Farkas Tax Advisors Inc.

The One, Big, Beautiful Bill Act (OBBBA) contains enhancements to Section 529 plans. The new law expands the list of educational expenses that can be paid with tax-free distributions. Starting in 2026, 529 plan funds can cover qualified expenses, including books, online instructional materials, tutoring or classes outside the home, and some testing fees. In addition, the OBBBA boosts the annual limit on tax-free distributions for qualified elementary and secondary school expenses from $10,000 to $20,000. And beginning in 2027, it introduces a tax credit of up to $1,700 for contributions to organizations that provide scholarships to primary and secondary school students. Questions? Contact us at (760) 237-4000.

Supporting your favorite charities in 2025? Track and document your donations as you make them so you're not scrambling at tax time. But charitable deductions might not provide the tax savings you expect because of the various rules and limits that apply. Contact us at (760) 237-4000. We can help you assess the potential tax benefits in your particular situation.

Probate can be expensive and significantly delay the distribution of assets to your loved ones. But you can sidestep it on your bank, brokerage and other eligible accounts by converting them to payable-on-death (POD) accounts. How? Simply complete a POD designation form naming one or more beneficiaries. At your death, the financial institution will transfer any balance directly to the named beneficiaries, outside of probate and usually within a few days of receiving a death certificate. Looking for more ways to reduce expenses and achieve your estate planning goals? Call us at (760) 237-4000.

One of the lesser-known provisions of the One, Big, Beautiful Bill Act is a new deduction for certain vehicle interest. This provision allows taxpayers to deduct up to $10,000 in interest on loans to buy new cars, minivans, vans, SUVs, pickup trucks and motorcycles. Vehicles must be purchased for personal (not business) use and final assembly must occur in the United States. This deduction for qualified loans made after 2024 and before 2029 is available to both itemizing and non-itemizing taxpayers. However, limitations apply. Used and leased vehicles don’t qualify, and the deduction phases out for modified adjusted gross income above $100,000 (individuals) and $200,000 (joint filers). Contact us at (760) 237-4000 with any questions.

Generally, if you're over age 59½, withdrawals of Roth IRA earnings are tax-free. But there’s one more requirement: Your Roth must have been open at least 5 years. The countdown clock starts on Jan. 1 of the year you made your very first Roth IRA contribution; it doesn’t apply to each contribution separately. Have questions? Let’s talk before you launch any Roth IRA withdrawals. Contact us at (760) 237-4000.

Struggling with tax debt? An Offer in Compromise (OIC) might be the solution if you’re eligible. The IRS allows qualified taxpayers to settle their debt for less than the full amount owed. If you're facing financial hardship, an OIC can help you get back on track while avoiding overwhelming penalties. The process requires proper documentation, negotiation and a $205 nonrefundable application fee. Be aware that most offers aren’t accepted. But in the right situation, it can significantly reduce an individual’s tax burden. Contact us at (760) 237-4000 to see if you’re a candidate.

Bonus depreciation is a tax incentive that allows businesses to immediately deduct the cost of eligible assets (like machinery, equipment, or certain improvements) rather than spreading the deduction over the useful life of the asset. First-year bonus depreciation had been phasing down 20% annually since 2023 and was set to drop to 0% in 2027. The good news is that the One, Big, Beautiful Bill Act makes permanent 100% first-year bonus depreciation for the cost of qualified new and used assets acquired and placed into service after Jan. 19, 2025. The law also introduces a 100% deduction for the cost of “qualified production property” (nonresidential real property used in manufacturing) placed into service after July 4, 2025, and before 2031. Contact us at (760) 237-4000 to learn about these and other business-related tax provisions in the law.

Having the right estate planning documents in place gives you peace of mind and provides clarity for your loved ones during difficult times. That should start with a will, which designates who receives your assets and who becomes guardian of your minor children. Without it, state law decides. Also, consider a financial power of attorney and a medical power of attorney. They authorize someone to handle financial matters on your behalf if you’re unable to do so and make medical decisions for you if you’re incapacitated. Contact us at (760) 237-4000 with questions.

If you’ve received a large inheritance, it may be tempting to view it as “found money” that can be spent freely. But it’s in your best interest not to make quick purchases or financial commitments. Wait until you know what your net proceeds from the estate will be. Once all fees and taxes are accounted for, the final settlement may be less than you expect. What if you’re receiving your inheritance through a trust? Learn the trust’s terms and understand the timing and amount of distributions and any conditions that must be satisfied to receive them. Contact us at (760) 237-4000 for assistance.

If you have a traditional or Roth IRA account, you’re likely familiar with its retirement-saving benefits. What you may not know is that funds in your IRA can be used to purchase your first home or fund your child’s higher education expenses. Indeed, exceptions for IRA withdrawals allow you to take a penalty-free distribution of up to $10,000 to buy or build a first home, meaning that you haven’t owned a home in the past two years. Also, you can withdraw funds to pay qualified higher education costs for yourself, your spouse or your children. For students enrolled at least half-time, this includes tuition, fees, books, and room and board. Contact us at (760) 237-4000 for additional details.