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Ext. PublicationYear-End Tax Planning for Businesses: Key 2025 OBBBA Provisions and Strategies
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As 2025 draws to a close, business taxpayers have an array of new incentives and complexities to incorporate into their tax planning. With the One Big Beautiful Bill Act (OBBBA) now law, businesses are looking at how the new law will affect their tax strategies for 2025 and beyond. From bonus depreciation to R&E expensing, many provisions from the 2017 Tax Cuts and Jobs Act (TCJA) have been revived or restructured, providing near-term opportunities for savings and longer-term strategy considerations. This article offers more details as well as tax planning tips for businesses.
EBITDA Is Back: Relief on Interest Expense Limitations
One of the most significant OBBBA changes for businesses is the restoration of the EBITDA-based limit under Section 163(j). Since 2022, businesses have had to calculate their interest expense limitation using EBIT (earnings before interest and taxes), which excluded depreciation and amortization. This created restrictions for capital-intensive industries. Starting January 1, 2025, companies can again use EBITDA to determine the 30% limitation, restoring the addback of depreciation and amortization. This change significantly increases deductible interest for manufacturers, real estate owners and other asset-heavy operations.
Taxpayers should also note the reordering of interest capitalization rules under Section 266 starting in 2026 and a new exclusion for GILTI (global intangible low-taxed income) in the 163(j) calculation.
Planning tip: Revisit deferred interest expense carryforwards and model the impact of the EBITDA change on 2025 taxable income and financing decisions.
Permanent 20% QBI Deduction for Pass-Throughs
The Qualified Business Income (QBI) deduction, which was scheduled to sunset after 2025, was made permanent in the OBBBA. Eligible sole proprietors, S corporations and partnerships may continue claiming the 20% deduction on qualified business income, subject to W-2 wage and unadjusted basis limitations. The phaseout thresholds have been extended and modestly increased. However, the deduction remains unavailable to specified service trades or businesses such as accounting and law.
Planning tip: Evaluate entity structure and wage allocations to ensure continued eligibility for the QBI deduction in 2026 and beyond.
Bonus Depreciation: Full Expensing Restored
In one of the most widely welcomed changes, the OBBBA reinstated 100% bonus depreciation for qualified property acquired and placed in service after January 19, 2025. It is important to note that the acquisition date is as important as the placed-in-service date. Assets acquired under written binding contracts before January 19, 2025, remain subject to the prior 40% rate.
The law also expands eligibility to qualified production property (QPP). This is nonresidential real property used as an integral part of qualified production activity. QPP includes areas of a facility used for qualified production activities but excludes certain areas such as administrative and office spaces.
Because QPP property elections trigger potential Section 1245 recapture if sold within 10 years, careful planning is critical.
Planning tips:
- Review acquisition and placed-in-service dates to ensure 100% bonus qualification.
- Consider whether to elect QPP treatment or pursue a cost segregation study to balance immediate deductions against long-term recapture risk.
Fixed Asset and Repair Opportunities
The 2013 tangible property regulations (TPR) remain an important tool for maximizing current-year deductions. The BAR test (Betterment, Adaptation, Restoration) governs whether expenditures must be capitalized or can be deducted as repairs.
While 100% bonus depreciation arrives at the same answer, repair deductions can create permanent savings by avoiding future recapture. Taxpayers who previously changed accounting methods but haven’t maintained those procedures may be missing out on deductions.
Planning tips:
- Revisit fixed asset capitalization policies and consider a Form 3115 method change to “catch up” on missed repair deductions.
- Use the de minimis safe harbor ($5,000 with an AFS; $2,500 without) and routine maintenance elections where applicable.
R&E Expensing and Credit Opportunities
OBBBA brought long-awaited relief under Section 174, allowing businesses to immediately expense domestic research and experimental (R&E) costs once again. The act repeals the TCJA rule that required five-year amortization of domestic R&E expenditures and clarifies that software development is deemed to be an R&E expenditure.
Foreign R&E expenditures remain subject to 15-year amortization, encouraging domestic innovation. The law also allows small businesses (those with under $31 million in average gross receipts) to amend prior-year returns (2022–2024) to expense domestic R&E retroactively.
Planning tip: Model whether to expense all unamortized domestic R&E expenditures in 2025 or spread the deductions ratably over 2025 and 2026. Review documentation and contracts to support research tax credit claims, especially for software development or third-party work.
Other Key Business Provisions
- Section 1202 Qualified Small Business Stock (QSBS): Gain exclusion limit increased from $10 million to $15 million, with partial benefits after three or four years of holding
- Section 179D Energy-Efficient Building Deduction: Still available through June 2026, offering permanent benefits for designers and engineers of government or tax-exempt projects
- Work Opportunity Tax Credit (WOTC): Scheduled to expire at year-end 2025 unless Congress extends it
- Energy Credit Updates: New restrictions on foreign ownership and higher thresholds for construction commencement apply to solar and wind projects
Action Steps for Year-End 2025
- Capitalize on bonus depreciation for qualifying purchases placed in service before December 31, 2025.
- Review repair and capitalization policies for potential catch-up deductions.
- Assess R&E activities and documentation to optimize expensing and credits.
- Evaluate entity structure for QBI and QSBS benefits.
- Model the EBITDA interest limitation change to manage financing and debt planning.
- Confirm project timing for 179D and energy-efficient construction deductions.
The Bottom Line
The OBBBA has ushered in a favorable but intricate set of tax planning opportunities for 2025. Restored deductions, full expensing and revived credits offer immediate savings potential, but timing, elections and documentation matter more than ever. Businesses that act before year end can position themselves for both current-year relief and long-term efficiency under the new rules. For assistance and information about potential tax opportunities for your business, contact us.
©2025
Year-End Tax Planning Series
The tax landscape in 2025 has shifted with The One Big Beautiful Bill Act, introducing important changes across individual, business and state and local tax areas. Weaver’s 2025 Year-End Tax Planning blog series delivers insights and practical guidance designed to help you navigate these updates and prepare for a successful year ahead.
