Richard C. Brozewicz, CPA

02/17/2026

To maximize — or not to maximize — depreciation deductions on your 2025 tax return
The deadlines for filing 2025 tax returns (or extensions) are fast approaching. Although most tax planning moves must be completed by December 31 of the tax year, there are some decisions you can make when filing your return that can save taxes now or in the future. One such decision is whether to claim accelerated depreciation breaks.
Depreciation basics
For assets with a useful life of more than one year, the cost generally must be depreciated over a period of years (unless accelerated depreciation breaks are available). In other words, taxpayers can deduct only a portion of the asset’s cost each year over the depreciation period.
The depreciation period depends on the type of asset, ranging from three years (such as for software and small tools) to 39 years (for commercial real estate). The Modified Accelerated Cost Recovery System (MACRS) provides larger deductions in the early years of an asset’s life than the straight-line method.
In many cases, assets can be depreciated much more quickly under special tax breaks. Some of these breaks were enhanced by last year’s One Big Beautiful Bill Act (OBBBA).
First-year bonus depreciation
Under the OBBBA, 100% first-year bonus depreciation can be claimed on 2025 tax returns for qualified assets that were acquired after January 19, 2025, and placed in service in 2025.
Eligible assets include:
• Depreciable personal property, such as equipment, computer hardware and peripherals,
• Transportation equipment, including certain passenger vehicles, and
• Commercially available software.
First-year bonus depreciation can also be claimed for real estate qualified improvement property (QIP). QIP is defined as an improvement to an interior portion of a nonresidential building placed in service after the date the building was placed in service. However, expenditures attributable to the enlargement of a building, elevators or escalators, or the internal structural framework of a building don’t count as QIP and usually must be depreciated over 39 years.
The first-year bonus depreciation percentage is 40% for qualified assets acquired on or before January 19, 2025, and placed in service in 2025.
Bonus depreciation is automatically applied to eligible assets unless you elect out of it. However, you can elect out of it only on an asset class basis. For example, you can elect out of it for all three-year property, but you can’t elect out of it for just one specific three-year asset.
Section 179 expensing election
Sec. 179 expensing allows small businesses to write off the full cost of 2025 eligible assets. For tax years beginning in 2025, the maximum Sec. 179 deduction is $2.5 million (double the pre-OBBBA limit).
Eligible assets include:
• Depreciable personal property, such as equipment, computer hardware and peripherals,
• Transportation equipment, including certain passenger vehicles,
• Commercially available software, and
• Real estate QIP.
For nonresidential real property, Sec. 179 deductions are also allowed for qualified expenditures for:
• Roofs,
• HVAC equipment,
• Fire protection and alarm systems, and
• Security systems.
Finally, eligible assets include depreciable personal property used predominantly to furnish lodging, such as furniture and appliances in a property rented to transients.
In addition to the annual expense limit, Sec. 179 expensing is subject to a couple of other limits that don’t apply to bonus depreciation. First, the deduction is phased-out dollar for dollar if you put more than $4 million of qualifying assets into service last year. Second, Sec. 179 deductions can’t cause an overall business tax loss. The Sec. 179 deduction limits can be tricky if you own an interest in a pass-through business entity.
That said, claiming Sec. 179 expensing can be beneficial for assets not eligible for 100% bonus depreciation or if you want to immediately deduct the cost of some, but not all, assets in a particular asset class that is also eligible for bonus depreciation.
Depreciation deduction strategies
Claiming the maximum depreciation deductions you can on your 2025 income tax return will generally provide the greatest 2025 tax savings. Among other benefits, this can boost cash flow and provide more funds for further investment in the business.
But there are circumstances where it may be better to depreciate assets over a period of years. For example, the Section 199A qualified business income (QBI) deduction for pass-through businesses can be up to 20% of an owner’s QBI. Because of the income limitations on this deduction, claiming big first-year depreciation deductions can reduce QBI and lower or even eliminate your allowable QBI deduction.
Depreciating assets over a period of years can also be beneficial if you expect to be subject to higher tax rates in the future, such as if you may be in a higher tax bracket or lawmakers increase rates. When you claim 100% bonus depreciation or Sec. 179 expensing today, you’re eliminating your depreciation deductions for those assets in the future. And deductions save more tax when tax rates are higher.
Time to get started
We can identify which depreciation breaks you’re eligible for, review your overall tax situation and help determine whether it will be beneficial for you to maximize depreciation-related breaks on your 2025 tax return. We can also strategize with you on tax planning for 2026 asset investments. Please contact us to get started.

02/02/2026

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 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, or
$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.

01/05/2026

Not all “business” expenses are tax deductible
With 2025 in the rear view mirror and the tax filing deadline on the road ahead, it’s a good time for businesses to start gathering information about their deductible expenses for 2025. But what’s deductible (and what’s not) might not be as clear-cut as you think.
Most business deductions aren’t specifically listed in the Internal Revenue Code (IRC). The general rule is what’s stated in the first sentence of IRC Section 162, that you can write off “all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business.” In addition, you must be able to substantiate the expenses.
Ordinary and necessary
In general, an expense is ordinary if it’s considered common or customary in the particular trade or business. For example, a landscaping company’s costs for fuel and routine maintenance on its lawn equipment would typically qualify as ordinary expenses because such costs are customary for that type of business.
A necessary expense is defined as one that’s helpful or appropriate. For instance, a retail store that invests in security cameras may be able to operate without them, but the expense is helpful for reducing theft and protecting employees and customers.
To be deductible, an expense must be both ordinary and necessary. An ordinary expense may be unnecessary because the amount isn’t reasonable in relation to the business purpose. For example, let’s say a construction business upgrades to premium, top-of-the-line tools when standard professional-grade tools already meet job requirements. Tool purchases are ordinary, but excessive upgrades may be unreasonable and, thus, unnecessary.
Cases in point
The IRS and courts don’t always agree with taxpayers about what qualifies as a deductible business expense. Often substantiation is the primary issue. Sometimes the question hinges not on the expense itself, but on whether the taxpayer was actually operating a trade or business.
For example, the U.S. Tax Court denied deductions claimed by an engineering firm owner for the value of his own time spent developing a program. Self-performed labor isn’t “paid or incurred,” the court noted. Therefore, it’s not deductible. The court disallowed other deductions due to insufficient records and lack of a clear business purpose.
In another case, a taxpayer engaged in real estate activities. His business expense deductions were denied by the Tax Court. The court ruled that the activities didn’t constitute an active trade or business. Instead, the real estate was held for investment purposes. In addition, the deductions weren’t substantiated because adequate records weren’t kept. The taxpayer appealed. The U.S. Court of Appeals for the Ninth Circuit agreed with the Tax Court. The court ruled the taxpayer “failed to provide sufficient evidence of his claimed deductions.”
What can you deduct for 2025?
Determining the deductibility of business expenses can be complicated, and proper substantiation is critical. We can help you determine what you can deduct on your 2025 tax return.

Call now to connect with business.

11/18/2025

What you need to know about deducting business gifts
Thoughtful business gifts are a great way to show appreciation to customers and employees. They can also deliver tax benefits when handled correctly. Unfortunately, the IRS limits most business gift deductions to $25 per person per year, a cap that hasn’t changed since 1962. Still, with careful planning and good recordkeeping, you may be able to maximize your deductions.
When the $25 rule doesn’t apply
Several exceptions to the $25-per-person rule can help you deduct more of your gift expenses:
Gifts to businesses. The $25 limit applies only to gifts made directly or indirectly to an individual. Gifts given to a company for use in its business — such as an industry reference book or office equipment — are fully deductible because they serve a business purpose. However, if the gift primarily benefits a specific individual at that company, the $25 limit applies.
Gifts to married couples. When both spouses have a business relationship with you and the gift is for both of them, the limit generally doubles to $50.
Incidental costs. The expenses of personalizing, packaging, insuring or mailing a gift don’t count toward the $25 limit and are fully deductible.
Employee gifts. Cash or cash-equivalent gifts (such as gift cards) are treated as taxable wages and generally are deductible as compensation. However, noncash, low-cost items — like company-branded merchandise, small holiday gifts, or occasional meals and parties — can qualify as nontaxable “de minimis” fringe benefits. These are deductible to the business and tax-free to the employee.
How entertainment gifts are treated now
Under the Tax Cuts and Jobs Act, most entertainment expenses are no longer deductible. This includes tickets to sporting events, concerts and other entertainment, even when related to business. However, if you give event tickets as a gift and don’t attend yourself, you may be able to classify the cost as a business gift, subject to the $25 limit and any applicable exceptions.
Note that meals provided during an entertainment event may still be 50% deductible if they’re separately stated on the invoice.
Why good recordkeeping matters
To claim the full deductions you’re entitled to, document your gifts properly. Record each gift’s description, cost, date and business purpose and the relationship of the recipient to your business. Digital records are acceptable — such as accounting notes or CRM entries — as long as they clearly support the deduction.
Track qualifying expenses separately in your books. That way they can be easily identified.
Make your business gifts count
A little knowledge and planning can go a long way toward ensuring your business gifts are both meaningful and tax-smart. If you’d like help reviewing your company’s gift-giving policies or want to confirm how the deduction rules apply to your situation, contact our office. We’ll help your business keep compliant with tax law while you show appreciation to your customers and employees.

11/02/2025

Calling all business owners, is your best set up to maximize wealth creation while also lowering your tax liability? Have you had your business structure and tax plan evaluated lately? I am running a special where we will look at your business structure and current tax plan and help determine if you are set up for success. Book the one hour zoom call and we will help evaluate your business structure and tax plan for the Low rate of $750. If you then engage with us to execute your plan and or have us prepare your taxes we will apply a portion of that fee as a credit against the tax prep costs. Don’t delay as there is only a short time to make changes for 2025.

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07/03/2025

I’m giving Credit to my Friend and Collegue for his great words. Thank you Tom Gorczynski.

Ok, the One Big Beautiful Bill Act will now become law.

This goes well beyond the Trump Tax cuts and Jobs act of 2017… and this is the opposite of tax simplification.

For Taxpayers: If you think you are impacted by these provisions (and you probably are) find a qualified professional (they should be a CPA, EA, tax attorney, or a professional governed by a state license). This is not free advice; you should expect to pay a consulting fee for competent assistance. I am happy to provide you with a consultation, feel free to book a time below and I can go over all of the impacts to you and your business

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04/22/2025

Explore SEP and SIMPLE retirement plans for your small business

Suppose you’re thinking about setting up a retirement plan for yourself and your employees. However, you’re concerned about the financial commitment and administrative burdens involved. There are a couple of options to consider. Let’s take a look at a Simplified Employee Pension (SEP) and a Savings Incentive Match Plan for Employees (SIMPLE).

SEPs offer easy implementation

SEPs are intended to be an attractive alternative to “qualified” retirement plans, particularly for small businesses. The appealing features include the relative ease of administration and the discretion that you, as the employer, are permitted in deciding whether or not to make annual contributions.

If you don’t already have a qualified retirement plan, you can set up a SEP just by using the IRS model SEP, Form 5305-SEP. By adopting and implementing this model SEP, which doesn’t have to be filed with the IRS, you’ll have satisfied the SEP requirements. This means that as the employer, you’ll get a current income tax deduction for contributions you make on your employees’ behalf. Your employees won’t be taxed when the contributions are made but will be taxed later when distributions are received, usually at retirement. Depending on your needs, an individually-designed SEP — instead of the model SEP — may be appropriate for you.

When you set up a SEP for yourself and your employees, you’ll make deductible contributions to each employee’s IRA, called a SEP-IRA, which must be IRS approved. The maximum amount of deductible contributions you can make to an employee’s SEP-IRA in 2025, and that he or she can exclude from income, is the lesser of 25% of compensation or $70,000. The deduction for your contributions to employees’ SEP-IRAs isn’t limited by the deduction ceiling applicable to an individual’s contributions to a regular IRA. Your employees control their individual IRAs and IRA investments, the earnings on which are tax-free.

You’ll have to meet other requirements to be eligible to set up a SEP. Essentially, all regular employees must elect to participate in the program, and contributions can’t discriminate in favor of highly compensated employees. But these requirements are minor compared to the bookkeeping and other administrative burdens associated with traditional qualified pension and profit-sharing plans.

The detailed records that traditional plans must maintain to comply with the complex nondiscrimination rules aren’t required for SEPs. And employers aren’t required to file annual reports with the IRS, which, for a pension plan, could require the services of an actuary. The required recordkeeping can be done by a trustee of the SEP-IRAs — usually a bank or mutual fund.

SIMPLE plans meet IRS requirements

Another option for a business with 100 or fewer employees is a Savings Incentive Match Plan for Employees (SIMPLE). Under these plans, a SIMPLE IRA is established for each eligible employee, with the employer making matching contributions based on contributions elected by participating employees under a qualified salary reduction arrangement. The SIMPLE plan is also subject to much less stringent requirements than traditional qualified retirement plans. Or, an employer can adopt a SIMPLE 401(k) plan, with similar features to a SIMPLE IRA plan, and avoid the otherwise complex nondiscrimination test for traditional 401(k) plans.

For 2025, SIMPLE deferrals are allowed for up to $16,500 plus an additional $3,500 catch-up contribution for employees age 50 or older.

Unique advantages

As you can see, SEP and SIMPLE plans offer unique advantages for small business owners and their employees. Neither plan requires annual filings with the IRS. Contact us for more information or to discuss any other aspect of your retirement planning.