LLC Tax Plan 2025

LLC Tax Planning 2025

A strategic roadmap for the 2025 fiscal landscape: Capitalizing on the "One Big Beautiful Bill Act" (OBBBA) while navigating state tax cliffs.

Executive Summary

The 2025 tax year marks a departure from the TCJA's restrictions. The OBBBA has restored 100% Bonus Depreciation (for assets bought after Jan 19) and immediate Domestic R&E Expensing. This offers massive liquidity for growth-focused LLCs.

However, the "set it and forget it" strategy is dead. State taxes are diverging (e.g., Washington's B&O hikes), and the "January Glitch" in depreciation rules requires precise timing of asset purchases.

The Stimulus

100% Expensing Restored: Bonus Depreciation is back to 100% (was phasing out). Section 179 limits raised to $2.5M.

The Glitch

January Gap: Assets bought Jan 1–19, 2025 get only 40% Bonus. Wait until Jan 20 to buy!

The Fix

R&E Expensing: Domestic R&D is fully deductible again. Retroactive relief available for 2022-2024.

Capital Asset Recovery (Depreciation)

The "January Glitch" Trap

The OBBBA's effective date is Jan 19, 2025. Assets placed in service before this date are stuck with the old 40% rate unless you use Section 179.

Section 179 (The Bridge)

  • Limit: $2.5 Million
  • Phase-out: Starts at $4 Million
  • Use Case: Assets bought Jan 1-19; Used assets; Heavy SUVs (>6,000 lbs).
  • Constraint: Cannot create a Net Operating Loss (NOL).

Bonus Depreciation (The Hammer)

  • Rate: 100% (Post-Jan 19)
  • Limit: None (Unlimited)
  • Use Case: Spending >$2.5M; Creating NOLs; Qualified Improvement Property (QIP).
  • Constraint: Must be placed in service after Jan 19, 2025.

R&E Expenditures (Section 174)

The "Tax on Innovation" is over for domestic activities.

Domestic R&E

100% Deductible in year incurred (2025+).
Retroactive Relief: Small businesses (<$31M gross receipts) can amend 2022-2024 returns to claim refunds.

Foreign R&E

Capitalize & Amortize over 15 years.
Strategy: Move engineering teams to the US to unlock immediate deductions.

Retirement Planning 2025

Limits have increased. Solo 401(k) remains the superior choice for owner-only LLCs.
Plan Employee Limit Total Limit (Under 50) Key Advantage
Solo 401(k) $23,500 $70,000 High contribution at lower income levels. Roth option.
SEP IRA $0 (Employer Only) $70,000 Easy setup. Deadline is tax filing date.

State Tax Traps (Washington B&O)

Federal deductions do not apply to Gross Receipts Taxes.

Rate Hikes (Oct 2025)

Service business rate increases to 2.1% for gross income >$5M.

Impact: A low-margin business could pay more in B&O tax than it makes in profit.

No Deductions

You cannot deduct Bonus Depreciation, Wages, or Rent from B&O tax base.

Interactive: 2025 Deduction Maximizer

Input your capital expenditure plans to optimize your depreciation strategy and estimate tax savings.

Expenditure Details

Critical for Bonus Dep rate.

Strategy & Savings

Recommended Strategy --
Total Year 1 Deduction $0
Est. Tax Savings (37% rate) $0