At Around the Tax World, you can find out all about what’s going on in the wonderful, worldwide world of tax. Every month, we’ll feature a few mini-articles on what’s been going on in the world when it comes to tax, and fully available for viewing even if you don’t have a subscription.
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In The Headlines
OpenAI goes on a spending spree to the tune of $3.7 billion. During the first quarter of 2026, the tech giant spent more than half of its revenue for that period. Analysts have noted that this reflects the ongoing challenge for artificial intelligence companies: the demand is high, but generating profits is proving difficult. Fortunately, OpenAI still has money to burn. As of March, the company held over $73 billion in cash and marketable securities, a major increase from its holdings of $40 billion in liquid assets at the end of December 2025. The jump largely reflects a major round of funding that the San Francisco-based organization announced at the end of March. Because of this, OpenAI can currently afford to spend at the same rate and still delay additional fundraising or pursuing an IPO. However, reports suggest that the company is planning to cut its pricing to stay competitive against Anthropic, which filed for an IPO at the beginning of June.
Netflix loses another bidding war—this time over Roku. Unfortunately for Netflix, Fox won out in its bid to buy Roku, which offers streaming players, smart TVs, and streaming services. Netflix also came up short in its attempt to buy Warner Bros. Discovery earlier this year, losing out to Paramount. This could mean more than disappointment for the world’s largest subscription streaming platform. Investors seem to be reacting to Netflix’s failed deals. Stock is down 16% compared to this time last year, despite a brief uptick between February and April. The company also decided not to increase its 2026 full-year outlook, causing more hesitation among investors. Adding to the concern is the fact that co-founder and longtime chairman Reed Hastings will be stepping down. Meanwhile, Netflix has been working out how to balance its pricing strategy with its advertising business while competing against other streaming platforms.
What contributed to the Dow Jones’ all-time record highs? This month, the index hit a new high for the third time in a row. The Dow tracks 30 stocks, including big names like Chevron, Disney, Goldman Sachs, Visa, and Walmart. While the Dow traded up 0.2%, the S&P 500 went down 0.2%, and the Nasdaq Composite dropped 0.4%. These shifts come as oil prices ticked up—West Texas Intermediate futures stood at almost $78 per barrel and Brent crude futures rose to about $80 a barrel. Meanwhile, President Trump announced a potential deal with Iran, causing energy prices to dip. If the deal pans out and new oil supplies open up, this could result in further price cuts and increased investor optimism. Another factor influencing trading prices was the pending interest rate decision from the Federal Reserve, the first policy decision under new Chairman Kevin Warsh.
What's New In The Tax World?
Money is running out from a Social Security trust fund—what could that mean for your taxes?
The Social Security Administration’s (SSA) funding backup plan may be in jeopardy. According to their annual report, the Old-Age and Survivors Insurance (OASI) trust fund is expected to run out in late 2032—three months earlier than originally projected. Social Security benefits are typically funded by payroll taxes, but the OASI fund is used when benefit payments exceed tax revenue. So what happens if the trust fund is depleted? The SSA estimates it would only be able to pay 78% of retirement benefits going forward. Social Security benefits currently provide the majority of income for 43% of seniors, according to AARP.
One factor that likely accelerated the depletion of OASI is President Trump’s “One Big, Beautiful Bill” Act. The bill introduced a new $6,000 deduction for taxpayers aged 65 or older. This deduction is on top of both the standard deduction and the additional standard deduction for seniors that already existed. When added up, this means that a senior who files as single could see a total of $24,150 deducted from their taxable income. Married couples could see up to $47,500 if both spouses are over age 65. Depending on other sources of income, this can make seniors’ Social Security checks tax-free. While this may be a perk for seniors, these changes also mean major shortfalls in the Social Security benefits available for future retirees.
What options might the SSA have to make up for lost revenue? If OASI were to be combined with the disability insurance trust fund, this could delay the moment that the funds run out. Social Security would likely be fully funded until the third quarter of 2034. At that point, only 83% of benefits would be payable. However, current law does not allow these trust funds to be combined, so Congress would have to officially authorize the change.
If that tactic is not approved, which is more likely: for taxes to go up or for benefits to go down? Experts predict that benefits may be reduced if the trust fund is depleted before another solution is found. In the past, Congress has taken actions like opting to tax Social Security benefits and raising the retirement age to prevent a bankruptcy.
State-By-State Updates
California’s governor pushes back on a proposed billionaire tax. Supporters of the proposal have until June 25th to get the potential tax onto the November ballot. Backed by the union Service Employees International Union-United Healthcare Workers West, the proposal would levy a one-time 5% tax on each billionaire’s net worth. According to the union, about 200 California residents have a net worth of over $1 billion—and a combined wealth of $2 trillion. Supporters of the tax say that the revenue is needed to fund state healthcare after massive federal funding cuts. As it stands, 90% of the revenue from the new tax would be required to go toward health care, and the remainder would go toward food assistance and education. However, Governor Gavin Newsom has spoken out against the bill, saying it could drive major job creators out of the state and could hurt California’s position as a leader in the tech industry.
Kentucky faces a lawsuit over a new excise tax on prediction markets. Earlier this year, the Bluegrass State introduced a 14.25% tax on the transaction fees of prediction markets, such as Crypto.com, Kalshi, and Polymarket. These companies are now challenging the tax as discriminatory and unconstitutional. What exactly is a prediction market? These platforms allow customers to buy, sell, or trade event contracts. The trades are based on whether real-world events happen or not. This might include election results, economic changes, or sporting championship outcomes. The lawsuit calls out local horse betting companies and notes that they only face a 9.75% tax, compared to the 14.25% levy for online betting markets. Additionally, the plaintiffs claim that the state is overstepping its authority, since the federal government has jurisdiction over “swaps” via the Commodity Futures Trading Commission. If the tax is upheld, it would go into effect next year.
Nebraska is staring down the barrel of a $471.5 million budget gap. The Cornhusker State is seeing the effects of years of budget deficits. Back in 2022, the state was solidly in the green. Due to tax changes and pandemic-related stimulus funds, Nebraska had over $1.6 billion in their coffers at the time. Then in 2023, state lawmakers passed new laws lowering personal and corporate income taxes and reducing tax revenue. These changes took individual income tax revenue from $3.2 billion down to $2.1 billion per year. Nebraska also introduced property tax credits to provide taxpayer relief, but with the side effect of lowering revenue even further. So far this fiscal year, Nebraska has spent $427 million on reimbursing property tax credits. The state has attempted to offset these losses with sales taxes, but legislators have struggled to agree on what goods and services should be taxed. For instance, the state currently taxes horse boarding and training but not veterinary services.
Tax relief is coming to 3 million New Yorkers this summer. The state approved $2 billion in direct payments to taxpayers, which should begin appearing in bank accounts and mailboxes over the next few months. This is part of the New York State School Tax Relief (STAR) program, which lowers property taxes for eligible homeowners. Since the payments are intended to offset school taxes, they will be directed toward New Yorkers who own houses, co-ops, and condos. Homeowners who earn less than $500,000 annually will receive between $350 and $600. Seniors who earn less than $110,000 will be eligible for double or more—between $700 and $1,500. The governor hopes that these checks will also help those struggling in the face of soaring gas prices, which also impacts the cost of shipping basic goods. These payments also come as the governor and a number of legislators are up for reelection this fall.
Tax Planning Tips
Tax planning could make a major difference to your student loan payments
The U.S. Department of Education has introduced a new repayment plan: the Repayment Assistance Plan (RAP). Under this plan, a federal student loan borrower’s monthly payment is based on their adjusted gross income. So if your income is on the lower end, your loan repayments will also be low. As income grows, borrowers must pay a higher percentage of it. This means that any steps you can take to lower your pretax income can make a major difference. Simple strategies include:
- Redirecting more of your paycheck to a 401(k) or traditional IRA
- Contributing to a health savings account (HSA) or flexible spending account (FSA)
- Claiming business expenses and deductions on your Schedule C if you are self-employed
If you have children or take care of another relative, you may also qualify to have your payment amount reduced by $50 per dependent.
Taking advantage of the Repayment Assistance Plan may be especially helpful for those who previously used the Saving on a Valuable Education (SAVE) plan introduced by the Biden administration. SAVE was ended by a federal appeals court this year, and users need to exit the plan within 90 days of July 1st.
Roth strategies are not disappearing but they are changing—and this may shift your tax plans
When should you use pretax retirement plans versus after-tax plans? This is often the question when tax planning for retirement. 401(k), 403(b), or governmental 457(b) plans allow you to contribute pretax dollars now, but you have to pay taxes on withdrawals later. On the flip side, contributions to Roth IRAs and Roth Thrift Savings Plans (TSPs) are made with after-tax dollars, but you do not have to pay taxes on distributions.
So what is changing, and what might this mean for your tax strategy? Starting in 2026, catch-up contributions for pretax plans will face new income limits. Typically, retirement account holders age 50 or older are eligible to contribute an extra $1,100 (for 2026) to their accounts. Now those who earned more than $145,000 in the prior year will not be allowed to make pre-tax catch-up contributions. This income limit is based on the past year’s W-2 wages. However, catch-up contributions are still possible with Roth IRA and Roth TSP accounts. Under the new rules, if you previously relied on pretax catch-up contributions, you may see your taxable income increase and your take-home pay decrease. Be sure to factor this into your tax plan to decide on the retirement planning strategy that works best for you.
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CURRENT EDITION
What Happens If You Can’t Use All Your Clean Energy Tax Credits This Year?
Clean energy tax credits have a lot going for them. Clients buy them at a discount, apply them dollar-for-dollar against federal tax liability, and walk away paying less to the IRS. That alone makes them worth a serious look. But here’s what often gets overlooked and what makes these investments genuinely remarkable compared to almost anything else in your tax planning toolkit: the flexibility built into how and when the credits can be used. Can’t absorb the full credit this year? Carry it back up to three years and trigger refunds on taxes your client already paid. Think about that for a second. There are very few places in the tax code where you can go back in time and rewrite last year’s tax bill. This is one of them. Still have excess after the carryback? Carry it forward for up to 22 years. That’s not a typo. Two decades of runway to put those credits to work as your client’s passive income grows. And if circumstances change and the credits simply aren’t needed? An emerging secondary market means there may even be an option to sell them. No other common tax planning strategy offers this combination a guaranteed discount on purchase, dollar-for-dollar offset of tax liability, the ability to look backward and forward, and a potential exit if plans change. Understanding how each of these features works is what separates a good credit investment from a great one.
Perspectives on IRS Scrutiny of Captive Insurance Elections
The Internal Revenue Service has made no secret of its increased scrutiny of captive insurance arrangements, particularly those involving the small insurance company election. For taxpayers and their advisors, this has created understandable concern and, in some cases, hesitation about whether captive insurance remains a viable risk management and tax planning tool. Yet heightened scrutiny does not mean prohibition. The Internal Revenue Code continues to recognize captive insurance, Congress has refined it, and courts evaluate it based on well-established insurance principles. The real issue is not whether captives are allowed, but whether a specific taxpayer has a legitimate business need for insurance, has structured the arrangement properly, and has implemented it in a manner consistent with both tax law and insurance fundamentals. Understanding where scrutiny arises, how elections function, and what separates compliant captives from problematic ones is critical for CPAs advising closely held businesses today.
Strict Substantiation: Why Being Right Without Proof Can Cost You Your Charitable Deduction
Reilly’s Sixteenth Law of Tax Planning – Being right without substantiation can be as bad as being wrong – is particularly apt when it comes to charitable contributions. The case law makes it clear that there is not much wiggle room in rules relating to substantiation and reporting of charitable contributions. We’ll dig into the rules here.
