Promotions of 2026

We’re excited to announce the promotions of two of our associates, effective January 1, 2026!

These promotions reflect the dedication, hard work, and growth each individual has demonstrated throughout their time with us. Their commitment to exceptional client service and to upholding our firm’s core values has made a meaningful impact, and we are proud to celebrate this next step in their professional journeys.

Recognizing and developing talent is a cornerstone of Snyder Cohn’s culture. These well-earned promotions highlight not only individual achievements, but also the continued strength and future of our team.

 

Before the Ball Drops: Maximizing Your Charitable Deductions

With less than one month left of tax year 2025, tax planning is in full swing. As part of the One Big Beautiful Bill (OBBBA), beginning in 2026, charitable deduction rules will significantly change for taxpayers. Taxpayers should focus on strategies that maximize their overall, multi-year tax benefit from charitable giving – not only their 2025 deduction alone.

Current Rules Through Tax Year 2025

Individuals who itemize may deduct charitable contributions up to:

  • 60% of AGI for cash gifts to public charities (including Donor Advised Funds (DAFs))
  • 30% of AGI for contributions of capital gain property to public charities (including most DAFs)
  • 20% or 30% of AGI for contributions to private foundations, depending on property type and foundation

Any excess contributions may be carried forward for five years.

Taxpayers using the standard deduction receive no federal deduction for charitable contributions under current law.

Rules Beginning in 2026 Under OBBBA

For 2026 and beyond, OBBBA introduces three major changes for individuals:

  • For non-itemizers: a new above-the-line charitable deduction for cash donations to public charities (up to $1,000 for single filers, $2,000 for joint filers).
  • For itemizers: charitable deductions will only be allowed to the extent the total exceeds a new 0.5% AGI floor (e.g., with $1,000,000 AGI, the first $5,000 of donations are non-deductible).
  • For high-income itemizers: Those in the 37% tax bracket ($640,600 single, $768,700 MFJ for 2026) will also face a new formula which reduces the value of their total itemized deductions by 2/37th of the lesser of either a) total itemized deductions, or b) the amount of AGI which exceeds the 37% bracket threshold.

Planning Opportunities for 2025

  • Consider front-loading charitable gifts before year-end

If you expect to itemize in 2025 but not in 2026, or expect reduced value from itemized deductions due to the new rules, consolidating multiple years of donations into 2025 may yield a larger overall tax benefit by avoiding the impending floor and ceiling rules.  There are other factors to consider when deciding whether a 2025 vs. 2026 charitable contribution yields the best results, such as effective tax rate or income changes.

  • Other Strategies to Consider
    1. Donate to a Donor Advised Fund (DAF): Make a contribution to a DAF to take the tax deduction in 2025 and avoid the 2026 limitations; then, recommend charitable recipients over future years.
      1. Example: Taxpayer D contributes $500,000 to a DAF in 2025. She may deduct up to the full $500,000 on her 2025 tax return, though she may direct the DAF to donate the funds to nonprofits in a future year.
    2. Use Qualified Charitable Distributions (QCDs): For those age 70 ½ or older on 12/31/2025, direct up to $111,000 from IRAs to charities. This may be a strategy to implement in 2026 because it bypasses the AGI-based limits and floors that will be in place.
      1. Important Note: Keep track of these contributions and communicate them to your tax advisor as the fiduciary does not disclose the portion of your IRA distribution that is a QCD on any tax forms.
    3. Donate Appreciated Stock: For long-term stock, you can deduct the fair market value and avoid capital gains altogether.

Because of the limitations in place starting in 2026, being strategic with your charitable gifts can significantly change their tax benefit to you. The methods described above, when intentionally utilized alongside other tax planning strategies, can help ensure you’re getting as much tax benefit from your charitable donations as possible. Contact your Snyder Cohn advisor to discuss your potential charitable donation options.

 

Understanding Disability Premiums: Key Insights for Employers and Employees

Understanding how disability premiums work is essential for both employers and employees. These decisions affect compliance, support during difficult times, and the taxability of benefits. Whether you’re dealing with short-term disability (STD) or long-term disability (LTD), here’s what you need to know.

Taxability of Disability Payments

The tax treatment of disability benefit payments hinges on who pays the premiums and how they are paid.

Here’s a quick breakdown:

  • Taxable Benefits: Payments are taxable when:
    • Employees pay premiums with pre-tax dollars, or
    • Employers pay premiums and do not include those amounts in the employee’s taxable wages on the employee’s Form W-2.
  • Non-Taxable Benefits: Payments are not taxable when:
    • Employees pay premiums with post-tax dollars, or
    • Employers pay premiums and do include those amounts in the employee’s taxable wages on their Form W-2.

Structuring your plan to allow for post-tax employee premium payments can ensure benefits are tax-free when needed. While employees may feel the tax impact upfront, they will appreciate the tax-free income during a disability event. Employees should confirm how premiums are paid and consider post-tax contributions if available.

Working with Third-Party Sick Pay Providers
Many employers outsource the administration of short- and long-term disability benefits to third-party providers. While this simplifies claims processing, it can complicate tax reporting. Typically, the third party handles most withholding and reporting obligations. However, generally the employer is still responsible for reporting sick pay benefit payments made by a 3rd party and any withheld income tax on Form 941. The employer would also file need to file Form 8922 to reconcile the employee’s Form W-2 and any Forms 941 filed by the employer.

Shared Contribution Plans
If both the employer and employee paid disability premiums, only the employer-funded portion of benefits is taxable. Use the three-year lookback rule to determine the taxable percentage.
For example, if the employer paid 70% of premiums over the past three years, then 70% of the benefit is taxable and should be reported accordingly.

Conclusion

Managing disability premiums is not merely an administrative task; it is a commitment to supporting employees during life’s unexpected challenges. By understanding the tax implications and structuring benefits strategically, employers can build a program that truly supports their team.

Most importantly, employers should educate employees on how their premium contributions affect benefit taxability. Employees should take an active role in understanding their coverage. Stay proactive, keep detailed records, and review policies regularly, as tax laws and reporting responsibilities can change.

If you have any questions, don’t hesitate to reach out to your advisors at Snyder Cohn for more insights and guidance.

By: Zane Sanchez

The One Big Beautiful Bill Act: Key Tax Changes for High-Net-Worth Individuals & Estate Planning

The One Big Beautiful Bill (OBBB), signed into law on July 4, 2025, is the biggest tax overhaul since the 2017 Tax Cuts and Jobs Act (TCJA). For high-net-worth individuals (HNWIs) and those involved in estate, trust, and gift planning, it brings significant changes that could reshape your tax strategy and wealth transfer plans. Here are the key provisions in OBBB to know:

Key Changes for High-Net-Worth Individuals

Income Tax Rates and Brackets: Makes permanent the current individual rates and brackets, including the top 37% rate, preventing the scheduled increase to 39.6% in 2026. This keeps planning predictable for those with substantial investment or business income.

SALT Cap Temporarily Raised: Increases the SALT deduction cap to $40,000 for joint filers through 2029, with the cap phasing out for incomes over $500,000 and reverting to $10,000 for anyone with income greater than $600,000. This provides modest relief for middle- to upper-middle-income taxpayers in high-tax states, but higher earners will see no benefit compared to the $10,000 cap imposed under the TCJA.  Fortunately, the Pass-through entity tax (PTET) deduction was untouched in OBBB, which will allow business owners to continue to benefit from deductions on some additional state-level tax.

Charitable Giving Adjustments: Charitable deductions are reduced by 0.5% of adjusted gross income (AGI) for itemizers. For non-itemizers, there’s now a permanent above-the-line deduction of up to $1,000 ($2,000 for joint filers). The 60% AGI limit for cash donations to public charities is also permanent. Review giving strategies carefully to maximize deductions.

QSBS Enhancements: Expands the capital gains exclusion for qualified small business stock (QSBS) with a tiered benefit: 50% exclusion after 3 years, 75% after 4 years, and 100% after 5 years. The maximum exclusion per issuer rises from $10 million to $15 million, and the gross assets cap for eligible companies goes from $50 million to $75 million for stock acquired after July 4, 2025. This rewards investors in startups and small businesses, offering increasing tax benefits for longer holding periods, but now also provides substantial incentives for those who exit earlier.

Deduction Limitation for High-Income Taxpayers: Revives a pre-TCJA limit on itemized deductions for top-bracket taxpayers. The benefit drops slightly, from 37 cents to 35 cents per dollar above the threshold, effectively capping the value of deductions for the highest earners.

Section 199A QBI Deduction: Makes the 20% Qualified Business Income (QBI) deduction for pass-through owners permanent, preserving a key benefit for business owners, subject to limits and phaseouts.  Making the deduction permanent brings added certainty and allows for more effective long-term planning.

Alternative Minimum Tax (AMT) Exemption Extended: Extends higher AMT exemption amounts but resets phaseout thresholds to 2018 levels ($1 million for joint filers), indexed for inflation. More high earners will continue to avoid the AMT for now.

Key Changes for Estates, Trusts, and Gifts

Estate and Gift Tax Exemption Increased: Permanently raises the federal estate and gift tax exemption to $15 million per person ($30 million for couples), indexed for inflation from 2026. This preserves the TCJA’s higher limits, giving more room to transfer wealth tax-free during life or at death.

GST Exemption Aligned: The generation-skipping transfer (GST) tax exemption matches the new estate and gift exemption, also indexed for inflation – a key benefit for multigenerational planning and dynasty trusts.

Practical Planning Considerations

  • Update Estate Plans: Revisit your plan, trusts, and gifting strategies to align with the new higher thresholds.
  • Make Lifetime Gifts: Larger tax-free gifts can reduce your taxable estate and shift appreciating assets sooner.
  • Optimize Charitable Giving: Structure gifts and trusts to maximize deductions under new rules.
  • Leverage QSBS: Review startup investments to take advantage of the expanded capital gains exclusion.

Final Thoughts

The OBBB creates major opportunities and new planning challenges. Staying informed and working with experienced advisors is key to navigating this evolving tax landscape. At Snyder Cohn, we’re here to help you adapt your plan, protect your wealth, and make the most of these changes.

Contact your Snyder Cohn advisor to discuss how the OBBB may affect you.

 

By: Zane Sanchez

The One Big Beautiful Bill Act: Key Tax Changes for Professional Service Organizations

The One Big Beautiful Bill Act (OBBB) introduces significant tax and business changes, especially for professional service organizations. It extends and updates several provisions from the 2017 Tax Cuts and Jobs Act (TCJA). Below is a summary of the key updates and planning tips to help your organization navigate these changes effectively:

Section 179 & Bonus Depreciation: 100% Bonus Depreciation is now permanent, allowing you to fully deduct qualified property placed in service after January 19, 2025.

Additionally, the Section 179 Expensing Limit has increased from $1 million to $2.5 million and the phase-out threshold rises from $2.5 million to $4 million. These thresholds will be adjusted annually for inflation starting in 2026.

Both provisions help businesses take larger up-front tax deductions for new equipment or property.  With careful planning, this can help reduce business owners’ overall tax burden.

Qualified Business Income (QBI) Deduction: The 20% Qualified Business Income (QBI) deduction for pass-through entities (such as partnerships and S corporations) is now permanent. The income thresholds for certain service-based business owners of Specified Service Trades or Businesses (SSTBs), like law firms and medical practices, have been relaxed, making it easier for them to qualify before being phased out.

Pass-Through Entity (PTET) Tax Deduction: The federal deduction for Pass-Through Entity Taxes (PTET) remains fully preserved. At the same time, the individual State and Local Tax (SALT) deduction increases to $40,000 for 2025 and will gradually rise through 2029.

However, the higher SALT deduction brought by OBBB begins to phase out for joint filers with income over $500,000. Because PTET remains fully deductible at the entity level, high-income business owners should continue paying these taxes through their entity to maximize their federal deductions.

C-Corporations: The OBBB introduces a new rule limiting charitable deductions for C-corporations. Now, only the portion of charitable contributions that exceeds 1% of taxable income is deductible, up to the existing 10% cap. This change reduces the tax benefit of making donations through a C-corporation. To maximize deductions, consider making charitable contributions through pass-through entities or on individual tax returns instead.

Additionally, the C-corporation tax rate is now permanently set at 21%, providing greater stability for long-term business planning and structuring.

Reporting Requirements (Forms 1099-NEC and 1099-K): Starting in 2026, the threshold for reporting payments on these forms increases from $600 to $2,000 per year. In 2027, this threshold will adjust with inflation. Businesses should start updating vendor payment systems now to stay compliant.

The One Big Beautiful Bill Act introduces a variety of complex tax law changes that are expected to have a significant impact on businesses, particularly professional service organizations. Many of the OBBB provisions affect business owners directly as well, with additional details covered in a separate article focused on High-net-worth individuals, estates, and trusts.

To fully understand how these changes might affect your unique situation, we recommend consulting with a qualified tax professional. Snyder Cohn is available to answer any questions and assist with strategic planning as you prepare for the changes in 2025 and beyond.

 

By: Melinda Kloster, Elizabeth Dentan and Desi Diaz

The One Big Beautiful Bill Act: Key Tax Changes for the Tech Industry

The One Big Beautiful Bill Act (OBBB) has introduced several key changes to both businesses and individuals.  Several of the changes relate specifically to the high-tech industry and are designed to stimulate economic growth and encourage investment in research and development (R&D).  The provisions below are of particular interest to this industry.

Research and Experimental (R&E) Expenditures (Section 174):  Businesses are once again permitted to immediately deduct domestic R&E expenditures paid or incurred in tax years beginning after December 31, 2024. However, foreign-based R&E expenditures must continue to be capitalized and amortized over a period of 15 years. Additionally, expenditures incurred for the acquisition of depreciable property used in research and development activities are not eligible for expensing under this section.

Qualified small businesses are allowed to make an election to retroactively expense any previously capitalized domestic R&E expenditures. This election must be made by July 4, 2026. For these purposes, a qualified small business is defined as one whose average annual gross receipts do not exceed $31 million for the three preceding tax years. This retroactive election may be executed either by amending previously filed tax returns or by filing a change in accounting method with the 2025 tax return which will run all previously capitalized R&E expenditures as expenses on that return.

Lastly, any business, even those which do not meet the qualified small business criteria, may make an election to deduct any remaining unamortized domestic R&D expenditures over a period of either one or two years, beginning with the first tax year that starts after December 31, 2024.

Bonus Depreciation:  OBBB brings back 100% bonus depreciation for qualified property placed in service after January 19, 2025. The Act makes 100% bonus depreciation permanent, with no end dates or phase-out periods. Prior to enactment, bonus depreciation was reduced to 40% in 2025 and 20% in 2026.

For fixed assets placed in service after December 31, 2024 but before January 20, 2025, the applicable bonus depreciation rate is 40%, as provided for under the prior law.

Section 179 Expensing:  The dollar limitation for Section 179 expensing increases from $1,250,000 under the old law to $2,500,000 effective for property placed in service in tax years beginning after December 31, 2024. This limitation is reduced by the amount by which the total Section 179 property placed in service during the tax year exceeds $4,000,000 ($3,130,000 under old law).

These increases are permanent, and the limitations will be adjusted annually for inflation for tax years beginning after 2025.

Qualified small business stock (QSBS) (Section 1202):  Expands the capital gains exclusion for qualified small business stock (QSBS) with a tiered benefit: 50% exclusion after 3 years, 75% after 4 years, and 100% after 5 years. The maximum exclusion per issuer rises from $10 million to $15 million, and the gross assets cap for eligible companies goes from $50 million to $75 million for stock acquired after July 4, 2025. The new QSBS provisions provide growing tax advantages for longer holding periods but importantly give investors the opportunity to benefit earlier, making the incentive more flexible and accessible.

In addition, the amount of gain exclusion has increased from the greater of 10 times stock basis or $10,000,000 (for QSBS acquired prior to July 4, 2025) to $15,000,000 (for QSBS acquired after July 4, 2025), adjusted each year thereafter for inflation.  These limits are subject to certain reductions.

Finally, for purposes of determining if a company qualifies as a qualified small business, the gross asset test has increased from $50,000,000 to $75,000,000 for stock issued after July 4, 2025.

See more on Section 1202. 

At Snyder Cohn, we’re here to help you navigate these changes, adjust your strategies as needed, and identify new opportunities in the evolving tax environment.

 

By: Cheryl Heusser and Joe Bishop

 

The One Big Beautiful Bill Act: Key Tax Changes for the Real Estate Industry

The One Big Beautiful Bill Act (OBBB), signed into law on July 4th, introduces a range of updates—some welcome, some more complex—for real estate developers, investors, and property owners. Below is a summary of the key tax provisions that are likely to impact the real estate sector.

QBI Deduction Made Permanent: One of the most significant updates is the permanent extension of the 20% Qualified Business Income (QBI) deduction, originally introduced under the 2017 Tax Cuts and Jobs Act. This is a major benefit for many real estate professionals, as a broad array of real estate-related activities typically qualify. Making the deduction permanent brings added certainty and allows for more effective long-term planning.

100% Bonus Depreciation Returns: Beginning January 20, 2025, qualifying property placed in service will once again be eligible for 100% bonus depreciation.  This includes assets like qualified improvement property (QIP), land improvements, equipment, furniture, and fixtures. OBBB makes this benefit permanent, with no end dates or phase-out periods. The return of full first-year depreciation provides a substantial tax advantage and further enhances the benefits of cost segregation studies, which can help reclassify assets to maximize depreciation deductions.

Business Interest Deduction Rules Revised: OBBB also revises the limitation on business interest expense deductions under Section 163(j), shifting the calculation back to an EBITDA basis (earnings before interest, taxes, depreciation, and amortization). This change allows taxpayers to deduct more interest expense since depreciation and amortization are no longer included in the income base used to calculate the 30% limitation. This is particularly helpful in real estate, where these non-cash expenses can be significant. Real estate businesses still have the option to elect out of these limitations altogether.

Clean Energy Incentives Phasing Out: Several clean energy tax incentives—including Sections 179D and 45L—are set to expire on June 30, 2026. These provisions have supported energy-efficient building projects and may have played a role in developers’ sustainability and tax saving strategies. With these incentives winding down, project economics may need to be reevaluated.

Opportunity Zones Program Extended: The Qualified Opportunity Zone (QOZ) program, originally set to sunset in 2026, is now permanent. The updated program includes the creation of Qualified Rural Opportunity Funds and new compliance and reporting rules, many of which will go into effect starting January 1, 2027. In the meantime, there are still valuable planning opportunities under the current rules.

Pass-Through Entity Tax (PTET) Deduction untouched: The Act did not alter the SALT workaround for business owners, preserving a valuable tax planning opportunity for real estate businesses and their owners.

The One Big Beautiful Bill Act brings lasting changes to the real estate tax landscape. While many favorable provisions have been extended or made permanent, others—such as clean energy incentives—are being phased out. These updates may affect your planning, investment decisions, and overall tax strategy.

At Snyder Cohn, we’re here to help you navigate these changes, adjust your strategies as needed, and identify new opportunities in the evolving tax environment.

 

By: Billy Litz and Dustin Cutlip

Laying a Strong Financial Foundation for New Nonprofits

At Snyder Cohn, we work with over 120 nonprofit organizations—ranging from newly established groups to large, nationally recognized charities.

We continue to have conversations with clients about how new nonprofits can establish smart accounting practices from the outset. In this article, we’re highlighting a few key strategies to help streamline financial processes and enhance operational efficiency from day one.

Create the Ideal Chart of Accounts

We’ve addressed this topic before (click here to read more), but it continues to be a common and important area of focus for nonprofits. Unlike for-profit entities, nonprofits may rely heavily on contributions and grants—many of which come with donor-imposed restrictions. This makes compliance and transparency critical when designing the chart of accounts.

A well-structured chart of accounts for a nonprofit typically includes categories for restricted and unrestricted contributions and grants, as well as other revenue sources such as special events, membership dues, and program income—some of which may be subject to unrelated business income tax (UBIT). On the expense side, costs are generally categorized into functional areas like general and administrative, fundraising, and program services. This structure supports clearer reporting and helps differentiate between overhead and mission-driven expenses.

Such an approach simplifies the preparation of Form 990 and annual audits. Additionally, a nonprofit’s Statement of Financial Position often includes unique accounts like pledges receivable and distinctions between net assets with and without donor restrictions—key indicators of an organization’s financial health and available resources.

When setting up your chart of accounts, also consider the following:

  • Accounting software: Many nonprofits use QuickBooks, which allows for the use of classes to track revenue and expenses by project or grant—avoiding an overly complex chart of accounts.
  • Budget alignment: Make sure your chart of accounts aligns with your budget to support timely and accurate financial reporting.
  • Grant readiness: If your organization currently receives—or plans to receive—federal or passthrough grant funding, a clearly organized chart of accounts is essential.

Automate the Bill Payment Process

Managing bill payments may not be top of mind for nonprofit founders, but establishing sound internal controls from the beginning is critical. Most new nonprofits are run by a small team, often with board members and staff working remotely. This can make it challenging to maintain proper segregation of duties and an efficient approval process.

Automating the payment process can help. Online bill payment platforms streamline invoice review and approval workflows, minimize manual data entry, and save valuable staff time. Many of these platforms integrate directly with accounting software, improving both efficiency and accuracy.

Digital solutions like BILL and Ramp are cost-effective tools that sync with platforms such as QuickBooks Online, Xero, and Sage Intacct. They also use AI to capture key invoice details—such as vendor, amount, and due date—reducing the risk of data entry errors. Invoices can be uploaded and approved digitally, making it easy for auditors to access documentation when needed.

These platforms also handle credit card transactions. For example, BILL Spend & Expense allows nonprofits to manage and document both bill payments and credit card activity in one place, simplifying reconciliation and improving audit readiness.

Protect Against Cybersecurity Threats

Cybersecurity may not feel like an immediate priority for a new nonprofit, but as organizations increasingly adopt cloud-based systems for accounting and bill payment, digital security becomes a critical concern.

Nonprofits are prime targets for cyberattacks such as phishing, ransomware, and social engineering. These threats can lead to serious consequences—including data breaches and financial losses. That’s why it’s important to take proactive steps to secure your systems and train your team.

Start by creating a cybersecurity policy that outlines clear guidelines for safe online behavior. You may also want to explore cybersecurity liability insurance, which can help cover losses related to attacks, including legal fees, data recovery, and operational disruptions. Ongoing staff training is also essential to stay ahead of evolving cyber threats.

These are just a few of the many factors new nonprofits should consider when establishing sound financial controls. Interested in learning more? Contact our nonprofit team at Snyder Cohn—we’re here to help you build financial systems that are efficient, transparent, and secure.

 

By: Rachel Zutshi and Sabeen Taha

The Clock Is Ticking: Maximizing the Lifetime Gift Exclusion Before It’s Too Late

The Clock Is Ticking: Maximizing the Lifetime Gift Exclusion Before It’s Too Late

The record-high lifetime gift exclusion, established by the Tax Cuts and Jobs Act (“TCJA”) is set to expire at the end of 2025. Under current law, every individual can transfer up to $13.99 million free of federal estate and gift tax in 2025. Combined, a married couple has the opportunity to pass $27.98 million if each takes advantage of his/her full exemption. Without congressional intervention, this amount will be halved on January 1, 2026, reverting to pre-TCJA levels. With uncertainty surrounding potential estate tax changes—new developments are unfolding almost daily—it is prudent to be prepared to act quickly. Delays could result in missed opportunities, as valuations, legal work, and trust funding all require lead time.

The gap between today’s generous exclusion and future thresholds could result in millions of dollars in added tax exposure, making proactive planning essential. It is crucial to evaluate individual circumstances, including the types of assets involved and the time required to execute strategies effectively. This article outlines key strategies to help you navigate possible impending changes and ensure that your estate planning remains effective and beneficial.

Use It or Risk Losing It

The 2017 tax legislation temporarily doubled gift and estate tax exclusions, allowing individuals to transfer significantly more wealth free of federal transfer tax. However, this elevated allowance is scheduled to sunset after 2025, potentially impacting individuals and families whose net worth exceeds the reverted exclusion amount.

“Anti-clawback” regulations ensure that individuals who make large gifts now will not be penalized if the exclusion later decreases. However, proposed rules may limit this protection if assets given away remain tied to the donor’s estate under certain tax provisions. To avoid complications, it is necessary to make completed gifts where you fully relinquish control. Any post-gift appreciation of transferred assets also stays outside your taxable estate, making early action even more advantageous.

Given that assets like real estate, business interests, and securities require valuations and careful structuring, waiting until late 2025 may be too late.

Spousal Lifetime Access Trusts (SLATs)

For many married couples, a Spousal Lifetime Access Trust (SLAT) is a powerful tool. This strategy allows one spouse to use his or her gift tax exclusion to transfer assets out of the estate while still providing indirect access to trust distributions through the beneficiary spouse. When structured properly, these assets remain outside the taxable estate of both spouses.

Because SLATs are irrevocable and family circumstances can change, thoughtful planning is necessary to maintain flexibility while securing tax benefits. Given the potential sunset of current exemptions, starting the process early ensures enough time to finalize an optimal trust structure.

Gift Splitting

A gift splitting election allows married couples to balance the use of their combined exclusions, even when family wealth is unevenly divided. The election treats a gift from one spouse as being made equally by both, maximizing the available combined exclusions. However, improper execution can lead to significant tax consequences, such as unintended estate inclusion or gift tax liabilities, making it crucial to consult a tax advisor.

Portability: A Backup Strategy

Portability allows a surviving spouse to inherit any unused exclusion from a pre-deceased spouse, known as the Deceased Spousal Unused Exclusion Amount (DSUEA). While this provides valuable flexibility, it has limitations: the DSUEA is not inflation-adjusted, does not apply to the Generation-Skipping Transfer (GST) tax exemption, and could be lost if the surviving spouse remarries, and the new spouse dies first with a smaller exclusion. A timely estate tax return must be filed to preserve portability, even if no tax is owed.

Step Transactions: Avoiding IRS Pitfalls

A common pitfall occurs when one spouse gifts assets to the other, who then quickly transfers them again. The IRS may collapse these steps into one transaction, resulting in substantial gift tax liabilities. To mitigate this risk, allow time and events to transpire between steps and document each transaction thoroughly. Working with an experienced tax advisor can help ensure your strategy is structured correctly for your situation.

Practical Takeaways

  • Start now, but stay flexible – Completing valuations, legal agreements, and trust funding takes time, and waiting until late 2025 may be too late. However, keeping an eye on legislative developments allows you to fine-tune your plan as needed.
  • Work with valuation experts and legal counsel. Certain assets require appraisals and legal structuring, which can take months to finalize.
  • Make true lifetime gifts – Fully removing assets from your taxable estate now locks in the current high exemption.
  • Review your plans regularly – Tax laws, state laws, and family circumstances change. Regular check-ins with estate planning professionals ensure plans are still aligned with goals and evolving legislation. Maryland residents, in particular, should also be aware of a current proposal to reduce the state’s estate tax exemption from $5 million to $2 million per individuals ($10 million to $4 million for married couples).

Conclusion

With the elevated gift and estate tax exemptions potentially expiring, the time to plan is now. While the future remains uncertain, failing to prepare could result in missed opportunities and substantial tax liabilities. Some lawmakers are pushing for extensions or expansions, while others advocate for reductions. If no action is taken, the exemption will automatically revert to pre-TCJA levels after this year, cutting it in about half.

Given this uncertainty, a proactive yet flexible approach is key. Planning now ensures that the necessary valuations, legal structures, and strategies are in place to act quickly if needed. The estate planning landscape is shifting, and timely action could make a significant financial difference. Our team at Snyder Cohn is ready to guide you through this evolving environment, helping to develop a strategy that preserves and protects wealth for generations to come.

by: Zane Sanchez

SECURE 2.0 Provisions Effective in 2025 for 401(k) and 403(b) Plans

The SECURE 2.0 Act of 2022 includes more than 100 separate provisions focused on updating and reforming the U.S. retirement plan system. It expands on the Setting Every Community Up for Retirement Enhancement Act of 2019 (commonly known as SECURE). Although SECURE 2.0 became law in 2022, its provisions are being phased in over several years.  Many already took effect in 2023 and 2024, but there are a number of key provisions going into effect for 2025, including:

  • Automatic Enrollment
  • Enhanced Catch-up Contributions
  • Coverage for Part-time Employees
  • Creation of a New Retirement Savings Database

 

Automatic Enrollment

As of January 1, 2025, all 401(k) and 403(b) plans established after December 29, 2022, must automatically enroll eligible employees in the plan through an eligible automatic contribution arrangement (EACA). Employees must be initially enrolled at a contribution rate between 3% and 10% of their compensation. That contribution rate is also required to automatically increase by 1% annually until it reaches at least 10%, but not more than 15%. Companies with 10 or fewer employees, plans established before December 29, 2022, and those operating for less than three years are exempt from this requirement.

 

EACAs must allow employees to withdraw automatic contributions (and any earnings) within 90 days of the first contribution without facing the standard 10% penalty on early withdrawals. Employers must also provide plan details to employees, including contribution rates, opt-out procedures, and investment options.

 

Enhanced Catch-up Contributions

The SECURE 2.0 Act allows 401(k), 403(b), and governmental 457(b) plans to offer higher catch-up contributions for participants aged 60 to 63. While not mandatory, plan sponsors may opt to amend their plans to include this enhanced catch-up option, in addition to the existing catch-up contributions for participants ages 50 or older.

 

For plans adopting this provision beginning in 2025, eligible individuals may contribute the greater of $10,000 or 150% of the regular catch-up limit, adjusted each year for inflation. For 2025, this means those ages 60-63 may make catch-up contributions up to $11,250, which is 150% of the regular catch-up limit of $7,500 for those under age 60, for a total maximum contribution of $34,750.

 

Coverage for Part-time Employees

Historically, employers were allowed to exclude employees who worked less than 1,000 hours during the plan year from being eligible to participate in their 401(k) plan.  Under the terms of the SECURE Act of 2019, starting with 401(k) Plan years beginning on or after January 1, 2021, part-time employees who completed at least 500 hours of service in three consecutive years and had reached age 21 by the end of the third year were required to be given the opportunity to participate in the Plan.  For example, a part-time employee who worked at least 500 hours in each of 2021, 2022 and 2023 must have been given the opportunity to participate in the Plan as of January 1, 2024.

 

Under the terms of the SECURE 2.0 Act, effective January 1, 2025, the service requirement for part-time employees is reduced from three years to two years. Therefore, a part-time employee who worked at least 500 hours in each of 2023 and 2024 must be given the opportunity to participate in the Plan as of January 1, 2025. SECURE 2.0 also extended this benefit to ERISA-covered 403(b) plans.

 

Creation of a New Retirement Savings Database

As the modern-day workforce has become more mobile, Congress recognized that it is not uncommon for workplace retirement accounts to be left behind when workers change jobs, or when companies go out of business or are merged into other companies. To try to give workers more tools for tracking down their retirement benefits that may be held by former employers or their successors, SECURE 2.0 requires the U.S. Department of Labor (DOL) to create an online, searchable database that participants and beneficiaries can use to locate retirement plan administrators who may owe them benefits. The secure database will include details about the plan, administrator, and separated vested participants ages 65 and older, including deceased beneficiaries who are entitled to benefits.

 

The DOL faced a statutory deadline of December 29, 2024, to roll out this database.  It was launched slightly ahead of schedule on December 27, but continues to be built-out and populated as additional plan information becomes available.

 

Deadline for SECURE 2.0 Amendments

The deadline for amending retirement plans to comply with SECURE 2.0 has been extended so that most plans now have until December 31, 2026, to incorporate SECURE 2.0-related changes, with collectively bargained plans and governmental plans having longer. That extension does not alleviate plan sponsors and their third-party administrators from implementing the required operational changes currently.

 

As the provisions of SECURE 2.0 continue to roll out, they represent a significant shift toward improving retirement savings accessibility and flexibility for American workers. The changes set to take effect in 2025, including automatic enrollment, enhanced catch-up contributions, expanded coverage for part-time employees, and the creation of a retirement savings database, are poised to make retirement planning more inclusive and efficient. Employers and plan sponsors will need to stay informed about these changes to ensure compliance and provide their employees with the most up-to-date retirement benefits. With the deadline for plan amendments set for December 31, 2026, businesses still have time to adjust their plans, but it is essential to begin making necessary operational changes sooner rather than later to fully take advantage of the SECURE 2.0 Act’s provisions.

By: Barbara Murphy Kromer