From bonus depreciation and research deductions to interest limitations and pass-through qualified income deductions, the legislation aims to extend or revise several Trump-era tax policies while cracking down on fraudulent pandemic-era claims. While the Senate works on its amendments to the House bill, business owners and advisors should take note of the potential implications for tax planning in the coming year.

Important Caveat: The fate of Trump’s comprehensive tax and spending package remains uncertain. The legislative process surrounding the 2025 budget and tax bill is ongoing. The provisions discussed in this article reflect the most current version passed by the House of Representatives but remain subject to change as the bill moves through the Senate and reconciliation process. We recommend consulting with your tax advisor before making any decisions based on the proposed legislation.

Although the provisions are not yet final, many are structured to take effect retroactively or extend those set to expire soon. That means the time to prepare is now. This blog highlights the most impactful business tax updates proposed in the House version of the 2025 budget bill, along with updates from the Senate Finance Committee’s proposal, published on June 16, 2025.

Bonus Depreciation and Section 179 Expansions

Current Law: Bonus depreciation has been phasing out since 2023. In 2025, it’s scheduled to drop to 40%. Section 179 expensing remains available up to $1.25 million with a phaseout starting at $3.13 million.

Proposed Changes Under the House Bill:

  • Reinstates 100% bonus depreciation for qualified assets acquired after January 19, 2025, through 2029 (and through 2030 for certain long-production property and aircraft).
  • Introduces a special depreciation allowance for "qualified production property."
  • Increases the Section 179 deduction limit to $2.5 million with a new phaseout threshold of $4 million for assets purchased and placed in service in 2025, with annual inflation adjustments after 2025.

Proposed Senate Finance Committee Changes:

The current Senate proposal includes the same provisions as the House bill, except it would permanently reinstate 100% bonus depreciation for qualified assets acquired after January 19, 2025.

What This Means for You: Businesses may want to accelerate purchases to capitalize on full expensing opportunities.

R&D Expensing: Section 174 Changes

Current Law: Since 2022, domestic research costs must be amortized over five years (15 years for foreign costs), significantly reducing near-term deductions.

Proposed Changes Under the House Bill:

  • Brings back the ability to fully deduct domestic R&D expenses from 2025 through 2029.
  • Optional amortization remains available but is no longer mandatory.

Proposed Senate Finance Committee Changes:

  • Permanently reinstates the deduction for domestic R&D expenses, starting in 2025.
  • Optional amortization remains available but is no longer mandatory.
  • Allows small businesses (with average annual gross receipts of $31 million or less) to retroactively claim the deduction to 2022. 

What This Means for You: Start budgeting now for eligible R&D activities that can be fully deducted again, pending Senate approval.

QBI Deduction: Section 199A Expansion

Current Law: The 20% deduction for qualified business income from pass-through entities is set to expire in 2026 and is subject to income thresholds and limitations.

Proposed Changes Under the House Bill:

  • Makes the QBI deduction permanent.
  • Increases deduction rate from 20% to 23% starting in 2026.
  • Modifies W-2 and capital investment limitations.

Proposed Senate Finance Committee Changes:

The current Senate proposal includes the same provisions as the House bill, except it retains the current 20% deduction rate. 

What This Means for You: This would offer long-term planning certainty for owners of pass-through entities, such as LLCs and S-corps.

Interest Expense Limitation Relief

Current Law: Business interest deductions are generally capped at 30% of adjusted taxable income (ATI), which is currently calculated based on EBIT (earnings before interest and taxes).

Proposed Changes Under the House Bill:

  • For 2025 to 2029, ATI would be recalculated based on EBITDA (adding back depreciation and amortization), effectively increasing the interest deduction base.

Proposed Senate Finance Committee Changes:

The current Senate proposal includes the same provisions as the House bill.

What This Means for You: Companies with significant depreciation and amortization may benefit from greater deductions.

ERTC Fraud Crackdown

Current Law: Fraud related to Employee Retention Tax Credit (ERTC) claims has led to increased IRS scrutiny, with penalties for promoters who help file invalid claims.

Proposed Changes Under the House Bill:

  • Boosts promoter penalties to the greater of $200,000 ($10,000 for individuals) or 75% of the income derived from the understatements
  • Adds a $1,000 penalty for failing due diligence on ERTC eligibility

Proposed Senate Finance Committee Changes:

The current Senate proposal includes a promoter penalty of $1,000 for each false ERTC claim, without a cumulative limit. 

What This Means for You: Be cautious about ERTC claims and consult a tax advisor to avoid costly penalties.

Opportunity Zones

Current Law: The Qualified Opportunity Zone (OZ) program provides tax benefits to those who invest  U.S. derived capital gains in eligible distressed communities through qualified opportunity funds. Benefits include a temporary tax deferral on the gains until the earlier of:

  • December 31, 2026, or
  • The occurrence of an inclusion event, such as the sale or disposal of the asset. 

Investors also can obtain a step-up in basis on the fund assets for longer holding periods and a permanent exclusion of taxable income on the gains for investments held at least 10 years. The initial OZ round is scheduled to expire after 2026. 

Proposed Changes Under the House Bill:

  • Creates a second round of OZs, from January 1, 2027, to December 31, 2033.
  • Simplifies the tax incentives, creates rural qualified opportunity funds and adds reporting requirements.  

Proposed Senate Finance Committee Changes:

  • Create a permanent OZ policy based on the original program, with rolling, ten-year OZ designations beginning on January 1, 2027.
  • Modifies the eligibility requirements, creates rural qualified opportunity funds and adds reporting requirements. 

Under both the House and Senate plans, significant changes to the OZ program are proposed. All anyone knows for sure is that any new program will likely be very different from the current program.

International Tax Updates

Current Law: The TCJA (tax act of 2018) included several international tax provisions, including deductions for foreign-derived intangible income (FDII) and global intangible low-tax income (GILTI), as well as the Base Erosion and Anti-Abuse Tax (BEAT). Currently, the FDII deduction is 37.5% (13.125% effective tax rate), GILTI is 50% (10.5% rate), and BEAT is 10.1%. These benefits are scheduled to diminish after 2025 unless extended.

Proposed Changes Under the House Bill:

  • FDII deduction would be set permanently at 36.5% (13.335% rate).
  • GILTI deduction would be set at 49.2% (10.668% rate).
  • BEAT would remain at 10.1% permanently in most cases.

The bill also proposes adding Section 899, which penalizes corporations connected to “discriminatory foreign countries” that impose unfair foreign taxes on U.S. persons. These may include:

  • Undertaxed profits rules (such as OECD Pillar 2)
  • Digital services taxes
  • Diverted profits taxes
  • Any other taxes the U.S. Treasury determines are disproportionately targeting U.S. persons

For affected corporations, the U.S. tax rate on certain domestic income could rise incrementally by 5% annually (capping at 20% above the normal rate), starting:

  • 90 days after bill enactment,
  • 180 days after the foreign law is passed, or
  • When the unfair foreign tax is first applied—whichever comes latest.

This provision also expands BEAT applicability for U.S. companies more than 50% owned by entities in those discriminatory countries.

Proposed Senate Finance Committee Changes:

  • Would permanently set the FDII deduction at 33.34% and the GILTI deduction at 40% (an effective rate of 14% combined), starting in 2026.
  • BEAT would increase to 14% permanently, starting in 2026.

The Senate proposal would also modify the treatment of GILTI and the foreign tax credit. These changes aren’t included in the House bill. 

The current Senate proposal would impose penalties on corporations connected to “discriminatory foreign countries” that impose unfair foreign taxes on U.S. persons, with significant changes from the House bill. Notably, the Senate would provide later applicability dates to give affected corporations additional time to navigate the changes. 

For affected corporations, the U.S. tax rate on certain domestic income could rise incrementally by 5% annually (capping at 15% above the normal rate). This provision also expands BEAT applicability for U.S. companies more than 50% owned by entities in those discriminatory countries.

What This Means for You: If you operate internationally or are affiliated with non-U.S. shareholders, these changes could increase your U.S. tax exposure. Early tax planning may help mitigate those effects.

Frequently Asked Questions About the 2025 Business Tax Bill

  1. Should my business accelerate asset purchases before year-end 2025?

    Yes, if the 100% bonus depreciation provision passes, acquiring eligible equipment after January 19, 2025, could result in a full deduction in the year of purchase.

  2. How do the proposed R&D expensing changes affect software developers?

     If passed, software development costs could be fully deductible again starting in 2025 — reversing current amortization rules and increasing near-term cash flow.

  3. What types of businesses benefit most from QBI changes?

    Pass-through entities like LLCs, partnerships, and S corporations may benefit, especially if they previously faced W-2 or capital limitation hurdles.

  4. Will the updated interest deduction rules help capital-intensive businesses?

    Likely yes — changing from EBIT to EBITDA would allow many manufacturers and real estate firms to deduct more interest expense.

Looking for the Individual Tax Provisions?

The proposed legislation also includes sweeping tax changes for individuals. For a closer look at how updates to income tax brackets, the Child Tax Credit, new deductions, and estate tax thresholds could impact your personal tax planning, read our full breakdown of the individual tax provisions in the Budget Bill.

Stay Tuned - This overview captures just a portion of the 1,100+ pages of tax provisions included in the House budget reconciliation bill and the 500+ pages of tax provisions included in the initial Senate Finance Committee proposal. The House and Senate still need to negotiate a unified bill, and political disagreements — especially over issues like State and Local Tax deductions and spending levels — could lead to revisions or delays.