Author: dsauder

Preface: “It is not the beauty of the building you should look at: it’s the construction of the foundation that will stand the test of time.” – David Allen Coe

Understanding Construction Allowances and Their Tax Benefits

If you currently lease retail space—or plan to in the future—it’s important to understand how “construction allowances” from a landlord may impact your taxes. The good news? If certain IRS requirements are met, these allowances can often be excluded from your taxable income.

What Are Construction Allowances?

A construction allowance is money (or a rent reduction) provided by a landlord to a tenant for the purpose of improving or building out leased space. These improvements usually involve the interior of the property, such as remodeling, adding walls, lighting, flooring, or fixtures.

In general, if you receive such an allowance and spend it on qualified construction or improvements to your leased retail space, you don’t need to include it in your gross income—meaning it’s not taxable.

This rule applies to leases signed after August 5, 1997 and only if all IRS criteria are met.

What Qualifies as a Construction Allowance?

A qualified construction allowance meets three key requirements:

1. 1. 1. Short-Term Retail Lease (15 Years or Less)
         The lease must be for a term of 15 years or less and cover retail space—defined as nonresidential property used in selling tangible goods or services to the general public.
      2. Used for Construction or Improvements
         The allowance must be used to construct or improve “qualified long-term real property,” meaning permanent improvements like flooring, lighting, or walls that remain with the building and revert to the landlord when the lease ends.
      3. Used Only for Business Improvements
         The money must be spent only for improvements related to your trade or business—not for personal purposes.

Timing Matters

The IRS places time limits on when these funds must be spent. To qualify, the construction allowance must be used in the same tax year it’s received—or within a short grace period.

You have up to 8½ months after the end of the tax year in which you received the allowance to spend it on qualifying improvements.

This rule ensures that the allowance truly supports active business development rather than being used as a delayed income benefit.

Example

Let’s make this practical:

Big Mall Co. leases retail space to Simple Designs Co., a calendar-year taxpayer. The lease starts November 1 and includes a $5,000 construction allowance for tenant improvements. Simple Designs receives the payment on December 31.

To exclude this $5,000 from taxable income, Simple Designs must use it by September 15 of the following year (8½ months after year-end) to construct or improve its retail space.

If the funds are used after that date—or for nonqualified improvements—the allowance becomes taxable income.

Why It Matters

This provision helps small business owners manage the cost of preparing a leased retail space without incurring additional tax liability. It’s particularly beneficial for:

• • • Retailers renovating leased storefronts
    • Franchises opening new locations
    • Businesses upgrading facilities for improved customer experience

However, businesses must maintain detailed records showing how and when the construction funds were used to support their tax position in the event of an IRS audit.

Planning Tip

Before signing a lease, review the construction allowance clause carefully and consult your tax advisor. Key things to verify include:

• • • The lease term (must be 15 years or less)
    • The type of improvements allowed
    • Whether improvements revert to the landlord at lease end
    • How and when the allowance must be used

Proper documentation and timing are critical.

Final Thoughts

Construction allowances can be a powerful tax advantage for business tenants—reducing upfront costs and improving cash flow—as long as the rules are followed.

If you’re negotiating a lease or recently received a construction allowance, consult your CPA or tax advisor to ensure proper classification and compliance. Missteps could result in unexpected taxable income.

Preface: “As much as others may need to change, or we may want them to change, the only person we can continually inspire, prod, and shape—with any degree of success—is the person in the mirror.” ― Kerry Patterson, Crucial Conversations Tools for Talking When Stakes Are High

How to Handle Tough Conversations with Grace: Lessons from Crucial Conversations

Have you ever walked away from a tough conversation wishing it had gone differently—wishing you’d said something better, or maybe said nothing at all?

We’ve all been there.

That’s why Crucial Conversations: Tools for Talking When Stakes Are High by Kerry Patterson, Joseph Grenny, Ron McMillan, and Al Switzler is such a timeless guide. It’s not about fancy communication theory—it’s about what to do when the stakes are high, emotions are intense, and the outcome really matters.

Whether it’s giving feedback at work, confronting a loved one, or resolving conflict with a friend, these are the moments that can either strengthen or strain relationships.

Defining a Crucial Conversation

A crucial conversation happens when stakes are high, opinions differ, and emotions run strong.

It might be a performance review, a family disagreement, or a tough decision between friends.

In those moments, most of us fall into one of two traps:

• • • We go silent, avoiding the topic to keep the peace.

    • Or we go aggressive, pushing our point so hard that we shut others down.

Neither path works. The authors offer a third option—dialogue.

“Dialogue is the free flow of meaning between two or more people.”

When people feel safe enough to share honestly, understanding deepens, and solutions become wiser.

Core Skills for Navigating Difficult Conversations

1. Start with Heart

Before speaking, pause and ask:

“What do I really want—for me, for them, and for this relationship?”

When we focus on genuine goals rather than ego or emotion, our words carry calmness and respect. This shift often changes the entire tone of the conversation.

2. Learn to Look

Strong communicators watch for signs that the conversation is slipping.

Are people shutting down? Getting defensive? Are you?

Recognizing these cues early lets you pause, reset, and restore safety before things spiral.

3. Make It Safe

People open up only when they feel respected and understood.

If safety is lost, stop addressing the issue and repair the relationship first. Sometimes that means apologizing; other times it means clarifying intentions through “Contrasting”:

“I’m not trying to criticize you—I just want to understand what happened.”

A moment of empathy can reopen the entire discussion.

4. Master Your Stories

We don’t react to facts—we react to the stories we tell ourselves about them.

When someone interrupts, we might think, They don’t respect me. That story fuels anger.

The book challenges readers to separate facts from assumptions. Ask yourself:

• • • What actually happened?

    • What story am I adding to it?

    • What else could be true?

It’s amazing how much calmer we become when we stop assuming the worst.

5. STATE Your Path

When it’s your turn to share your perspective, use the STATE model:

• • • Share your facts

    • Tell your story

    • Ask for others’ views

    • Talk tentatively

    • Encourage testing

This approach balances confidence and humility. You express yourself clearly while showing you’re open to learning.

6. Explore Others’ Paths

Real communication goes both ways.

To keep the conversation open, you need to make space for others to talk too. The AMPP skills help with this:

• • • Ask questions
    • Mirror their emotions (reflect what you see)
    • Paraphrase what they’re saying
    • Prime them if they’re quiet (take a guess at what they might be thinking)

When people sense you genuinely care about their perspective, they’re more likely to lower their guard and speak openly.

“When we stay curious instead of defensive, conversations stop being battles and start becoming bridges.”

7. Move to Action

Even the best conversations fall apart if they end without clear next steps.

The authors emphasize defining:

• • • What will be done

    • Who will do it

    • By when, and

    • How you’ll follow up

Dialogue builds understanding; action builds results.

And as they note, participation doesn’t always equal consensus—what matters is that everyone’s voice has been heard.

Applying These Ideas Beyond Work

While many people read Crucial Conversations for professional growth, its principles are universal.

These tools help in marriages, friendships, and parenting just as much as in meetings and performance reviews.

Improving how we communicate takes practice. The authors suggest starting small:

“Pick one relationship or recurring conversation where you want to improve, and focus on one skill.”

Over time, you’ll notice yourself reacting less, listening more, and creating safer, more meaningful dialogue in every area of life.

Final Thoughts

Crucial Conversations reminds us that difficult discussions aren’t something to fear—they’re opportunities to grow, to connect, and to strengthen trust.

When we replace defensiveness with curiosity and courage, even the hardest talks can become turning points for better relationships.

So next time you feel your pulse quicken before a hard talk, take a breath and remember:

Start with heart. Listen with humility. Speak with respect.

You might be surprised at how much can change—with just one good conversation.

Preface: “Chase the vision, not the money; the money will end up following you.”  –Tony Hsieh

Understanding Reasonable Compensation for S-Corporations (Made Simple)

If you own an S-Corporation or plan to, there’s one important rule you need to know about: reasonable compensation. It might sound like a technical tax term, but it really just means: Are you paying yourself a fair salary for the work you do?

Why It’s a Big Deal

S-Corporations are special kinds of businesses where the company’s profits “pass through” to the owner’s personal tax return. This setup helps avoid some business taxes—but it also comes with IRS rules.

If you work in your S-Corp (not just own it), the IRS says you’re an employee, not just an owner. That means you have to take a real paycheck (with payroll taxes), not just profits or “distributions.” Why? Because wages get taxed differently from profits. And if the IRS sees that you’re only taking profits and no paycheck, they might hit you with taxes, penalties, and interest.

What Counts as “Reasonable”?

The IRS says reasonable compensation is the amount you would pay someone else to do your job in your business. So, if you’re doing full-time management, your pay should match what someone in that role would normally earn.

Here are some things the IRS looks at when deciding if your pay is reasonable:

• • • What kind of work you do
    • How much time you spend working
    • Your skills and experience
    • What you pay other employees
    • What similar jobs pay at other businesses
    • How much profit your business makes

The idea is to make sure your salary isn’t too low (to avoid taxes) or too high (which could hurt your business financially).

Why Getting This Right Matters

If you underpay yourself, the IRS might say some of your profits should’ve been wages. That means:

• • • You could owe back payroll taxes
    • You could face penalties and interest
    • You might even risk your S-Corp status

On the flip side, paying yourself too much means your business pays more employment tax than necessary.

So, What’s the Right Salary?

It depends on what you actually do for the business. For example:

• • • If you work 40 hours a week and run day-to-day operations, you should get a market-rate salary.
    • If you only help out once in a while or offer advice, a smaller salary might make sense.

The goal is to find a fair balance that matches your role and how similar businesses pay.

How a CPA Can Help You

Getting reasonable compensation right can be tricky. That’s why it helps to work with a CPA They can:

• • • Look at your role and what you do day to day
    • Compare what others in similar roles earn
    • Review your current pay and business profits
    • Help you figure out benefits and taxes
    • Keep records in case the IRS ever asks questions

Final Thoughts

Paying yourself fairly from an S-Corporation isn’t just about following the rules—it’s smart business. It helps you avoid IRS problems, pay the right taxes, and keep your business strong.

Preface: “The precise point at which a tax deduction becomes a ‘loophole’ or a tax incentive becomes a ‘subsidy for special interests’ is one of the great mysteries of politics.” – John Sununu

Understanding IRS Schedule A Itemized Deductions Under the OBBB Act

When filing taxes, taxpayers can choose between the standard deduction or itemized deductions on IRS Schedule A. The One Big Beautiful Bill (OBBB) Act, signed into law in 2025, made several important updates that impact itemized deductions for individuals. Below is a breakdown of the key changes and how they may affect your tax return.

State and Local Tax (SALT) Deduction Limit

• • • From 2025 through 2029, the SALT deduction limit increases to $40,000 ($20,000 if married filing separately).
    • In 2025, the limit starts at $40,000 ($20,000 separate). It rises slightly each year by 1% until 2029.
    • However, the benefit phases out for high-income taxpayers:
      • If your modified adjusted gross income (AGI) exceeds $500,000 ($250,000 if separate), your deduction limit is reduced.
      • The reduction equals 30% of the excess income above the threshold, with at least a $10,000 ($5,000 if separate) reduction.
    • After 2029, the limit returns to $10,000 ($5,000 if separate) in 2030.

Home Mortgage Interest Deduction

• • • The home mortgage interest deduction rules from the Tax Cuts and Jobs Act (TCJA) are made permanent.
    • You can deduct interest on up to $750,000 of acquisition debt ($375,000 if married filing separately).
    • The suspension of interest deductions on home equity debt also remains permanent.

Car Loan Interest Deduction

• • • Typically, personal loan interest is not deductible.
    • Under the OBBB Act, for 2025–2028, you can deduct up to $10,000 per year of interest on loans for U.S.-assembled passenger vehicles.
    • The deduction phases out for taxpayers with AGI over $100,000 ($200,000 for joint filers).
    • Important: This deduction applies even if you don’t itemize.

Charitable Contribution Deductions

• • • Starting in 2026, non-itemizers can deduct up to $1,000 ($2,000 for joint filers) of cash charitable contributions.
    • For those who itemize, a new 0.5% floor applies: your allowable deduction is reduced by 0.5% of your contribution base.
    • Example: If your contribution base is $100,000, $500 would be subtracted from your allowable deduction.

Personal Casualty and Theft Loss Deduction

• • • Under the OBBB Act, the rules limiting deductions to federally declared disasters are made permanent.
    • The law expands this to include state-declared disasters such as floods, fires, or explosions recognized by a governor.
    • Losses tied to qualified disasters between 2019 and September 2025 are also covered.

Gambling Losses

• • • Gambling losses can only offset gambling winnings.
    • The OBBB Act introduces a new restriction: starting after 2025, only 90% of wagering losses are deductible, and this deduction is limited to the amount of gains.
    • Example: If you win $10,000 and have $12,000 in losses, you can deduct only $9,000.

Moving Expenses

• • • The TCJA suspended most moving expense deductions, and the OBBB Act makes this permanent.
    • Only active-duty military members and intelligence community employees (and their families) qualify for moving expense deductions or reimbursements.

Miscellaneous Itemized Deductions

• • • The suspension of miscellaneous itemized deductions (like unreimbursed employee expenses) is now permanent.
    • Exception: Educator expenses are allowed above the line up to $300 (increasing with inflation). Starting after 2025, teachers can also itemize classroom expenses above this limit.

Phaseout of Itemized Deductions

• • • A new overall limit applies to high-income taxpayers:
      • • Itemized deductions are reduced by 2/37 of the lesser of:
          1. Total itemized deductions, or
          2. Taxable income above the 37% bracket threshold.
    • This applies after other limits (such as the SALT cap) are calculated.

Planning Note: Standard Deduction vs. Itemizing

• • • The OBBB Act makes the standard deduction increase permanent:
      • $15,750 for single filers (2025)
      • $23,625 for heads of household
      • $31,500 for married filing jointly
    • The amounts adjust for inflation in future years.
    • You may still choose to itemize if your deductions (SALT, mortgage, charitable, etc.) are greater than the standard deduction.

Final Thoughts

The OBBB Act reshaped how taxpayers approach Schedule A deductions. For most, the higher standard deduction will remain the simpler choice. However, with changes such as the higher SALT cap, charitable deduction rules, and the new car loan interest deduction, some taxpayers may benefit from itemizing their deductions.

Careful planning is essential, especially for those near phase-out thresholds. Consider consulting a tax advisor to evaluate whether itemizing or taking the standard deduction will provide the best tax outcome under the new rules.

Preface: “Strategy is the hard work of choosing what to do today to improve our tomorrow.” ― Seth Godin, This Is Strategy: Make Better Plans

Book Report: This is Strategy by Seth Godin

Introduction

Seth Godin is a well-known writer and thinker on marketing, leadership, and innovation. In his book This is Strategy: Make Better Plans, Godin explains how people and organizations can make smarter choices that lead to long-term success.

The book isn’t about complicated charts or formulas. Instead, it’s about changing how we think about planning, taking action, and growing in a world that is always changing. Godin’s main message is that success doesn’t come from working harder or faster. It comes from working smarter, asking better questions, and being willing to face discomfort.

The Problem with Default Thinking

Godin begins by pointing out a common problem: many people rush from task to task without making real progress. This leads to stress and burnout. The issue, he says, is that people often know what they want, but they don’t have a real strategy to get there.

Repeating the same actions over and over won’t work if the world has changed. Old methods may feel safe, but sticking to them is a trap. Strategy requires adapting to new realities.

Character as the Foundation of Strategy

One of Godin’s strongest points is the importance of character. He defines character as choosing your values over your instincts. In other words, strategy works best when it’s guided by values, even when those choices are hard.

For example, a strong leader doesn’t avoid tough conversations. They face them because those talks build trust and a stronger team. Godin believes that growth often comes from discomfort. Instead of running from it, he tells readers to seek it out because it helps us grow faster.

Learning Myths and Growth

Godin also challenges the popular idea of “learning styles.” He says people don’t really learn better in just one style—they simply have preferences that make them feel comfortable. Real growth comes when we move out of our comfort zones and try new ways to learn.

This lesson connects to strategy. Businesses can’t just stick to what’s familiar. A company that has always used one kind of marketing might need to explore new platforms or creative methods to grow.

Procrastination and Discomfort

Godin takes another common issue—procrastination—and reframes it. He argues that procrastination usually isn’t laziness. Instead, it’s avoiding the uncomfortable feelings tied to the task. Good strategists recognize this and face the discomfort rather than delay.

He quotes Ted Lasso: “If you’re comfortable, you’re doin’ it wrong.”

Tactics vs. Strategy

A key message in the book is the difference between tactics and strategy.

• • • Tactics are small daily actions.
    • Strategy is the bigger picture—the “why” behind what you’re doing.

Without strategy, tactics are just busywork. Godin says many companies get caught up in tactics like running ads or chasing sales without answering bigger questions like:

• • • Why are we doing this?
    • Where are we going?
    • Who are we serving?

Examples from the Book

• • • Marketing a Product – Strategy is not about pushing out more ads. It’s about building trust and connection with customers. A loyal customer base is worth more than short-term sales.
    • Career Development – Strategy in your career may mean saying “no” to an easy job in order to grow skills in a harder one. Godin says we should look at our careers as a purposeful journey, not just a series of jobs.
    • Community Building – Strategy in a community is not about control. It’s about creating shared values and giving people a chance to be part of something bigger.

Practical Applications

Godin gives several ways to put his ideas into practice:

1. 1. 1. Set Clear Values – Decide what matters most to you before making a plan.
      2. Seek Discomfort – Choose the option that helps you grow, even if it’s harder.
      3. Separate Tactics from Strategy – Ask yourself if your daily actions connect to your bigger plan.
      4. Test and Adapt – Strategies must change as situations change.
      5. Think Long-Term – Focus on sustainability and lasting impact, not just quick wins.

Key Lessons for Everyone

• • • Growth Requires Change – Old methods won’t work forever.
    • Character Matters – Decisions guided by values build trust.
    • Comfort Can Hold You Back – Real growth happens in discomfort.
    • Keep It Simple – Strategy doesn’t need to be complicated, just clear.
    • Strategy Is for All – It’s not only for CEOs; anyone can use it in life or work.

Conclusion

Seth Godin’s This is Strategy is a powerful reminder that success isn’t about nonstop hustle. It’s about smart, values-based strategies that help us grow and make an impact.

For leaders, it’s a call to focus on long-term vision and culture instead of quick wins. For individuals, it’s encouragement to view life and career choices as part of a bigger picture.

In today’s world, where change is constant and distractions are everywhere, Godin’s advice is clear: strategy is more than a plan—it’s a way of living and leading.

Preface: “I am indeed rich, since my income is superior to my expenses, and my expense is equal to my wishes.” – Edward Gibbon

OBBB Act: What the New Section 179 Expensing Limits Mean for Your Business

On July 4, 2025, President Trump signed the One Big Beautiful Bill (OBBB) Act into law. Among many tax changes, one major update affects Section 179 expensing—a valuable tool for small and mid-sized businesses to write off equipment and property purchases.

What Is Section 179 Expensing?

Section 179 lets businesses deduct the cost of certain equipment, vehicles, and property right away, instead of depreciating it over many years. This makes it a powerful way to lower taxable income in the year you make a big investment.

Qualifying property generally includes:

• • New or used equipment
  • Business vehicles (with some limits, like SUVs)
  • Office furniture
  • Computers and software
  • Certain types of real property improvements

What Changed Under the OBBB Act?

Before the law, businesses could expense up to $1,250,000 in 2025, with deductions starting to phase out after $3,130,000 of total purchases.

The OBBB Act doubles those amounts starting in 2025:

• • New Section 179 Deduction Limit: $2.5 million
  • New Investment Cap: $4 million

These amounts will also be adjusted for inflation every year going forward.

The rules for SUVs didn’t change. For 2025, the maximum Section 179 deduction for an SUV is still $31,300.

Why This Matters

This change makes it much easier for businesses to deduct large investments. Whether you’re buying farm equipment, upgrading your factory machinery, or investing in technology, you may now expense the full cost up front.

Examples

Example 1 – A Small Business Upgrade
ABC Landscaping buys $150,000 of new trucks and mowers in 2025.

• • • • Before the law: Still fully deductible, because the old $1.25 million limit was plenty.
      • After the law: No change for them, but more room for growth if they expand further.

Example 2 – A Growing Manufacturer
XYZ Manufacturing spends $3.5 million on new machinery in 2025.

• • • • Before the law: They would have hit the $3.13 million investment cap, and their deduction would start phasing out.
      • After the law: With the new $4 million cap, they can deduct the entire $3.5 million under Section 179. This could save them over $700,000 in taxes (assuming a 20% tax rate).

Key Takeaway

The OBBB Act permanently raises Section 179 expensing limits, giving businesses greater ability to deduct equipment purchases up front. This is especially helpful for companies making multi-million-dollar investments.

Planning Note: If you’re considering large purchases of equipment or property, now is the time to plan ahead. The new limits make Section 179 one of the most powerful tax tools available for business growth.

Preface: “Over deliver in all you do and soon you will be rewarded for the extra effort”. — Zig Ziglar

New Tax Breaks Under the OBBB Act: Deductions for Tips and Overtime Pay

On July 4, 2025, President Trump signed the One Big Beautiful Bill (OBBB) Act into law. Among many tax changes, the Act introduces two new provisions designed to benefit employees in tip-based industries and those who regularly work overtime. Here’s what you need to know.

Qualified Tips Deduction

What It Is

Starting in 2025 and continuing through 2028, employees can claim a special deduction for qualified tips. This applies to anyone working in an occupation that customarily and regularly received tips on or before December 31, 2024 (for example, restaurant servers, bartenders, and hotel staff).

How Much Can You Deduct?

• • You can deduct up to $25,000 per year in qualified tips.
  • The deduction begins to phase out if your modified adjusted gross income (AGI) is above:
    • $150,000 (single filers)
    • $300,000 (married filing jointly)
  • It phases out completely at:
    • $400,000 (single filers)
    • $550,000 (joint filers).

• Key Requirements

• • Your Social Security number must appear on your tax return.
  • Married taxpayers must file a joint return to claim the deduction.
  • If you’re self-employed and receive tips, the deduction only applies if your gross receipts are greater than your related business deductions.

Reporting Tips

• • Employers will report qualified tips on your W-2.
  • If tips are not reported by your employer, you may need to use Form 4137 to report them.
  • For nonemployees, tips must be reported on Form 1099-NEC or Form 1099-K.

Important Caution

Even though you can deduct tips for income tax purposes, the amounts are still subject to Social Security and Medicare taxes (FICA) and may also be subject to unemployment taxes (FUTA) for employers.

Qualified Overtime Pay Deduction

What It Is

From 2025 through 2028, individuals can also deduct qualified overtime pay. This deduction benefits employees who regularly work more than 40 hours a week under the rules of the Fair Labor Standards Act (FLSA).

How Much Can You Deduct?

• • Up to $12,500 per year for single filers.
  • Up to $25,000 per year for joint filers.
  • Phase-outs begin when AGI exceeds:
    • $150,000 (single)
    • $300,000 (joint)
  • The deduction is completely phased out at:
    • $275,000 (single)
    • $550,000 (joint)

What Counts as Overtime Pay?

“Qualified overtime compensation” is overtime that must be paid under FLSA rules:

• • At least 1.5 times your regular pay rate.
  • Applies to non-exempt employees working over 40 hours in a week.
  • Your regular pay rate includes most types of pay, but certain payments are excluded.

Reporting Overtime Pay

• • Employers must include qualified overtime pay on your W-2.
  • Nonemployees must receive reporting on a 1099-NEC.
  • For overtime earned before January 1, 2026, the IRS allows “reasonable methods” to estimate and report.

• Eligibility Rules

• • The deduction is not allowed unless your Social Security number appears on your return.
  • Married couples filing separately are not eligible.

Why This Matters

These new deductions under the OBBB Act can create meaningful tax savings for employees in industries with significant tips or overtime. However, the rules are detailed, with income phase-outs and specific reporting requirements.

Need Help?

If you think you may qualify for the new tips or overtime deductions, or if you’d like to estimate the potential savings, please contact our office. We’d be glad to help you plan ahead and make the most of these new opportunities.

Preface: “Agriculture is our wisest pursuit, because it will in the end contribute most to real wealth, good morals, and happiness.” – Thomas Jefferson

New Tax Option for Selling Farmland Under the OBBB Act

On July 4, 2025, President Trump signed the One Big Beautiful Bill (OBBB) Act into law. Among its many changes, the OBBB Act includes a new tax break for farmers and landowners: if you sell qualified farmland to a qualified farmer, you can now choose to spread your tax payments over four years instead of paying the full amount all at once.

What This Means

If you qualify, you can pay the taxes from the sale in four equal annual installments—making it easier to manage cash flow after selling your farmland. This applies to sales or exchanges that happen in tax years starting after July 4, 2025.

How It Works

1. 1. You make an election on your tax return for the year you sell the land.
   2. The installment option only applies to the part of your tax bill related to the gain from the sale.
   3. The first payment is due on the normal due date of your return for that year (no extensions).
   4. The other three payments are due on the regular tax return due dates for the next three years.

What Counts as “Qualified Farmland”

The land must:

• • Be located in the United States.
  • Have been used by you for farming—or leased by you to a farmer—for almost all of the last 10 years before the sale.
  • Come with a legal agreement that it will stay as farmland for at least 10 years after the sale.
  • Tip: This election must be made when you file your return for the year of the sale—if you miss it, you can’t go back and choose it later. If you’re thinking about selling farmland, talk with your tax advisor well before the sale to see if you qualify and to plan ahead.

Who is a “Qualified Farmer”

• The buyer must be an individual who is actively engaged in farming.

Selling farmland can lead to a large tax bill in one year for farming land owners. This new legislation lets you spread out that tax cost, giving you more flexibility to reinvest, save, or manage your cash flows.

Preface: “To compel a man to furnish funds for the propagation of ideas he disbelieves and abhors is sinful and tyrannical.” – Thomas Jefferson

Qualified Business Income Deduction Changes Under the OBBB Act

On July 4, 2025, President Trump signed the One Big Beautiful Bill (OBBB) Act into law. One major change in the bill is that it makes the Qualified Business Income (QBI) deduction permanent. The bill also adjusts how the wage and investment limitation and the “specified service trade or business” (SSTB) limitation phase in, changes how the threshold amount is calculated, and—starting in 2026—adds a new inflation-adjusted minimum deduction.

Background

The QBI deduction was first created under the Tax Cuts and Jobs Act (TCJA) for tax years starting after December 31, 2017, and ending before January 1, 2026. It allows certain individuals, trusts, and estates to deduct 20% of qualified business income from:

• • A partnership
  • An S corporation
  • A sole proprietorship

It also applies to 20% of qualified REIT dividends and qualified publicly traded partnership income. Special rules apply for specified agricultural or horticultural cooperatives.

This deduction:

• • Is taken when calculating taxable income, not adjusted gross income.
  • Is available whether or not you itemize deductions.
  • Cannot exceed 20% of taxable income (reduced by net capital gains).

Limitations

There are income thresholds where limits begin to phase in:

• • For 2025 joint filers: threshold is $394,600; phase-in ceiling is $544,600.
  • For 2025 married filing separately: threshold is $197,300; ceiling is $247,300.
  • For 2025 single and head of household: threshold is $197,300; ceiling is $247,300.

Limits are based on W-2 wages paid and capital investment amounts. There is also a gradual phase-out for SSTB income over the thresholds.

Changes Under the OBBB Act

• • QBI deduction is now permanent—it will not expire in 2026 as originally planned.
  • The phase-in range for the W-2 wage and investment limit is increased:
    • Non-joint returns: from $50,000 to $75,000.
    • Joint returns: from $100,000 to $150,000.
  • New Minimum Deduction:
    • Starting with tax years after December 31, 2025, taxpayers with at least $1,000 in qualified business income from one or more active businesses they materially participate in will receive a minimum $400 QBI deduction (indexed for inflation in future years).

Qualified Business Income Deduction — Old Law vs. OBBB Act

Feature	TCJA Rules (Pre-OBBB)	OBBB Act Changes (Effective 2025)
Expiration Date	Set to expire after 2025	Permanent — no sunset date
Base Deduction Rate	20% of qualified business income	20% rate retained
Phase-In Range for Wage & Investment Limit	$50,000 for non-joint filers, $100,000 for joint filers	$75,000 for non-joint filers, $150,000 for joint filers
Threshold Amounts (2025)	Joint: $394,600 Single/HOH: $197,300 MFS: $197,300	Same thresholds retained
Specified Service Trade or Business (SSTB) Phase-Out	Begins above threshold + $50k/$100k range	Begins above threshold + $75k/$150k range
Minimum Deduction	None	$400 minimum deduction (indexed for inflation) for taxpayers with $1,000+ QBI and material participation
Applies to	Sole proprietors, partnerships, S corps, certain trusts & estates	Same coverage — plus permanent certainty for long-term planning

Example — Joint Filers with $200,000 QBI

Scenario	Old TCJA Rule (Pre-OBBB)	OBBB Act Rule (2025 onward)
Qualified Business Income	$200,000	$200,000
Deduction Rate	20%	20%
Deduction Amount	$40,000	$40,000 (same rate, but now permanent)
Phase-In Impact	No change below threshold	No change below threshold — but higher phase-in range helps higher earners

Key Takeaways for Business Owners

1. 1. 1. Long-term certainty — The deduction no longer expires, allowing stable multi-year tax planning.
      2. Higher phase-in ranges — Helps more high-income taxpayers avoid full deduction phase-outs.
      3. New minimum deduction — Ensures small business owners with modest QBI still get a benefit.

Action Steps for Business Owners

• • • Review Entity Structure — Ensure you’re maximizing eligibility for the QBI deduction.
    • Plan for Income Management — Stay within favorable phase-in thresholds when possible.
    • Document Material Participation — Especially for small business owners relying on the minimum deduction.

Bottom Line: The OBBB Act cements the QBI deduction as a powerful tax savings tool for qualified business owners, providing stability and improved access for both small and high-income earners.

Preface; “For a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.”–Winston Churchill

What You Need to Know About the Child Tax Credit Changes in the OBBB Act

On July 4, 2025, President Trump signed the One Big Beautiful Bill (OBBB) Act into law. This new law includes many updates to the tax code for both individuals and businesses. One of the major changes in the bill is how it affects the Child Tax Credit (CTC) — including how much you can claim and who qualifies.

Let’s simplify it.

What Is the Child Tax Credit?

The Child Tax Credit is a tax break given to families with children. If you have a qualifying child under age 17, you can reduce your tax bill by claiming this credit.

• • Before 2025, you could claim up to $2,000 per child.
  • After 2025, that amount was going to drop to $1,000.
  • Under the OBBB Act, this has increased to $2,200.

There are 2 parts to the CTC, one is refundable and the other isn’t. The refundable portion has risen to $1,700 for 2025. In addition, there is a separate $500 credit for other dependents (like an elderly parent or college student you support). This second credit is non-refundable.

To qualify, the child must be a U.S. citizen, national, or resident, and you must list their Social Security number on your tax return.

Who Can Claim the Credit?

There are income limits that determine whether you can claim the full credit:

• • For 2025, the credit starts to phase out (gradually decrease) when your adjusted gross income (AGI) is over:
    • $400,000 for married couples filing jointly
    • $200,000 for all other taxpayers

These income limits are now permanent under the OBBB Act.

What’s Changed Under the OBBB Act?

Here’s how the Child Tax Credit has changed with the new law:

1. Bigger Credit

• • • The credit goes up to $2,200 per child starting in 2025.
    • This amount will increase over time to keep up with inflation.

2. Refundable Portion (ACTC)

• • • If the credit is more than what you owe in taxes, part of it can be refunded to you as a check from the IRS. This is called the Additional Child Tax Credit (ACTC).
    • The refundable portion is $1,700 in 2025 and will increase with inflation beginning in 2026.
    • To qualify for the ACTC, you need to have at least $2,500 in earned income.

3. Other Dependent Credit (ODC)

• • The $500 credit for non-child dependents (such as aging parents or students over 17) stays in place, but it does not increase with inflation.

Important Reminder: Social Security Numbers Are Required

You must include valid Social Security numbers (SSNs) for your child (and for yourself or at least one spouse if filing jointly) to claim the child tax credit. These SSNs must be employment-eligible.

Summary

Feature	Old Rule	OBBB Act Update
Max Child Tax Credit	$2,000	$2,200 (2025, inflation-adjusted)
ACTC Refundable Amount	$1,400	$1,700 in 2025 and growing with inflation
Other Dependent Credit	$500	$500 (no change, not inflation-adjusted)
Income Phaseout	$400,000 (MFJ), $200,000 (others)	Made permanent
SSN Requirement	Yes	Continues to apply

Final Thoughts

The OBBB Act provides families with additional support starting in 2025 by increasing the Child Tax Credit and maintaining some generous income limits. But like all tax benefits, you’ll need to meet certain rules — like listing SSNs and filing correctly — to take full advantage.

If you’re unsure whether you qualify or how much of a credit you might get, talk to your tax advisor. Planning ahead can make a big difference in your refund or tax bill.

Let us know if you’d like help with tax planning for your family in light of these new rules!