Melvin, Bibb, Segars & Associates, P.C.

Melvin, Bibb, Segars & Associates, P.C. We are a public accounting firm dedicated to helping small businesses and individuals with their tax, planning and accounting needs. Call us today.

Melvin Bibb Pinson & Segars PC is a Huntsville, AL Accounting company with a clear focus on client service. Let us lay the track for your venture to success -- be it personal or business.

03/11/2026

WHAT'S NEW FOR RETIREMENT CATCH-UP CONTRIBUTIONS IN 2026
Beginning in 2026, a significant change to retirement plan catch-up contributions takes effect. Part of the 2022 Setting Every Community Up for Retirement Enhancement (SECURE) 2.0 Act, the change affects higher-income taxpayers age 50 and older who contribute to certain types of employer-sponsored retirement plans.

CATCH-UP CONTRIBUTION BASICS

For years, taxpayers age 50 or older have been able to make catch-up contributions to certain employer-sponsored retirement plans, up to annual inflation-adjusted limits. For 2026, eligible individuals can contribute an additional $8,000 above the $24,500 regular 401(k), 403(b) or 457(b) plan limit, for a total of $32,500.

Under SECURE 2.0, beginning in 2025, participants age 60 to 63 can make up to $11,250 in catch-up contributions to these plans, bringing the maximum to $35,750 for 2026.

Before 2026, employees could make catch-up contributions pretax to traditional plans or, if their employer offered the option, after-tax to Roth plans. Pretax contributions reduce taxable income for the year contributed, but distributions are generally taxable. Roth contributions don’t reduce current-year taxable income, but distributions are generally tax-free.

MANDATORY ROTH TREATMENT FOR HIGH EARNERS

SECURE 2.0 requires that, beginning in 2026, any catch-up contributions made by higher-income participants to 401(k), 403(b) or 457(b) plans be designated as Roth contributions.

The Roth requirement was originally scheduled to take effect for 2024. In 2023, the IRS extended the effective date to January 1, 2026.

For 2026, the Roth requirement applies to participants whose 2025 Social Security wages from the employer exceeded $150,000 as reflected in Box 3 of Form W-2, “Wage and Tax Statement.” The $150,000 threshold will be adjusted annually for inflation.

ARE YOU AFFECTED?

Plans that didn’t offer a Roth option in 2025 had to either add one for 2026 or eliminate higher-income participants’ ability to make catch-up contributions. So if the Roth requirement applies to you and your retirement plan doesn’t offer a Roth option, you won’t be able to make catch-up contributions in 2026.

Check with your employer about your options. It may have implemented a “deemed election” approach for employees subject to the new rules. This automatically treats catch-up contributions as Roth unless the employee opts out of catch-up contributions.

Also, keep in mind that making Roth catch-up contributions instead of traditional ones (or not making catch-up contributions) will increase your taxable income for 2026. This may reduce or eliminate the tax benefits of breaks that are subject to phaseouts, floors or other income-based limits and even push you into a higher tax bracket.

(Reposted from our website newsletter)

02/15/2026

THE REAL ESTATE PROFESSIONAL ADVANTAGE

For federal tax purposes, rental real estate losses are usually treated as passive, meaning they can be deducted only against passive income, such as profits from other rental properties. If you don’t have enough passive income, your unused losses are suspended and carried forward. Those suspended losses can be deducted later, once you have sufficient passive income or when you sell the property that generated them.

However, there’s a big exception for real estate professionals. If you qualify, a rental real estate loss potentially can be classified as a nonpassive loss.

To be eligible for the real estate professional exception:

You must spend more than 750 hours during the year delivering personal services in real estate activities in which you materially participate, and
Those hours must be more than half the time you spend delivering personal services (in other words, working) during the year.
The next step to being able to claim a nonpassive loss is determining if you have one or more rental properties in which you materially participate. Generally, you need to pass one of the following to meet the material participation test for a rental real estate activity:

Spend more than 500 hours on the activity during the year.
Spend more than 100 hours on the activity during the year and make sure no other individual spends more time than you.
Make sure the time you spend on the activity during the year constitutes substantially all the time spent by all individuals.
There are other ways to meet the material participation test, but these three are typically the easiest. Note, also, that participation by your spouse is included for material participation purposes, although it’s not included for the real estate professional test.

If you qualify as a real estate professional and meet the material participation test for a property, losses from the property are treated as nonpassive losses that you can generally deduct in the current year.

DON’T MEET THE REQUIREMENTS?

If you don’t meet the real estate professional rules, you may still deduct certain rental losses currently through limited exceptions:

Small landlord exception. If you own at least 10% of the property and actively participate, you may be able to treat up to $25,000 of losses as nonpassive. (Properties owned via limited partnerships don’t qualify.) This exception begins to phase out when adjusted gross income (AGI) exceeds $100,000. It’s eliminated when AGI reaches $150,000.

Seven-day rental rule. If the average rental period is seven days or less, the activity is treated as a business, not real estate. Passing a material participation test makes losses nonpassive.

30-day rental with services. If the average rental period is 30 days or less and significant personal services are provided, the activity is also considered to be a business. Losses may be treated as nonpassive if a material participation test is met.

MAKE THE MOST OF YOUR TAX BENEFITS

With proper documentation and knowledge of available exceptions, you can better position yourself to reduce your tax liability.

(Reposted from our website newsletter)

01/12/2026

HEAVY TAX BREAKS FOR HEAVY BUSINESS VEHICLES
Did you buy a “heavy” business vehicle in 2025? An SUV, pickup or van with a manufacturer’s gross vehicle weight rating (GVWR) over 6,000 pounds that’s used over 50% in your business is treated as transportation equipment for tax purposes. That means the business percentage of its cost can qualify for 100% first-year bonus depreciation.

Heavy vehicles used over 50% for business may also be eligible for Sec. 179 expensing. But the maximum Sec. 179 deduction for 2025 is generally only $31,300 for vehicles with GVWRs between 6,001 and 14,000 pounds.

To claim one of these breaks for 2025, you must have placed the heavy business vehicle in service by Dec. 31, 2025.

(reposted from our website newsletter)

01/11/2026

2026 TAX LAW CHANGES FOR INDIVIDUALS
Here’s a sampling of some significant tax law changes going into effect this year:

New charitable contribution deduction for nonitemizers for cash contributions up to $1,000 ($2,000 for married couples filing jointly)

New 0.5% of adjusted gross income floor on charitable deduction for itemizers

New 35% benefit limit on itemized deductions for taxpayers in the 37% tax bracket

Reduced income thresholds at which the alternative minimum tax exemption begins to phase out (and a phaseout rate that’s twice as fast as 2025’s)

New tax-advantaged Trump accounts to benefit children under age 18

Increase in tax-free 529 plan withdrawal limit for qualified elementary and secondary school expenses to $20,000 (from $10,000 for 2025)

New requirement that higher-income taxpayers’ catch-up contributions to employer-sponsored retirement plans must be treated as post-tax Roth contributions

Elimination of certain energy-efficiency credits for homeowners

Wider income ranges over which the Section 199A qualified business income (QBI) deduction limitations phase in, potentially allowing larger deductions for some pass-through entity owners.

New minimum QBI deduction of $400 for taxpayers who materially participate in an active trade or business if they have at least $1,000 of QBI from it

(Reposted from out newsletter)

01/11/2026

CAN YOU CLAIM A TAX DEDUCTION FOR TIPS OR OVERTIME INCOME?
If you received tips or overtime pay in 2025, you may be eligible for a new deduction when you file your income tax return. Both deductions can be claimed whether or not you itemize deductions. But various rules and limits apply. Also be aware that such income may still be fully taxable for state and local income tax purposes. And federal payroll taxes still apply to tips and overtime income you deduct for federal income tax purposes.

DEDUCTING TIPS

Eligible taxpayers can deduct up to $25,000 of annual qualified tips income. The deduction begins to phase out when modified adjusted gross income (MAGI) exceeds $150,000 ($300,000 for married couples filing jointly). It’s completely phased out when MAGI reaches $400,000 ($550,000 for joint filers).

Qualified tips can be paid by customers in cash or with credit cards or given to workers through tip-sharing arrangements. The tips deduction is available if you receive qualified tips in an occupation that’s designated by the IRS as one where tips are customary. Some examples of eligible occupation categories are beverage and food service, hospitality and guest services, personal appearance and wellness, and transportation and delivery.

The tips deduction is allowed for both employees and self-employed individuals. However, those who work in certain trades or businesses (such as health, law, accounting, financial services, investment management) are ineligible.

DEDUCTING OVERTIME

Eligible taxpayers can deduct up to $12,500 of qualified overtime income ($25,000 for joint filers). The deduction begins to phase out when MAGI exceeds $150,000 ($300,000 for joint filers). It’s completely phased out when MAGI reaches $275,000 ($550,000 for joint filers).

Qualified overtime income is overtime compensation mandated under Section 7 of the Fair Labor Standards Act. It requires time-and-a-half overtime pay except for certain exempt workers. Only the extra “half” constitutes qualified overtime income and thus is deductible.

Qualified overtime income doesn’t include overtime premiums that aren’t required by Sec. 7, such as those required under state laws or pursuant to union-negotiated collective bargaining agreements.

REPORTING REQUIREMENTS

Under the OBBBA, qualified tips income must be reported on Form W-2, Form 1099-NEC or another specified information return or statement furnished to both the worker and the IRS. And qualified overtime income must be reported to workers on Form W-2 or another specified information return or statement furnished to both the worker and the IRS.

However, the IRS announced that for the 2025 tax year, there will be no OBBBA-related changes to federal information returns such as Form W-2, Forms 1099 and Form 941. The IRS is providing transition relief for the 2025 tax year and will update forms for the 2026 tax year.

(Reposted from our newsletter)

12/13/2025

THE TAX IMPLICATIONS OF REMOTE WORK
Remote work can offer advantages for both employers and employees. But it’s not without challenges, such as unexpected tax consequences.

STATE TAX ISSUES FOR EMPLOYEES

Remote work allows employees to live in one state and work for an employer in another, which can create complex tax issues. Each state has the right to tax people based on domicile, which is where they intend to make their permanent home, and residency, where they’re physically present for a significant portion of the year, typically 183 days or more.

It’s possible to be domiciled in one state and a resident of another, which can lead to being taxed by both states on the same income. While some states offer tax credits to prevent double taxation, differences in tax rates could still mean a higher overall tax bill.

TAX AND COMPLIANCE BURDENS FOR EMPLOYERS

Allowing employees to work remotely may introduce significant tax and compliance challenges for employers. For example, when employees are located in multiple states, employers may be required to withhold and remit income and payroll taxes in each jurisdiction.

Having employees in another state can also establish what’s known as a “nexus” — a legal connection that subjects the employer to that state’s tax laws. Once nexus is established, the employer may become liable for a range of state-level taxes, including income, franchise, gross receipts, and sales and use taxes.

Managing multistate reporting and compliance can be time-consuming and costly. These added complexities can increase an employer’s overall tax burden and administrative workload, making proactive planning and professional guidance essential.

JOB-RELATED EXPENSES

Before 2018, employees could claim a home office deduction if they met certain conditions. In most cases, that deduction is no longer available except for self-employed business owners. Employees also generally can’t deduct other unreimbursed job-related expenses under current law.

Employers may reimburse remote workers for their business expenses according to an “accountable plan” that requires employees to substantiate the costs and meet other requirements. Properly reimbursed expenses are deductible by an employer and excludable from an employee’s income. They also generally aren’t subject to payroll taxes.

KNOW THE CONSEQUENCES

Remote workers and their employers need to understand the tax implications they may face. You may or may not be able to minimize negative tax consequences, but it’s still important to know what to expect.

Reposted from our website newsletter.

12/10/2025

HOW DOES THE NEW TAX DEDUCTION FOR CAR LOAN INTEREST WORK?
Generally, except for home mortgage interest, personal interest expense isn’t deductible for federal income tax purposes. With the passage of the legislation commonly known as the One Big Beautiful Bill Act (OBBBA), another exception has been added. That is, you might be able to deduct your car loan interest. But various rules and limits apply.

THE SPECIFICS

The OBBBA allows eligible individuals, including those who don’t itemize deductions, to deduct some or all the interest on a car loan they take out to purchase a qualifying passenger vehicle. The maximum car loan interest you can deduct is $10,000 per year for 2025 through 2028.

But the deduction is phased out starting at $100,000 of modified adjusted gross income (MAGI) or $200,000 for married couples filing jointly. For an unmarried individual, the deduction is completely phased out when MAGI reaches $150,000, and for married joint filers, the phaseout is complete when MAGI reaches $250,000.

Another limit is that only certain vehicles qualify for the deduction:

The vehicle must be a car, minivan, van, SUV, pickup truck or motorcycle with a gross vehicle weight rating under 14,000 pounds,
The vehicle must have been manufactured primarily for use on public streets, roads and highways,
The vehicle must be new, and
The “final assembly” of the vehicle must have occurred in the United States.
You must report the vehicle identification number (VIN) on your tax return. A car assembled in the United States has a special VIN to signify that it’s American-made.

LOAN-RELATED REQUIREMENTS

The loan must be taken out after 2024 and must be a first lien secured by a vehicle used for personal purposes. If an original qualified car loan is refinanced, the new loan will be a qualified loan for purposes of the deduction as long as: 1) the new loan is secured by a first lien on the eligible vehicle, and 2) the initial balance of the new loan doesn’t exceed the ending balance of the original loan.

Also be aware that interest on loans from certain related parties doesn’t qualify. And lease financing isn’t eligible.

To claim the deduction, you’ll need to substantiate how much interest you paid during the year. For that, your car loan lender must file an information return with the IRS specifying the amount. (Transitional relief is available for 2025.)

FINAL THOUGHTS

The new deduction for auto loan interest can make buying a car less expensive. But you need to consider the eligibility requirements. First, is your income below the phaseout threshold? Second, have you checked that the car you’re considering will qualify?

Also, don’t make a decision based solely on the ability to qualify for the tax deduction. In some cases, buying a used or foreign vehicle or leasing a vehicle might make more sense, even if you won’t be able to claim a tax deduction.

Finally, keep in mind that the deduction will expire after 2028 unless Congress acts to extend it.

 Reposted from our website newsletter 

11/20/2025

MAKING TAX-FREE GIFT IN 2025 AND 2026
As the year winds down, you may be hoping to combine smart estate tax planning with tax savings using the annual gift tax exclusion. For 2025 and 2026, this exclusion is $19,000, which you may give in cash or property to any number of family members or friends, without gift tax implications. Married couples may be able to give up to $38,000 to any recipient.

Generally, married taxpayers can also gift an unlimited amount to their spouse without gift tax implications. However, if the spouse isn’t a U.S. citizen, the 2025 gift exclusion is limited to $190,000 (rising to $194,000 for 2026). Gifts exceeding that amount may require filing a federal gift tax return.

Each year you need to use your annual exclusions by Dec. 31. They don’t carry over from year to year. For example, if you don’t make an annual exclusion gift to your granddaughter this year, you can’t add this year’s unused exclusion to next year’s exclusion to make a $38,000 tax-free gift to her in 2026.

Reproduced from our website’s newsletter 

11/17/2025

MAKE SURE EVERY DONATION COUNTS
Charities obviously benefit when you donate to them. But you can also benefit by securing a tax deduction on your 2025 income tax return if you donate by Dec. 31, itemize deductions and comply with the tax rules. Here are a few rules to keep in mind:

Ensure you’re donating to a qualified charitable organization. A tool on the IRS website, the Exempt Organizations Select Check, allows users to confirm a charity’s tax-exempt status.
If you receive something in return for your donation, find out its fair market value (FMV). Suppose you donate $500, and, in return, you receive event tickets. You must subtract the FMV of the tickets from the $500 to arrive at your tax deduction.
Substantiation rules apply when deducting charitable gifts, and they vary based on the type and amount of the donation. For example, some types of property donations may require a professional appraisal.

Reposted from our website newsletter 

11/17/2025

THROWING A PARTY FOR YOUR WORKFORCE? KNOW THE TAX RULES
The holiday season is here once again, and for some workplaces, that means holiday parties. Although the rules for deducting business entertainment expenses changed several years ago, you may still qualify for some holiday party write-offs for this year, possibly even the entire cost. As you plan, understand the rules so you can avoid potentially costly missteps.

THE RULES BEFORE AND SINCE THE TCJA

Before the Tax Cuts and Jobs Act (TCJA), businesses could deduct 50% of certain entertainment costs, such as tickets for clients after contract negotiations. Although the TCJA permanently eliminated deductions for entertainment expenses starting in 2018, a key exception remains: If your business holds a company-wide party for employees, you may be able to deduct 100% of the cost. Some examples of potentially eligible expenses are:

Food and beverages,
Decorations,
Venue and furniture rentals,
Prizes and giveaways, and
DJ or live band fees
However, for such expenses to be deductible, the party must not be “lavish and extravagant,” and the entire staff must be invited, not just management. Also, if your staff consists only of family members, your party costs aren’t deductible. Under family attribution rules, the IRS views this as an event for owners or officers rather than employees.

NONEMPLOYEE GUESTS

Inviting friends, family, clients or business associates complicates matters. Here’s an example:

In December 2025, a company invites 60 employees and their partners to a holiday party. Forty employees and their plus-ones attend. In addition, the owner invites five friends, three business associates, and two independent contractors, who all attend with their plus-ones. The total party tab is $10,000, or $100 per person, for 100 guests.

On its 2025 corporate return, the company may deduct $8,000 (the $100 cost for each of the 40 employees and their 40 plus-ones). The $2,000 cost for the other 20 guests is considered personal and not deductible. Independent contractors are treated as nonemployees for this purpose, even if they perform similar work.

The takeaway is that the more nonemployees you invite, the less you can deduct.

SAFEGUARDING YOUR DEDUCTIONS

As always, keep detailed receipts and records. If the IRS questions your deductions, it may request documentation. Reduce audit risk by keeping expenses reasonable relative to company size and limiting personal guests.

Reposting from our website newsletter 

11/10/2025

5 SMART TIPS FOR INDIVIDUAL YEAR-END TAX PLANNING

Even during the last two months of the year, you can take steps to reduce your 2025 tax liability. Here are five practical strategies to consider.

1. USE BUNCHING TO MAXIMIZE DEDUCTIONS

If your itemized deductions are close to the standard deduction, consider a “bunching" strategy. This means timing certain payments (such as mortgage interest, state and local taxes, charitable gifts and medical expenses) so that they push you above the standard deduction in one year. The following year, you can take the standard deduction and, to the extent possible, defer paying deductible expenses to the following year. This alternating approach helps you capture deductions that might otherwise be lost.

2. BALANCE GAINS AND LOSSES

If you have investments in taxable accounts, keep an eye on both realized and unrealized gains and losses. Selling appreciated securities held for more than a year ensures they’re taxed at your lower long-term capital gains rate (typically 15% or 20%, plus the 3.8% net investment income tax at higher income levels), rather than your higher, ordinary-income rate (which may be as much as 37%). But selling investments at a loss can offset gains. If losses exceed gains, up to $3,000 can offset ordinary income, with the remainder carried forward. This flexibility can reduce taxes this year and in future years.

3. GIFT APPRECIATED ASSETS TO LOVED ONES

If you want to support family members while cutting your tax bill, consider giving appreciated investments to adult children or other relatives in lower tax brackets. They can sell the assets at a lower capital gains rate, possibly even 0%. Just be cautious about the “kiddie tax," which generally applies to children under age 19 (24 if they’re full-time students), and potential gift tax implications.

4. GIVE WISELY TO CHARITIES

Instead of donating cash, consider giving highly appreciated stock or mutual fund shares that you’ve held more than one year. You avoid the capital gains tax you’d owe if you sold the shares, and you can deduct the full fair market value if you itemize. Alternatively, selling investments at a loss and donating the proceeds allows you to claim both the capital loss and the charitable deduction. With some tax rules set to tighten in 2026, making larger gifts before year-end could be especially advantageous. (But if you don’t itemize, you can look forward to the limited charitable deduction that will be available to nonitemizers beginning in 2026.)

5. USE YOUR IRA FOR DONATIONS

For those age 70½ or older, making charitable donations directly from an IRA, called “qualified charitable distributions" (QCDs), offers unique advantages. You can donate up to $108,000 in 2025 directly to qualified charities, keeping those amounts out of your taxable income. This strategy reduces adjusted gross income, which may help preserve eligibility for other tax breaks.

Reposted from our website‘s newsletter 

11/10/2025

BONUS DEPRECIATION AND OTHER YEAR-END TAX-SAVING TOOLS FOR BUSINESSES

As this year comes to a close, business owners seeking to reduce their taxes for 2025 have a variety of opportunities. Here’s a look at two tax-saving tools: bonus depreciation and retirement plan contributions.

ASSETS ELIGIBLE FOR BONUS DEPRECIATION

First-year bonus depreciation has been given new life under the legislation commonly known as the “One Big Beautiful Bill Act" (OBBBA). It had been scheduled to be only 40% for 2025 (60% for certain long-production assets) and to vanish after 2026. The OBBBA permanently reinstates 100% bonus depreciation for eligible assets acquired and placed in service after January 19, 2025. Acquiring eligible assets and placing them in service by Dec. 31, 2025, could significantly reduce your 2025 tax liability.

Eligible assets include most depreciable personal property, such as:

Equipment,
Computer hardware and peripherals,
Certain vehicles, and
Commercially available software.
Also eligible is qualified improvement property (QIP), defined as improvements to the interior of a nonresidential building that was already placed in service. QIP doesn’t include costs to change the building’s internal structural framework (such as enlargement). These costs must generally be depreciated over 39 years.

Unlike Section 179 expensing, which is limited to $2.5 million for 2025 (up from $1.25 million before the OBBBA) and subject to a phaseout, the amount of bonus depreciation a taxpayer can claim is generally unlimited. But there are other tax consequences to consider.

BEWARE OF THE EXCESS BUSINESS LOSS RULE

Individual taxpayers who have losses as a sole proprietor or as an owner of a pass-through entity (partnerships, S corporations and, generally, limited liability companies) may inadvertently trigger the excess business loss rule when they claim bonus depreciation. The excess business loss rule allows business losses to offset income from other sources (such as salary, self-employment income, interest, dividends and capital gains) only up to an annual limit. Amounts above that limit are excess business losses. For 2025, this is the excess of aggregate business losses over $313,000 ($626,000 for married couples filing jointly).

Excess business losses can’t be deducted in the current year and must be carried forward to the following tax year. Such losses can then be deducted under the rules for net operation loss carryforwards. As a result, an individual taxpayer’s 100% first-year bonus depreciation deduction can effectively be limited by the excess business loss rule.

SAVE TAXES BY SAVING FOR RETIREMENT

Tax-favored retirement plans can provide significant savings for small business owners, both by building retirement security and by reducing taxes. Contributions are tax-deductible (or pre-tax, if you’re contributing as an employee).

One of the simplest options is a Simplified Employee Pension (SEP) IRA. If you’re self-employed, you can contribute up to 20% of your net income to a SEP IRA, with a cap of $70,000 for the 2025 tax year. If your own corporation employs you, the contribution limit is 25% of your salary, also capped at $70,000. The tax savings can be substantial.

Other options include 401(k)s, SIMPLE IRAs and defined benefit plans. Depending on your age and income, some of these options might allow you to make even larger contributions. Ask your tax advisor for details.

WRAPPING IT UP

The permanent restoration of 100% first-year bonus depreciation creates tax-saving opportunities for taxpayers while they expand their business potential. And a tax-favored retirement plan is beneficial for you, your business and your employees. Every business is different, so it’s essential to consult a tax professional. Contact the office for help tailoring your tax strategies for 2025 and beyond.

Reproduce from our websites newsletter 

Address

303 Williams Avenue SW, Ste 129
Huntsville, AL
35801

Opening Hours

Monday 8am - 5pm
Tuesday 8am - 5pm
Wednesday 8am - 5pm
Thursday 8am - 5pm
Friday 8am - 5pm

Telephone

(256) 533-7040

Website

Alerts

Be the first to know and let us send you an email when Melvin, Bibb, Segars & Associates, P.C. posts news and promotions. Your email address will not be used for any other purpose, and you can unsubscribe at any time.

Contact The Business

Send a message to Melvin, Bibb, Segars & Associates, P.C.:

Shortcuts

Share

Category