New Tax Law for Entrepreneurs: Key Provisions Explained

Key Business Tax Provisions in the New Law

• 🚀 Bonus Depreciation is largely continued, offering immediate deductions for qualifying assets, with a focus on maintaining continuity with previous rules.
• 💡 A new 100% depreciation deduction for qualifying structures used in tangible production facilities is introduced, applying to construction beginning after January 19, 2025, and before January 1, 2029.
• ⚠️ This new structure expensing provision is temporary, with a runway of approximately five years, and has exclusions for certain facilities like those providing food as a service.
• 💰 The interest deduction limitation reverts to a more generous EBITDA-based calculation (30% of EBITDA) and is made permanent, offering greater flexibility for businesses.

Research & Development (R&D) Expensing

• ✅ R&D expensing is made permanent, a significant change from previous capitalization requirements that had negatively impacted cash flow for many businesses.
• 🌍 This provision is specifically for domestic R&D and has retroactive application for small businesses (gross receipts under $31 million) back to December 31, 2021.
• 📈 For larger businesses, R&D deductions can be accelerated over a one or two-year period for expenses incurred between December 31, 2021, and November 25, 2025.

Renewable Energy and Electric Vehicle Credits

• ⚡ Clean electricity production and investment credits (45Y and 48E) will be eliminated for projects placed in service after 2027, with exceptions for projects beginning construction within 12 months of passage and base load power sources.
• 🚗 The electric vehicle credit has a shortened runway, ending by September 30, 2025, encouraging early adoption through leasing.
• ⛽ The clean fuel production credit (45Z) is extended until 2030 with expanded eligibility.

Other Important Business Provisions

• 📊 Charitable contribution deductions now have a 1% floor and a 10% ceiling for C-corporations, potentially reducing the value of these deductions.
• 🔑 The Qualified Business Income (QBI) deduction (Section 1A) is made permanent at 20%, with adjusted phase-in limitations for joint filers and a new minimum deduction of $400 for material participants with $1,000+ in QBI.
• 🧐 Business owners must pay close attention to effective dates and run the numbers with their tax advisors to maximize benefits and understand the nuances of the new law.