Depreciation and Equipment Deductions

The Section 179 deduction limit increases to $2 million in 2025, allowing businesses to immediately expense more of their equipment purchases. Additionally, bonus depreciation returns to 100% through 2027, offering a major tax incentive for investing in qualifying assets. If you’re planning to purchase equipment, 2025 may be an ideal time to act.

Meals and Entertainment Deductions

Client meals remain 50% deductible, consistent with prior years, allowing continued partial tax relief for business-related dining. However, entertainment expenses are now fully non-deductible—this includes tickets to sporting events, concerts, golf outings, and similar activities. Meanwhile, company events such as holiday parties and staff appreciation days continue to qualify for a 100% deduction, but starting in 2025, these are capped at $2,000 per employee per year.

Corporate Tax Change

The C-Corporation tax rate will increase from 21% to 25%, affecting many incorporated businesses. Additionally, corporations with profits exceeding $10 million will be subject to a new minimum 15% tax on their financial statement (book) income.

R&D and Innovation Credits

The R&D credit for U.S.-based labor will increase, and a new “Innovation Workforce Credit” will offer a 15% credit for STEM apprentice wages. Immediate expensing will return for software development.

Pass-Through Entities and QBI

The QBI phase-out will be raised to $450,000 for married filers, and there will be an optional flat 18% deduction for service businesses earning under $2 million.

Energy and Vehicle Incentives

There will be a 30% credit for solar, geothermal, or battery storage investments, and a 50% credit for converting fleet vehicles to electric, capped at $40,000 per vehicle.

Reporting and Compliance

New digital asset reporting rules will apply to transactions over $5,000, and mandatory e-filing will be required for businesses filing 10 or more returns annually.