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A Closer Look: The QBI Deduction and What’s New in the One, Big, Beautiful Bill Act

The qualified business income (QBI) deduction, which became effective in 2018, is a significant tax benefit for many business owners. It allows eligible taxpayers to deduct up to 20% of QBI, not to exceed 20% of taxable income. It can also be claimed for up to 20% of income from qualified real estate investment trust dividends.

With recent changes under the One, Big, Beautiful Bill Act (OBBBA), this powerful deduction is becoming more accessible and beneficial. Most important, the OBBBA makes the QBI deduction permanent. It had been scheduled to end on December 31, 2025.

A closer look

QBI is generally defined as the net amount of qualified income, gain, deduction and loss from a qualified U.S. trade or business. Taxpayers eligible for the deduction include sole proprietors and owners of pass-through entities, such as partnerships, S corporations and limited liability companies that are treated as sole proprietorships, partnerships or S corporations for tax purposes. C corporations aren’t eligible.

Additional limits on the deduction gradually phase in if 2025 taxable income exceeds the applicable threshold — $197,300 or $394,600 for married couples filing joint tax returns. The limits fully apply when 2025 taxable income exceeds $247,300 […]

By Linkenheimer LLP|2025-08-05T14:15:17+00:00August 5th, 2025|business, deduction, deductions, New Tax Laws, News|0 Comments

Tax Court Denies Charitable Contribution Deduction for Lack of Substantiation

Why Your Charitable Receipts Need More Than Just a Signature

When was the last time you actually read the receipt from that donation drop-off? If you’re like most folks, you probably grabbed it and called it a day. Well, John Henry Besaw’s recent Tax Court case (TC Summary Opinion 2025-7) might make you think twice about that approach.

Besaw claimed $6,760 in noncash charitable contributions on his 2019 return, attaching Form 8283 with donee names and general descriptions – but crucially, no dates or values for the donated items. When the IRS disallowed the deduction for insufficient substantiation, Besaw scrambled. He provided receipts, but they were blank regarding specific item descriptions and values. He even submitted non-contemporaneous “reconstructed” documents detailing his donations. Special Trial Judge Leyden wasn’t impressed, noting that Treasury Regulation 1.170A-13 mandates receipts must include “a reasonably sufficient description of the donated property.” The Court ruled in favor of the IRS, upholding the disallowance of the entire deduction (though Besaw dodged accuracy-related penalties under IRC Section 6662(a) – small victories, right?).

How to Stay Out of Trouble

Finish […]

By Linkenheimer LLP|2025-07-29T16:12:52+00:00July 29th, 2025|charity, deduction, deductions|0 Comments

Startup Costs and Taxes: What You Need to Know Before Filing

The U.S. Census Bureau reports there were nearly 447,000 new business applications in May of 2025. The bureau measures this by tracking the number of businesses applying for an Employer Identification Number.

If you’re one of the entrepreneurs, you may not know that many of the expenses incurred by start-ups can’t currently be deducted on your tax return. You should be aware that the way you handle some of your initial expenses can make a large difference in your federal tax bill.

How to treat expenses for tax purposes

If you’re starting or planning to launch a new business, here are three rules to keep in mind:

Start-up costs include those incurred or paid while creating an active trade or business or investigating the creation or acquisition of one.
Under the tax code, taxpayers can elect to deduct up to $5,000 of business start-up costs and $5,000 of organizational costs in the year the business begins. As you know, $5,000 doesn’t go very far these days! And the $5,000 deduction is reduced dollar-for-dollar by the amount your total start-up or organizational costs exceed $50,000. Any remaining costs must be amortized over 180 months […]

By Linkenheimer LLP|2025-07-11T15:01:41+00:00July 11th, 2025|business, deduction, expensing|0 Comments

5 Tax Breaks on the Table: What Business Owners Should Know About the Latest Proposals

A bill in Congress — dubbed The One, Big, Beautiful Bill — could significantly reshape several federal business tax breaks. While the proposed legislation is still under debate, it’s already sparking attention across business communities.

Here’s a look at the current rules and proposed changes for five key tax provisions and what they could mean for your business.

1. Bonus depreciation

Current rules: Businesses can deduct 40% of the cost of eligible new and used equipment in the year it’s placed in service. (In 2026, this will drop to 20%, eventually phasing out entirely by 2027.)

Proposed change: The bill would restore 100% bonus depreciation retroactively for property acquired after January 19, 2025, and extend it through 2029. This would be a major win for businesses looking to invest in equipment, machinery and certain software.

Why it matters: A full deduction in the year of purchase would allow for faster depreciation, freeing up cash flow. This could be especially beneficial for capital-intensive industries.

2. Section 179 expensing

Current rules: Businesses can “expense” up to $1.25 million of qualified asset purchases in 2025, with a phaseout beginning at $3.13 million. Under Section 179, businesses can deduct the cost of qualifying […]

By Linkenheimer LLP|2025-06-14T15:15:46+00:00June 14th, 2025|business, deduction, depreciation, New Tax Laws, News, research credit, tax cuts|0 Comments

Ways to Manage the Limit on the Business Interest Expense Deduction

Prior to the enactment of the Tax Cuts and Jobs Act (TCJA), businesses were able to claim a tax deduction for most business-related interest expense. The TCJA created Section 163(j), which generally limits deductions of business interest, with certain exceptions.

If your business has significant interest expense, it’s important to understand the impact of the deduction limit on your tax bill. The good news is there may be ways to soften the tax bite in 2025.

The nuts and bolts

Unless your company is exempt from Sec. 163(j), your maximum business interest deduction for the tax year equals the sum of:

30% of your company’s adjusted taxable income (ATI),
Your company’s business interest income, if any, and
Your company’s floor plan financing interest, if any.

Assuming your company doesn’t have significant business interest income or floor plan financing interest expense, the deduction limitation is roughly equal to 30% of ATI.

Your company’s ATI is its taxable income, excluding:

Nonbusiness income, gain, deduction or loss,
Business interest income or expense,
Net operating loss deductions, and
The 20% qualified business income deduction for pass-through entities.

When Sec. 163(j) first became law, ATI was computed without regard to depreciation, amortization […]

By Linkenheimer LLP|2025-03-10T15:52:43+00:00March 10th, 2025|business, deduction, deductions|0 Comments