What Business Owners Need to Know
This has been a significant year for tax law changes. In the summer, the President signed the One Big Beautiful Bill Act (OBBBA) into law. Many of the changes are highly favorable to businesses, and most apply retroactively to the beginning of the year.
Below is a high-level overview of the most important new and expanded tax breaks, along with other key tax considerations as we approach year-end. If any of these items may apply to your situation, I recommend discussing them sooner rather than later.
New & Expanded Tax Breaks
Section 179 Expensing — Limit More Than Doubled
The Section 179 deduction received a major increase, allowing businesses to expense up to $2.5 million of qualifying equipment placed in service in 2025 (subject to phase-out thresholds).
For 2025:
- Maximum deduction: $2,500,000
- Phase-out begins at: $4,000,000 of qualifying purchases
Certain vehicles are subject to dollar limits:
- Passenger vehicles: limited to $12,200
- SUVs over 6,000 lbs (but under 14,000 lbs): up to $31,300
Planning Tip: Section 179 allows you to choose which assets (and how much of each asset) to expense, making it one of the most flexible planning tools available.
100% Bonus Depreciation Made Permanent
The OBBBA permanently restores 100% bonus depreciation for qualified property acquired after January 19, 2025. This reverses the scheduled phase-down that had begun under prior law.
Planning Tip: In some cases, electing less than 100% bonus depreciation may make sense (for example, to avoid creating losses). Strategic planning is key.
Full Expensing for Domestic R&D and Software Costs
Domestic research, experimental, and software development costs are once again fully deductible, reversing capitalization rules that had been in place since 2022.
- Small businesses (under $31 million in gross receipts) may be able to amend prior returns
- Larger businesses can write off previously capitalized costs over 1–2 years
This creates significant refund and cash-flow opportunities for qualifying businesses.
Special Depreciation for U.S. Manufacturing Property
A new category called Qualified Production Property allows 100% first-year depreciation for certain nonresidential manufacturing facilities placed in service between July 4, 2025 and January 1, 2031.
Office, administrative, parking, lodging, and non-manufacturing space is excluded.
Business Interest Deduction Returns to EBITDA
For tax years beginning after 2024, the limit on deductible business interest is again based on EBITDA, not EBIT, increasing allowable deductions for many businesses.
Qualified Business Income (QBI) Deduction Extended
The Section 199A deduction is now permanent. Income phase-in ranges were expanded, and a new minimum QBI deduction applies for qualifying taxpayers with modest business income.
Qualified Small Business Stock (QSBS) Expanded
For QSBS acquired after July 4, 2025:
- 50% gain exclusion after 3 years
- 75% after 4 years
- 100% after 5+ years
The exclusion cap and asset thresholds were also significantly increased and indexed for inflation.
Other Notable Changes
- 1099 reporting threshold increased from $600 to $2,000 (1099-NEC / 1099-MISC)
- 1099-K reporting rules repealed
- Employer childcare credit expanded
- Paid family and medical leave credit made permanent
- Opportunity Zones made permanent (QOZ 2.0)
Tax Increases & Limitations to Watch
- Excess business loss limitation made permanent (lower thresholds starting in 2026)
- Corporate charitable contributions now subject to a 1% floor
- Excise tax on international remittance transfers
- Several clean-energy business credits phased out or repealed earlier than expected
Year-End Planning Considerations
Rental Real Estate
Rental losses may be limited unless you actively participate. Some taxpayers may still qualify for:
- The $25,000 rental loss allowance
- The Qualified Business Income deduction
Vehicle Deductions
Vehicle expenses remain a common audit target. Proper mileage logs, receipts, and contemporaneous records are essential.
Employee Benefits
Offering retirement plans, HSAs, FSAs, and other fringe benefits can:
- Reduce taxable income
- Improve employee retention
- Generate tax credits
Pass-Through Entities & S Corporations
- Ensure sufficient basis to deduct losses
- Review reasonable compensation for S-corp shareholders
- Confirm shareholder eligibility and ownership changes
make a significant difference in tax liability and cash flow.
Please contact me to discuss how these changes may affect your business and to identify strategies for minimizing your 2025 tax liability.
