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.

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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.

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Below is a detailed breakdown of what changed and why it matters for 2025 and beyond.

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Qualified Business Income (QBI) Deduction Is Now Permanent

​The 20% QBI deduction no longer sunsets after 2025.

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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

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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.

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With the expanded window, more households keep the full 20% deduction even as profits rise. This rewards growth instead of penalizing it.

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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.

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Here is how the categories break down:

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Equipment

​Physical, tangible assets used in business operations. Examples include:

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• Machinery.

• Production equipment.

• Office equipment.

• Business use vehicles.

• Computer hardware such as laptops, desktops, monitors, and printers.

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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.

• Routers, switches, and firewalls.

• On premise data storage systems.

• Point-of-sale technology systems.

• Internal digital frameworks that power business operations.

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These systems are capital assets and may qualify for bonus depreciation when purchased outright.

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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.

• Internally developed software, which falls under R&D rules.

• Subscription based or cloud hosted software, which typically does not qualify for bonus depreciation unless it meets specific capitalization requirements.

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This clarity helps owners avoid misclassifying expenses and ensures accurate tax planning.

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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.

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This directly helps owners:

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• Smooth taxable income.

• Strengthen QBI positioning.

• Avoid unwanted net operating losses.

• Deduct equipment, technology, and certain software purchases more efficiently.

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Section 179 and 100% bonus depreciation now work together to create stronger year end planning options.

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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.

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Immediate expensing improves cash flow and encourages ongoing investment in technology, development, and business growth.

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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.

• Ongoing deductibility of PTET payments.

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This provides more flexibility for itemizing and lowers overall tax liability, especially for owners with significant state taxes or property taxes.

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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.

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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.​

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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.

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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.

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This assessment supports S-Corp owners, partnerships, professional service practices, and small business operators who want clarity and confident planning for 2025 and beyond.

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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.