Win for S-Corp Owners
A Major Long-Term Win for S-Corp Owners
The One Big Beautiful Bill Act (OBBBA) delivers one of the strongest sets of tax planning updates S-Corp owners have seen in years. These changes create more certainty, more room for strategic planning, and more opportunities to reduce taxable income across multiple categories.
Several benefits that were set to expire are now permanent. Others have been expanded so that owners can capture more deductions and strengthen long term financial positioning.
Below is a detailed breakdown of what changed and why it matters for 2025 and beyond.
Qualified Business Income (QBI) Deduction Is Now Permanent
The 20% QBI deduction no longer sunsets after 2025.
This update gives S-Corp owners a predictable long-term framework for compensation planning, reasonable salary decisions, and income optimization. It also creates meaningful multiyear savings, especially for owners with passthrough income above certain thresholds
More Owners Qualify for QBI Beginning in 2026
The income phase in window widens in 2026. Under the old rules, many S-Corp owners lost their QBI deduction once income exceeded prior limits.
With the expanded window, more households keep the full 20% deduction even as profits rise. This rewards growth instead of penalizing it.
100% Bonus Depreciation Is Restored, With Clearer Definitions
Bonus depreciation returns to 100%, meaning qualifying purchases can be fully expensed in year (1). OBBBA also clarifies distinctions that matter for compliance and tax planning.
Here is how the categories break down:
Equipment
Physical, tangible assets used in business operations. Examples include:
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Machinery.
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Production equipment.
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Office equipment.
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Business use vehicles.
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Computer hardware such as laptops, desktops, monitors, and printers.
Technology
The digital infrastructure and systems that support business operations. These are not the physical devices themselves. Examples include:
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Servers and networking equipment.
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Routers, switches, and firewalls.
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On premise data storage systems.
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Point-of-sale technology systems.
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Internal digital frameworks that power business operations.
These systems are capital assets and may qualify for bonus depreciation when purchased outright.
Software
Intangible digital tools that are purchased, licensed, or developed. The IRS distinguishes between:
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Purchased software that is capitalized and qualifies for 100% bonus depreciation.
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Internally developed software, which falls under R&D rules.
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Subscription based or cloud hosted software, which typically does not qualify for bonus depreciation unless it meets specific capitalization requirements.
This clarity helps owners avoid misclassifying expenses and ensures accurate tax planning.
Higher Section 179 Expensing Limits
Section 179 limits increase under OBBBA. Most S-Corps now have more room to expense qualifying purchases immediately rather than depreciate them over time.
This directly helps owners:
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Smooth taxable income.
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Strengthen QBI positioning.
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Avoid unwanted net operating losses.
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Deduct equipment, technology, and certain software purchases more efficiently.
Section 179 and 100% bonus depreciation now work together to create stronger year end planning options.
U.S.-Based Research and development (R&D) Becomes Immediately Deductible Again
Research and development costs, including internal software development and product innovation, no longer need to be amortized over 5 years.
Immediate expensing improves cash flow and encourages ongoing investment in technology, development, and business growth.
Higher State and Local Tax (SALT) Cap Plus Continued Pass-Through Entity Tax (PTET) Benefits
S-Corp owners in high tax states regain access to stronger federal deductions through:
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A higher SALT deduction cap.
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Ongoing deductibility of PTET payments.
This provides more flexibility for itemizing and lowers overall tax liability, especially for owners with significant state taxes or property taxes.
The Bottom Line for S-Corp Owners
OBBBA creates a stronger, more predictable long term tax environment. With permanent QBI rules, restored 100% bonus depreciation, expanded Section 179 limits, immediate R&D expensing, and enhanced SALT benefits, S-Corp owners gain more opportunities to plan early, stack deductions, and strengthen cash flow.
If you want help reviewing your numbers or mapping out your 2025 tax strategy, feel free to message me or reach out through Vulcan Tax. I will walk you through how these updates apply to your business so you can plan with confidence.
Strengthen Your S-Corp Tax Strategy Under the OBBBA
The updated OBBBA rules create significant long-term savings for S-Corp owners through permanent QBI rules, restored 100% bonus depreciation, higher Section 179 limits, and improved treatment for technology, equipment, and software investments.
A structured S-Corp tax planning review identifies opportunities to reduce taxable income, optimize payroll strategy, maximize asset expensing, and position your business for stronger multiyear savings.
This assessment supports S-Corp owners, partnerships, professional service practices, and small business operators who want clarity and confident planning for 2025 and beyond.
Provide your business details to assess QBI eligibility, evaluate equipment, technology, and software deductions, estimate 100% bonus depreciation impact, and identify planning opportunities created by the new OBBBA rules.
A concise review now can strengthen your tax position for the entire year.