06-08-2025
After Recent Tax Updates, What Business Owners Should Be Thinking About
David McGuire is a leading expert on cost segregation, fixed assets and depreciation law and a co-founder of McGuire Sponsel.
After months of headlines, debate and political theater, one of the most talked-about pieces of tax legislation in recent history, the 'Big Beautiful Bill,' was signed into law on July 4. While much of the public focus has been on individual benefits—such as 'no tax on tips'—the real long-term impact for business owners lies in the provisions related to bonus depreciation, Section 179 expensing and research and development costs.
These changes are technical, yes. But they're also deeply practical. If your company builds, buys or improves property (or invests in research and development) these changes offer a rare chance to clean up the past few years and create a more strategic path forward. But as with most things in tax, timing is everything.
Here's what you need to know and why waiting could be a costly mistake.
100% bonus depreciation is back (but there's a catch).
Bonus depreciation has long been a powerful planning tool, allowing businesses to fully deduct the cost of qualifying assets in the year they're placed in service. The Tax Cuts and Jobs Act (TCJA) in 2017 temporarily expanded this to 100%, but that benefit began phasing out in recent years.
The new bill brings it back—and makes it permanent.
That's the good news. But there's a caveat: This time, it's not just about when an asset is placed in service. It's also about when you signed a binding contract to acquire or build it.
If your business entered into a contract before January 20, 2025, even if the asset is placed in service later in the year, it could be subject to the old, reduced depreciation rules—possibly only qualifying for 40% bonus instead of 100%.
This creates some surprising results. Two assets placed in service in July 2025 could receive dramatically different tax treatment, simply based on contract timing.
Don't assume your depreciation strategy is set. Review all current and future capital investments—especially real estate projects, equipment purchases and construction contracts. In some cases, it may make sense to adjust timing, renegotiate terms or split contracts to optimize bonus eligibility.
Section 179 expensing gets a boost.
Section 179 expensing has always been a go-to for smaller businesses looking to deduct the full cost of qualifying property. The new bill expands this benefit, increasing the deduction limit to $2.5 million, with a phase-out beginning at $4 million.
What's especially valuable about Section 179 is that it's not subject to the same contract date rules as bonus depreciation. Instead, it's tied solely to the placed-in-service date, making it a more straightforward—and often more flexible—tool.
Even better, most U.S. states conform to Section 179, whereas many do not recognize bonus depreciation. This makes 179 especially powerful for businesses operating across multiple jurisdictions with different tax rules.
Businesses that exceed bonus depreciation thresholds, or operate in states that decouple from federal bonus rules, should take a fresh look at how Section 179 can support their tax planning strategy.
R&D expensing is finally fixed.
One of the most frustrating developments in recent tax law was the requirement, starting in 2022, to amortize research and experimental (R&E) expenses under Section 174. Many innovative companies (particularly those in manufacturing, tech and engineering) were suddenly required to spread those costs over five years, even if they provided no future benefit.
This created a painful mismatch between how expenses occurred and how deductions were recognized.
The new bill fixes that.
Beginning in 2025, businesses may once again fully expense qualifying R&D costs in the year they're incurred. But it also goes a step further by offering two paths to clean up prior-year treatment:
• Large businesses must carry forward any remaining amortized Section 174 costs from 2022-2024 into their 2025 return (or elect to spread it across 2025 and 2026).
• Smaller businesses (with average annual gross receipts under $31 million) may amend prior returns to fully expense those R&D costs retroactively.
This matters for businesses that avoided claiming the Section 41 R&D credit in recent years to sidestep 174 compliance, especially if they expensed those costs incorrectly on their returns. Now's the time to revisit those decisions and potentially unlock both deductions and credits.
The planning window is open—but it's already closing.
While the new law offers powerful opportunities, some of the most valuable options come with short deadlines.
Certain elections including the ability to change accounting methods and pull forward prior-year deductions must be made on the first taxable year beginning after December 31, 2024.
Additionally, businesses that extended their 2024 tax returns will still need to comply with the previous 174 amortization rules, even as they prepare to switch gears in 2025.
This creates a narrow window for proactive planning. Business owners should work closely with their tax advisors to:
• Review the timing and structure of capital projects
• Evaluate whether to amend 2022-2024 returns
• Identify opportunities to optimize R&D credit claims
• Prepare for method changes or Section 481(a) adjustments in 2025
The sooner that planning begins, the better the outcomes are likely to be.
This is a moment to reset.
This bill is a chance for businesses to pause, reset and take a smarter approach to tax planning moving forward.
If your company has invested in new buildings, machinery or technology over the past few years, there's a good chance you've either left money on the table or are carrying forward costs you don't need to. This new law gives you the tools to change that—but only if you act.
No two businesses will approach this the same way. But the most successful ones will take this moment to consider the options and make informed decisions with a multiyear view.
The opportunity is real. Now's the time to get curious—and get moving.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
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