Good morning! Quarterly estimated taxes were due yesterday. If that sentence just gave you a small heart attack, let’s keep you on track for Q3. Coffee in hand, let’s go.

This week’s lineup:

🏖️ Your vacation home isn’t taxed like your house. Not even close.
🪙 Self-employed and no 401(k)? You have better options than you think.
💥 Fender bender on your tax return? Probably not anymore.
🚔 A father-son tax prep operation just got indicted in spectacular fashion.

Personal Finance

🏖️ Your vacation home and your regular home live in two different tax universes

Image from Envato

The Quick & Bristly: Your primary residence gets the best tax breaks in the code — up to $500,000 in tax-free profit when you sell. Your vacation home gets none of that. And if you rent it out even once, a different set of IRS rules kicks in depending on exactly how many days you use it yourself.

You bought a beach house. Congratulations. You now own two properties and approximately four times the tax complexity.

Your primary home is the IRS’s favorite child. When you sell it, you can exclude up to $250,000 in gains (or $500,000 if married filing jointly) under the Section 121 exclusion. Your mortgage interest is deductible. Your property taxes count toward the SALT deduction. It’s the full VIP package.

Your vacation home? It gets the velvet rope.

No capital gains exclusion when you sell. Mortgage interest is deductible only if your combined loan balance (both homes) stays under $750,000. And the moment you start renting it out, the IRS pulls out a stopwatch.

Here’s where it gets weird. The tax treatment of your vacation rental depends entirely on a day count:

14 days or fewer of rental: The income is tax-free. You don’t even report it. This is the so-called “Augusta Rule,” and it’s one of the cleanest breaks in the tax code.
More than 14 rental days + personal use exceeding 14 days (or 10% of rental days): It’s “mixed use.” You can deduct some expenses, but only up to the amount of rental income. No losses allowed.
More than 14 rental days + personal use under the threshold: Now it’s a rental property. Deductions open up. Losses may be deductible against other income, subject to passive activity rules.

The difference between “vacation home” and “rental property” can be a single weekend. Track your days like the IRS is watching. Because eventually, they will be.

📎 IRS Topic 415 — Renting Residential and Vacation Property

PRESENTED BY BEYOND

The moment you start renting your vacation home, the IRS pulls out a stopwatch.

So before you hand over the keys, know your numbers. Beyond‘s free listing analyzer tells you what your property can earn, so the math makes sense before the tax complexity kicks in.

👉 See what your listing is worth

Six questions, pulled straight from this week’s issue. No studying, no spreadsheet, no idea why you suddenly remember the standard mileage rate at parties now. Whoever racks up the most right answers earns a spot on the leaderboard and the right to be insufferable about it.

Click below, to get started. If you haven’t played before, you’ll need to enter some basic info that is only used for the quiz. Good luck, and may the tax knowledge be ever in your favor.

👉 Take the quiz →

Business & Gigs

🧓 The retirement math gap that catches self-employed people off guard

Image from Envato

The Quick & Bristly: A self-employed person earning $100,000 can contribute more than twice as much to retirement with a Solo 401(k) versus a SEP-IRA. The difference is structure, not income. If you’re self-employed and haven’t compared plans, you’re probably leaving money on the table.

When you work for an employer, someone else handles the retirement plan. They pick it, they set it up, and you just decide how much to contribute. When you’re self-employed, that job falls entirely to you, and most people don’t realize how much that choice actually matters. There are three main retirement plans built for self-employed people and small business owners: the SEP-IRA, the Solo 401(k), and the SIMPLE IRA. They all offer tax deductions. They do not all offer the same limits.

The SEP-IRA is the plan most people hear about first. Easy to open, no annual filing, deductible contributions. You can put in up to 25% of your net self-employment income, capped at $70,000. At $100,000 net income, that works out to roughly $18,600. Not bad.

But a Solo 401(k) at that same income? About $42,000.

Same income. More than double the contribution. The difference is the structure. A Solo 401(k) lets you contribute as both the employee (up to $23,500 in salary deferrals) and the employer (up to 25% of compensation). You’re playing both roles anyway — you might as well get both deductions.

For those ages 60–63, the Solo 401(k) gets even more aggressive. SECURE 2.0 created an enhanced catch-up contribution for this age group: $11,250 instead of the standard $7,500, for a potential total of $81,250 in 2025.

A few other useful things to know:

The Solo 401(k) must be established by Dec. 31.
The SEP-IRA gives you until Oct. 15 if you file an extension.
SIMPLE IRAs exist specifically for small businesses with employees. Different tool, different purpose.

All three plans are tax-deductible. All three reduce your adjusted gross income. The difference is how much you can put in.

ALSO PRESENTED BY ROCKET DOLLAR

Your old 401(k) gave you a target-date fund and a pat on the head. A Rocket Dollar Solo 401(k) lets you invest in real estate, startups, crypto — all tax-sheltered. You’re already your own boss. Act like it.

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Filing Made Simple

🚗 Why your fender bender is a tax dud

Photo from Envato

The Quick & Bristly: The government has officially stopped letting you write off everyday personal mishaps like car accidents or minor house fires. Thanks to the OBBBA, you can only claim a casualty loss if you were hit by a disaster big enough to get a formal government declaration.

The One Big Beautiful Bill Act (OBBBA) just made the “declared disaster only” rule a permanent part of your tax life.

If you were hoping to deduct that basement flood from a leaky pipe or the “crunch” of a parking lot fender bender on your 2025 return, we have a secret for you: the IRS doesn’t care unless the president says so.

Here’s a few facts about that new wall between you and your deduction:

The FEMA VIP List: Personal casualty losses are ONLY deductible if they are caused by a federally declared disaster for the 2025 tax year.
The 2026 Expansion: We found a loophole for next year. Starting Jan. 1, 2026, the OBBBA expands this to include state-declared disasters (if your governor and the Treasury secretary agree the damage is severe enough).
The Math Gauntlet: Even if you make the list, you have to subtract insurance payouts, then $100 per event, and finally 10 percent of your adjusted gross income (AGI).

Unless your total loss (after insurance) is a massive mountain higher than 10 percent of your income, don’t waste time digging for those repair receipts. Focus instead on the qualified disaster status. If an event gets that special label, the 10 percent AGI trap is nuked, and you might actually see some cash back.

Want a one page cheat-sheet to explain how OBBBA changed casualty losses? Click below and get it for free.

Download Now

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The TaxStache Business Edition is built for owners and operators. Quick hits on entity structure, quarterly deadlines, deduction strategy and the IRS rule changes that actually affect your bottom line. Plus a weekly download you can put to use the same afternoon.

If you run a business (or you’re building one), Thursday is definitely your day.

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Wild Tax Tales

🚔 Geothermal Pumps and Federal Jumps: A Phillips Family Saga

Image by Andres M.

The Quick and Bristly: A father-and-son tax preparation duo in Washington, D.C. were just slapped with a 24-count indictment for running a multi-year scam that involved inventing geothermal heat pump expenses. They tried to hide their work by using a “ghost” identity, but an IRS undercover operation proved that even fictional green energy can’t save you from a very real federal prison sentence.

Vincent Larry Phillips Sr. and his son, Vincent Michael Phillips Jr., just turned “family values” into a 24-count federal indictment in Washington, D.C.

The Phillips duo operated under a revolving door of business names like Tax Express LLC and Nubian Tax Service, where they allegedly specialized in making taxes disappear — usually without their clients even knowing how.

In a 2022 undercover sting, the pair allegedly prepared returns for secret agents that included fake expenses for “geothermal heat pumps.” It’s a creative way to lower a tax bill, but it only works if you actually own a pump.

Phillips Sr. was actually banned from the IRS e-File program after a 2010 tax fraud conviction. To keep the scam alive, he allegedly stole the identity of a female associate to file returns under her name.

Beyond inventing deductions, they allegedly skimmed parts of their clients’ refunds for personal use, leaving the taxpayers with the legal risk and a lighter wallet.

Let the Phillips case be your warning. If your preparer suggests a massive credit for a “geothermal heat pump” you didn’t buy, you aren’t getting a deal — you’re getting a liability. The IRS is cracking down on green energy fraud with more undercover operations than ever before.

The quick (and slightly prickly) stories we didn’t have time to get to:

Your 50s (not your 20s) are the best time to start a business.
🎓 Unused 529 funds aren’t trapped, here’s what you can do with them.
📈 2027 Social Security COLA would add about $77/month to the average retiree’s benefit.
Need a cheap summer getaway? ResortPass gets you the resort experience without the overnight price tag (sponsored).

If you made it this far, you’re our kind of nerd. Hit reply and tell us which story you want us to dive deeper into next week.

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🏖️ Your vacation home isn’t a vacation