Tax Deductions For Business Expenses

The new Tax Law didn't just tweak the code It rewired it for business owners who know how to play offense. Entrepreneurs, investors, and small business owners now have access to powerful deductions and permanent rules that create certainty. Here are the key takeaways: 1) QBI Deduction Made Permanent The 20% deduction for qualified business income (QBI) from partnerships, S corps, sole proprietorships, REIT dividends, and MLP income is here to stay. This stability fosters long-term planning for flow-through owners. 2) Expanded Eligibility Phase-in thresholds are now $75K (individual) and $150K (joint). More taxpayers qualify, widening access to meaningful tax savings. 3)Minimum $1,000 QBI Rule Even modest business income of $1,000 guarantees access to the deduction. Startups and small ventures win here. 4)100% Bonus Depreciation, Permanent Full expensing of qualified property like machinery and equipment is now locked in, improving cash flow and fueling growth investments. 5)Boosted Section 179 Expensing The limit rises to $2.5 million, giving more SMEs the ability to expense critical capital expenditures upfront. These changes create predictability, and flexibility in structuring business operations. Timing purchases and coordinating with your CPA will be critical to maximizing benefits. The OBBBA did more than tweak the rules. It gave business owners permanent tools to keep more cash, plan with confidence, and accelerate growth.

Build it, Deduct it!   On July 4th, the U.S. passed OBBBA, a sweeping tax reform package that delivers a windfall for companies who invest in innovation and infrastructure. It’s simple: more R&D + more CapEx = more free cash flow. Here’s why:   OBBBA reinstates 100% immediate expensing for U.S.-based R&D. No more amortizing over 5 years. If you’re building the next breakthrough in AI or life sciences, your tax deduction is instant. That means lower taxes this year, not in 2029. On the CapEx side, OBBBA brings back full bonus depreciation for qualified property, including everything from machinery, data center infrastructure, chip fabs, and corporate jets.   Buy it. Build it. Deduct it.   This bill serves to accelerate free cash flow, which will be a powerful tailwind for growth-oriented companies that reinvest heavily in their businesses. Companies that rely on R&D for product development (technology, biotech), building critical infrastructure (semis, energy, manufacturing, commercial property), or deploy heavy equipment (railroads, ship builders, farm equipment) benefit from this full write-off in year 1. For many companies this will result in a spike in free cash flow which should help drive valuations.   OBBBA also includes retroactive "catch-up" deductions for previously capitalized R&D from 2022–2024, which is a gift as refund checks for companies that have been carrying deferred tax assets is off-set this tax year. This policy rewards domestic innovation and encourages onshoring for strategic industries.   Asset Based Lending will also benefit since hard assets valuations will experience a step-function higher and U.S. taxpayers will see this flow through on their K-1s. At Marathon Asset Management, we are witnessing firsthand the demand to finance many of these hard mission-critical assets. 

All tax planning moves are not created equal Some deductions lead to $100s in savings Others lead to $10,000+ in savings This one specifically has led some of my clients to $10,000-$50,000 in tax savings Here's how to optimize the Qualified Business Income Deduction (QBID In 2017, Tax Cut and Jobs Act created the QBID It is a tax benefit designed for self-employed individuals and small business owners It allows eligible business owners to reduce their taxable income by letting them deduct either: - 20% of their qualified business income or - 50% of their wages paid out to themselves and employees Whichever is lesser This deduction serves as a valuable tool for reducing income tax payments If your business generates $200,000 in profit, you could potentially benefit from a $40,000 deduction Surprisingly, many business owners remain unaware of this deduction and how to maximize it Particularly for business owners who might overlook this opportunity Also... it's important to know that 1. You can claim the QBI deduction even if you opt for the standard deduction 2. The QBI deduction affects your income tax but does not impact self-employment tax So Who Qualifies for QBI and At What Income Levels? In 2024, the qualification for the QBI deduction is based on your taxable income. And for those married filing jointly, the threshold is $383,900 for full eligibility If your taxable income exceeds these thresholds, the QBI deduction begins to phase out However, there's also a higher QBI threshold to consider If you're married filing jointly and your taxable income exceeds $483,900, or if you're a single filer with taxable income exceeding $241,950 And your business falls into the category of a specified service trade or business (SSTB), then you won't receive any deduction For those that have incomes that exceed the threshold, here's the equation - You can deduct 50% of the W-2 wages paid by your business Or - You can deduct 20% of business profits Whichever is lower Unless you are a "specified service trade or business" (SSTB) then you get no deduction This chart below helps you understand how it works and if you qualify Consider the following example to see how this would work out in a basic case et’s say you’re a single filer and have taxable income of $250,000 You paid out $100,000 in W2 wages from the business Which leaves $150,000 in profit If you were under the taxable income threshold of $191,950, you’d simply take a $30,000 QBI deduction from 20% of that $150,000 profit But because you are over the income limit, you weigh the 2 options: Option 1: $100,000 x .5 = $50,000 from the wages Option 2: .2 x $150,000 = $30,000 You have to go with the lesser which is option 2 (not a choice) You have $20,000 less in deductions because you did not optimize So who qualifies for QBI? The QBI deduction is for owners of passthrough entities/self-employed Like: - Sole props - LLCs - Partnerships - S Corps Maximize this!

If you're a freelancer, consultant, or small business owner, the Qualified Business Income (QBI) Deduction is your friend. It's one of the most powerful tax breaks in the US, but most people don't use it right- or don't know they qualify! What is QBI? (Section 199A): - The QBI Deduction allows eligible owners of non-corporate businesses (called "pass-through entities") to deduct up to 20% of their net business income. Who Qualifies? - Sole Proprietorships (Schedule C) - Partnerships - S Corporations - LLCs taxed as any of the above. - If your business income is taxed on your personal return (Form 1040), you are likely eligible. What is QBI? - Essentially, your net profit from the qualified business activity. - It generally excludes W-2 wages, capital gains/losses, and guaranteed payments to partners. Why does it exist? - It was created to give small businesses a comparable tax break when the corporate tax rate was significantly lowered. The Big Catch: Income Limits - While the deduction is simple at low incomes, it becomes complicated (or disappears) if your total Taxable Income (business + all other income) goes over certain thresholds. Below the Threshold: You generally get the full 20% QBI deduction with no limitations, regardless of your business type. Above the Threshold: - Specified Service Trades/Businesses (SSTBs): Your deduction is phased out and eventually eliminated (SSTBs include fields like health, law, accounting, consulting, and financial services). - All Other Businesses: The deduction becomes limited based on the W-2 wages paid by your business or the cost of business property (like equipment and real estate). Key Takeaway - If you are self-employed, the QBI deduction is not an optional write-off; it is a critical tax reduction. If your income is high, strategies like paying W-2 wages or buying business property might be needed to keep the deduction alive. Follow @thetaxsaaab on Instagram for more simple US tax breakdowns!

Most business owners overpay taxes—not because they have to, but because they don’t know better. Every year, I see entrepreneurs losing lakhs simply because they aren’t aware of tax strategies designed to help them save. The best part? These strategies are 100% legal and used by the smartest business owners to optimize their tax outflows. If you’re a business owner, read this carefully—it could save you serious money. 1. Choose the Right Business Structure Your legal entity matters more than you think. Sole proprietorship, partnership, LLP, or a private limited company—each has its own tax benefits and drawbacks. The right structure can reduce your tax liability significantly. A sole proprietor might pay taxes at individual slab rates, while an LLP or Pvt Ltd company may offer better tax efficiency depending on revenue, compliance costs, and future growth plans. The key? Get expert advice and choose wisely. 2. Claim Every Business Expense Possible One of the biggest mistakes small business owners make is not claiming all eligible deductions. If it’s a business-related expense, it’s tax-deductible. Office rent, utilities, internet, software, employee salaries, marketing expenses, travel costs for work, depreciation on equipment—the list is long. Keep proper records and claim everything you legally can. You’ll be surprised how much this one habit can save you in taxes. 3. Don’t Ignore GST Input Credit If you’re paying GST, you must claim input tax credit on business-related expenses. This reduces your net GST payable and can save lakhs every year. Many businesses either don’t know about this or don’t track their eligible credits properly. If you're paying GST on rent, advertising, professional fees, or software—get that credit back. 4. Use Presumptive Taxation for Simplicity & Savings For businesses with revenue up to ₹3 crore and professionals earning up to ₹75 lakh, the government allows presumptive taxation—a fixed profit percentage of revenue is taxed instead of maintaining detailed accounts. Businesses: Tax is calculated on just 6% of total revenue (if digital payments) or 8% (if cash-based). Professionals: You can declare 50% of revenue as profit and pay tax only on that amount. No detailed books, no audits—just tax savings and peace of mind. The truth is, tax planning is not just for big corporations—it’s for every business owner who wants to keep more of what they earn. In life, only two things are constant—death and taxes. We can’t avoid the first one, but we can definitely optimize the second. If this helped you, share it with a fellow entrepreneur who needs to stop overpaying taxes. Let’s build wealth the smart way. #taxsavings #businessgrowth #entrepreneurship #smallbusinessowner #taxplanning #financialfreedom #gst #incometax #wealthbuilding #taxstrategies #moneytips #businessowner #startupindia #ca #taxconsultant #savemoney #investmenttips #financialliteracy #finance101 #legaltaxhacks

𝐀 𝐒𝐦𝐚𝐫𝐭 𝐖𝐚𝐲 𝐭𝐨 𝐒𝐚𝐯𝐞 𝐔𝐩 𝐭𝐨 𝐀𝐄𝐃 2 𝐌𝐢𝐥𝐥𝐢𝐨𝐧 𝐢𝐧 𝐓𝐚𝐱 Many companies in UAE are already doing R&D without realising it. From improving processes and reducing costs to developing new products, automation, or digital systems, these activities can qualify for up to AED 2 million in tax credits under UAE’s new R&D regime. Introduced through Cabinet Decision No. 215 of 2025 and Ministerial Decision No. 24 of 2026, this framework offers 15% to 50% tax credit on qualifying R&D expenditure. The Ministerial Decision introduces a tiered credit system linked to both expenditure and workforce: • 15% for the first AED 1 million, subject to minimum 2 R&D staff • 35% for the next AED 1 million, subject to minimum 6 R&D staff • 50% for expenditure up to AED 5 million, subject to minimum 14 R&D staff Both thresholds must be satisfied for each tier, failing which the applicable rate is adjusted downward. To qualify, activities must be novel, systematic, and involve technical uncertainty. Most importantly, they must be carried out within UAE. For international groups, this creates a strong opportunity to relocate or build R&D functions locally in UAE and align tax efficiency with real operations. One of the most critical conditions is pre-approval. Without approval from the UAE R&D Council, no credit can be claimed. To get full benefit, businesses need a structured approach: • Identify qualifying R&D activities early • Maintain technical documentation and project evidence • Align staffing with credit thresholds • Ensure intellectual property and control sit within UAE • Maintain records for at least 7 years • Align group structures and transfer pricing where applicable In practice, many industries are already performing qualifying activities. For example,, Manufacturers improving processes, Logistics companies optimising systems, Technology firms building new platforms, construction companies working on modular methods, or digital engineering. Yet most of these efforts go unclaimed due to lack of proper documentation and tax alignment. If a business restructures, exits UAE, or fails conditions within a 5-year period, credits may be clawed back. This incentive applies across sectors including contracting, manufacturing, technology, logistics, energy, healthcare, fintech, retail, and food industries. For more details, read my article on gulf news. Happy reading! 😊 https://lnkd.in/dTewwuRf

R&D Costs Are Back to Full Deduction in 2025: No More Amortization Starting in 2025, you can finally stop stretching your R&D deductions over 5 or 15 years. Thanks to new legislation, domestic R&D expenses will once again be fully deductible in the year they’re incurred. That means: 🔵 Software development? 🔵 Engineering and prototyping? 🔵 Process improvement and testing? All of it can now hit your books immediately - no more waiting years to realize the benefit. This is a big win for companies who’ve been stuck cash flowing their innovation. If you’ve been hesitant to ramp up R&D spend because of amortization rules, 2025 is your green light. More upfront savings means more capital to reinvest in your team, tech, or growth. For CFOs, controllers, and founders this is the time to revisit your tax strategy. And if you’re already claiming the R&D credit, this pairs perfectly for a bigger bottom-line boost. One caveat: timing matters. Projects straddling 2024 and 2025 might need extra planning to maximize deductions. But overall? This is the R&D win the innovation economy’s been waiting for. Are you ready to write it all off? #TaxStrategy #RDcredit #EngineeringFinance

Understanding the Pass-Through Entity Tax (PTET) ●Why PTET exists? The 2017 Tax Cuts and Jobs Act (TCJA) limited the federal deduction for state and local taxes (SALT) on individual tax returns to $10,000. This cap affects business owners with pass-through income in high-tax states, as they can’t deduct the full amount of state taxes on their federal return. PTET helps to bypass this cap by allowing the pass-through entity itself to pay the state taxes—which is then deductible at the federal level, effectively reducing federal taxable income for the owners. ● How PTET Works? Under PTET, the pass-through entity pays state tax on the income before it passes to the individual owners or partners. Then, the individual owners or partners: 1. Report the pass-through income from the entity (partnership or S-corp) on their personal tax returns. 2.Claim a credit on their state tax return for the tax the entity paid. This setup can reduce federal taxable income because the business can deduct the state taxes it paid, which reduces the pass-through income reported on the individual’s federal return. ● Example of PTET in Action Scenario: - Imagine a partnership in New York with two partners, Alex and Sam. - The partnership generates $500,000 in income, and New York’s PTET rate is 10%. Steps and Tax Effects: 1. Partnership Pays State Tax: The partnership pays $50,000 (10% of $500,000) in New York PTET. 2. Deduction on Federal Return: The $50,000 PTET payment reduces the partnership’s reported income to $450,000 for federal tax purposes, which is split between Alex and Sam. 3. Pass-Through to Partners: - Alex and Sam each report $225,000 ($450,000 / 2) as income on their federal tax returns, instead of $250,000 each, because the PTET reduced the partnership’s taxable income. - This reduced federal income results in lower federal income tax for Alex and Sam. 4. Credit on State Return: Alex and Sam each receive a PTET credit on their New York state return, offsetting the state tax on their pass-through income. ●Key Benefits of PTET - Federal Tax Savings: The deduction on the federal return reduces taxable income, providing federal tax savings. - Bypassing the SALT Cap: PTET effectively allows full deduction of state taxes for pass-through entity owners, bypassing the $10,000 SALT limit for individuals. ● Potential Considerations - PTET isn’t mandatory, so entities must elect to pay PTET if their state allows it. - Rules and rates vary by state, so it's important to consult state-specific regulations. In short, PTET is a strategy to help pass-through entities reduce the federal tax burden on their owners by shifting state tax payments from personal to entity level, resulting in more favorable federal tax treatment. #taxstrategy #PTET #accounting #taxes #passThroughEntities #business

Whether you love it or hate, the One Big Beautiful Bill Act has some important positive rule changes for SBIR/STTR companies. Immediate Expensing of U.S. R&D (Section 174 Rule Fixed): Under the revised Section 174A rules, domestic research costs are now again fully deductible. The new law also provides a retroactive fix for most small businesses. Eligible small business with capitalized domestic R&D expenses from 2022–2024 may elect a catch-up deduction, or they can choose to retroactively apply full expensing to tax years beginning after 2021, enabling them to amend previous returns and recover costs that were previously amortized. Congress has known the expensing of R&D is a real problem, now they have finally fixed the problem. This is a big win as the requirement to capitalize R&D was a real killer for early-stage SBIR/STTR companies. Also a big win for the accounting industry as they will now get paid to file three years of amended returns. Qualified small business stock (QSBS): The new law has enhanced the tax benefits associated with qualified small business stock (QSBS), which should make venture capital a more attractive asset class for investors. A tiered gain exclusion is established for QSBS: 50% exclusion applies to shares held for more than three years, 75% exclusion to shares held for more than four years, and 100% exclusion to shares held for more than five years. The per-issuer dollar cap is increased from $10 million to $15 million, with adjustments for inflation beginning in 2027. Other additional pro business changes include: -Reinstatement of 100% first-year “bonus depreciation," an increase in the Section 179 deduction cap to $2.5 million, and the addition of a 100% depreciation allowance for certain commercial real property. -The law permanently establishes the Section 199A qualified business income deduction, maintaining the current deduction rate of 20%. Furthermore, the bill extends the phase-in threshold for limitations from $50,000 to $75,000 for single filers, and from $100,000 to $150,000 for those filing jointly. #sbir #startups #vc 

If you’ve been stressed about your tax bill because of R&D costs, 2026 brings some much-needed relief. For the past few years, businesses had to spread out (amortize) their U.S. research costs over five years. That meant smaller deductions upfront and higher tax bills in the early years. Now, that’s changing. Starting in 2025 and moving into 2026, companies can once again deduct 100% of their U.S.-based R&D costs in the same year they spend the money. Here’s what that means in simple terms: U.S. R&D If your engineers and developers are based in the U.S., you can deduct the full cost in year one. No more five-year waiting period. Foreign R&D If your development work is done outside the U.S., those costs still have to be spread out over 15 years. So where your team is located now matters even more. Software Development Counts Coding, testing, and software design are clearly included. If you have a U.S. dev team, their costs are fully deductible again. Old R&D Costs (2022–2024) If you still have R&D costs from those years that were being spread out, you may have options: • Deduct the remaining amount all at once in 2025, or • Split it between 2025 and 2026 to manage your taxable income. Smaller businesses (under $31M in gross receipts) might even be able to amend prior returns and potentially get refunds. Why This Matters Let’s say you spend $1 million on R&D. Under the old rule, you might have only deducted about $100,000 in the first year. Under the new rule, you can deduct the full $1 million in year one. That can significantly lower your taxable income and estimated tax payments. This isn’t just about taxes. It’s about strategy. Does keeping your development team in the U.S. - and getting the full deduction - make more sense now? Or do lower overseas labor costs still outweigh the longer tax write-off? 2026 gives businesses a chance to rethink how and where they invest in innovation. #TaxUpdate #RandD #StartupFinance #BusinessTax #Entrepreneurship #FinancialPlanning