That’s a wrap on 2025. That means that if your company’s fiscal year aligns with the calendar year, you’re closing your books. While you won’t need to file anything with tax authorities for a while now, you don’t want to wait until April to figure out your tax liability (or if you have any). If you do, you could face some unwelcome surprises and added stress this spring.
With that in mind, we want to highlight some things we’ve been regularly touching on during our year-end tax planning calls with clients. Here are some of the new tax rules you should know about for your 2025 filings.
R&D credits and deductions: A lot has changed
There’s a lot you should know that came from the One Big Beautiful Bill Act (OBBBA). Since you probably don’t have time to read through the actual legislation, we’ll hit the high notes here.
Restored immediate expensing of domestic R&D
Specifically, that Act did away with R&D expensing changes from the Tax Cuts and Jobs Act (TCJA) of 2017. Under the TCJA, companies had to amortize domestic R&D expenses over five years.
This created some unwelcome scenarios for our clients. We’ll give you an example to clarify what the situation has been — and how it’s changing.
Say a company has $1 million in revenue but assumed it had $1 million in expenses, $500,000 of which was domestic R&D costs. Under the TCJA, the company had to break that $500,000 up over five years. That meant they could only deduct $100,000 in that given tax year, leaving them with what looked like a profit of $400,000.
Suddenly, customers who thought they wouldn’t have any tax liability were seeing bills from the IRS. Or, in some cases, making changes. We saw some customers recategorize what they would have previously claimed as R&D (e.g., into a marketing expense). By making the subjective assessment to say the company had fewer R&D expenses, some companies were able to lower their tax bill.
Regardless, the last few years have required some maneuvering, and some higher-than-expected payments to the IRS. Fortunately, the OBBBA strikes that part of the TCJA, fully restoring immediate expensing of qualifying domestic R&D expenses. That company in our example above is back to $0 profit, helping them avoid a bill from the IRS.
Ripple out: The impact on the R&D tax credit
Technically, the OBBBA didn’t make any significant changes to the way the R&D tax credit works. But because it impacted R&D expensing, we’re seeing it shift how our clients think about this credit.
Specifically, with immediate domestic expensing restored, more companies decide to categorize more expenses as R&D. As a result, the total they can apply to their R&D tax credit goes up.
This is particularly powerful for our clients who are pre-profit. You can apply this tax credit to your company’s income tax — but if you don’t have a tax bill yet and you meet other criteria, you can alternatively apply the credit to your payroll taxes. That means it gives you a way to reduce what your company hands over for your employee’s Medicare and Social Security taxes.
Talk with our team. We can help you optimize your 2025 books to get the most from this tax savings opportunity.
One thing to note: Foreign R&D expense tax treatment
The OBBBA does away with the amortization requirement for domestic R&D expenses, but it doesn’t touch tax treatment of foreign R&D. If you’re paying international employees or contractors or you’re buying R&D supplies from foreign companies, you still need to break up that expense over 15 years.
New QSBS rules and holding periods
If your company issues qualifying small business stock (QSBS), the Act also adjusted treatment here. Note that this all applies to any stock issued after the Act’s enactment date of July 4, 2025. Any stock issued before Independence Day 2025 still falls under the old rules.
First, any stock issued after the Act went into effect is subject to a bigger lifetime cap for each taxpayer. The ceiling on this capital gains exclusion was $10 million, but it’s $15 million for stock issued after enactment. That ceiling will get indexed for inflation starting in 2027, too.
Just as notably, the Act introduces new holding period options for stock to qualify. Now, if you or one of your investors wants to sell before the historic five-year marker, you can still see some tax benefit. QSBS now has a tiered holding period requirement:
- Stock held for three years qualifies for a 50% exemption
- Stock held for four years qualifies for a 75% exemption
- Stock held for five years qualifies for the 100% exemption
Bonus depreciation is fully back on the table
There’s one last OBBBA change to note as you plan for your 2025 tax filings. And it’s one that could be a big help to your business.
Bonus depreciation was on schedule to phase down. In 2025, companies might have been limited to 40%. But the Act both restores 100% depreciation of qualifying property and makes that permanent.
As a reminder, that depreciation applies for the year you put the property into service, so you need to make sure your team actually used it in 2025.
There’s a somewhat odd cutoff date for this one. The Act says that the 100% bonus depreciation applies to any assets your business acquired after January 19. For anything you bought in the first 19 days of the year, you’re subject to the old rule of bonus depreciation at 40%.
This is a pretty quick overview of new tax rules companies should know about for their 2025 filings. It’s barely skimming the surface, though. To go deeper with a team who can help you optimize your tax planning to best support your company’s financial outcomes, contact us. Our team at ShayCPA specializes in the R&D tax credit. We’re here to help you use your 2025 filings with the IRS to your advantage. For a deeper breakdown of what’s ahead and how to prepare, download our complete guide to the 2026 tax landscape.
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