Archives for October 2025

Year-End Tax Planning: Reviewing Your Business Expenses for Maximum Deductions

Ken Botwinick, CPA | 10/27/2025

As the year draws to a close, now is the perfect time to review your business expenses and identify opportunities for tax savings. Strategic year-end planning can help reduce your 2025 tax liability and may even result in permanent savings. With the passage of the One Big Beautiful Bill Act (OBBBA) — which makes certain Tax Cuts and Jobs Act (TCJA) provisions permanent or revised — it’s more important than ever to understand which expenses remain deductible and which have changed.

Understanding “Ordinary and Necessary” Business Expenses

The Internal Revenue Code (IRC) Section 162 allows deductions for all “ordinary and necessary” business expenses. While there’s no master list of deductible items, the IRS generally defines them as follows:

Ordinary: Common and accepted in your trade or industry.
Necessary: Helpful and appropriate for conducting your business (not necessarily essential).

However, expenses deemed lavish or extravagant by the IRS may be partially or entirely non-deductible, even if they meet the above criteria.

Key Deduction Updates Under the OBBBA and TCJA

Here’s a look at how several key categories of business expenses are impacted:

1. Entertainment Expenses

The TCJA eliminated most entertainment deductions beginning in 2018, and the OBBBA did not restore them.

Still Deductible: Entertainment for employee events, such as holiday parties, if the entire staff (not just management) is invited.

2. Business Meals

Business meals remain 50% deductible, provided they are not part of nondeductible entertainment.

Meals purchased separately or clearly itemized from entertainment remain eligible.
The TCJA extended the 50% deduction for employer-provided meals through 2025. Beginning in 2026, most on-premises meal deductions are scheduled for elimination — though the OBBBA allows certain exceptions that qualify for 100% deductibility.
Meals sold to employees continue to qualify for full deduction.

3. Transportation and Commuting

Transportation for business travel remains 100% deductible, but the TCJA permanently eliminated deductions for qualified transportation fringe benefits, such as parking and transit passes.

These benefits are still tax-free for employees, subject to applicable limits.
The previously suspended bicycle commuting reimbursement will not return — the OBBBA permanently removed it.

4. Employee Business Expenses

Before the TCJA, employees could claim unreimbursed business expenses as itemized deductions. The TCJA suspended these through 2025, and the OBBBA has now made that suspension permanent.

Businesses should consider creating a reimbursement plan beginning in 2026. When structured correctly, reimbursements are deductible by the business and tax-free for employees.

Smart Year-End Planning Tips

Now is the time to evaluate your deductible expenses and consider accelerating payments before December 31. Doing so can:

Lower your taxable income for 2025.
Provide potential long-term savings if current deduction limits change.
Help you plan proactively for upcoming OBBBA phase-outs and 2026 changes.

Remember, every business is different — and so are its tax opportunities. Working with a trusted CPA ensures you capture every allowable deduction while remaining fully compliant with the latest IRS and legislative updates.

Plan Ahead for 2025 and Beyond

Tax law continues to evolve, and the OBBBA introduces both challenges and opportunities for business owners. The experts at Botwinick & Co., Certified Public Accountants can help you:

Review your current expenses for deductibility.
Identify opportunities to accelerate or defer costs.
Develop a comprehensive tax-saving strategy for 2025 and 2026.

📞 Contact Botwinick & Co. today to schedule your year-end tax review and take control of your financial future.

Should Your Business Take the Full Write-Off on Commercial Property Improvements Now or Spread Out the Deductions?

Ken Botwinick, CPA | 10/24/2025

When you’re looking at commercial real estate improvements, one strategic question looms large: should you accelerate deductions now—or take a more gradual approach over time? For many businesses, the answer hinges on the status of their property, the kinds of improvements made, business income, and future tax plans.

What counts as “Qualified Improvement Property” (QIP)?

In the commercial space, most improvements to non-residential buildings must be depreciated over a 39-year period. But a special category of improvements — called Qualified Improvement Property (QIP) — can qualify for faster write-offs.

In essence, QIP covers interior improvements to a nonresidential building after the building was first placed in service. But it does not include the enlargement of the building, elevators/escalators, or structural framework.

QIP has a 15-year recovery period and is eligible for bonus depreciation as well as Section 179 expensing.

How Bonus Depreciation & Section 179 Apply

100% Bonus Depreciation
Recent law change under the One Big Beautiful Bill Act (OBBBA) restores and makes permanent the ability to claim 100% bonus depreciation for qualifying property placed in service after January 19, 2025. For assets acquired January 1, 2025–January 19, 2025, the first-year bonus depreciation is only 40%.

Section 179 Expensing
Under Section 179, businesses may elect to immediately deduct eligible assets (rather than depreciate over time). The OBBBA increased the 2025 tax-year threshold to $2.5 million (up from $1.25 million) and the phase-out begins at $4 million (previously ~$3.13 million). For QIP specifically, Section 179 may cover items beyond interior improvements—including HVAC, roofing, fire/protection and alarm systems, and security systems (if placed in service after the building was first placed in service).

Why “Accelerate Now” Might Be a Good Move

If you immediately deduct the full cost of QIP via bonus depreciation or Section 179, you reduce taxable income in the first year.
That can boost cash‐flow, reinvestment, debt reduction, or other growth strategies.
With the permanent 100% bonus depreciation in place (for assets after Jan. 19, 2025) you have certainty of the tax treatment.

Why Spreading Out the Deductions Could Be Better

There are important caution flags:

The “excess business loss” rule can limit your deduction if the accelerated deduction creates a large loss in a non-corporate pass-through setting. For tax year 2025, the threshold is $313,000 ($626,000 married filing jointly).
Large first-year write-offs can lead to higher tax rates on recapture when you sell the property. If you claimed bonus depreciation or Section 179 on QIP, depreciation recapture is taxed as ordinary income (up to ~37%) plus applicable NIIT. If you chose straight-line depreciation instead, you may qualify for lower 25% rate on gain (for QIP held more than 1 year) plus NIIT.
Claiming large deductions now reduces future depreciation deduction potential. If you expect higher tax brackets or income in future years (or expect tax rates to increase), you might prefer to preserve deduction potential for later.

Making the Decision: What to Consider

Your current income vs. expected future income.
Whether you anticipate higher tax rates in the future (or an increase in tax income).
The likelihood of selling the property (and facing depreciation recapture).
Your business structure (corporation vs. pass-through) and whether you might hit the excess business loss limitation.
Whether you have eligible QIP (vs. non-eligible improvements).
Timing: whether the improvements will be placed in service after Jan. 19, 2025, so they qualify for 100% bonus.
State tax and local tax rules—some states may not conform to federal bonus depreciation rules.

The tax landscape for commercial property improvements is rich with opportunity—but it’s not one-size-fits-all. While the ability to write off QIP immediately is powerful, it may not always align with your long-term strategy. Spreading deductions over time can sometimes better match income, tax rate expectations, and sale horizon.

If you’d like help evaluating your specific scenario, we can walk you through the numbers, estimate tax impact, and align the depreciation strategy with your business goals.

Act Fast: How Businesses Can Still Claim Clean Energy Tax Breaks Before They Expire

Ken Botwinick, CPA | 10/16/2025

The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, brought sweeping updates to the U.S. tax code — extending, modifying, and in some cases, accelerating the end date for several clean energy incentives that benefit businesses.

While some incentives are being phased out earlier than expected, there’s still time for companies to take advantage of valuable clean energy tax deductions and credits — but only if they act quickly.

Energy-Efficient Building Deduction (Section 179D)

The Section 179D deduction allows commercial building owners to immediately deduct the cost of qualifying energy-efficient improvements rather than depreciating them over the traditional 39-year period.

However, under the OBBBA, this deduction will no longer be available for property that begins construction after June 30, 2026.

Eligible taxpayers include:

Commercial building owners
Tenants and REITs that make qualifying upgrades
Architects, engineers, and designers of government-owned or nonprofit-owned buildings (including schools, religious institutions, and tribal organizations)

This deduction applies to both new construction and renovations of commercial properties — as well as multifamily residential buildings that are four or more stories above ground.

Qualifying improvements may include:

Interior lighting systems
HVAC and hot water systems
The building envelope (such as insulation, windows, and walls)

To qualify, improvements must reduce annual energy and power costs by at least 25% compared to industry standards, verified by a licensed engineer or independent contractor.

Deduction Amounts

Base deduction: $0.50 to $1.00 per square foot, depending on energy savings (25% to 50%).
Bonus deduction: $2.50 to $5.00 per square foot if projects meet prevailing wage and apprenticeship requirements.

Other Key Clean Energy Tax Credits Impacted by the OBBBA

Alternative Fuel Vehicle Refueling Property Credit (Section 30C)

Businesses can still claim this credit for electric vehicle (EV) charging stations and clean fuel storage equipment placed in service before June 30, 2026.

Credit value: Up to $100,000 per qualifying item (each charging port, dispenser, or storage unit)
Previously scheduled to expire in 2032, this credit now ends much sooner.

Clean Electricity Investment & Production Credits (Sections 48E and 45Y)

These credits for wind and solar energy projects will no longer apply to facilities placed in service after 2027, unless construction begins before July 4, 2026.

To qualify:

Projects must begin by July 4, 2026
They must be operational by December 31, 2027

This acceleration creates urgency for developers and investors in renewable energy sectors.

Advanced Manufacturing Production Credit (Section 45X)

The OBBBA also reshapes this credit for manufacturers producing clean energy components.

Wind energy components will no longer qualify after 2027.
The law adds metallurgical coal (used in steel production) to the list of critical materials.
Credits for most other critical materials will phase out from 2031 through 2033, while metallurgical coal credits end after 2029.

Why Businesses Should Act Now

The window to secure these clean energy incentives is closing fast. If your business has been considering solar panels, EV infrastructure, or energy-efficient building upgrades, now is the time to move forward.

Working with an experienced CPA firm like Botwinick & Company ensures you:

Identify eligible projects under the latest IRS guidance
Maximize available deductions and credits before they expire
Comply with prevailing wage and apprenticeship requirements
Structure investments to capture the highest possible tax benefits

Many of the most valuable clean energy tax incentives are ending years earlier than expected due to the OBBBA’s accelerated phase-outs. Strategic planning can help your business save thousands — or even millions — in tax liability before these opportunities disappear.

Botwinick & Company, CPAs can help you navigate these complex changes, determine your eligibility, and take full advantage of the benefits still available.

📞 Contact us today to discuss how your business can act before time runs out.

2025–2026 IRS High-Low Per Diem Rates: Simplifying Business Travel Reimbursements

Ken Botwinick, CPA | 10/07/2025

Managing employee travel expenses can quickly become a hassle — from collecting endless receipts for meals and hotels to ensuring every reimbursement stays IRS-compliant. Fortunately, the IRS “high-low” per diem method streamlines the process. Instead of reimbursing actual costs, businesses can use standardized daily rates based on whether the travel destination is a high-cost or low-cost area.

In IRS Notice 2025-54, the agency released the latest high-low per diem rates effective October 1, 2025, through September 30, 2026. Here’s what business owners and finance teams should know.

How the High-Low Per Diem Method Works

The per diem approach allows companies to pay employees fixed daily amounts for lodging, meals, and incidental expenses rather than reimbursing every individual receipt. Employees only need to record the time, place, and business purpose of their trip.

As long as payments do not exceed the IRS-approved per diem rates, they are non-taxable and excluded from income and payroll tax withholding.

Under this simplified system:

High-cost locations receive a higher flat rate established annually by the IRS.
All other U.S. destinations are considered low-cost areas.
Employers may use the high-low method in place of city-specific per diem rates.

Some locations, such as New York City, Chicago, Boston, and Los Angeles, are designated as high-cost throughout the year, while others qualify as high-cost only during certain seasons — particularly popular resort destinations where lodging rates fluctuate.

If a company covers hotel costs directly, employees may receive the meals-and-incidentals (M&IE) per diem only. There is also a $5 incidental-expenses-only rate for employees who incur no meal costs during a travel day.

New IRS Per Diem Rates for 2025–2026

Beginning October 1, 2025, the IRS has set the following high-low per diem rates for travel within the continental United States (CONUS):

High-cost areas: $319 total
- $233 for lodging
- $86 for meals & incidentals
Low-cost areas: $225 total
- $151 for lodging
- $74 for meals & incidentals

Employers must continue using the same reimbursement method for an employee throughout the 2025 calendar year — switching methods mid-year isn’t permitted. Additionally, per diem payments cannot be issued to employees who own 10% or more of the business.

Why Review Your Travel Reimbursement Policy Now

With the new rates in effect, this is the perfect time to re-evaluate your company’s travel reimbursement policy before 2026 begins. Transitioning from an “actual expense” model to a per diem system can:

Reduce administrative burden for accounting and HR staff
Simplify recordkeeping and minimize audit risk
Ensure tax compliance with IRS reporting standards
Save employees time while maintaining transparency

Partner with Experts Who Understand IRS Compliance

Implementing the per diem method correctly can lead to significant time savings and fewer compliance headaches. At Botwinick & Co, our team of tax professionals can help your business:

Determine which method best fits your needs
Set up compliant travel reimbursement policies
Maintain proper documentation for IRS audits

If you have questions about the 2025–2026 high-low per diem rates or need help designing efficient reimbursement procedures, contact Botwinick & Co today for expert tax and accounting guidance.

The Hidden Tax Risks of Personally Guaranteeing Your Corporation’s Loan

Ken Botwinick, CPA | 10/01/2025

When you’re asked to personally guarantee a loan for your closely held corporation, it may feel like just another step in supporting your business. But before signing, it’s critical to understand the potential tax consequences. Acting as a guarantor, endorser, or indemnitor means that if the corporation defaults, you—not the business—could be responsible for repaying the loan. Without careful tax planning, you may face unexpected and costly surprises.

Business vs. Nonbusiness Bad Debt Deductions

If you’re required to make payments toward the principal or interest on a loan you guaranteed, those payments may be considered a bad debt deduction. The type of deduction depends on your circumstances:

Business Bad Debt – Deductible against ordinary income. It can be partially or totally worthless.
Nonbusiness Bad Debt – Deductible only as a short-term capital loss and only if it’s completely worthless.

The distinction is important. Business bad debts can provide more favorable tax treatment, while nonbusiness bad debts come with limitations.

Determining If It’s a Business Bad Debt

For your payment to qualify as a business bad debt, the guarantee must be closely tied to your trade or business. For example, if you guaranteed the loan to protect your job, the IRS may consider that motive “closely related” to your trade or business as an employee—provided that protecting your job was the dominant reason.

If your salary is greater than your investment in the corporation, that typically shows your motive was to protect your job.
If your investment outweighs your salary, the IRS may conclude that your main motive was to protect your investment, making the deduction a nonbusiness bad debt instead.

Proving Your Motive to the IRS

Outside of protecting a job, it can be harder to show that your guarantee is business-related. You may need to demonstrate that the guarantee was tied to your work as a promoter or another trade or business you operate. If your dominant motive was protecting your investment or seeking profit, the IRS will treat it as a nonbusiness bad debt deduction.

Keep in mind: the IRS and courts carefully scrutinize your intent. “Reasonable compensation” doesn’t always mean just a paycheck—it can include protecting employment opportunities or other business interests.

Additional Conditions for Deductibility

Whether classified as business or nonbusiness, a bad debt deduction requires that:

You have a legal duty to make the guaranty payment.
The guaranty agreement was entered into before the debt became worthless.
You received reasonable consideration (not always cash—sometimes protection of your job or business suffices) for agreeing to the guarantee.

Payments you make are generally deductible in the year they’re made. However, if your agreement or state law provides a right of subrogation (meaning you can seek repayment from the corporation), you can’t deduct the bad debt until those rights are deemed worthless.

Protecting Yourself from Tax Traps

The decision to personally guarantee your corporation’s loan shouldn’t be taken lightly. Along with the financial risk, there are complex tax implications that could affect your bottom line.

At Botwinick & Company, we specialize in helping business owners and professionals navigate the tax traps of loan guarantees and other complicated financial matters. With our guidance, you can avoid costly mistakes and secure the best possible outcome for your situation.

✅ Want to avoid unnecessary tax headaches? Contact Botwinick & Company today for expert tax planning and corporate advisory services.