Tax Reform 2025: Breaking Ground on Better Business

by | Jan 28, 2025

Let’s talk about what’s ahead for your business. With significant tax changes both confirmed and proposed for 2025 and beyond, you’re likely wondering how to position your company for success. Whether you’re in manufacturing, distribution, construction, or real estate, these changes will affect your business plan. As partners invested in your business success, Rea wants to help you navigate these changes confidently. 

What’s Changing Right Now 

First, let’s address the immediate changes affecting your business. If you’re planning any major equipment purchases or real estate improvements, you’ll want to pay close attention to the bonus depreciation phase-down. While we can still claim 60 percent bonus depreciation in 2024, this benefit decreases to 40 percent in 2025 and 20 percent in 2026. The good news? Section 179 expensing remains strong with a $1,220,000 deduction limit for 2024, offering another valuable tool for managing your capital investments and property improvements. This includes certain business vehicle deductions like heavy SUVs, cargo vans, and other qualified vehicles used primarily for business purposes.  

For our manufacturing clients, the current draft of form 6765 Credit for Increasing Research and Activities includes significant changes from previous years. Requiring enhanced qualitative and quantitative business components, research activities, and qualified expenditures. Despite these added reporting requirements, Research & Development (R&D) tax credits are still available and can provide substantial benefits when properly documented.  

Construction and real estate developers should note that the treatment of qualified improvement property (QIP) continues to provide opportunities for accelerated depreciation, making renovations and improvements more financially attractive. 

Distribution companies should pay attention to inventory-related tax provisions. The uniform capitalization (UNICAP) rules continue to evolve, potentially affecting how you account for storage and handling costs. Additionally, last-in, first-out (LIFO) inventory methods may need review as supply chain dynamics shift. 

Looking Ahead: Proposed Changes That Could Impact Your Business 

President Trump has proposed several business-focused initiatives that could significantly affect your planning. Most notably, there’s a proposed 15 percent corporate tax rate specifically for companies operating domestically. This could substantially impact decisions about facility locations, development projects, and supply chain structure. 

For real estate investors and developers, proposed changes to like-kind exchanges and opportunity zones could reshape investment strategies. Construction companies should watch for infrastructure initiatives that might create new project opportunities while affecting labor and material costs. 

Distribution businesses should prepare for significant tax policy shifts affecting their operations. A possible return to 100 percent bonus depreciation could accelerate fleet modernization, while renewable fuel incentives may reshape fleet planning. The proposed increase in tariffs on imported vehicle parts and potential changes to estate tax exemptions could affect both immediate operations and succession planning. Additionally, proposed modifications to state nexus rules could affect multi-state distribution operations. 

Think about your current business footprint. Are you positioned to take advantage of domestic incentives? Would your development pipeline or supply chain need restructuring under the proposed changes? These are conversations worth having with your Rea advisory team now, rather than reacting to changes after they’re implemented. 

Energy and Sustainability: Opportunities You Might Be Missing 

Here’s something many businesses overlook: the Advanced Energy Project Credit and Clean Energy Manufacturing Credits can provide up to 30 percent of qualified investment costs. Whether you’re considering facility upgrades, implementing energy-efficient systems, or exploring renewable energy components, these incentives could significantly impact your bottom line. 

For construction and real estate developers, green building incentives and energy-efficient building credits offer more opportunities to enhance project value while reducing tax liability. Distribution companies can benefit from credits for electric delivery vehicles and energy-efficient warehouse systems. 

Planning for 2025 and Beyond 

We’re particularly focused on helping our clients prepare for 2025, when many Tax Cuts and Jobs Act provisions expire. If you’re operating as a pass-through entity, these changes could significantly impact your tax situation. Now is the time to start thinking about potential business structure adjustments and succession planning strategies. 

Your Next Steps 

Rather than giving you an overwhelming checklist, let’s focus on three key areas: 

  • Capital Planning: Review your equipment investment timeline and property improvement plans. With changing depreciation rules, timing these investments strategically could save you significantly. 
  • Documentation: Whether for R&D activities, energy credits, or construction costs, proper documentation is crucial. We can help you establish systems to track and document these expenses effectively. 
  • Strategic Positioning: Consider how your business structure and operations align with proposed changes. This might include reviewing your locations, development projects, supply chain relationships, and energy efficiency initiatives. 

Stay Informed Without Getting Overwhelmed 

Tax law changes can seem overwhelming, but you don’t have to navigate them alone. For deeper dives into specific areas: 

Visit manufacturing.gov for comprehensive manufacturing policy updates. Explore IRS.gov for detailed tax guidance. Connect with your state business associations for local opportunities. Visit NAR.realtor for real estate specific guidance and try Construction Management Association of America for construction industry updates. For the latest news and information on distribution and logistics, check WERC.org. 

Let’s Talk About Your Specific Situation 

Every business is unique, and what works for one might not work for another. Rea is here to help you develop strategies tailored to your specific circumstances. Whether you’re concerned about immediate tax planning, long-term strategy, or specific proposals that could affect your business, let’s have a conversation. 

Contact our Rea industry team for a personalized discussion about your business’s future. Together, we can turn these changes into opportunities for growth and success. 

Staying informed doesn’t mean you need to become a tax expert – that’s what we’re here for. Our goal is to help you understand what matters most for your business while providing the experience to handle the complexities. 

By Kaitlyn Robison (Cleveland Office)

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