Tax

When a five-figure commercial building expense hits your desk, the first question is simple: Can you deduct it, or must you depreciate it over 39 years?

Consider a recent example. An office building owner replaced a failed sliding glass door and frame at a total cost of $12,000, including removal and installation. The new unit was the same brand, size, and quality as the old one. No upgrades. No redesign. No expansion.

Under the tax rules, expenses must be capitalized if they result in a betterment, an adaptation to a new or different use, or a restoration—the so-called BAR tests. Replacing a door with one of the same type and quality, without improving the building overall, does not clearly meet the capitalization tests. In situations like this, the strongest technical position is often to deduct the full amount as a repair under Section 162 of the tax code.

That said, conservative taxpayers may prefer to capitalize the cost. If you take that route, you must capitalize the entire $12,000—including installation—and depreciate it over 39 years. The good news: you may also elect a partial disposition and deduct the remaining basis of the old door, which can produce a meaningful current write-off.

The key takeaway? Not every expensive building cost is a capital improvement. The tax result depends on the nature and scope of the work—not on the price tag.

If you want to discuss deductible repairs, please call me directly at 408-778-9651 

• By Leon Clinton
• March 20, 2026

With today’s $15 million federal estate and gift tax exemption ($30 million for married couples), it’s easy to believe estate tax planning is no longer a concern. But a recent Tax Court case proves otherwise—an estate lost $1.5 million simply because a portability election was not properly and timely filed.

Here’s the key issue: When the first spouse dies, any unused estate tax exemption can be transferred to the surviving spouse—but only if the executor files a timely and properly completed Form 706 and elects portability. This is true even when no estate tax is owed.

Why does this matter? Because circumstances change. A surviving spouse’s assets may grow significantly due to business success, investments, inheritance, or even future changes in the law that reduce the exemption amount.

• Without the portability election, the unused exemption is permanently lost.
• With it, the surviving spouse may preserve millions of dollars in additional tax-free protection.

The filing deadline is generally nine months after death (with a six-month extension available). Even estates below the filing threshold can use a simplified Form 706 if the sole purpose is to elect portability. But if the return is not properly filed within the allowable window, the opportunity disappears forever.

The lesson is simple: if you are married, make sure your executor understands the importance of filing Form 706 and electing portability—no matter how modest the estate may seem today.

If you want to discuss the portability election, please call me directly at 408-778-9651  

• By Leon Clinton
• March 17, 2026

Beginning in 2026, the One Big Beautiful Bill Act increases the employer childcare credit for small businesses to 50 percent of qualified expenses, up to $600,000 per year. Even one-owner businesses can benefit—and the savings are substantial.

If you operate as a sole proprietor, you cannot claim the credit for your own childcare because you are not an employee. But if you hire your spouse as a legitimate W-2 employee, your business qualifies.

For example, on $20,000 in childcare expenses, the 50 percent credit results in a $10,000 dollar-for-dollar tax reduction. The remaining $10,000 is deductible, producing additional tax savings. After your spouse pays tax on the wages, the household comes out thousands of dollars ahead.

Solo S corporation owner-employees also win. Although a more-than-5-percent owner must include the childcare benefit in W-2 wages, the combination of the 50 percent credit plus the deduction outweighs taxes paid on wage inclusion, resulting in thousands in savings.

The key driver is the 50 percent credit. When paired with a deduction for the remaining expense, the math is strongly favorable, despite the benefit being taxable.

If you want to discuss the new childcare credit, please call me directly at 408-778-9651  

• By Leon Clinton
• March 13, 2026