deductions - Linkenheimer LLP CPAs & Advisors

Increase Your Current Business Deductions Under Tangible Property Safe Harbors

Did your business make repairs to tangible property, such as buildings, equipment or vehicles, in 2025? Such costs may be fully deductible on your 2025 income tax return — if they weren’t actually for “improvements” that must be depreciated over a period of years.

Betterment, restoration or adaptation

In general, a cost that results in an improvement to a building structure or any of its building systems (for example, the plumbing or electrical system) or to other tangible property must be capitalized, with depreciation deductions spread over a few years or longer (depending on depreciation method and property type). An improvement occurred if there was a betterment, restoration or adaptation of the unit of property.

Under the “betterment test,” you generally must capitalize amounts paid for work that’s reasonably expected to materially increase the productivity, efficiency, strength, quality or output of a unit of property or that’s a material addition to a unit of property.

Under the “restoration test,” you generally must capitalize amounts paid to replace a part (or combination of parts) that is a major component or a significant portion of the physical structure of a unit of property.

Under the “adaptation […]

By Linkenheimer LLP|2026-02-16T20:43:40+00:00February 16th, 2026|business, deductions|0 Comments

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

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