2025 Business Tax Breaks: Maximize Deductions with Section 179 and R&D Expensing

As the 2025 tax year kicks off, businesses can take advantage of new and expanded federal tax deductions designed to encourage investment and innovation. These updates to Section 179 expensing, bonus depreciation, and R&D deductions offer significant opportunities for reducing taxable income.

Section 179 Expensing Limit Increased

Beginning January 1, 2025:

• Maximum Deduction: $2.5 million

• Phase-Out Threshold: Begins at $4 million in qualifying purchases

Businesses can now fully deduct the cost of equipment, software, and other eligible assets placed in service during the year—rather than depreciating them over time.

Qualifying property includes:

• Office furniture and equipment

• Computers and business software

• Certain business vehicles

• Machinery and manufacturing equipment

Note: The assets must be placed into service before the end of the tax year to qualify.

Bonus Depreciation Still Available

In addition to Section 179, businesses can take advantage of bonus depreciation, which allows for immediate expensing of 100% of the cost of eligible property. This is especially useful for companies with larger capital expenditures that exceed the Section 179 limit.

R&D Deduction Restored for 2025

The IRS will once again allow businesses to fully deduct domestic research and development (R&D) expenses in the year they are incurred.

Key updates:

• Full expensing resumes in 2025 for new R&D expenses

• Previously capitalized R&D costs from prior years must still be amortized

Companies in technology, manufacturing, product design, and software development stand to benefit the most from this change.

What Your Business Should Do

• Review planned equipment purchases: Consider accelerating purchases into 2025 to take advantage of these deductions.

• Track R&D spending carefully: Maintain detailed documentation for qualifying activities.

• Consult your tax advisor: We can help you align your business strategy with these tax changes to maximize benefits.

These updates are designed to help businesses reinvest in growth—and reward those that innovate. If you’re looking to make strategic purchases or expand operations in 2025, now is the time to plan.

Need help reviewing your eligibility or calculating your deductions? Contact our office to set up a consultation.