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New Deduction for QPP Can Save Significant Taxes for Manufacturers and Similar Businesses

The One Big Beautiful Bill Act (OBBBA) allows 100% first-year depreciation for nonresidential real estate that’s classified as qualified production property (QPP). This new break is different from the first-year bonus depreciation that’s available for assets such as tangible property with a recovery period of 20 years or less and qualified improvement property with a 15-year recovery period. Normally, nonresidential buildings must be depreciated over 39 years.

What is QPP?

The statutory definition of QPP is a bit complicated:

QPP is the portion of any nonresidential real estate that’s used by the taxpayer (your business) as an integral part of a qualified production activity.
A qualified production activity is the manufacturing, production or refining of a qualified product.
A qualified product is any tangible personal property that isn’t a food or beverage prepared in the same building as a retail establishment in which the property is sold. (So a restaurant building can’t be QPP.)

In addition, an activity doesn’t constitute manufacturing, production or refining of a qualified product unless the activity results in a substantial transformation of the property comprising the product.

To sum up these rules, QPP generally means factory buildings. But additional rules apply.

Meeting the placed-in-service rules

QPP 100% […]

By Linkenheimer LLP|2025-11-20T21:34:34+00:00November 20th, 2025|deduction, deductions, New Tax Laws|0 Comments

New Itemized Deduction Limitation Will Affect High-Income Individuals Next Year

Beginning in 2026, taxpayers in the top federal income tax bracket will see their itemized deductions reduced. If you’re at risk, there are steps you can take before the end of 2025 to help mitigate the negative impact.

The new limitation up close

Before the Tax Cuts and Jobs Act (TCJA), certain itemized deductions of high-income taxpayers were reduced, generally by 3% of the amount by which their adjusted gross income exceeded a specific threshold. For 2018 through 2025, the TCJA eliminated that limitation. The One Big Beautiful Bill Act (OBBBA) makes that elimination permanent, but it puts in place a new limitation for taxpayers in the 37% federal income tax bracket.

Specifically, for 2026 and beyond, allowable itemized deductions for individuals in the 37% bracket will be reduced by the lesser of: 1) 2/37 times the amount of otherwise allowable itemized deductions or 2) 2/37 times the amount of taxable income (before considering those deductions) in excess of the applicable threshold for the 37% tax bracket.

For 2026, the 37% bracket starts when taxable income exceeds $640,600 for singles and heads of households, $768,700 for married couples filing jointly, and $384,350 for […]

By Linkenheimer LLP|2025-11-18T16:22:45+00:00November 18th, 2025|deduction, deductions, New Tax Laws|0 Comments

Payroll Tax Implications of New Tax Breaks on Tips and Overtime

Before the One Big Beautiful Bill Act (OBBBA), tip income and overtime income were fully taxable for federal income tax purposes. The new law changes that.

Tip income deduction

For 2025–2028, the OBBBA creates a new temporary federal income tax deduction that can offset up to $25,000 of annual qualified tip income. It begins to phase out when modified adjusted gross income (MAGI) is more than $150,000 ($300,000 for married joint filers).

The deduction is available if a worker receives qualified tips in an occupation that’s designated by the IRS as one where tips are customary. However, the U.S. Treasury Department recently released a draft list of occupations it proposes to receive the tax break and there are some surprising jobs on the list, including plumbers, electricians, home heating / air conditioning mechanics and installers, digital content creators, and home movers.

Employees and self-employed individuals who work in certain trades or businesses are ineligible for the tip deduction. These include health, law, accounting, financial services, investment management and more.

Qualified tips can be paid by customers in cash or with credit cards or given to workers through tip-sharing arrangements. The deduction can be claimed […]

By Linkenheimer LLP|2025-09-09T16:10:50+00:00September 9th, 2025|1099, deduction, New Tax Laws|0 Comments

New Rules Could Boost Your R&E Tax Savings in 2025

A major tax change is here for businesses with research and experimental (R&E) expenses. On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) reinstated the immediate deduction for U.S.-based R&E expenses, reversing rules under the Tax Cuts and Jobs Act (TCJA) that required businesses to capitalize and amortize these costs over five years (15 years for research performed outside the United States).

Making the most of R&E tax-saving opportunities

The immediate domestic R&E expense deduction generally is available beginning with eligible 2025 expenses. It can substantially reduce your taxable income, but there are strategies you can employ to make the most of R&E tax-saving opportunities:

Apply the changes retroactively. If you qualify as a small business (average annual gross receipts of $31 million or less for the last three years), you can file amended returns for 2022, 2023 and/or 2024 to claim the immediate R&E expense deduction and potentially receive a tax refund for those years. The amended returns must be filed by July 4, 2026.

Accelerate remaining deductions. Whatever the size of your business, if you began to amortize and capitalize R&E expenses in 2022, 2023 and/or 2024, you can deduct the remaining amount either on […]

By Linkenheimer LLP|2025-09-08T19:36:59+00:00September 8th, 2025|deduction, New Tax Laws, research credit, tax implications|0 Comments

Business Meals — What’s Still on the Menu After 2025

Starting in 2026, the tax treatment of business meals changes dramatically. Under the Tax Cuts and Jobs Act (TCJA), employer-provided meals for the “convenience of the employer” including de minimis fringe benefit were limited to a 50% deduction. Unlike many other provisions that were extended or made permanent by the One Big, Beautiful Bill Act (OBBBA), this one wasn’t renewed. That means beginning in 2026, the deduction for these meals drops all the way to 0% at the federal level.

In plain terms: that stack of takeout boxes in the breakroom may keep your team happy, but it won’t trim your tax bill.

The big change: convenience meals lose their bite

Currently, meals provided by employers for their convenience and de minimis fringe benefit “meals” such as coffee, sodas, doughnuts etc.— qualify for a 50% deduction. Beginning in 2026, those expenses will no longer be deductible for federal tax purposes.

The exceptions: The restaurant industry can continue deducting employee meal expenses for kitchen and waitstaff and Crews of certain commercial vessels, oil platform/drilling rig workers, and of certain fishing vessels and processing facilities can continue to be 50% deductible.

California doesn’t play by the same rules

Here’s where things get tricky: California […]

By Linkenheimer LLP|2025-08-25T19:29:58+00:00August 20th, 2025|business, deduction, New Tax Laws|0 Comments