2025 is shaping up to be one of the most significant tax years for U.S. corporations in recent memory. Several major provisions from the 2017 Tax Cuts and Jobs Act (TCJA) are set to expire, while new regulations and enforcement priorities from the Internal Revenue Service (IRS) are beginning to take hold. Together, these changes could reshape how businesses plan, invest, and report income across the country.
For many companies, the combination of expiring tax incentives, tighter deduction limits, and evolving audit protocols will increase both their effective tax rates and administrative complexity. Even businesses with strong accounting systems may see cash flow impacts if they don’t prepare early.
From bonus depreciation phase-outs to renewed alternative minimum tax (AMT) rules, understanding what’s ahead is crucial for strategic planning. In this guide, we’ll break down the most important U.S. corporate tax changes, explain who’s most affected, and share practical steps to help your business stay ready before year-end.
TL;DR – 30-Second Summary
Several major U.S. corporate tax changes are on the horizon as temporary provisions from the 2017 Tax Cuts and Jobs Act begin to expire. Businesses can expect tighter deduction limits, reduced bonus depreciation, and increased IRS enforcement activity.
Key updates include potential shifts to the federal corporate tax rate, new applications of the corporate alternative minimum tax (CAMT), and more scrutiny on interest deductions under Section 163(j). With the IRS expanding its audit capacity and data-driven review tools, maintaining accurate records and proactive tax planning will be essential.
Companies that prepare now—by reviewing entity structures, cash flow impacts, and capital investment timing
Why 2025 Marks a Turning Point for U.S. Corporations
1. Corporate Tax Rate and AMT Outlook
Potential Rate Adjustments Under Review
The federal corporate tax rate remains at 21% following the Tax Cuts and Jobs Act of 2017. However, new fiscal proposals have reignited debate around possible changes.
Some policymakers, including President Trump and several Republican lawmakers, continue to push for a lower rate—potentially 20% or even 15%—to strengthen U.S. competitiveness. Others argue for raising the rate to 28% or introducing targeted surcharges on large corporations to improve fiscal balance and tax progressively.
Meanwhile, state-level reforms are also in motion. Several states are shifting to flat corporate tax systems, expanding their bases, or modifying long-standing business exemptions. For multistate corporations, these state-level adjustments could amplify or offset federal changes, making it essential to track both federal and local developments closely.
Corporate Alternative Minimum Tax (CAMT)
The corporate alternative minimum tax (CAMT) imposes a 15% minimum tax on large corporations’ adjusted financial statement income (AFSI). Introduced under the 2023 Inflation Reduction Act, the rule ensures that highly profitable corporations pay a baseline level of tax, regardless of credits or deductions.
In 2025, new IRS interim guidance has broadened the scope of CAMT compliance. The updates clarify how the rules apply to consolidated groups, book-tax differences, bankruptcies, and deferred-tax items—areas where prior ambiguity created uncertainty for corporate tax departments.
CAMT specifically targets companies that report substantial book profits to shareholders yet pay little federal tax due to aggressive tax planning or credits. The rule effectively limits how much large corporations can offset their federal liability through timing or accounting strategies.
Who’s Most Affected
CAMT applies primarily to corporations with average annual profits exceeding $1 billion—a threshold met by roughly 100 of the largest U.S. companies. Businesses with significant deferred-tax adjustments, large book-tax differences, or substantial tax-credit usage are the most exposed.
According to Treasury estimates, about 60% of CAMT payers previously had effective federal tax rates below 1%, while roughly a quarter paid no federal tax at all. For these corporations, the expanded enforcement framework represents a major shift.
Every large corporation should re-evaluate its tax planning strategy for 2025, considering both statutory rates and book-based tax adjustments under CAMT. Coordinating federal and state compliance reviews early in the fiscal year can prevent costly mismatches and unexpected exposures.
2. Bonus Depreciation and Equipment Write-Offs
Expiration of 100% Bonus Depreciation
Congress has permanently reinstated 100 percent bonus depreciation as of January 20, 2025, removing the phase-out that was previously scheduled under earlier law. The One Big Beautiful Bill Act (2025) repealed the planned reductions that would have lowered bonus depreciation to 40 percent in 2025 and 20 percent in 2026 before elimination.
For qualifying property placed in service after January 19, 2025, businesses can now fully expense the entire cost in the first year rather than depreciating it over time. The rule applies to both new and used assets with a recovery period of 20 years or less, including machinery, software, and certain building improvements.
This permanent change offers a significant planning opportunity for companies considering large purchases or upgrades in 2025.
Section 179 Expensing Thresholds
For 2025, the Section 179 deduction limit increases to $2.5 million, with a phase-out beginning once total asset purchases exceed $4 million for the year. Both thresholds are indexed for inflation, meaning the 2026 limits are expected to rise to $2.56 million and $4.09 million respectively.
Section 179 expensing remains particularly beneficial for small and mid-size businesses investing moderately in equipment or technology. It can also be combined with bonus depreciation, allowing businesses to deduct the maximum amount in the year assets are placed in service.
Strategic Planning Tips
Businesses should revisit capital-spending plans to take advantage of the restored 100 percent bonus depreciation and expanded Section 179 limits. Together, these provisions create an opportunity to accelerate deductions and improve after-tax cash flow.
When deciding between leasing and buying, consider both the short-term liquidity benefits of leasing and the full deduction potential of purchasing. Lease-versus-buy models can help determine which approach better aligns with your company’s budget and growth goals.
Time large equipment purchases after January 19, 2025, to qualify for immediate expensing, and coordinate purchases around the Section 179 thresholds to capture maximum federal tax benefits while maintaining healthy cash flow.
Aligning purchasing strategy with these updated expensing rules can help businesses strengthen their financial position through 2025 and beyond.
3. Business-Interest Deduction Limits
Section 163(j) EBITDA vs. EBIT Shift
Congress has reversed course on the scheduled tightening of Section 163(j). Starting in 2025, businesses will continue calculating deductible interest based on 30 percent of EBITDA rather than the more restrictive EBIT measure.
Section 163(j) limits the amount of business interest that can be deducted each year to 30 percent of adjusted taxable income (ATI). Under prior law, this limit was scheduled to shift from EBITDA to EBIT beginning in 2025, which would have excluded depreciation and amortization from the calculation. For capital-intensive businesses, this change would have significantly reduced allowable deductions and constrained after-tax cash flow.
The One Big Beautiful Bill Act (2025) eliminates that shift. Maintaining the EBITDA benchmark preserves greater interest deductibility, supports stronger cash-flow management, and enables more tax-efficient leverage for large, asset-heavy companies.
S-Corporation and Partnership Impact
Section 163(j) applies to S-corporations and partnerships at the entity level, capping deductible interest at 30 percent of EBITDA in line with corporate entities.
For partnerships, any business interest disallowed at the entity level is passed through to partners, who may carry it forward to offset future income. S-corporations also carry forward disallowed interest but retain it at the corporate level.
These rules mean that pass-through entities cannot avoid limitation under Section 163(j). Strategic borrowing and capitalization decisions remain essential for maintaining a tax-efficient structure and ensuring future deductibility.
What Businesses Can Do Now
Businesses should update their tax models using the 30 percent of EBITDA standard to improve forecasting around financing costs and leverage. Projecting interest expense under these updated rules allows management to assess how new borrowing or capital investment decisions will affect after-tax profitability.
Capital-intensive companies should review planned expansions or acquisitions that increase depreciation and amortization, since these expenses continue to boost ATI and expand the interest-deduction base.
Partnerships and S-corps may also consider restructuring to improve utilization of disallowed interest carryforwards or electing real property trade or business status if the long-term benefits outweigh the costs. Maintaining detailed ATI schedules and tracking multi-year carryforwards is critical to maximizing future deduction potential.
Overall, this legislative reversal provides welcome relief for leveraged and asset-heavy businesses heading into 2025, but ongoing scenario modeling and proactive tax review remain essential to sustain compliance and optimize financial outcomes.
IRS Enforcement and Audit Expansion
AI-Driven Audit Selection
The IRS has begun deploying advanced artificial intelligence and data analytics tools to enhance audit selection for the 2025 tax year. These systems analyze millions of data points to flag returns with unusual deductions, income mismatches, or missing documentation.
Machine learning models can now detect patterns linked to potential underreporting or high-risk claims, such as large charitable deductions, inconsistent payroll filings, or discrepancies in digital asset reporting, including cryptocurrency transactions.
The agency has also expanded its data science division, hiring new analysts and engineers to refine case selection and improve audit precision. As a result, businesses can expect a higher likelihood of being flagged based on statistical accuracy rather than random sampling.
Priority Areas for 2025
Audit activity in 2025 will center around several high-impact areas:
- Large partnerships: especially those in real estate, law, and investment sectors, where entity complexity and layered ownership often create reporting challenges.
- Payroll tax compliance: with increased scrutiny of worker classification, remittance timing, and withholding accuracy.
- Employee Retention Credit (ERC) claims: ongoing reviews for high-value or questionable submissions, particularly those filed through third-party promoters.
- Cryptocurrency and offshore accounts: enhanced tracking of wallets, exchanges, and undeclared income streams tied to digital assets or foreign jurisdictions.
These focus areas reflect the IRS’s effort to balance enforcement resources with the areas of greatest potential noncompliance.
How to Stay Prepared
Businesses should invest in strong digital recordkeeping systems to ensure all transaction data, payroll reports, and supporting documentation are securely maintained. Receipts, contracts, invoices, and wage statements should be stored with clear dates and descriptions for fast retrieval in the event of an audit.
Regular internal or external compliance reviews are equally important. Conducting pre-filing checkups with tax advisors helps identify potential red flags, verify deduction eligibility, and confirm reporting accuracy before submission.
Keeping up with current IRS guidance and common audit triggers allows management to respond swiftly and credibly if contacted. In an era of AI-driven audits, proactive organization and transparency are key to minimizing disruption and demonstrating good-faith compliance.
Expiring Credits and Deductions to Watch
R&D Credit, Energy Incentives, and Domestic Production Activities
Several key federal tax incentives are scheduled to expire or change by the end of 2025, including significant provisions that affect research, energy, and production.
The federal research and development (R&D) tax credit remains available, but lawmakers continue to debate revisions to its eligibility criteria and qualification standards. While an outright sunset has not been confirmed, potential restrictions or enhancements could reshape how businesses claim the credit after 2025.
Multiple energy-related credits are also nearing expiration:
- Energy Efficient Home Improvement Credit (Section 25C): ends December 31, 2025.
- Residential Clean Energy Credit (Section 25D): ends December 31, 2025.
- Clean Vehicle Credits (Sections 30D and 25E): end for vehicles acquired after September 30, 2025.
- Energy Efficient Commercial Building Deduction (Section 179D) and New Energy Efficient Home Credit (Section 45L): phase out for projects starting after June 30, 2026.
Domestic production activity deductions, once a major incentive for U.S.-based manufacturing, remain unrenewed and will terminate unless Congress acts to reinstate them later in the year.
Payroll-Related Provisions
Pandemic-era payroll relief measures—including enhanced family leave credits, the employee retention credit (ERC), and paid sick leave programs—have either expired or are set to conclude by the end of 2025.
Businesses that previously claimed the ERC should continue monitoring amended returns and audit notices, as the IRS maintains an active focus on identifying and recapturing ineligible credits.
Maintaining proper documentation and reviewing eligibility with a tax advisor before filing any adjustments can prevent costly penalties and delays.
Monitoring Congressional Updates
With multiple incentives nearing expiration, businesses should keep a close eye on Congressional activity throughout late 2025. Tax packages often evolve rapidly in year-end negotiations, meaning new credits or extensions can appear in final legislation with little notice.
To stay ahead, companies should subscribe to IRS update bulletins, follow reputable tax publications, and consult advisors regularly to assess credit availability before year-end deadlines.
Remaining informed on these shifting provisions ensures that businesses don’t miss valuable deductions and can adapt quickly to any new laws affecting 2025 and 2026 returns.
Year-End Planning Strategies for 2025
Re-evaluate Entity Structures
Effective year-end planning begins with a careful review of your business’s legal and tax structure. Each entity type—C-corporation, S-corporation, and limited liability company (LLC)—offers distinct benefits and trade-offs under the latest 2025 U.S. corporate tax changes.
C-Corporations: With the 21 percent corporate tax rate remaining in place and 100 percent bonus depreciation reinstated, C-corps may benefit from reinvesting earnings and accelerating capital purchases. However, shareholders should still weigh the impact of double taxation on dividends when assessing profit distribution strategies.
S-Corporations: Income flows directly to shareholders, avoiding entity-level taxation. S-corps continue to calculate interest deductions under the more favorable EBITDA-based Section 163(j) rule, helping preserve cash flow. This structure also avoids double taxation on distributed profits while maintaining flexibility for owner compensation.
LLCs: Offer flexibility in how income is taxed, allowing members to elect partnership, S-corp, or C-corp treatment. LLCs remain attractive for businesses seeking tailored tax planning, as members can manage self-employment tax exposure and allocate profits strategically under partnership rules.
When comparing structures, C-corps enjoy steady rates and capital incentives, while S-corps and LLCs retain pass-through advantages and may benefit from state-level tax workaround deductions. The optimal choice depends on ownership goals, reinvestment needs, and the scale of future expansion.
Reassess Timing of Income and Expenses
Strategic timing of income and expenses remains a cornerstone of year-end tax planning. Accelerating deductible costs before December 31, 2025—such as equipment purchases, bonuses, or pension contributions—can help reduce taxable income in high-profit years or before certain incentives expire.
If your business expects lower income or less favorable tax law in 2026, deferring revenue recognition can also create short-term relief. Businesses should evaluate thresholds for Section 179 expensing and charitable contributions under the latest updates to maximize overall deductions.
Bunching deductions into a single tax year or timing large purchases can further enhance benefits while staying within statutory limits.
Use Tax Projections to Avoid Surprises
Running detailed tax projections before year-end allows businesses to measure the impact of accelerated deductions, deferred income, and structural changes. Scenario modeling—using pro forma returns or “what if” simulations—can help forecast cash-flow implications and identify potential risks.
Quarterly estimated tax reviews are equally critical, especially after legislative updates or major business transactions. These reviews help prevent underpayment penalties and give management visibility into year-end positions well before filing deadlines.
Partnering with an accounting advisor ensures your projections reflect the most current thresholds, deduction limits, and credit expirations. Proactive, data-driven planning helps businesses minimize liabilities, capture available incentives, and stay compliant as 2025’s complex tax landscape evolves.
How TMP Corp Can Help
Navigating 2025’s corporate tax changes requires more than year-end checklists. Businesses need ongoing guidance to understand how shifting deductions, credit expirations, and enforcement trends interact with their unique structures and goals.
TMP Corp’s U.S. advisory team supports corporations, partnerships, and LLCs with proactive planning, compliance reviews, and real-time insight into legislative updates. Our approach helps businesses anticipate changes early—reducing risk and optimizing tax outcomes across multiple filing years.
Whether you need entity-level projections, audit-readiness assessments, or help mapping cash-flow strategies around the new depreciation and deduction rules, TMP Corp provides tailored expertise every step of the way.
To learn how our team can support your business, visit our page on U.S. corporate tax planning and filing services or connect directly with one of our cross-border and domestic tax advisors for a personalized review.
Frequently Asked Questions
1. What are the main U.S. corporate tax changes for 2025?
The most significant 2025 U.S. corporate tax changes include the permanent reinstatement of 100 percent bonus depreciation, higher Section 179 expensing limits, and the continued use of EBITDA for business interest deductibility under Section 163(j). The IRS is also expanding its use of artificial intelligence for audit selection, while several federal tax credits—such as R&D and clean energy incentives—are scheduled to expire or change after 2025.
2. Is the corporate tax rate increasing in 2025?
As of now, the federal corporate tax rate remains at 21 percent. However, proposed legislation could introduce future adjustments, with some policymakers suggesting increases up to 28 percent and others advocating for reductions. Businesses should continue monitoring both federal and state-level tax developments through late 2025.
3. How does the restored bonus depreciation affect 2025 planning?
With 100 percent bonus depreciation now permanent, businesses can fully deduct the cost of qualified new and used property placed in service after January 19, 2025. This change creates strong incentives for equipment purchases and capital investments before year-end, particularly for manufacturing and technology-driven firms.
4. What should businesses know about IRS audits in 2025?
The IRS is using new AI-driven analytics to identify high-risk returns more efficiently. Large partnerships, payroll compliance, and employee retention credit claims are among the top focus areas. Businesses should maintain clear records, ensure deductions and credits are properly documented, and conduct pre-filing compliance reviews to reduce audit risk.
5. Which tax credits are expiring after 2025?
Several key incentives are set to end or change after December 31, 2025, including the Energy Efficient Home Improvement Credit, Residential Clean Energy Credit, and clean vehicle credits. Some domestic production deductions are also expiring unless extended by Congress. R&D credit revisions are under discussion but have not been finalized.
6. What are the best year-end tax planning strategies for 2025?
Businesses should review entity structures, accelerate eligible deductions, defer income where advantageous, and use tax projections to anticipate liabilities. Scenario modeling and quarterly estimated tax reviews are valuable tools to identify savings opportunities and stay ahead of upcoming law changes.