Tax laws change constantly, and staying informed is crucial for business owners looking to maximize savings, remain compliant, and plan ahead. Recent updates impact bonus depreciation, R&D deductions, QBI benefits, corporate tax rates, and compliance reporting, making proactive tax planning more essential than ever.
At Cathcap, we help businesses stay ahead of tax law changes and optimize strategies accordingly. Here’s what you need to know about the latest updates and how they could impact your business in 2025 and beyond.
- Changes to Business Deductions and Expensing
Bonus Depreciation Extended Through 2025
The Tax Relief for American Families and Workers Act of 2024 has extended 100% bonus depreciation for qualified property placed in service through December 31, 2025. This defers the previously scheduled phase-down of bonus depreciation that would have started in 2023.
What This Means for Businesses:
- Companies planning significant capital investments in equipment, machinery, or technology should accelerate their purchasing timelines to take full advantage of 100% expensing before the new deadline.
- R&D Tax Credit Enhancements
The same 2024 legislation restored the immediate deduction for U.S. research and development (R&D) expenses until 2026. This reverses the prior requirement to amortize these expenses over five years, which had previously created cash flow challenges for businesses.
What This Means for Businesses:
- Companies investing in technology, innovation, or process improvements can continue to fully deduct R&D expenses in the year incurred through 2025, improving cash flow and reducing taxable income.
- Section 199A QBI Deduction Adjustments
The Qualified Business Income (QBI) deduction, which allows pass-through entities (LLCs, S-Corps, and sole proprietorships) to deduct up to 20% of their qualified business income, is set to expire after December 31, 2025, unless Congress enacts an extension.
What This Means for Businesses:
- If your business operates as a pass-through entity, now is the time to review your tax structure and explore ways to maximize this deduction before it potentially expires.
- Potential Corporate Tax Rate Reduction
While the corporate tax rate remains at 21%, recent proposals—including Project 2025—suggest a possible reduction to 18% in the coming years.
What This Means for Businesses:
- C-corporations should monitor legislative developments closely, as tax rate adjustments could impact financial planning, tax liability, and business structuring decisions.
- Employee Retention Credit (ERC) Audits and Compliance Crackdowns
The Employee Retention Credit (ERC) program has officially ended, and the IRS is ramping up audits due to concerns over improper claims. Businesses that incorrectly claimed the ERC may face penalties and repayment obligations.
What This Means for Businesses:
- If your company claimed the ERC, consult a tax professional to review your claim’s validity. If errors are found, corrective action should be taken immediately to minimize potential IRS penalties.
- New Digital Payment Reporting (1099-K Updates)
The IRS has updated the Form 1099-K reporting thresholds for businesses receiving payments through third-party platforms (PayPal, Venmo, Stripe, Square, etc.):
- 2024: $5,000 reporting threshold
- 2025: $2,500 reporting threshold
- 2026 and beyond: $600 reporting threshold
What This Means for Businesses:
- Businesses using digital payment platforms must track all income carefully to ensure compliance with lower reporting thresholds beginning in 2025.
Final Recommendations: How to Adapt to These Tax Changes
With tax laws shifting, businesses need a proactive approach to stay compliant and maximize opportunities.
Key Actions to Take:
✔ Leverage Bonus Depreciation Before 2026 – If you plan to purchase equipment or technology, do so before the 100% deduction expires.
✔ Maximize R&D Deductions While Available – Take advantage of full R&D expense deductions before they revert to five-year amortization in 2026.
✔ Plan for the Potential Expiration of QBI Deduction – Pass-through businesses should review their structure and income planning to make the most of this benefit.
✔ Stay Alert for Corporate Tax Rate Changes – C-corporations should monitor legislative updates for potential tax rate adjustments.
✔ Ensure ERC Compliance – If your business claimed the ERC, confirm the claim’s accuracy and validity to avoid penalties.
✔ Track Digital Payment Income – With the 1099-K reporting threshold dropping, businesses should properly record all third-party transactions to avoid IRS scrutiny.
The Takeaway: Stay Ahead with Strategic Tax Planning
Tax law changes create both challenges and opportunities for businesses. Being proactive and staying informed ensures you can minimize tax liability, maximize deductions, and avoid compliance issues.
At Cathcap, we specialize in helping businesses navigate tax law changes with strategic financial planning.
Need expert tax guidance? Book a consultation today to develop a customized tax strategy that keeps your business financially strong in 2025 and beyond.
Stay ahead of tax changes—plan smarter today!
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