The new tax bill delivers a major win for U.S. businesses: 100% full expensing is now permanent for certain capital investments and domestic R&D spending. This move is designed to boost domestic manufacturing, innovation, and economic competitiveness — and it could reshape how your business approaches growth and tax planning.
Here’s what you need to know.
Permanent 100% Bonus Depreciation for Business Property
Businesses can now immediately deduct 100% of the cost of qualifying assets — machinery, equipment, computers, vehicles, and more — placed in service after January 19, 2025.
Key highlights:
Applies to new and used property
Covers property with a useful life of 20 years or less
Includes self-constructed assets
Includes certain plants and agricultural property
No longer phases down over time — 100% expensing is permanent
This change is especially valuable for capital-intensive businesses like manufacturers, logistics, construction, and agriculture. It replaces the previous phase-out schedule (which was set to hit 0% by 2027), giving businesses certainty to invest long-term.
Transitional rule:
For property placed in service during your first tax year ending after Jan 19, 2025, you can elect a reduced expensing rate: 40% for general property and 60% for long-production property or plants — if you prefer to spread out deductions.
Full Deduction for U.S.-Based Research & Development (R&D)
Section 174A creates a new, permanent deduction for domestic research and experimental (R&E) expenditures, reversing the unpopular requirement to amortize R&D costs over five years.
What qualifies:
R&D conducted in the U.S.
Includes software development costs
Covers wages, supplies, and contract research
You now have two options:
Deduct the full amount immediately
Amortize over at least 60 months, if you choose
This is a significant change for tech companies, manufacturers, life sciences firms, and any startup investing in IP or product development. It also aligns with how the R&D tax credit is calculated, making planning simpler.
Note: Foreign R&D still must be amortized over 15 years and is not eligible for full expensing.
Catch-Up Option for Prior R&D Costs
If your business capitalized R&D expenses between 2022–2024 (as previously required), you may now:
Elect to fully deduct the remaining unamortized costs in 2025, or
Spread that deduction over 2025–2026
This offers immediate tax relief for companies that were forced into longer amortization schedules under the 2017 TCJA.
Retroactive Relief for Small Businesses
Certain small businesses (meeting the gross receipts test under IRC §448) can retroactively apply these rules back to 2022. That means you can:
Amend prior returns
Elect full deductions for domestic R&D done in 2022, 2023, or 2024
Recalculate R&D credits accordingly
This is a valuable opportunity for startups and growth-stage businesses to reclaim cash and lower their effective tax rates.
Impact on the R&D Credit
The R&D credit under Section 41 is still available — and now it’s easier to claim:
Domestic R&D must now be deducted under 174A
Coordination between the credit and deduction has been simplified
You can still choose to reduce the credit instead of reducing the deduction (under IRC §280C)
Between full expensing of business assets and the full deductibility of domestic R&D, this bill delivers significant tax savings and strategic flexibility for businesses that invest in the U.S.
If you’re planning capital expenditures, expanding your product team, or filing amended returns — now’s the time to review your strategy.
Want help modeling your 2025 tax impact or amending past returns? Let’s talk. We’ll help you quantify the benefit and make sure you comply with the new rules — especially if you want to retroactively apply these deductions.