What’s Inside the New Tax Law? Highlights for Businesses

The latest tax legislation brings major wins – and a few cautionary notes – for business owners, especially those involved in capital investment, manufacturing, and R&D.

100% Bonus Depreciation Is Back – and Permanent

The new law restores and makes permanent the 100% bonus depreciation originally introduced under the 2017 TCJA:

• Applies to "qualified property" acquired and placed in service on or after Jan. 20, 2025.

• Eligible property includes tangible personal property with a recovery period of 20 years or less and qualified improvement property.

Expanded Business Interest Deduction

The Bill reinstates a more favorable method for calculating the business interest expense limitation under Section 163(j):

• For tax years beginning in 2025 and beyond, Adjusted Taxable Income (ATI) will once again be calculated without deductions for depreciation, amortization, and depletion.

• This increases the deductible interest amount and can be especially beneficial for capital-intensive businesses.

Immediate Expensing of R&D Costs

In a major shift, businesses can now immediately deduct domestic research and development (R&D) expenditures, reversing the unpopular five-year amortization rule from 2022:

• Effective starting in 2025.

• Small businesses (under $31M in average gross receipts) may apply this retroactively to 2022–2024.

• Other businesses can elect to accelerate remaining amortization deductions over 1–2 years beginning in 2025.

Excess Business Loss Limits Made Permanent

The Bill makes permanent the TCJA’s limitation on excess business losses for non-corporate taxpayers.

• The limitation (currently $500,000 for joint filers) no longer expires in 2028.

• Disallowed excess losses are carried forward as net operating losses (NOLs).

Opportunity Zones Become a Long-Term Strategy

The tax benefits of Qualified Opportunity Zones (QOZs) are now permanent.

ERC Claims: New Limits and Penalties

The IRS is tightening oversight of Employee Retention Credit (ERC) claims:

• No refunds will be issued for Q3 2021 ERC claims filed after Jan. 31, 2024.

• The IRS now has 6 years (instead of 3) to audit and assess tax on any ERC refund claim.

• Enhanced penalties apply to ERC promoters engaging in abusive or fraudulent claims.