A close-up of masculine hands signing an official document on a desk. A gavel, books, and glasses are on the desk in the background.
A close-up of masculine hands signing an official document on a desk. A gavel, books, and glasses are on the desk in the background.

Anticipated Impact of New Legislation on Business Finances

A look at how recent changes may impact lending, taxes, deductions, and more

There is nothing new about new legislation — every couple of years, business leaders grapple with changes in tax policy and the national budget. The recent passage of the current administration’s signature bill introduces several new policies, with some having more impact on running a business than others. Below, we detail a few of the items and their possible effects.

Business

Individual

Business

100% Bonus Depreciation Restored

Businesses can immediately expense qualifying assets placed in service after January 19, 2025, eliminating the previously scheduled phase-down.

Effect: Businesses can immediately write off the full cost of new equipment, which can reduce taxable income in the year of purchase.

Section 179 Expensing Cap Increased

Small businesses can expense up to $2.5 million in qualifying property, creating an expanded opportunity for heavy equipment operations to write off costs. The phase-out threshold also rises to $4 million, enabling more businesses to take full advantage of these deductions.

Effect: Small and mid-sized businesses will be able to expense even more equipment upfront, which may lower their near-term tax burden.

Interest Expense Deduction Enhanced

The new law reverts the business interest deduction to an EBITDA-based limit instead of EBIT — allowing many companies to deduct more interest on financed purchases.

Effect: Businesses can deduct more interest on financed equipment, which may improve after-tax cash flow and make borrowing more attractive while reducing the total cost of ownership.

R&D and R&E Expenditures

Permanently allows taxpayers to immediately deduct domestic research or experimental expenditures paid or incurred in tax years beginning after December 31, 2024. Taxpayers with annual gross revenue of $31MM or less are permitted to apply the change retroactively to 2022. Any foreign R&D expenditure must continue to be capitalized over 15 years.

Effect: Smaller businesses may experience tax benefits from retroactive deductions by amending prior returns. Larger businesses won’t experience retroactive benefits, but all businesses may experience increased tax benefits moving forward because they can fully deduct all domestic R&E expenses for tax years beginning 2025.

International Tax Provisions

Renames Global Intangible Low-Taxed Income (GILTI) to Net CFC Tested Income and establishes a 12.6% – 14.0% rate after foreign tax credit treatment. Renames Foreign-Derived Intangible Income (FDII) to Foreign-Derived Eligible Income (FDDEI) and establishes a 14% rate. Raises the BEAT rate to 10.5% and preserves the current policy on allowability of US tax credits under BEAT.

Effect: Multinational companies with foreign investments may experience an increase in taxes, and companies may find those taxes easier to calculate.

Individual

Standard and Local Tax (SALT) Deduction

The individual SALT deduction cap increases from $10,000 to $40,000 (for both individuals and joint filers) for 2025, followed by 1% yearly increases from 2026 – 2029. The deduction can be claimed for earners with less than $500,000 modified adjusted gross income (MAGI).

Effect: Taxpayers and homeowners in high tax states are expected to experience tax relief, as their SALT payments are more than likely to exceed $10K.

Auto Loan Interest Deduction

Any new vehicle for personal use that is assembled in the USA is eligible for up to $10,000 above the line deduction in interest paid.

Effect: Taxpayers who purchase new USA vehicles will experience tax relief on interest paid, regardless of itemized or standard deduction.

No Tax on Tips, No Tax on Overtime

Cash and credit card tips are excluded from taxable income for federal income tax. This provides a maximum deduction of $25,000 for qualified tips from 2025 – 2028. Overtime is also excluded from taxable income at a federal level, but with a lower cap of $12,500 in overtime pay.

Effect: Workers will be excluded from federal tax for $25,000 in tips, and excluded from federal tax for $12,500 in overtime pay. These wages are still subject to Social Security and Medicare taxes. These breaks can be claimed under the standard deduction, or they can be an itemized deduction.