We don’t expect you to read and digest a 900-page federal tax bill.

That’s our job.

A sweeping new law was signed into effect on July 4th, and we’ve gone through the fine print to highlight what matters most to our clients – the franchisees, startup founders, and business owners building from the ground up.

This bill brings some of the biggest updates we’ve seen in years. It makes some rules permanent, revives tax-saving opportunities that were previously lost, and introduces new ways to reduce your tax burden and keep more cash in the business.

Let’s walk through the key changes of the new tax law for franchisees and what they mean for your operations, your investments, and your future plans.

 

The 20 Percent Deduction for Pass-Through Businesses Is Here to Stay

If your business is an S corporation, LLC, or partnership, your profits are taxed on your personal return, this is what’s called “pass-through” income.

Since 2018, qualifying business owners have been able to deduct 20 percent of that income before calculating federal income tax. This is known as the Qualified Business Income (QBI) deduction.

This deduction was scheduled to disappear after 2025. The new law makes it permanent.

What this means for you:

You can continue to plan around this 20 percent deduction indefinitely. Whether you’re drawing profits from your business now or projecting future income, this offers major long-term savings. If you’re considering switching your entity type or adjusting how you pay yourself, this change may impact that decision too.

 

You Can Fully Deduct Equipment and Build-Out Costs Again

If you’ve been holding off on big upgrades or opening a new location, here’s some good news. Starting in January 2025, you will be allowed to deduct 100 percent of the cost of new equipment, furniture, and certain improvements the same year they’re placed into service.

This is often called bonus depreciation, and it used to be the norm. But it had started phasing out, and businesses were being forced to spread deductions out over several years again. This law brings it back permanently for property acquired after January 20, 2025.

What this means for you:

If you’re building out a franchise unit, buying new commercial ovens or fryers, installing POS systems, or upgrading your signage, you can now deduct the full cost right away instead of waiting years. That means a lower tax bill in the same year you’re spending money.

 

Section 179 Expensing Just Got a Boost

Section 179 is another way to write off equipment purchases quickly, especially for smaller businesses. Unlike bonus depreciation, which applies to nearly all qualifying property, Section 179 has a cap on how much you can deduct and starts to phase out if your purchases get too large.

The new law increases both the dollar limit and the phase-out threshold.

What this means for you:

If you’re outfitting a location, buying software, or leasing equipment, and you’re not spending millions, Section 179 gives you a simple way to deduct those costs right away. It’s also easier to use on some leased or used assets, depending on your situation.

 

You Can Deduct Research and Development Costs Again (and Go Back for More)

Previously, if your business had research or development expenses – whether that meant custom software development, process improvement, or technical innovation – you had to spread those costs out over five years.

This rule is now reversed for domestic R&D costs starting in 2025. Even better, the law allows businesses to amend prior-year tax returns to claim deductions that were previously deferred.

What this means for you:

If you’ve invested in anything that made your systems better, faster, or more efficient, like designing a proprietary inventory system or working with developers on a client-facing app, this might qualify. We can help you look back at past expenses and potentially unlock refunds.

 

Interest Deductions Will Be Easier for Debt-Financed Growth

If you’ve used loans or lines of credit to expand your business, you’ve probably been limited in how much interest you could deduct.

The rules previously used an EBIT formula, that means earnings before interest and taxes. The new law switches this back to EBITDA, which includes depreciation and amortization in the calculation.

What this means for you:

Your business will likely be able to deduct more interest, especially if you’ve made big capital investments in real estate, vehicles, or equipment that generate depreciation. This is a direct benefit if you’re financing growth through debt.

 

Qualified Small Business Stock (QSBS) Has New and Improved Terms

QSBS is a tax incentive that allows startup founders and early investors to sell shares tax-free if they meet certain conditions. This law improves those conditions significantly.

Here’s what’s changed:

• If you hold the stock for 3 years, you can exclude 50 percent of the gain
• Hold it for 4 years and exclude 75 percent
• Hold it for 5 years and exclude 100 percent
• The total gain you can exclude is now $15 million
• Businesses with assets under $75 million can now qualify

 

What this means for you:

If you’re building something big and aiming for an eventual sale, whether that’s franchising your concept or raising outside capital, this gives you more tax protection on the exit. It also makes you more attractive to early investors.

 

A Few Other Business Changes Worth Noting

• Excess business loss limitations are now permanent, but will adjust for inflation. This rule limits how much you can write off in business losses if your personal income is high
• Pass-through entity tax (PTET) elections are preserved. This strategy is still available in states that allow it, and can help you work around the SALT deduction cap
• Opportunity Zones will now follow a continuous 10-year designation schedule starting in 2027. If you’re investing in OZ locations, this brings more long-term clarity

 

A Quick Note on Individual Tax Changes

While the law focuses heavily on businesses, here are a few changes that may apply to your personal taxes:

• The current tax brackets and standard deductions are now permanent
• The estate and gift tax exemption is increased to $15 million per person
• A new $6,000 deduction for seniors over age 65 will be introduced
• The child tax credit will rise to $2,200 per child in 2026
• New temporary deductions for tips, overtime pay, and auto loan interest may apply in 2025 through 2028
• A new retirement account for children allows up to $5,000 per year in contributions, with a one-time $1,000 government match for eligible newborns
• Many clean energy tax credits will begin to phase out starting in 2026

 

What to Do Next

This new law gives growing business owners more options, more certainty, and more ways to reduce their tax burden… especially if you’re expanding, upgrading, or investing in your own success.

Now is the time to revisit:

• How your business is structured
• Whether your recent investments qualify for immediate deductions
• Missed opportunities for R&D deductions
• Plans for financing, growth, or exit

 

We’re here to help you make sense of it and apply it to your business. 

If you want to walk through what this means for your situation, get in touch with our team at Specialized Accounting Services.

You can get in touch with us in just a few minutes by filling in our form here. We’ll respond to you as soon as possible.

Let’s make a plan that helps you keep more of what you earn, and use the new rules to your advantage.

Until next time!