2 Important Changes for Businesses under the New Tax Law

Sarah B

The One Big Beautiful Bill Act (OBBBA) introduces a range of tax changes that will impact businesses. Many provisions set to expire this year are now being extended or made permanent. Below is a snapshot of two important changes to help you with tax planning in the fourth quarter of 2025 and going forward.


How the Deduction for R&E Expenses Has Changed

Under the Tax Cuts and Jobs Act (TCJA), businesses had to amortize deductions for Section 174 research and experimentation (R&E) costs over five years for expenses incurred in the United States or 15 years for those incurred abroad. This provision used a mid-year rule that effectively stretched write-offs over six years. The OBBBA changes that by permanently allowing full, immediate deductions for domestic R&E expenses starting in the 2025 tax year. Foreign R&E expenses will still be amortized over 15 years.


In addition, the OBBBA lets “small businesses” (in 2025, those with average annual gross receipts of $31 million or less for the past three years) claim R&E deductions retroactively to 2022. A business of any size with domestic R&E costs from 2022 to 2024 can choose to speed up the remaining deductions for those years over a one- or two-year period.


How the Business Interest Deduction Has Changed

Generally, the TCJA limited business interest deductions to 30% of the taxpayer’s adjusted taxable income (ATI) for the year. Before the OBBBA, ATI generally referred to earnings before interest and taxes. For tax years beginning after December 31, 2024, the OBBBA increases the cap on the business interest deduction by excluding depreciation, amortization and depletion when calculating ATI. This change typically increases ATI, allowing taxpayers to deduct more business interest expense.

But it’s important to note that, in 2025, taxpayers with average annual gross receipts for the last three years that don’t exceed $31 million are exempt from the interest deduction limitation.


Rethink Tax Planning

For business owners, the OBBBA helps resolve tax planning uncertainty. Keep in mind, these are just two of the key changes for businesses in this tax legislation.


Contact the office to discuss the full range of tax provisions covered by the new law. We can help you optimize any extended or new provisions that are relevant to your situation and reduce your tax obligations for 2025 and beyond.


October 2025 Newsletter

By Sarah Bolton • October 3, 2025
Our regularly updated newsletter provides timely articles to help you achieve your financial goals. Please come back and visit often. Feature Articles Enhanced SALT Tax Break Will Help Many Homeowners 2 Important Changes for Businesses under the New Tax Law Tax Breaks for Medical Expenses Tax Tips Can Your Business Benefit from the WOTC? Say Goodbye to Paper Checks Dependent Care Flexible Spending Accounts for Your Business

October 2025: Upcoming Tax Due Dates

By Sarah Bolton • October 3, 2025
October 15 Individuals: File a 2024 income tax return (Form 1040 or Form 1040-SR) if an automatic six-month extension was filed (or if an automatic four-month extension was filed by a taxpayer living outside the United States and Puerto Rico). Pay any tax, interest and penalties due. Individuals: Make contributions for 2024 to certain existing retirement plans or establish and contribute to a SEP for 2024 if an automatic six-month extension was filed. Individuals: File a 2024 gift tax return (Form 709) and pay any tax, interest and penalties due if an automatic six-month extension was filed. Calendar-year bankruptcy estates: File a 2024 income tax return (Form 1041) if an automatic six-month extension was filed. Pay any tax, interest and penalties due. Calendar-year C corporations: File a 2024 income tax return (Form 1120) if an automatic six-month extension was filed. Pay any tax, interest and penalties due. Calendar-year C corporations: Make contributions for 2024 to certain employer-sponsored retirement plans if an automatic six-month extension was filed. Employers: Deposit Social Security, Medicare and withheld income taxes for September if the monthly deposit rule applies. Employers: Deposit nonpayroll withheld income tax for September if the monthly deposit rule applies. October 31 Employers: Report Social Security and Medicare taxes and income tax withholding for third quarter 2025 (Form 941) and pay any tax due if all of the associated taxes due weren’t deposited on time and in full. November 10 Individuals: Report October tip income of $20 or more to employers (Form 4070). Employers: Report Social Security and Medicare taxes and income tax withholding for third quarter 2025 (Form 941) if all of the associated taxes due were deposited on time and in full.

Dependent Care Flexible Spending Accounts for Your Business

By Sarah Bolton • October 3, 2025
Employers seeking to offer family-friendly benefits may want to consider flexible spending accounts (FSAs) for dependent care. These FSAs let employees make pre-tax contributions through payroll withholding to help cover eligible expenses. Because of the major tax bill enacted on July 4, 2025, the annual contribution limit, currently $5,000, will rise to $7,500 in 2026. FSA contributions reduce employees’ income tax and payroll tax and employers’ payroll tax. Withdrawals used to pay qualified expenses are tax-free. These include expenses for care for a child under age 13 or another dependent unable to care for themselves due to physical or mental limitations. Contact the office with questions.