Whalen CPAs is proud to announce that T.J. Lowry has been promoted to Vice President of Audit Services and named the firm’s newest Partner.

For T.J., becoming a partner is more than a professional milestone. It is a responsibility – to clients, to the team, and to the long-term future of the firm.

“In my youth, becoming partner was about the achievement,” T.J. shared. “Today, it’s about service and having an impact beyond the financial statements.”

That sense of responsibility has shaped much of T.J.’s career. Inspired by his father, a CPA, T.J. knew from a young age that he wanted to follow in his footsteps. Over time, that early admiration grew into something deeper: a desire to use the profession to help people make sense of complex issues, make better decisions, and move forward with confidence.

To T.J., strong audit work begins with getting the fundamentals right: planning, organization, communication, and technical rigor. But it cannot stop there. An audit team earns trust by telling the truth clearly, being willing to have difficult conversations, and helping clients understand not only what changed, but what those changes may mean for the organization they are trying to build.

“A good CPA gets the work right,” T.J. said. “A great advisor helps clients understand what the work means for where they are going.”

In his work with audit clients, T.J. values the opportunity to look beneath the surface, understand an organization’s goals, and identify where operations, risks, reporting, or processes may be out of alignment. He believes clients are served best by advisors who care deeply, communicate plainly, and are willing to bring an honest perspective to the table.

As a VP, T.J. is excited to continue strengthening Whalen’s audit practice around quality, consistency, client service, and team development. He sees the profession moving beyond traditional compliance and into deeper strategic guidance, where sound judgment, relationships, and clear communication matter more than ever.

When asked what he hopes clients experience when they work with Whalen, T.J. described a team that is organized, technically strong, easy to communicate with, and willing to have difficult conversations when needed. In his view, being in a client’s corner does not mean avoiding hard truths. It means earning enough trust to say what needs to be said, with clarity and care.

T.J. also sees this next chapter as an opportunity to help preserve and strengthen the culture that has meant so much to him. Whalen’s core values – Start with Heart, Stand Up Straight, and Aim Higher – are not just words to him. They are a practical standard for how the firm serves clients, develops people, and makes decisions.

T.J. shared. “The legacy I care about is helping steward the values that made Whalen worth joining in the first place, and helping foster them for future generations.”

Please join us in congratulating T.J. on this well-deserved promotion and exciting new chapter.

Home values have risen significantly in many areas of the country over the last several years, leaving some homeowners with substantial gains when they sell. Of course a large profit is generally a good thing. But, depending on the amount of your gain, how long you’ve owned and resided in the home, and your income level, a sale may trigger capital gains tax and, in some cases, the net investment income tax (NIIT).

Save tax with the gain exclusion

If you’re selling your principal residence and meet certain requirements, you can exclude from tax up to $250,000 of gain ($500,000 for married couples filing jointly).

To qualify for the exclusion, you must:

1. Have owned the property for at least two years during the five-year period ending on the sale date.
2. Have used the property as a principal residence for at least two years during the five-year period. (Periods of ownership and use don’t need to overlap.)

In addition, you can’t use the exclusion more than once every two years.

Be aware of ineligible gain

What if you have more profit than your gain exclusion? Any gain in excess of the exclusion generally will be taxed at your long-term capital gains rate (typically 15% or 20%), as long as you owned the home for more than one year. If you didn’t, the gain will be considered short-term and subject to your marginal ordinary-income rate (usually 22% to 37%).

If you’re selling a second home (such as a vacation home), it isn’t eligible for the gain exclusion and the entire gain generally will be subject to capital gains tax. But if the home qualifies as a rental property, it can be considered a business asset. In that case, you may be able to defer tax through an installment sale or a Section 1031 like-kind exchange.

Watch out for the NIIT

When does the NIIT apply to a home sale? If you sell your principal residence and qualify for the gain exclusion, the excluded gain isn’t subject to the 3.8% NIIT.

However, gain that exceeds the exclusion is subject to the NIIT if your modified adjusted gross income (MAGI) is over a certain amount. Gain from the sale of a vacation home or other second residence, which doesn’t qualify for the exclusion, may also be subject to the NIIT.

The NIIT applies only if your MAGI exceeds $200,000 ($250,000 for joint filers or $125,000 for married taxpayers filing separately). If your MAGI is above the applicable threshold, additional factors will affect your NIIT liability. Be aware that the NIIT kicks in before the top long-term and ordinary-income rates apply.

Keep track of your basis

Gain on your home is calculated by subtracting your tax basis in the home from the sale price. Your basis generally includes what you paid for the home plus major improvements you made to it.

To support an accurate basis, be sure to maintain complete records, including information about your original cost and subsequent improvements (such as a kitchen remodel or a new roof). But basis-increasing improvements don’t include maintenance and repairs (such as painting your kitchen or fixing a leak in your roof). Also, you must reduce your basis by any casualty losses or depreciation claimed for business use (such as if a portion of your home was rented out or you claimed the home office deduction).

If your basis is more than what you sell your home for, your loss generally won’t be deductible. But if a portion of your home was rented out or used exclusively for business, the loss attributable to that part may be deductible.

Plan for the tax impact

A home sale can be tax-free or create a sizable tax liability — or result in a tax bill between those extremes. If you’re thinking about selling your home, it’s important to know the potential tax impact. Contact us before putting your home on the market so we can help you estimate the tax impact and discuss possible planning opportunities.

Many parents don’t know that the so-called “kiddie tax” exists. Others assume it affects only minor children. But it also can apply to full-time students through age 23 and 18-year-olds even if they aren’t full-time students. When it applies, most of the child’s unearned income may be taxed at the parent’s higher tax rate.

The purpose of the kiddie tax is to minimize the ability of parents to significantly reduce their family’s taxes by transferring income-producing assets to their children in lower tax brackets. If your child has investment income from custodial accounts or other assets, understanding these rules can help you avoid unexpected tax consequences.

Who it affects

The kiddie tax generally applies to most unearned income of individuals who, at the end of the tax year, are:

• Under age 18,
• Age 18 (unless they provide more than half of their own support from earned income), or
• At least age 19 but under age 24 and full-time students (unless they provide more than half of their own support from earned income).

So, for a student, the kiddie tax can be an issue until the year that he or she turns age 24. For that year and future years, even full-time students who are still supported by their parents are kiddie-tax-exempt.

How it works

Earned income from a job or self-employment is never subject to the kiddie tax. And the tax is assessed on a child’s (or young adult’s) unearned income only to the extent that it exceeds the applicable threshold, which is $2,700 for 2026.

Unearned income usually means interest, dividends and capital gains. These types of income often come from custodial accounts that parents and grandparents set up and fund for younger children.

For 2026, the first $1,350 of unearned income is taxed at 0%. The second $1,350 is taxed at the child’s (or young adult’s) rate. This might also be 0% for some or all of the second $1,350, depending on 1) how much of the unearned income is made up of long-term capital gains and qualified dividends, and 2) whether the child’s (or young adult’s) taxable income is low enough for him or her to qualify for the 0% rate.

Then the excess is taxed at the parent’s rate. This could be up to 20% on long-term capital gains and qualified dividends and as much as 37% on interest, short-term capital gains and nonqualified dividends — depending on the parent’s taxable income.

When it applies

For 2026, Form 8615, “Tax for Certain Children Who Have Unearned Income,” must be filed and kiddie tax paid for any child (or young adult) who:

 

• Has more than $2,700 of unearned income,
• Is required to file Form 1040,
• As of December 31, 2026, is under age 18, is age 18 and didn’t have earned income in excess of half of his or her support, or is age 19, 20, 21, 22 or 23 and a full-time student and didn’t have earned income in excess of half of his or her support,
• Has at least one living parent, and
• Isn’t married and filing a joint return for the year.

The kiddie tax threshold is annually adjusted for inflation, but generally only in increments of at least $100. So it doesn’t necessarily go up every year. It didn’t increase for 2026, so it may be more likely to increase for 2027.

Planning opportunities

The kiddie tax can increase a family’s overall tax liability if investment income is generated in a child’s name. In some situations, it may make sense to review the types of investments owned in custodial accounts and the timing of investment sales. For example, growth-oriented investments that generate little current income may help reduce exposure to the kiddie tax until your child is old enough that this tax no longer applies. At that time, appreciated investments can begin to be sold, with the gains taxed at your child’s own, potentially lower, rate.

If you’d like help evaluating your family’s situation, contact us. We can assess potential kiddie tax exposure and suggest tax-efficient investment strategies.

Tax scammers continue to target taxpayers through email, text messages, phone calls and regular mail. They often try to create urgency or fear to trick victims into sharing sensitive information or sending money. The IRS warns taxpayers to remain cautious because scammers continually change tactics to steal personal and financial information.

IRS impersonation scams

First and foremost, know that the IRS will never contact you by email, text or social media channels about a tax bill or refund. Most IRS initial communications are sent through regular mail. So if you get a call or message saying it’s the IRS and asking for your Social Security number, it’s someone trying to steal your identity and defraud you. Remember that the IRS already has your Social Security number.

Here are some common impersonation-related schemes to be aware of:

Phone calls. AI-generated voices and spoofed caller IDs to impersonate IRS agents are becoming more common. Scammers may leave urgent messages threatening arrest, penalties or legal action unless immediate payment is made. The IRS stresses that it won’t demand immediate payment over the phone.

Text messages and emails. Scammers use text messages and emails containing fake IRS links or QR codes to direct taxpayers to fraudulent websites designed to steal personal or financial information. These messages often claim there’s a problem with a refund, tax return or IRS account to try to create panic and pressure taxpayers into responding quickly.

Fake IRS notices. One current scheme takes advantage of growing confusion about the IRS CP53E notice. This is a notice related to tax refunds and bank account information. As the IRS shifts from paper checks to direct deposit, it’s mailing these notices to taxpayers who may need to add or update their banking details. Unfortunately, the IRS is sometimes mistakenly sending the notices when a taxpayer has already provided this information, creating confusion. Now fraudsters are sending fake versions of the notice in an attempt to steal taxpayers’ sensitive information. If you receive an IRS CP53E notice, verify its authenticity before acting. Don’t click links or scan QR codes.

Malware. In scams to infect computers and phones with malicious software, a phony email claims to come from the IRS. The subject line often states that the message is a notice of underreported income or a refund. There may be an attachment or a link to a bogus web page with your “tax statement.” When you open the attachment or click on the link, malware is downloaded to your device. This malware can give criminals remote access to your device and allow them to search for passwords, banking information and other sensitive data to help them steal your assets or your identity.

Other tax scams

The IRS recommends that taxpayers create an account to securely access their tax information. The account lets you view your refund status, make payments, check your balance and more. But be cautious. Scammers may offer account setup “help” so they can collect your sensitive data. Or they may use stolen personal information to access your account without authorization. Once inside an account, they may attempt to redirect refunds, obtain tax records or use the information to commit additional identity theft. Create and always access your account directly through IRS.gov, don’t share your information with unsolicited third parties, and check your account regularly.

Also watch out for fake online tax deduction calculators. These digital tools are intended to steal personal information and money from unsuspecting users. They’re often accompanied by false promises about new or expanded tax credits and deductions. The IRS says you should use calculators only on sites that end in .gov (such as irs.gov) or of well-known tax software companies. Also, be wary of any calculator that guarantees its result. Legitimate calculators can only produce estimates. And, as always, be suspicious of claims that seem “too good to be true,” such as unusually large tax savings.

The IRS also warns taxpayers to avoid other schemes involving questionable refund claims or credits promoted online or through social media. Promoters may encourage taxpayers to file inaccurate forms or claim credits they don’t qualify for. Improper claims can lead to refund delays, audits, penalties and other enforcement actions.

Reporting fraud

The IRS has launched a “Report fraud” webpage to simplify confidential reporting of suspected tax fraud or scams. It consolidates multiple IRS fraud-reporting options into a single location, allowing taxpayers to report suspected scams, tax evasion or other tax-related misconduct in one place: irs.gov/help/report-fraud.

If you’ve been a victim of identity theft, consider obtaining an Identity Protection Personal Identification Number (IP PIN). Issued by the IRS, this unique six-digit number helps prevent criminals from filing a fraudulent tax return using your Social Security number. It’s valid for one year and is automatically replaced after expiration. You can expect to receive a new one each year in mid-December to early January. You can apply online or get one at a Taxpayer Assistance Center. Once you receive your IP PIN, be sure to safeguard it. Use it only on Forms 1040.

Stay alert

Tax-related scams continue to evolve, so it’s important to be cautious when receiving unexpected phone calls, messages or even letters involving taxes, refunds or financial information. If you receive a questionable communication related to a tax return we prepared, contact us before responding. We can also answer other questions you have about protecting yourself from tax-related fraud.

Businesses that own commercial real property may be sitting on an overlooked treasure chest of tax savings — and a cost segregation study can be the key to unlocking it. This is a strategic tool that combines accounting and engineering techniques to identify building costs that are properly allocable to tangible personal property rather than real property. A cost segregation study may allow you to accelerate depreciation deductions on certain items, thereby deferring taxes and boosting cash flow.

Timing counts when depreciating assets

Commercial rental properties and buildings used for business purposes are generally depreciated over 39 years under federal tax law. But such properties may include a wide range of components with much shorter depreciation recovery periods. These can include parts of various systems such as HVAC, plumbing, electrical, fire protection, alarm and security, as well as:

• Drywall,
• Doors,
• Fixtures,
• Data and communication ports,
• Flooring, and
• Cabinetry.

These assets could have useful lives of five, seven or 15 years — all significantly less than 39 years. By segregating such assets, you can claim greater depreciation deductions sooner. You’ll claim the same total amount of depreciation on the assets over time but reduce your tax bill in the short term, providing greater cash flow.

OBBBA changes add value

Recent tax law changes under the One Big Beautiful Bill Act (OBBBA) enhanced these benefits by increasing first-year depreciation write-offs. The two most widely relevant provisions relate to:

1. Bonus depreciation. The OBBBA restored 100% first-year bonus depreciation deductions for eligible assets acquired and placed in service after January 19, 2025. While commercial real properties aren’t eligible for first-year bonus depreciation, segregated building components with shorter recovery periods may be eligible. There are no phaseout limits for bonus depreciation, which is helpful for larger companies.

2. Section 179 expensing. For tax years beginning in 2025, the OBBBA increased the maximum amount of eligible assets you can immediately deduct under the Sec. 179 expensing election to $2.5 million. A phaseout reduces the maximum Sec. 179 deduction if, during the year, you place in service eligible assets in excess of $4 million. Both figures are adjusted annually for inflation. For 2026, they’re $2.56 million and $4.09 million, respectively. Again, commercial real properties aren’t eligible for Sec. 179 expensing, but segregated building components with shorter recovery periods may be eligible.

Additionally, if your business involves manufacturing or certain agricultural activities, you may be eligible for a new depreciation-related tax break. The OBBBA introduced a 100% deduction for the cost of qualified production property (QPP). To be eligible, among other requirements, a qualifying real property’s construction must begin after January 19, 2025, and before January 1, 2029, and it must be placed in service before 2031. This break allows eligible businesses to immediately deduct the cost of QPP that otherwise would be depreciable over 39 years.

The QPP deduction makes cost segregation studies less relevant for qualifying property. But it’s subject to several specific requirements and exceptions that may prevent you from claiming it.

Ready, set, save

A cost segregation study can significantly lower your taxes, but it isn’t a do-it-yourself project. Although this strategy has been consistently upheld in the courts, the IRS closely monitors deductions based on cost segregation studies. And the rules can be confusing.

So, it’s prudent to hire experienced professionals to help you identify various building components and break down write-off periods for them. Contact us to discuss whether a cost segregation study could potentially save you taxes. We can determine reasonable cost allocations to help withstand IRS scrutiny.