Small Business Tax Planning Tips for 2025
Running a small business successfully is one thing. Keeping more of your profits legally is another. With the tax changes passed in 2025 under the One Big Beautiful Bill Act (OBBBA), small businesses have a fresh opportunity to optimize their tax planning. In this post, we’ll go through both classic strategies and 2025-specific changes you’ll want to leverage this year.
Why 2025 Is Unique for Small Business Tax Planning
Because of OBBBA, many new opportunities exist for small business owners:
- 100% Bonus Depreciation is reinstated for qualified property placed in service after January 19, 2025. That means you can write off the full cost in the year you place the asset, rather than depreciating over many years.
- Expanded Section 179 limits: The deduction limits for Section 179 are increased, letting you immediately expense more of your qualifying property.
- New treatment of R&D/research expenditures: OBBB allows small businesses (with certain thresholds) to expense domestic research & experimental costs instead of amortizing them.
- Restored deductibility of business interest in computing “Adjusted Taxable Income (ATI)” by excluding depreciation, amortization, and depletion from the base.
- Changes to Qualified Small Business Stock (QSBS): OBBBA expands the pool of businesses that qualify, increases the gain exclusion limits, and shortens the holding period for new stock issued after enactment.
So, along with “classic” tax moves, these are powerful new lever arms to use in 2025.
Top Tax Planning Tips for Small Businesses in 2025
1. Use 100% Bonus Depreciation Wisely
Because OBBBA restores 100% bonus depreciation for qualified property, plan capital purchases that will qualify (machinery, equipment, software, certain computer hardware) and place them in service in 2025 to get the full write-off.
Caution: If you sell or dispose of property early, you may have to recapture depreciation. Also, property that doesn’t qualify (long-lived real property) is not eligible.
2. Max Out Section 179 Deductions
With the higher limit under OBBBA, more of your investments in property (machines, office equipment, etc.) can be immediately deducted under Section 179.
Make sure you meet the “more than 50% business use” requirement, and prorate the deduction if the asset is used partially for personal or non-business uses.
3. Take Advantage of R&D Expensing and Credit
If your business does product development, software, process improvements, or experimentation, you may be eligible to expense R&D costs instead of amortizing them over years. That front-loads your deduction.
Also, small businesses may be able to retroactively elect this for past years (subject to rules) if gross receipts are under certain thresholds.
Additionally, if you prefer to take a tax credit for R&D expenses, that option is still available. Unfortunately, we can’t have the best of both worlds, so there is no double-dipping on expensing R&D and also claiming those same expenses for a credit. However, you can expense a portion and claim a portion for the credit. There is a lot of information available online on this, but feel free to contact us if you would like a review of your specific case.
4. Optimize Your Business Structure & Distributions
Re-evaluate your entity structure (C corp, S corp, partnership, or sole-proprietor) to ensure you’re minimizing self-employment taxes, taking prudent distribution strategies, and maximizing the Qualified Business Income (QBI / §199A) deduction. Under OBBBA, §199A is made permanent with some expanded thresholds.
5. Monitor Interest Expense Deductions
With OBBBA’s change to §163(j), depreciation, amortization, and depletion are excluded from the base used to compute allowable business interest deduction. That can allow more interest expense deduction for many businesses.
6. Track and Leverage Credits
Don’t ignore tax credits — they reduce your tax bill dollar-for-dollar. For 2025, look especially at:
- R&D credit
- Work Opportunity Tax Credit (for hiring from certain groups)
- Energy and clean technology credits (if your business invests in energy efficiency or renewable tech)
- Small Business Health Care Credit (if you provide insurance)
7. Plan Your Timing of Income & Expenses
Defer income or accelerate deductible expenses thoughtfully. For example, make necessary purchases just before year-end so they hit 2025. Delay revenue recognition into 2026 if it’s beneficial for your tax bracket.
8. Keep Meticulous Records & Substantiation
New law changes increase scrutiny. Keep invoices, contracts, logs (for home office, mileage), and documentation to support bonus depreciation, R&D expenses, credit claims, etc.
9. Use Qualified Small Business Stock (QSBS) Planning
If your business qualifies and you issue stock, the new OBBBA changes make QSBS more favorable: exemptions are higher, the pool of qualified small businesses is expanded, and holding periods for new stock may be shortened.
10. Revisit Estimated Taxes & Withholding
Because deductions and income levels may shift, update your estimated tax payments or withholding to avoid penalties or overpayment.
Below is a tax planning checklist to help you get started this planning season:
Final Thoughts
Tax planning for small businesses isn’t just about following the rules — it’s about using law changes to your benefit. In 2025, with the sweeping changes of OBBBA, owners who act proactively — timing purchases, leveraging bonus depreciation, R&D expensing, QSBS planning — can capture significant savings. And remember, this isn’t an all-inclusive list; there are many other opportunities for tax savings out there. These are just the most universal and applicable to many small business owners out there.
I’ll wrap up by reminding you to stay ahead: review your capital budget, revisit entity decisions, and talk with your CPA to get more information so your moves are strategic, not reactive.
– Brendan Tiedeman, CPA
