Business owners should take away from the new tax law three main provisions.
The first provision is bonus depreciation. What does that mean? That means you can deduct depreciation 100%.
The second takeaway is research and development expenditures are now again 100% deductible in the year occurred.
Third and final is business interest deduction. Previously, there was a limitation. Now, under the new law, there's a new calculation which will allow more business interest deduction. With the passage of this bill, it has provided clarity for business owners to make future decisions.
Prior to the passage of this bill, there was a lot of uncertainty because a lot of provisions were set to sunset, meaning expire. So businesses didn't really know like how do I make future decisions when I don't even know what the law is going to be. And we now have clarity with passage of the act.
Modeling is crucial for planning tax strategies in 2025 because third-quarter estimates are due 9/15 and these strategies can help reduce your third-quarter estimates.
The risk of waiting until 2026 to plan is you've then lost the opportunity for additional cash flow in 2025 because you've paid in too much tax in 2025.
Don't wait till next year to start your tax planning. Now is the time to start your planning and we can help you with that.
Key insights
- The new tax law known as The One Big Beautiful Bill Act offers many business tax savings opportunities — for prior, current, and future tax years.
- The three biggest business benefits may be enhanced research and experimental expensing, renewed 100% bonus depreciation, and restored EBIDTA-based business interest deductions.
- These three benefits can be especially powerful when used together, but the options vary by business. Modeling can help determine what your business should consider.
Get a custom tax analysis to enhance new business tax benefits.
The new tax law known as The One Big Beautiful Bill Act includes substantial benefits for businesses. New and enhanced opportunities include continued tax breaks for pass-through business owners, expanded small business stock gain exclusions, and higher state and local tax deductions.
But the biggest business benefits may be these three:
- Enhanced research and experimental expensing
- Renewed 100% bonus depreciation
- Restored EBITDA-based business interest deductions
These benefits are especially powerful when used together, but the options vary by business. Learn more about these benefits in the new tax law and your tax planning opportunities.
Enhanced research and experimental/Section 174 expensing
The new tax law remedied one of the biggest frustrations from the Tax Cuts and Jobs Act of 2017 by restoring full expensing of domestic research and experimentation costs under Section 174.
Capitalized R&D costs from prior years can either be deducted in 2025 or split between 2025 and 2026. If you own a small business (three-year average gross receipts of $31 million or less), you have additional option available: you can amend your 2022, 2023, and 2024 tax returns to deduct the unamortized research and development (R&D) costs. You’ll want to model the options for recovering your capitalized costs to see which is most beneficial.
Unfortunately, nothing has changed with foreign R&D expensing. Foreign R&D costs remain on a 15-year amortization schedule and an annual capitalization analysis remains necessary.
Renewed 100% bonus depreciation
The new law permanently reinstates 100% bonus depreciation for qualifying property acquired and placed in service after January 19, 2025. Businesses can now expense the entire cost of equipment and certain building improvements in the year those costs are incurred, providing a substantial immediate incentive for investment.
Business interest expense expansion
The amount of interest a large business can deduct is generally capped at 30% of income. The new law increases the deduction limit by allowing depreciation, amortization, and depletion to be added back in calculating the income base. The change allows capital-intensive businesses to deduct more interest, reducing taxable income and improving cash flow. This change is effective for tax years beginning after December 31, 2024.
Other beneficial business equipment depreciation options
Section 179 depreciation
The new law increases the Section 179 depreciation benefit from $1.25 million to $2.5 million annually.
New Qualified Production Property deductions
There’s now a new depreciation opportunity especially beneficial to manufacturers called the Qualified Production Property (QPP) deduction. Property used in qualified production activity for manufacturing, production, or refining of tangible personal property can be fully deducted against the property adjusted in the year it’s placed into service. To qualify, construction must begin after January 19, 2025, and before January 1, 2029, and the property must be placed in service before January 1, 2031.
Cost segregation studies
Cost segregation studies identify building assets that can be depreciated at an accelerated rate using a shorter depreciation life and improve the cash flow benefits from buying or constructing a building. Several provisions in the new tax bill accelerate depreciation deductions — such as the new QPP, 100% bonus depreciation, and enhanced section 179 expensing — and thus increase the amount of tax that can be saved by doing a cost segregation study.
How CLA can help with business opportunities in the new tax law
The new tax law offers many business tax savings opportunities — for prior, current, and future tax years.
Capitalizing on these opportunities requires high-level analysis and modeling, such as comparing the options available for capitalized domestic R&D expenses and performing a cost segregation analysis to accelerate deductions for your business and investment real estate. CLA’s experienced business tax team can help explain the new benefits and explore options well suited for your business.
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