Archives for July 2025

Major Tax Update: QBI Deduction Made Permanent Under the One, Big, Beautiful Bill Act

Ken Botwinick, CPA | 07/29/2025

The Qualified Business Income (QBI) deduction has been a game-changer for small business owners since its introduction in 2018. Offering up to a 20% deduction on eligible business income, this provision has helped reduce tax burdens for millions of entrepreneurs, sole proprietors, and owners of pass-through entities.

Now, thanks to updates under the One, Big, Beautiful Bill Act (OBBBA), the QBI deduction isn’t just here to stay—it’s more generous and accessible than ever.

What Is the QBI Deduction?

The QBI deduction allows eligible business owners to deduct up to 20% of their qualified business income, along with up to 20% of REIT dividends. This applies to income from U.S.-based sole proprietorships, partnerships, S corporations, and certain LLCs. C corporations, however, are excluded.

Previously set to expire at the end of 2025, this deduction is now permanent under the OBBBA, giving taxpayers more stability when planning for the long term.

Who Qualifies?

You may be eligible for the QBI deduction if you’re:

sole proprietor
A partner in a partnership
A shareholder in an S corporation
An owner of an LLC treated as a pass-through entity

Your eligibility may depend on your taxable income and the type of business you operate.

For 2025, income phase-out thresholds begin at:

$197,300 for individuals
$394,600 for joint filers

The deduction is fully phased out at:

$247,300 for individuals
$494,600 for joint filers

Understanding the Limitations

If your income exceeds the applicable thresholds, the QBI deduction may be limited based on:

50% of W-2 wages paid by your business, or
25% of W-2 wages + 2.5% of qualified property cost (used in generating QBI)

Additionally, if you operate a Specified Service Trade or Business (SSTB)—such as law, consulting, healthcare, performing arts, or financial services—the deduction may be reduced or eliminated once your income crosses the phase-out thresholds.

What’s New Under the One, Big, Beautiful Bill Act?

The OBBBA enhances the QBI deduction in several impactful ways:

✅ 1. The Deduction Is Now Permanent

No more worrying about losing this benefit in 2025. With the OBBBA, the QBI deduction is here to stay, offering peace of mind and consistency for long-term tax planning.

✅ 2. Expanded Phase-In Ranges in 2026

Starting in 2026, the income ranges for applying deduction limits will expand, allowing higher-income business owners to qualify for partial deductions:

$75,000 phase-in range for individuals (up from $50,000)
$150,000 range for joint filers (up from $100,000)

These ranges will be adjusted for inflation annually, helping to preserve their value over time.

✅ 3. New Minimum Deduction Introduced

Beginning in 2026, taxpayers who materially participate in an active trade or business and have at least $1,000 in QBI can claim a minimum deduction of $400. This amount will also increase with inflation in future years, providing a baseline benefit even for smaller operations.

Why This Matters for Your Business

If you’re a business owner, these updates could significantly impact your tax liability and financial planning. The increased accessibility and permanence of the QBI deduction provide new opportunities to optimize income, wages, and property use to maximize tax savings.

Action Steps to Consider

Now’s the time to revisit your tax strategy. Here’s what you should do:

Evaluate your current QBI eligibility
Assess if you’re in a specified service trade or business
Review your business structure to ensure you’re maximizing deductions
Plan for 2026 thresholds and new minimum deduction rules

Tax strategies that were relevant last year may not be optimal moving forward. At Botwinick & Co., our tax professionals stay on top of legislative changes to help you adapt and plan with confidence.

FAQs About the QBI Deduction

Question: Who qualifies for the QBI deduction?
Answer: Sole proprietors, partners, S corp shareholders, and certain LLC members with qualified U.S. business income can claim the deduction. C corporations are not eligible.

Question: What is considered a “specified service trade or business”?
Answer: These include professions like law, health, consulting, accounting, financial services, and the arts, where eligibility may phase out at higher income levels.

Question: Is the QBI deduction still temporary?
Answer: No. Under the OBBBA, the deduction is now permanent, providing long-term planning opportunities.

Question: How do wage and property limits affect my deduction?
Answer: If your income exceeds certain thresholds, your deduction may be limited by either W-2 wages paid or a combination of wages and property used in the business.

Question: What’s new in 2026?
Answer: The OBBBA expands the phase-in range and introduces a new $400 minimum deduction (adjusted for inflation) for active participants with $1,000+ in QBI.

Ready to Take Advantage of the Enhanced QBI Deduction?

The recent updates under the One, Big, Beautiful Bill Act offer powerful opportunities to reduce your tax burden—but only if you plan ahead. Whether you’re unsure if you qualify or want to maximize your deduction, our expert team at Botwinick & Co. is here to help. We’ll review your business structure, analyze your income and deductions, and develop a tailored tax strategy that puts you in the best possible position moving forward.

Don’t wait—contact us today to schedule a consultation and get started on maximizing your QBI deduction.

Key Small Business Tax Changes in the One Big Beautiful Bill Act (OBBBA): What You Need to Know

Ken Botwinick, CPA | 07/28/2025

On July 4, the One Big Beautiful Bill Act (OBBBA) was signed into law, introducing sweeping tax reforms that will significantly impact small business owners across the country. From generous new depreciation deductions to expanded credits and revised interest expense rules, the law brings both opportunities and challenges. Here’s a breakdown of the most important tax changes every business owner should understand.

100% Bonus Depreciation Reinstated

One of the most notable changes is the permanent return of 100% bonus depreciation for qualified assets placed in service after January 19, 2025. This replaces the reduced 40% bonus rate that would have otherwise applied and enables businesses to deduct the full cost of eligible property in the first year.

Eligible assets include:

Equipment and machinery
Computer systems and software
Certain vehicles
Qualified Improvement Property (QIP)

Expanded First-Year Depreciation for Production Property

Under the OBBBA, qualified production property (QPP)—nonresidential real estate used in manufacturing or similar production activities—can also benefit from 100% first-year depreciation.

Key rules:

Construction must begin after January 19, 2025, and before 2029
Property must be placed in service in the U.S. or its possessions
QPP must be used in tangible goods production, not administrative or R&D roles

Section 179 Expensing Doubled

Beginning in 2025, small businesses can now deduct up to $2.5 million under Section 179 expensing, up from $1.25 million. The phase-out threshold increases to $4 million.

Adjustments for inflation will begin in 2026.

Section 179 applies to the same property types eligible for bonus depreciation and includes additional items like:

HVAC systems
Roof improvements
Fire protection and alarm systems
Lodging-related furnishings and equipment

R&D Expense Write-Offs Accelerated

The OBBBA allows businesses to immediately deduct eligible domestic research and experimental (R&E) expenses incurred starting in 2025. Previously, these expenses had to be amortized over five years.

Retroactive benefit:
Businesses can apply this rule back to tax years after 2021, and R&E costs incurred between 2022 and 2024 can be written off over one or two years starting in 2025.

Enhanced Business Interest Deduction

Starting in 2025, the OBBBA permanently improves the business interest expense deduction by allowing a larger deduction. The law excludes depreciation, amortization, and depletion when calculating adjusted taxable income (ATI), increasing the deduction limit for many businesses.

More Flexible Small Business Stock (QSBS) Gains

The law expands tax-free treatment of gains from selling Qualified Small Business Stock (QSBS) with a new tiered system:

50% exclusion for stock held 3+ years
75% exclusion for stock held 4+ years
100% exclusion for stock held 5+ years

These changes apply to QSBS issued after July 4, 2025.

Excess Business Losses Made Permanent

On the downside, the OBBBA permanently extends the limitation on excess business losses for noncorporate taxpayers, which was previously scheduled to expire after 2028.

Paid Family & Medical Leave Credit Made Permanent

Employers can now rely on the permanent credit for providing paid family and medical leave (FML). The credit applies to both insurance premiums and wages and supports ongoing FML program expansion.

Bigger Tax Credits for Employer-Provided Child Care

Starting in 2026, the tax credit for employer-sponsored child care programs increases significantly:

Credit rate increases from 25% to 40% (up to 50% for qualifying small businesses)
Annual credit cap increases from $150,000 to $500,000 (or $600,000 for small businesses)
Indexed for inflation beginning in 2027

Phase-Out of Clean Energy Business Tax Incentives

The OBBBA eliminates several clean energy-related tax credits for businesses over the next few years:

Clean commercial vehicle credit: Ends after Sept 30, 2025
Alternative fuel property credit: Ends after June 30, 2026
Energy-efficient commercial buildings deduction: Ends for projects starting after June 30, 2026
New energy-efficient home credit: Ends for homes sold/rented after June 30, 2026
Clean hydrogen production credit: Ends after Dec 31, 2027
Sustainable aviation fuel credit: Ends after Sept 30, 2025

Stay Ahead of the Changes

The IRS is expected to release further guidance on implementing these updates in the coming months. With so many significant changes, both positive and negative, proactive tax planning is more important than ever.

Need help navigating the OBBBA’s impact on your business? Contact our team for tailored guidance to help you maximize deductions, minimize liabilities, and make smart financial moves for 2025 and beyond.

How the OBBBA Revives 100% Bonus Depreciation and Expands First-Year Write-Offs for Small Businesses

Ken Botwinick, CPA | 07/24/2025

If you own a small business, there’s exciting news on the tax front. The recently enacted One Big Beautiful Bill Act (OBBBA) introduces powerful updates to how businesses can depreciate eligible assets—most notably, a permanent return of 100% first-year bonus depreciation and expanded Section 179 expensing. Here’s how these favorable changes can boost your bottom line and help you plan smarter for the years ahead.

Full Reinstatement of 100% Bonus Depreciation

Under the OBBBA, 100% first-year bonus depreciation is back—and it’s here to stay. Businesses can now fully deduct the cost of qualifying property acquired and placed in service after January 19, 2025.

This marks a significant change from previous law, where bonus depreciation was being phased out:

80% in 2023
60% in 2024
40% from Jan 1 to Jan 19, 2025

For certain assets classified as long-production-period property, these phaseouts were delayed, but they too now benefit from the updated 100% provision.

Eligible assets include:

Most depreciable personal property (e.g., machinery, equipment, computers, vehicles)
Commercial software
Qualified Improvement Property (QIP) – improvements made to the interior of non-residential buildings, excluding building enlargements, elevators/escalators, or structural components

Section 179 Expensing: Limits Doubled

The OBBBA also doubles the Section 179 limit for tax years beginning in 2025:

New maximum deduction: $2.5 million (up from $1.25 million)
Phase-out threshold: $4 million (up from $3.13 million)

Both limits will be adjusted annually for inflation beginning in 2026.

Section 179 allows businesses to immediately deduct the full cost of qualifying equipment or property in the year it’s placed in service. Qualifying property includes:

Equipment and software
QIP (interior improvements of non-residential buildings)
Roofs, HVAC systems, fire and security systems for non-residential buildings
Furnishings and equipment used in lodging operations

Heavy SUV Cap: For vehicles over 6,000 pounds but under 14,000 pounds, the Section 179 deduction is capped at $31,300 for 2025.

📝 Tax Planning Tip: While both Section 179 and bonus depreciation can be useful, bonus depreciation typically has fewer limitations and is often preferred—especially for pass-through entities like partnerships and S corporations.

Special 100% First-Year Deduction for Qualified Production Property (QPP)

Another game-changer: the OBBBA now allows 100% first-year depreciation for Qualified Production Property (QPP). This applies to non-residential real estate used directly in manufacturing, refining, or production activities.

What qualifies as QPP?

Industrial or manufacturing buildings
Properties used directly in creating tangible personal goods

Exclusions: Office space, administrative functions, R&D, parking, software development, and lodging uses do not qualify.

Eligibility Timeline:

Construction must begin after January 19, 2025
Must be placed in service before 2031
Property must be located in the U.S. or a U.S. territory

This provision is designed to boost U.S.-based production and encourage long-term investment in manufacturing infrastructure.

Don’t Miss Out on These Tax-Saving Opportunities

These depreciation-related changes under the OBBBA could dramatically impact your tax planning strategy—especially if you’re planning major purchases or facility upgrades. Whether you’re investing in new equipment, upgrading commercial space, or expanding production capabilities, the enhanced first-year deductions can lead to significant tax savings.

Need Help Navigating These Changes?

Tax laws are complex—and every business situation is unique. If you’re planning to invest in assets or property in the near future, our team can help you strategically maximize your deductions under the OBBBA’s new provisions.

Let us help you unlock the full potential of these new tax incentives for 2025 and beyond.

Unlock the 20% Rehabilitation Tax Credit for Business Property Renovations

Ken Botwinick, CPA | 07/08/2025

Is your business planning to relocate, expand, or renovate a commercial property—especially one with historic value? If so, you may be eligible for the Rehabilitation Tax Credit, a powerful federal incentive that can offset the costs of improving a qualified building. At Botwinick & Co., we help businesses across industries take full advantage of available tax credits, including this valuable opportunity for historic building renovations.

What Is the 20% Rehabilitation Tax Credit?

The Rehabilitation Tax Credit allows business owners to claim 20% of qualified rehabilitation expenditures (QREs) for the restoration of a certified historic structure. These buildings must be:

Depreciable commercial buildings placed in service before the start of rehabilitation
Substantially rehabilitated (QREs must exceed the greater of $5,000 or the purchase cost of the existing building)
Certified historic structures listed by the National Park Service

After rehabilitation, the building must be used for business or income production—not held for resale.

What Expenses Qualify?

To be eligible, expenses must meet the definition of Qualified Rehabilitation Expenditures (QREs). These include:

Capital improvements directly related to restoring or reconstructing the building
Costs associated with interior and exterior structural improvements
Expenditures on real property only (land costs and building enlargements are not eligible)

Important: Acquisition costs, landscaping, and any additions that increase the building’s size are not QREs.

How Is the Tax Credit Applied?

Thanks to updates under the Tax Cuts and Jobs Act (TCJA), the 20% tax credit must now be claimed ratably over five years, rather than all in the year the building is placed into service. That means you can apply 4% of your QREs per year for five years, starting the year your rehabilitated property goes into service.

Even better, the credit can be used to offset both regular federal income tax and alternative minimum tax (AMT) liabilities.

Key Changes to the Credit

The TCJA of 2017 made permanent updates to the rehabilitation credit, including:

Mandatory five-year credit allocation (no more claiming the full 20% in one year)
Elimination of the 10% credit for non-historic pre-1936 buildings

Unlike other individual tax cuts under the TCJA, these changes to the rehabilitation credit are not set to expire after 2025—they’re here to stay.

Maximize Your Tax Savings with Botwinick & Co.

At Botwinick & Co., our experienced real estate tax advisors help clients evaluate and optimize tax strategies related to commercial property investments. Whether you’re restoring a historic downtown storefront or repurposing an industrial building, we’ll guide you through the technical requirements to ensure your project complies with federal regulations and qualifies for all available tax benefits.

We’ll help you:

Determine if a property meets the criteria for the rehabilitation tax credit
Identify all eligible QREs during the construction and renovation process
Work with architects, developers, and contractors to ensure compliance with federal standards
Explore additional tax credits related to green building upgrades, location-based incentives, or energy efficiency
Monitor and document project costs for IRS audit readiness

Are There Other Incentives Available?

Absolutely. Depending on the building’s location and your long-term plans, you might also qualify for:

State or local historic preservation grants or tax credits
Energy-efficient building credits under Section 179D or the Investment Tax Credit (ITC)
Opportunity Zone incentives, if the property is located in a designated zone

Every property and business plan is different. That’s why it’s essential to work with a tax advisor who understands the intersection of tax law, real estate, and business strategy.

Let’s Talk About Your Project

If you’re considering rehabilitating an older or historic commercial building, Botwinick & Co. is here to help you navigate the process from start to finish. We’ll ensure you capture the full value of the 20% rehabilitation tax credit—while also identifying additional savings opportunities that can dramatically improve your bottom line. Contact Botwinick & Co. today to schedule a consultation and see how your real estate improvements can lead to substantial tax advantages.