BBB Part 2! Business Tax Alert: 100% Bonus Depreciation and R&E Expensing Are Back

For the last few years, business owners have faced shrinking depreciation schedules and frustrating amortization rules for research expenses. The One Big Beautiful Bill Act reverses these trends, aiming to supercharge domestic investment.

If you own a business, these changes effectively lower your cost of capital and reward innovation. Here is what you need to know.

1. Return of 100% Bonus Depreciation

The phase-down of bonus depreciation has been halted and reversed.

• The New Rule: You can now take 100% bonus depreciation for qualified property (machinery, equipment, software) acquired and placed in service after January 19, 2025.

• The Impact: This allows you to write off the full cost of new assets in year one, drastically reducing taxable income and freeing up cash flow.

2. Immediate R&E Expensing (Fixing Section 174)

One of the biggest pain points for tech and manufacturing firms has been the requirement to amortize Research & Experimental (R&E) costs over five years.

• The Fix: The new bill restores immediate expensing for domestic R&E costs, including software development.

• Retroactive Benefit: Small businesses (under $31M gross receipts) can apply this retroactively to tax years beginning after 2021.

3. Permanent QBI Deduction

The 20% Qualified Business Income (QBI) deduction for pass-through entities (S-Corps, Partnerships, Sole Props) was set to expire. This bill makes the 20% deduction permanent, providing long-term certainty for small business owners.

4. Expanded Section 179 Limits

For smaller businesses, the Section 179 expense limit has been nearly doubled.

• New Limit: You can now expense up to $2.5 million in assets, with the phase-out threshold starting at $4 million.

5. Interest Expense Limitation (163(j))

The bill reinstates the friendlier EBITDA standard (Earnings Before Interest, Taxes, Depreciation, and Amortization) for calculating the interest expense limitation, replacing the stricter EBIT standard. This is a major win for capital-intensive industries with significant debt service.

Conclusion

The government is effectively putting "sale" signs on new equipment and innovation. Now is the time to review your capital expenditure budgets for 2025. Let’s sit down and run the numbers to see how much tax liability we can eliminate through strategic asset purchases.