Tax law saw major changes in 2025. As the year ends, what should you know?

Andrew Seifert

Nov 06, 2025

5 min read

July’s One Big Beautiful Bill (OBBB) Act rewrote U.S. tax law in significant ways. What key 2025 tax changes should businesses and individuals be aware of as we head toward the end of the year?

Keep reading for a short rundown on 10 major updates, plus links to our more detailed articles on each.

10 essential tax rules introduced, eliminated or updated in 2025

The One Big Beautiful Bill Act introduced changes to tax rules that directly affect how businesses, organizations and individuals operate. These include the return of 100% bonus depreciation, adjustments to R&D expensing and the phaseout of clean energy incentives, as well as new lifetime gift exemption and state and location tax (SALT) deduction rules.

Here are 10 essential changes to know:

1. 100% bonus depreciation is back

100% bonus depreciation is a tax provision that gives personal property purchasers the option to take a deduction that equals 100% of the cost of certain qualified business property. This deduction is taken in the year of purchase, so you can reduce your tax burden the same year you purchase the property.

Bonus depreciation had originally begun phasing out in 2023 and was scheduled to end entirely after 2027. However, it is now a permanent part of the tax code.

2. New tax incentive introduced for qualified production property

A new tax incentive introduced in 2025 essentially expands bonus depreciation rules to also include what’s called qualified production property (QPP). Defined as real property that is integral to performing a qualified production activity, eligible QPP can now also be deducted fully in the year of purchase.

The QPP rule is aimed specifically at boosting domestic manufacturing by allowing manufacturers to deduct more of their essential expenses.

3. Clean energy incentives largely eliminated

The OBBB eliminated major clean energy incentives, including several introduced under the Inflation Reduction Act in 2022. Tax credits used to promote wind and solar power are now phasing out for projects that don’t begin construction by July 4, 2026, although projects that start after that date may still qualify if they enter service by December 31, 2027.

The bill also ended significant individual clean vehicle and home energy credits and will phase out certain other commercial energy incentives like Section 179D in 2026. However, incentives for geothermal energy were largely unaffected.

4. GILTI became NCTI, with new tweaks

Global intangible low-taxed income (GILTI) was renamed net-CFC tested income (NCTI). Beyond the name change, adjustments to the NCTI rules have created a global effective tax rate of 12%-13% for foreign income earned by U.S. corporations.

This change and other key changes, including updates to base erosion and anti-abuse tax (BEAT) rules and foreign derived intangible income (FDII), are largely seen as taxpayer-friendly, but of course are dependent on specific taxpayer circumstances

5. Opportunity zones made permanent

Originally set to expire in 2026, the opportunity zones program is now permanent. Changes to the law include a five-year rolling deferral for capital gains invested after December 31, 2026, along with stricter eligibility and reporting requirements.

And beginning next July, state governors will propose new opportunity zones, which will last 10 years. This decade-long time frame will allow for greater stability and should increase confidence in opportunity zone projects.

6. Domestic R&D expenses now immediately deductible

Section 174 now allows companies to fully deduct domestic research and development (R&D) expenses immediately. This change from previous rules is permanent, although companies also have the option to capitalize and amortize R&E expenditures over a period of at least 60 months.

Additional changes also allow eligible businesses to deduct certain past domestic R&D costs and establish specific retroactive deduction rules for small businesses that have average annual gross receipts of $31 million or less. However, foreign R&D expenditures must continue to be capitalized and amortized over 15 years.

7. New deductions for overtime and tips

From 2025 through 2028, employees may now deduct up to $12,500 (single) or $25,000(married filing jointly) in tips and overtime pay from their income. From an employer perspective, this income is still subject to all normal federal, state and local withholdings, including Social Security and Medicare taxes.

Employers should consider how this adjustment can help with employee job satisfaction by assessing their current pay structures to see whether actions like shifting more tips to a voluntary rather than automatic basis would help employees claim larger deductions and keep more money.

8. Higher lifetime gift exemption limit

Beginning on January 1, 2026, the lifetime gift exemption limit increases to $15 million for individuals and $30 million for married couples. The exemption will also now increase every year to account for inflation.

This is a significant estate planning opportunity that will allow individuals and families to give or transfer wealth more thoughtfully and strategically. Consider assessing your existing estate planning in light of this new development.

9. State and local tax deduction cap quadrupled — temporarily

For taxpayers making under $500,000, the SALT deduction cap has increased from $10,000 to $40,000 a year, with annual 1% adjustments. However, this change phases out after the 2029 tax year, with the cap resetting to $10,000 in 2030.

While temporary, the higher SALT cap still provides significant relief for certain taxpayers, especially those living in higher-tax areas.

10. Adjusted qualified small business stock requirements

Finally, the OBBB modified rules for holders of Section 1202 qualified small business stock (QSBS). Starting in 2026, the per shareholder minimum gain exclusion rises to $15 million (from $10 million before), with annual adjustments for inflation.

Additional changes include new holding period rules and an increase in the aggregate gross asset threshold from $50 to $75 million (also adjusted for inflation annually).

What about the tariffs?

For much of the business community, 2025 has also been the year of the tariff. The Trump administration’s aggressive tariff policy has created cost hikes and planning or logistical problems for manufacturers, distributors, retailers and other businesses that rely on importing or exporting materials and goods.

There is significant uncertainty around tariffs, both because the administration itself wields tariffs unpredictably and due to ongoing legal challenges. More than ever, it’s essential that business leaders understand their supply chains and put systems in place to accurately track sourcing and maintain visibility over potential tariff impacts.

What should you do next?

If you haven’t yet, consult with your tax advisor about how 2025’s sweeping tax changes could affect your business or personal finances. You should also be aware that the IRS plans to continue issuing guidance around some of these changes through June 30, 2026, so in some situations, additional clarification or nuances may be forthcoming.

Wipfli advises businesses and individuals on how to navigate changing tax rules and maximize their benefits. Ask us to assess your current tax strategy and help you establish more favorable positioning moving forward. Start a conversation.