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 test,” you generally must capitalize amounts paid to adapt a unit of property to a new or different use — one that isn’t consistent with your ordinary use of the unit of property at the time you originally placed it in service.

Immediate deduction safe harbors

Costs incurred on incidental repairs and maintenance can be expensed and immediately deducted. But distinguishing between repairs and improvements can be difficult. A few IRS safe harbors can help:

Routine maintenance safe harbor. Recurring activities dedicated to keeping property in efficient operating condition can be expensed. These are activities that your business reasonably expects to perform more than once during the property’s “class life,” as defined by the IRS.

Amounts incurred for activities outside the safe harbor don’t necessarily have to be capitalized, though. These amounts are subject to analysis under the general rules for improvements.

De minimis safe harbor. Amounts paid for tangible property can be currently deducted for tax purposes if those amounts are deducted for financial accounting purposes or in keeping your books and records. However, a dollar limit applies:

• $5,000 if you have an “applicable financial statement,” generally meaning one that’s audited by a CPA, of $2,500 if you don’t have an applicable financial statement.

Additional rules apply that may limit or eliminate your current deduction for a particular expense.

Small business safe harbor. For buildings that initially cost $1 million or less, qualified small businesses may elect to deduct the lesser of $10,000 or 2% of the unadjusted basis of the property for repairs, maintenance, improvements and similar activities each year. A qualified small business is generally one with average annual gross receipts of $10 million or less for the past three tax years.

A variety of tax-saving opportunities

As you can see, various options may be available to immediately deduct repair and maintenance costs safely. But keep in mind that improvements might also be eligible to be deducted immediately in certain circumstances, such as if they qualify for 100% bonus depreciation or Section 179 expensing. Contact us to discuss what you can deduct on your 2025 return and to start planning for tax-efficient repairs, maintenance and improvements in 2026.

© 2026

Tax credits reduce tax liability dollar-for-dollar. As a result, they can be more valuable than deductions, which reduce only the amount of income subject to tax. One tax credit that hasn’t been getting much attention lately but that can still be valuable for some small businesses is the credit for providing health insurance to employees.

Who’s eligible?

Under the Affordable Care Act (ACA), certain small employers that provide employees with health care coverage are eligible for this tax credit. Although it’s been available for more than a decade and generally can be claimed for only two years, some small businesses may still be eligible. These may include newer businesses as well as older ones that only recently have begun offering health insurance.

The maximum credit is 50% of group health coverage premiums paid by the employer, if it contributes at least 50% of the total premium or of a benchmark premium. For 2025, the full credit is available for employers with 10 or fewer full-time equivalent employees (FTEs) and average annual wages of $33,300 or less per employee. Partial credits are available on a sliding scale to businesses with fewer than 25 FTEs and average annual wages of less than $66,600. (These amounts are annually adjusted for inflation and increase to $34,100 and $68,200, respectively, for 2026.)

As noted, the credit can be claimed for only two years. Also, those years must be consecutive. (Credits claimed before 2014 don’t count, however.) If you started offering employee health insurance in 2025, you may be eligible for the credit on your 2025 return (and again on your 2026 return next year). If you’re offering coverage beginning in 2026, you may be able to claim the credit when you file your 2026 return next year (and then again on your 2027 return the following year).

Keep in mind that additional rules apply to the health care coverage credit. But premiums that aren’t eligible for the credit generally can be deducted, subject to the rules that apply to deductions for ordinary business expenses.

Can your business claim the credit?

If you’re not sure whether your business is eligible for a full (or partial) credit for health care coverage, contact us. We can help assess your eligibility. We can also advise on whether you may be eligible for other tax credits on your 2025 return and if you can take any steps this year so you can potentially claim credits on your 2026 return next year.

© 2026

Does your family business keep its strategic decisions within the family? It’s common for family businesses to assign relatives to positions of authority and require other employees to defer to them. But “common” doesn’t necessarily mean “good.” Not only is outside input recommended, but it can help reduce the risk of certain problems (such as unaccountability and fraud) and promote long-term financial health. Here’s how your family business might benefit from an advisory board made up primarily of nonfamily members.

A consulting body

An advisory board serves only in a consulting capacity. So it doesn’t carry the fiduciary responsibilities or legal authority of a formal board of directors. Small business advisory boards generally are less formal and enjoy greater freedom to develop creative solutions and suggest new business opportunities.

Advisory boards can also act as mediators. Board members may provide perspective and potential solutions for family disagreements over:

• -Your company’s strategic direction,
• -Growth and expansion opportunities,
• -Mergers and acquisitions,
• -Loans and other financing initiatives,
• -Compensation and promotion decisions,
• -Interpersonal conflicts, 
• -Succession plans
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Depending on your board’s composition, it may also be qualified to offer opinions on legal, regulatory and complicated financial issues.

Building the base

You’ll want a mix of professionals from varying fields, demographics and backgrounds on your board. One effective way to recruit advisory board members is to network with business, industry, community, academic and philanthropic organizations. You may also want to involve professional advisors, such as your CPA, banker, insurance agent, estate planner or legal counsel. These advisors will likely already be familiar with your company’s goals, issues and operations.

Specify the mix of traits and qualifications; leadership skills, experience, competencies, education, affiliations and achievements; needed in members to fulfill your board’s purpose. Ensure these individuals are willing to make candid observations and provide constructive advice. They must also maintain confidentiality and exercise discretion regarding sensitive business and family matters.

It may be practical for you or another family member to serve as the advisory board’s chair. But as your business grows in size and complexity and the demands on your time increase, consider delegating this responsibility to a board member.

Nail down the details

Other details to work out include the frequency of advisory board meetings. Meeting at least monthly initially will help the group build rapport and become relevant to your business. Once the board is established, quarterly meetings may suffice. However, emergency meetings scheduled on short notice may become necessary at certain points.

Your business should cover advisory board members’ travel costs and pay them for their time. Cash compensation makes sense for family businesses that intend to remain closely held. However, companies planning to go public often issue stock or equity-based compensation (subject to legal and tax considerations).

Impartial perspectives

If your family business doesn’t already have one, consider creating an independent advisory board to provide impartial perspectives on your company’s pressing challenges and opportunities. Contact us to discuss how we can help you design an effective advisory board or participate as an independent financial advisor to support governance and long-term planning.

© 2026

As remote and hybrid work have become more common, corporate retreats have surged in recent years. Some or all of your employees may now work from home and experience little in-person interaction with coworkers. A retreat can foster collegial relationships and, ultimately, greater productivity. But the first decision you’ll likely need to make is whether your retreat will be a smaller-scale affair held in your office or an off-site retreat. There are ways to make either one affordable.

Your office

Staying on your company’s premises can keep out-of-pocket costs in check. The most obvious is that you won’t need to rent meeting rooms. And, assuming employees live in the area, you won’t have transportation and lodging expenses. You’ll also likely spend less on food and beverages. A local restaurant can cater your meals and snacks, and you could buy beverages in bulk.

On the downside, employees tend to view on-site retreats as just another day at the office. This can hamper creative thinking and team building and limit possible activities. Worse, employees may be distracted if they can frequently run back to their desks to check email and voicemail.

Off-site locations

In general, workers are better able to focus on a retreat agenda at an off-site location. They’re in a new, “special” environment with no visual cues to trigger workday routines. So, even though you’ll incur greater costs than if you’d stayed in your office, you may get a better return on investment.

The fact is, hotels and other facilities that host company retreats need and want your business! Many things may be negotiable, and you might be able to snag discounts by booking or paying early. Get several quotes and compare prices and services. You’ll have more leverage if you avoid scheduling your retreat during seasonal peaks when local venues tend to be busy with weddings, trade shows and industry conferences.

Hotels earn their biggest margins on food, beverages and meeting setup fees, so they may be willing to provide complimentary or discounted rooms for guest speakers and out-of-town employees. Also, try to negotiate a flat food-and-beverage price for the entire retreat, rather than a per-person or per-event rate.

Possible tax relief

Here’s another way to save: Some of your company retreat expenses may be tax-deductible. They need to meet IRS criteria as “ordinary and necessary” business expenses and can’t be extravagant or include expenditures for employees’ spouses. In general, business meals are only 50% deductible, and entertainment costs are nondeductible. Contact us to learn more about tax-deductible costs and the IRS’s documentation requirements.

© 2026

One of the most critical decisions entrepreneurs make when starting or restructuring a business is choosing the right entity type. This choice directly impacts how the business is taxed, the level of administrative complexity and regulatory compliance obligations. While legal liability considerations also matter, we will focus on tax implications. For liability advice, consult a legal professional.

Whether launching a new venture or reassessing your current structure, understanding how each entity is taxed can help you make strategic and compliant decisions. Here’s a brief overview of five entities.

1. Sole proprietorship: Simple with full responsibility

A sole proprietorship is the easiest structure to set up. It’s owned and operated by one person and requires minimal administrative effort. Here are the main features:

• Taxation. Income and losses are reported on the owner’s personal tax return on Schedule C of Form 1040. Income is subject to 15.3% federal self-employment tax, and the business itself isn’t taxed separately. The owner may also qualify for a Qualified Business Income (QBI) deduction, potentially reducing the effective tax rate.
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• Compliance. Aside from obtaining necessary licenses or a business name registration, there’s little required paperwork. However, the owner is personally liable for all business debts and legal obligations.
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2. S Corporation: Pass-through entity with payroll considerations

An S Corp is a tax designation offering pass-through taxation benefits while imposing stricter rules. Here are the highlights:

• Taxation. S Corps don’t pay income tax at the entity level. Instead, profits or losses are passed through to shareholders via Schedule K-1 and reported on individual returns. A key tax benefit is that shareholders who are employees receive a salary (subject to payroll tax), while additional profit distributions aren’t subject to self-employment tax. However, the salary must be reasonable. The business is eligible for QBI deductions.
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• Compliance. To qualify, S corps must have 100 or fewer shareholders, all U.S. citizens or residents, and only one class of stock. They must file Form 2553, issue annual Schedule K-1s and follow corporate formalities like shareholder meetings and recordkeeping. An informational return (Form 1120-S) is also required.
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3. Partnership: Collaborative ownership with pass-through taxation

A partnership involves two or more individuals jointly operating a business. Common types include general partnerships, limited partnerships, and limited liability partnerships (LLPs). Here’s what makes it unique:

• Taxation. Partnerships are pass-through entities. The business files Form 1065 (an informational return), and income or loss is distributed to partners on Schedule K-1. Partners report this on their personal returns. General partners must pay self-employment tax, while limited partners usually don’t. The business is eligible for QBI deductions.
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• Compliance. Partnerships require a detailed partnership agreement, coordinated recordkeeping and clear profit-sharing arrangements. While more complex than a sole proprietorship, partnerships offer flexibility for growing businesses.
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4. Limited liability company: Flexible and customizable

An LLC merges elements of corporations and partnerships, offering owners called members both operational flexibility and liability protection.

• Taxation. By default, a single-member LLC is taxed like a sole proprietorship, and a multimember LLC like a partnership. However, LLCs may elect to be taxed as a C or S Corp by filing Form 8832 or Form 2553. This gives owners control over their tax strategies. LLCs that don’t elect C Corp status are eligible for QBI deductions.
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• Compliance. LLCs require articles of organization and often must have an operating agreement. Though not as complex as corporations, they still generally face state-specific compliance requirements and annual filings.
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5. C Corporation: Double taxation with scalability

A C Corp is a distinct legal entity offering the most liability protection and growth potential through stock issuance. Here are its features:

• Taxation. C corps face double taxation the business pays taxes on earnings (currently at a 21% federal rate), and shareholders pay taxes again on dividends. However, C Corps can offer deductible benefits (for example, health insurance, retirement plans) and retain earnings without immediately distributing profits. C corps aren’t eligible for QBI deductions.
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• Compliance: These entities require the most administrative upkeep, including bylaws, annual meetings, board minutes, and extensive state and federal reporting. C corps are ideal for companies seeking venture capital or IPOs.
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After hiring employees

Regardless of entity type, adding employees increases compliance requirements. Businesses must obtain an Employer Identification Number (EIN) and withhold federal and state payroll taxes. Employers also take on added responsibilities related to benefits, tax deposits, and employment law compliance.

What’s right for you?

There’s no universal answer to which entity is best. The right choice depends on your growth goals, ownership structure and financial needs. Tax optimization is a critical factor. For example, an LLC electing S Corp status may help minimize self-employment taxes if set up properly. Contact us. We can coordinate with your attorney to ensure your structure supports both your tax strategies and business goals.

© 2025

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 equipment or software in the year it’s placed in service, rather than depreciating it over several years.

Proposed change: The bill would increase the expensing limit to $2.5 million and the phaseout threshold to $4 million for property placed into service after 2024. The amounts would be adjusted annually for inflation.

Why it matters: This provision could help smaller businesses deduct more of the cost (or the entire cost) of qualifying purchases without dealing with depreciation schedules. Larger thresholds would mean more flexibility for expanding operations.

3. Qualified business income (QBI) deduction

Current rules: Created by the Tax Cuts and Jobs Act (TCJA), the QBI deduction is currently available through 2025 to owners of pass-through entities. These include S corporations, partnerships, limited liability companies, sole proprietors and most self-employed individuals. QBI is defined as the net amount of qualified items of income, gain, deduction and loss that are effectively connected with the conduct of a U.S. business. The deduction generally equals 20% of QBI, not to exceed 20% of taxable income minus net capital gain. But it’s subject to additional limits that can reduce or eliminate the tax benefit.

Proposed change: Under the bill, the QBI tax break would be made permanent. Additionally, the deduction amount would increase to 23% for tax years beginning after 2025.

Why it matters: The increased deduction rate and permanent extension would lead to substantial tax savings for eligible pass-through entities. If the deduction is made permanent and adjusted for inflation, businesses could engage in more effective long-term tax planning.

4. Research and experimental (R&E) expensing

Current rules: Under the TCJA, businesses must capitalize and amortize domestic R&E costs over five years (15 years for foreign research).

Proposed change: The bill would reinstate a deduction available to businesses that conduct R&E. Specifically, the deduction would apply to R&E costs incurred after 2024 and before 2030. Providing added flexibility, the bill would allow taxpayers to elect whether to deduct or amortize the expenditures. (The requirement under current law to amortize such expenses would be suspended while the deduction is available.)

Why it matters: Many businesses especially startups and tech firms depend heavily on research investments. Restoring current expensing could ease tax burdens and encourage innovation.

5. Increase in information reporting amounts

Current rules: The annual reporting threshold for payments made by a business for services performed by an independent contractor is generally $600. That means businesses must send a Form 1099-NEC to contractors they pay more than $600 by January 31 of the following year.

Proposed change: The bill would generally increase the threshold to $2,000 in payments during the year and adjust it for inflation. This provision would apply to payments made after December 31, 2024. (The bill would also make changes to the rules for Form 1099-K issued by third-party settlement organizations.)

Why it matters: This proposal would reduce the administrative burdens on businesses. Fewer 1099-NECs would need to be prepared and filed, especially for small engagements. If the provision is enacted, contractors would receive fewer 1099-NECs. Income below $2,000 annually would still have to be reported to the IRS, so contractors may have to be more diligent in tracking income.

More to consider

These are just five of the significant changes being proposed. The One, Big, Beautiful Bill also proposes changes to the business interest expense deduction and some employee benefits. It would eliminate federal income tax on eligible tips and overtime and make many more changes.

If enacted, the bill could deliver immediate and long-term tax relief to certain business owners. It narrowly passed in the U.S. House of Representatives and is currently being considered in the Senate. Changes are likely to be made there, at which point the new version would have to be passed again by the House before being sent to President Trump to be signed into law. The current uncertainty means business owners shouldn’t act prematurely.

While these changes may sound beneficial, their complexity and the possibility of retroactive provisions make professional guidance essential. Contact us to discuss how to proceed in your situation.

© 2025