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In The Headlines
- 2026 kicks off with labor market concerns and a slowly rebounding stock market. We’re a day away from the next Employment Situation report, released by the Bureau of Labor Statistics. What are experts expecting to see in this upcoming report? Estimates suggest that around 55,000 U.S. jobs were added in December. In November, the job count rose by 64,000, but the unemployment rate remained at 4.6%—its highest rate in the last four years. Many have worried that any dips in employment could point to an oncoming recession. Concerns over labor were also a factor in the Federal Reserve’s decision to lower interest rates at the end of last year. In the last three meetings of 2025, the Fed lowered its rates each time, but additional cuts this January are considered unlikely. Lastly, investors are hopeful that trading will go up in 2026. The S&P 500 has already seen gains since early January.
- Tesla is trumped by Chinese automaker BYD in 2025 sales. Previously the world’s largest EV maker, Tesla saw a 16% decline in 2025, down to 1.64 million vehicles delivered. This marks the second year in a row that sales have dropped for the automaker. By comparison, BYD sold 2.25 million EVs last year despite being barred from the U.S. market—an increase of 28%. Combined with plug-in hybrids, BYD’s 2025 sales totaled 4.6 million vehicles and over 1 million exports. Tesla’s decline may have some correlation to the end of the EV tax credits last fall. The well-known EV maker has especially struggled to sell its Cybertruck model, which sold fewer than 50,000 units since deliveries began. Reportedly, Musk addressed the problem by selling Cybertrucks to another of his companies, SpaceX. Musk has also indicated that the company’s strategy may be shifting away from EVs and toward the autonomous-driving Robotaxis and Optimus robots (humanoid assistants designed to complete basic tasks).
- Fifth Avenue fixtures Saks and Bergdorf Goodman consider bankruptcy as their CEO departs. This news comes from an unnamed source as Saks Global—owner of Bergdorf Goodman and Neiman Marcus—struggles with unpaid invoices and missed loan payments. One creditor has even instructed vendors to pause inventory shipments because of these payment delays. Amid these challenges, former CEO Marc Metrick announced his resignation and has been replaced by executive chairman, Richard Baker. Baker was behind Saks Global’s acquisition of the Neiman Marcus Group in 2024. The $2.7 billion acquisition resulted in debt that the retail conglomerate has yet to recover from. Since then, the company has been fighting to keep up its sales numbers, which fell by more than 13% year-over-year in Q3 2025. To increase sales, Saks even opened a storefront on Amazon marketplace last year in addition to its 70 U.S. locations across its three luxury brands. Saks may not be alone in its struggle. Analysts say that the global luxury industry is facing its biggest challenges in 15 years.
What's New In The Tax World?
The long-debated ACA health subsidies have expired—what’s next?
With the beginning of the new year came the end of the enhanced premium tax credits for Affordable Care Act (ACA) plans. This means higher insurance costs for over 20 million Americans to the tune of a 114% increase on average. The question of whether to extend the credits was at the center of the 43-day government shutdown last fall. Last year, the Senate failed to pass two partisan health care bills that would have provided some version of relief: either extended subsidies or new health savings accounts for Americans. Republican opponents to these bills cited high costs and fraud concerns as reasons for their rejection. However, the conversation isn’t necessarily over. A House vote this month could revive the credits, though hopes are not high among political analysts.
ACA premium tax credits became available back in 2014, but the enhanced version was introduced in 2021 to offset the financial impact of COVID-19 pandemic. This expansion allowed some lower-income Americans to pay no premiums, while many others paid a significantly reduced cost. The new policy capped premium costs at 8.5% of an enrollee’s annual income. Before this, the cap was close to 10%. The enhancement also made subsidies available to households with income exceeding 400% of the federal poverty level. However, this extension was set to expire at the end of 2025 without Congressional action.
Who is impacted by the expired tax credits? Self-employed workers, small business owners, farmers, and ranchers are just some of the Americans who may not receive health insurance through an employer. Unless these workers happen to qualify for Medicaid or Medicare, they will have to decide whether to absorb the additional cost or forego health insurance entirely. Health analysts are predicting that as many as 4.8 million Americans may drop their health care coverage due to the higher costs. This could have the side effect of causing insurance costs to rise for older enrollees or those with enduring illnesses.
Rising health insurance costs is expected to be a hot topic during this year’s midterm elections. Since 2020, ACA enrollment has more than doubled to 24 million people in 2025. About 88% of new enrollees live in states that voted for Trump in the 2024 presidential election, including Georgia, Louisiana, Mississippi, Tennessee, Texas, and West Virginia. On top of the federal cuts to food assistance, this could pose challenges for Republicans seeking reelection.
State-By-State Updates
- California asks an important question: is a tax on billionaires worth losing a few? The Golden State is debating a new measure that would create a one-time 5% tax on the estimated 255 billionaires who live there. Opponents of the proposal worry that the tax would cause the state’s richest residents to relocate or discourage them from launching new businesses in California. Advocates of the tax say that billionaires’ net worth is ballooning while the average American’s income is stalling out. Based on these factors, advocates assert that the tax would level the playing field and would not affect billionaires’ current standard of living. If the tax moves forward, it would apply to assets, not income. This would include things like art, businesses, collectibles, intellectual property, and securities. The additional funds would primarily go toward health care, with a smaller percentage set aside for food assistance or education.
- Hawaii’s cruise ship tax hits a wall after a recent court ruling. The “Green Fee” bill focused on funding climate change by increasing tourism-related taxes, including a new 11% tax on cruises. However, following a lawsuit by the Cruise Lines International Association, the Ninth U.S. Circuit Court of Appeals has temporarily blocked enforcement of the tax while the appeals process is underway. The bill would also raise taxes on tourists who stay at Hawaii hotels. Opponents of the “Green Fee” bill worry that the additional costs will deter visitors and damage the state’s economy. The lawsuit also notes that county governments add a 3% surcharge, which would bring the total tax up to 14%. Advocates of the tax point to the $100 million the bill would generate each year to go toward projects involving invasive species, wildlife conservation, beach management and restoration, and the creation of a “green jobs youth corps.”
- South Carolina may see income tax drops under the “One Big, Beautiful Bill” Act. Major changes under the OBBBA include adjusted income tax brackets and the extension of a higher standard deduction. Additionally, seniors 65 and older may qualify for a $6,000 deduction if they meet the income requirements. Why is this significant for South Carolina in particular? The Palmetto State conforms closely to many federal tax rules. This means that South Carolina employers will have updated withholding tables, resulting in a gradual shift in workers’ paychecks over this year. For instance, a single taxpayer earning $50,000 a year could see a $200 to $300 bump in their annual take-home pay. Of course, this will not be identically true across the board. The shifts in federal tax brackets mean that taxpayers enter higher tax brackets at different income levels than before. Tax experts recommend that taxpayers compare their paystubs to the new 2026 tax brackets and adjust their tax withholding as needed.
- Texas introduces 33 new laws this year on everything from property taxes and new tax exemptions to AI regulation. About half of the new bills taking effect in 2026 involve state taxes. Most are minor tweaks to existing laws, but two major changes involve property taxes. Texas homeowners will enjoy a higher homestead exemption of $140,000. Those who are aged 65 or older or who have a disability will see an even higher exemption of $200,000. Farmers and ranchers will enjoy a new tax exemption for livestock feed. Border-security infrastructure built on private property will also be tax-exempt. Lastly, a new law limits cities’ ability to raise taxes after a natural disaster—the governor’s approval will now be required. State lawmakers also showed concern for the regulation of artificial intelligence. The Texas Responsible Artificial Intelligence Governance Act takes effect this year and sets new restrictions, such as banning AI-driven pornography bots, barring chatbots from impersonating underage minors, and criminalizing the use of AI for violent or financial crimes.
Tax Planning Tips
Elon Musk donates $100 million Tesla shares to charity before the year-end. Can the average taxpayer enjoy similar charitable tax benefits?
Before ringing in 2026, the Tesla CEO rounded off his 2025 tax strategy by donating around 210,000 Tesla shares to undisclosed charities. This $100 million donation hardly makes a dent in Musk’s $619 billion net worth. Musk is looking forward to a pay bump this year, which could be worth as much as $1 trillion. This likely means even more aggressive tax reduction strategies in 2026.
Ultra-wealthy taxpayers like Musk often rely on a mixture of strategies to keep their net earnings high and tax bills low. Can a similar strategy work for W-2 employees and small business owners? If charitable giving is already a part of your life—or you want it to be—tax benefits may be available. First, the nonprofit receiving your donation must be IRS-approved. Second, you need to keep records of any cash gifts, such as canceled checks, bank records, or receipts. Third, appreciated property, like real estate or jewelry, can be more strategic than cash. When donating household goods, your deduction will be equal to its fair market value. When donating cars, your deduction will be equal to what the car would sell for at auction. Lastly, if you volunteer with a charitable organization, you may be eligible to deduct the cost of materials, uniforms, parking, tolls, and vehicle mileage associated with your volunteer work.
The OBBBA meant sweeping changes. Here’s what takes effect in 2026.
New year, new tax deductions. As part of your tax planning, keep in mind the provisions that kick in starting this tax year. First, a number of new benefits could give you a boost. Charitable givers who do not itemize on their tax returns can deduct up to $1,000 (or $2,000 for married couples filing jointly) for their donations. Taxpayers in the highest tax bracket will see a lower tax rate, dropping from 37% to 35%.
Also, those looking to buy a new home may qualify for a deduction on their private mortgage insurance if they earn less than $100,000 a year and put less than 20% on their down payment. Similarly, those looking to buy a new car can deduct up to $10,000 in loan interest on U.S.-assembled vehicles, if the buyer falls within the income limits.
2026 also ushers in limitations that may affect you. The enhanced premium tax credit expired at the end of 2025 and has not been renewed by Congress. This means that households exceeding 400% of the federal poverty line no longer have access to ACA Marketplace subsidies, and many other enrollees will see higher premium costs. The OBBBA also restricts the amount of money students and parents can borrow through federal loan programs and reduces the available repayment options.
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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.
