January Quarterly Newsletter - 2026

Highlights of this Special Edition Newsletter:

• Year-End Tax Planning Update: Key Changes from the One Big Beautiful Bill

  • What Changed for 2025 Taxes

  • Planning Implications for Clients

  • Looking Ahead to 2026

• Supporting Our Communities

• Tax Season Reminder for IRA and Roth IRA Holders

Year-End Tax Planning Update: Key Changes from the One Big Beautiful Bill

AS TAX SEASON APPROACHES and year-end planning concludes, a major piece of federal tax legislation warrants your attention. The One Big Beautiful Bill (OBBB), signed into law on July 4, 2025, introduces broad changes to the U.S. tax code that affect individual and family tax planning. Many of these provisions will shape 2025 filings and extend into 2026 and beyond. You should consult with your qualified tax professional on the impacts of this legislation.

What Changed for 2025 Taxes

Standard deduction updates

The OBBB makes permanent several provisions of the 2017 Tax Cuts and Jobs Act and modestly expands the standard deduction beginning in 2025. Married couples filing jointly can claim approximately $31,500, with an additional $7,600 (per person, subject to phase-out limitations) for those over age 65. Comparable increases apply across other filing statuses.

New income deductions for workers For the first time, certain types of compensation receive special tax treatment. From the 2025 tax year through 2028, taxpayers can exclude federal income tax on qualified tips and the premium portion of overtime pay. While all tips and overtime pay must still be reported on your tax return, and FICA taxes must be paid on both, a portion of tips and overtime premiums under the Fair Labor Standards Act can be excluded from federal taxable income.

Expanded SALT deduction The cap on the state and local tax deduction increases meaningfully for 2025, subject to income phaseouts. This change may provide meaningful relief for households in higher-tax states that itemize deductions.

Additional 2025 provisions

Other targeted changes include supplemental deductions for older taxpayers and adjustments to itemized deductions designed to increase refunds for many filers this spring.

Planning Implications for Clients

Take-home pay and withholding

Some provisions of the new law are already reflected in updated payroll withholding tables,

which may result in higher take-home pay during 2025.

Itemizing versus the standard deduction

With an expanded SALT cap and new deductions related to tips and overtime, more households may benefit from itemizing. However, a side-by-side comparison against the higher standard deduction remains essential.

Year-end giving and retirement planning

Changes to deductions and inflation adjustments reinforce the importance of reviewing charitable giving strategies and retirement contributions. Timing decisions can meaningfully impact overall tax efficiency.

Looking Ahead to 2026

Several additional provisions take effect in 2026 and should be incorporated into longer-term planning discussions:

Estate and gift planning

The unified lifetime gift and estate tax exemption increases to $15 million per taxpayer, creating

additional planning flexibility for high-net-worth families.

Inflation adjustments

Standard deductions and tax brackets will increase by an estimated 2.2 percent to 4.0 percent,

depending on final inflation calculations.

Charitable deductions for non-itemizers

Taxpayers who do not itemize may deduct up to $1,000 for single filers or $2,000 for married couples for charitable contributions.

Education saving

Annual 529 plan distributions for K–12 qualified education expenses increase to $20,000 per student.

Flexible Spending Accounts (FSAs)

For 2026, the Health Care FSA limit increases to $3,400, with up to $680 eligible for carryover. The Dependent Care FSA limit rises to $7,500 per household. Health Care FSAs apply per employee, allowing spouses to each contribute the maximum if eligible, while Dependent Care FSAs remain capped per household.

Supporting Our Communities

For many years, LVM has contributed to charities that make a direct and meaningful impact on the

lives of others. In December 2025, we honored you – our valued clients – by making donations to these nonprofit organizations:

• Centrica Care Navigators (originally founded as Hospice Care of Southwest Michigan)

• Kalamazoo Gospel Ministries

• Kalamazoo Loaves and Fishes

• Warrior Homes of Collier (Florida)

Tax Season Reminder for IRA and Roth IRA Holders

AS YOU PREPARE FOR TAX SEASON, please remember:

• If you completed Qualified Charitable Distributions (QCDs), Roth Conversions, or Backdoor Roth Conversions this year, it’s essential to provide your tax preparer with the correct documentation.

• Specifically, ensure you present your Form 1099-R and any QCD details related to your IRA and Roth IRA accounts.

These steps help avoid reporting errors and ensure your tax return accurately reflects your

retirement account activity.

Please reach out to our team to discuss strategies tailored to your goals for 2026 and beyond.

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