Key 2025 Tax Updates for Small Businesses and How to Prepare

Small business owners in West Virginia, Ohio, and across the U.S. are gearing up for the 2025 tax filing season (due April 15, 2026). The big story? The One Big Beautiful Bill Act (signed July 4, 2025) delivered sweeping 2025 tax updates and business-friendly reforms that make many pro-growth provisions permanent while introducing powerful new incentives. At Cowdery Tax and Business Solutions, we’re helping our clients throughout the Mid-Ohio Valley and beyond turn these changes into real tax savings and cash flow advantages.

This post highlights the most impactful 2025 tax updates for small businesses (especially pass-through entities like LLCs, S-Corps, and sole proprietorships), explains what they mean for you, and shares actionable steps to maximize benefits when filing your 2025 return.

Discover these important 2025 tax updates for Small Businesses

Permanent Extension of the 20% Qualified Business Income (QBI) Deduction

One of the biggest wins for small businesses is the permanent extension of the 20% Qualified Business Income (QBI) deduction under Section 199A. This deduction — which was set to expire after 2025 — allows eligible pass-through owners to deduct up to 20% of their qualified business income directly from taxable income.

Key details for 2025:

• Applies to most small businesses (sole proprietors, partnerships, S-Corps).
• Phase-out rules remain for higher-income owners (starting around $191,950 single/$383,900 married filing jointly, adjusted for inflation).
• The new law also adds enhancements, such as a minimum $400 deduction floor for those with at least $1,000 in QBI.

Real-World Example: A married couple in Akron, OH, running a consulting firm with $150,000 in qualified business income could deduct $30,000 (20%), significantly lowering their taxable income and tax bill compared to if the provision had expired. This permanence gives small business owners the certainty needed for long-term planning, hiring, and investment.

Restored & Permanent 100% Bonus Depreciation

The Act permanently reinstates 100% bonus depreciation for qualified property placed in service after January 19, 2025. This allows businesses to immediately deduct the full cost of eligible assets (machinery, equipment, vehicles over 6,000 lbs GVWR, off-the-shelf software, and more) rather than depreciating over years.

Additionally:

• New 100% bonus depreciation applies to qualified production property (certain nonresidential real estate used in manufacturing).
• Combines powerfully with the expanded Section 179 deduction (limit increased to $2.5 million, phase-out starting at $4 million in purchases).

Real-World Example:

A Huntington, WV, retailer purchases $300,000 in new store fixtures and equipment in 2025 — they can deduct the full amount immediately, reducing taxable income and freeing up cash for growth. This is a game-changer for businesses planning capital investments.

Immediate Expensing for Domestic R&D Costs (Plus Retroactive Relief)

The law reverses the 2022 requirement to amortize domestic research and experimental (R&D) expenses over 5 years. For 2025 and beyond:

• Businesses can immediately deduct qualifying U.S.-based R&D costs (including software development).
• Small businesses (average gross receipts ≤ $31 million over prior 3 years) can elect retroactive application back to 2022, allowing amended returns for 2022–2024 to claim previously capitalized amounts.

This benefits tech, manufacturing, and innovation-driven businesses, potentially unlocking thousands in refunds via amended filings.Expanded Section 179 Expensing LimitsSection 179 limits doubled for 2025:

• Maximum deduction: $2.5 million (up from $1.25 million).
• Phase-out threshold: $4 million in total purchases (benefit phases out dollar-for-dollar above this, fully gone at $6.5 million).

This targets small and mid-sized businesses investing in equipment, vehicles, and improvements — perfect for local WV and OH retailers, contractors, and service providers.

Other Notable Business-Friendly Tax Updates

• Employer-Provided Childcare Credit Expansion — Starts in 2026 but plan ahead: Maximum credit rises to $500,000 ($600,000 for small businesses), with higher credit rates.
• Interest Deduction Relief — Returns to EBITDA-based limit (more favorable than post-2021 EBIT rule).
• Qualified Small Business Stock (QSBS) Enhancements — Tiered gain exclusions for stock acquired after July 4, 2025, encouraging investment in startups.

Practical Steps to Prepare for Your 2025 Small Business Tax Filing

With these tax updates, proactive planning is key:

• Review & Accelerate Purchases
  • If planning equipment or R&D investments, prioritize 2025 placements to capture 100% bonus depreciation and expanded Section 179.Evaluate Retroactive R&D Relief
• Small businesses should analyze 2022–2024 R&D costs for potential amended returns — this could yield significant refunds.Optimize QBI & Deductions
• Run projections to maximize the 20% QBI deduction; ensure proper entity classification and income tracking.
• Gather Records Early
  • Collect receipts, invoices, asset purchase docs, and R&D expense details. Use tools like QuickBooks for clean categorization.Check State Impacts
  • West Virginia and Ohio generally conform to federal changes, but confirm local rules (e.g., sales tax on equipment).
  • Our team can align federal and state filings.
• Consider Year-End Strategies
  • Accelerate deductible expenses, defer income where possible, and review withholding/estimated payments to avoid surprises.

Why Partner with Cowdery Tax and Business Solutions?

These sweeping tax updates — from permanent QBI and bonus depreciation to retroactive R&D relief — offer huge opportunities but require careful navigation. At Cowdery Tax and Business Solutions, we specialize in small business tax planning for WV and OH clients. We help identify every new incentive, file amendments if beneficial, and ensure compliance so you keep more of your hard-earned profits.

Wherever you’re located in the Mid-Ohio Valley, we’re here to turn 2025’s tax reforms into real savings. Schedule your free 2025 tax review today at cowderytax.com or call our Marietta office. Let’s make 2026 the year your business thrives!

This information is not intended as legal or tax advice. Cowdery Tax and its representatives does not offer legal or tax advice. We offer services for business bookkeeping, payroll, tax payments, and personal tax filings. We share information that is publicly available. Tax laws may change with or without notice that may alter or change the information contained in this publication.