on how a specific arrangement actually functioned in practice. For tax professionals advising clients who rely on micro-captives, the case raises important questions about where structures tend to break down, why some arrangements attract IRS attention while others do not, and what really separates a defensible captive from one that invites challenge.
Not Every Client Is a Keeper: When Saying Goodbye Protects Your Practice
Bad chemistry with one client can disrupt the flow with everyone. That one client who doesn’t follow your processes and messes up the workflow during tax season. The client who never turns things in on time but then wants results from you immediately when they do. These things affect how you interact and work with your other clients as well. As the firm owner we should do whatever we can to protect good chemistry within our business. As a tax advisor the people we work with become our family. We help them make decisions that impact them and their families. That is why firing clients can be a delicate matter when you are doing the firing.
