A recent survey found that 45% of small businesses reported growth, but 78% wanted to grow. This January 2026 data from Intuit QuickBooks Small Business Insights suggests that many small businesses are struggling to achieve their expansion goals.
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If you’re thinking about starting a business, make sure you understand your federal tax responsibilities before opening your doors.
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Here’s a sampling of some significant tax law changes going into effect this year: Increase of the Section 179 expensing limit…
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The One Big Beautiful Bill Act (OBBBA) introduces a range of tax changes that will impact businesses. Many provisions set to expire this year are now being extended or made permanent. Below is a snapshot of two important changes to help you with tax planning in the fourth quarter of 2025 and going forward.
Under the Tax Cuts and Jobs Act (TCJA), businesses had to amortize deductions for Section 174 research and experimentation (R&E) costs over five years for expenses incurred in the United States or 15 years for those incurred abroad. This provision used a mid-year rule that effectively stretched write-offs over six years. The OBBBA changes that by permanently allowing full, immediate deductions for domestic R&E expenses starting in the 2025 tax year. Foreign R&E expenses will still be amortized over 15 years.
In addition, the OBBBA lets “small businesses” (in 2025, those with average annual gross receipts of $31 million or less for the past three years) claim R&E deductions retroactively to 2022. A business of any size with domestic R&E costs from 2022 to 2024 can choose to speed up the remaining deductions for those years over a one- or two-year period.
Generally, the TCJA limited business interest deductions to 30% of the taxpayer’s adjusted taxable income (ATI) for the year. Before the OBBBA, ATI generally referred to earnings before interest and taxes. For tax years beginning after December 31, 2024, the OBBBA increases the cap on the business interest deduction by excluding depreciation, amortization and depletion when calculating ATI. This change typically increases ATI, allowing taxpayers to deduct more business interest expense.
But it’s important to note that, in 2025, taxpayers with average annual gross receipts for the last three years that don’t exceed $31 million are exempt from the interest deduction limitation.
For business owners, the OBBBA helps resolve tax planning uncertainty. Keep in mind, these are just two of the key changes for businesses in this tax legislation.
Contact the office to discuss the full range of tax provisions covered by the new law. We can help you optimize any extended or new provisions that are relevant to your situation and reduce your tax obligations for 2025 and beyond.
408-252-1800
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To help ensure small businesses take advantage of all potential tax breaks, the IRS Taxpayer Advocate Service summarizes the types of tax…
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Businesses close for various reasons. Perhaps you’re ready to embark on a welcome change such as retirement or launching a new venture…
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Bartering is simply the exchange of services or property, and it’s a taxable event. For example, if a computer consultant trades services…
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Ever since you became a business owner, you’ve focused on growing revenue, managing expenses and leveraging tax advantages. But don’t overlook a critical element of your long-term financial well-being, that is, a business exit strategy. Ideally, your exit strategy will help you meet your retirement and estate planning goals.
A buy-sell agreement is a powerful tool for businesses with multiple owners. A well-drafted agreement outlines what happens if specified events occur, such as the owner’s retirement, disability or death. The agreement should:
Life or disability insurance can help fund the buyout and can give rise to several tax issues and opportunities. Life insurance proceeds are generally tax-free to the beneficiary, provided certain conditions are met, making this a tax-efficient strategy.
If you have family members who are willing and able to fill ownership roles in the business, you can pass your business on by giving them interests, selling them interests or doing some of each. Consider your income needs, the tax consequences, and how family members will feel about your choice.
Under the annual gift tax exclusion, in 2025, you can gift up to $19,000 of ownership interests without using up any of your lifetime gift and estate tax exemption. Valuation discounts may further reduce the taxable value of the gift.
With the gift and estate tax exemption for 2025 at $13.99 million, gift and estate taxes may be less of a concern for some business owners. However, others may want to make substantial transfers now to take maximum advantage of the high exemption. What’s right for you will depend on the value of your business and your timeline for transferring ownership.
If family succession isn’t the right fit, you might consider selling the business to key employees. This requires significant planning, including executive compensation plans, loans and possibly “key person” life insurance. So you’ll need plenty of time and professional guidance to put the elements in place.
Another option is a leveraged Employee Stock Ownership Plan (ESOP), under which an ESOP trust borrows funds to buy the company. Then stock units are periodically awarded to eligible employees and are eventually vested.
Finally, there’s the option to sell to an outsider. If you can find the right buyer, you may be able to sell the business at a premium. Putting your business into a sale-ready state can help you get the best price. This generally means transparent operations, assets in good working condition and minimal reliance on key people.
Whatever path you pursue, you want your business to be in good hands in the future. Your exit strategy will require planning well in advance of retirement or any other reason for an ownership transition. Contact the office for assistance.
408-252-1800
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Summer is here, and you may be planning a picnic or other outing for your employees. When doing so, keep tax deductions in mind. Most entertainment expenses aren’t deductible, and business meals are generally subject to a 50% deduction limit. But, you may be able to deduct 100% of employee party costs. The event must be for your entire staff and not be “lavish or extravagant.” Deductible costs include food, beverages, live music and venue rentals.
Detailed invoicing and recordkeeping are a must. Before sending out invitations, contact the office about maximizing your tax deduction.
408-252-1800
Photo by Rob_Bye from Freerange Stock.
If you have a passthrough entity (Partnership, LLC, S Corporation) and would like the opportunity to make the Passthrough Entity Tax election for 2025, you have a California PTET deposit due for your entity on Monday, June 16th.
Your PTET deposit payment can be made via the Franchise Tax Board Direct Pay website. We recommend that you make the payment using this method and send your preparer the confirmation for your tax files once completed.
We also recommend making this payment ahead of time to avoid any deadline related issues with the FTB Direct Pay website. If you mail the payment, please send certified and save a copy of the certified receipt.
Franchise Tax Board
PO Box 942857
Sacramento, CA 94257-0531
If you have any additional questions that were not covered above, let us know by reaching out to your preparer or our front desk.
408-252-1800
