House Tax Bill Proposes Key Changes: R&D Expensing, Bonus Depreciation & SALT Cap

On May 12, 2025, the House Ways and Means Committee released an expanded version of proposed tax legislation as part of the FY 2025 budget reconciliation process. Building on a smaller draft from Chairman Jason Smith (R-MO) released just days earlier, this comprehensive proposal focuses primarily on extending and enhancing key provisions from the 2017 Tax Cuts and Jobs Act (TCJA), many of which are set to expire after 2025.

This legislation—still in the early stages of negotiation—would deliver meaningful tax relief and incentives for businesses and individuals if passed. The highlights include a long-anticipated fix to Section 174 R&D amortization, full bonus depreciation, a significantly higher SALT deduction cap, and targeted boosts for pass-through entities.

Here’s a breakdown of what’s currently in the bill and what it could mean for you or your clients:

Key Business Provisions

1) 100% Bonus Depreciation Reinstated

The bill reinstates full 100% bonus depreciation for qualified property placed in service between January 19, 2025, and December 31, 2029. This retroactive relief would be a major win for businesses that rely on capital investment, particularly in real estate, manufacturing, and logistics.

2) Section 174 R&D Expensing Fix

Under the TCJA, domestic R&D costs began requiring amortization over five years starting in 2022—significantly reducing immediate deductions for many businesses. This bill suspends the amortization rule for tax years beginning after December 31, 2024, through December 31, 2029, allowing businesses to fully expense domestic research expenditures in the year incurred.

This change is critical for innovation-heavy sectors like tech, pharma, and manufacturing.

3) Pass-Through Deduction Boost

The bill enhances the Section 199A deduction for qualified pass-through business income from 20% to 23%. It also expands eligibility for professional service businesses—like law firms, consultants, and asset managers—by offering them a partial deduction worth up to 5.75% regardless of income level.

Individual Taxpayer Highlights

1) SALT Deduction Cap Increase

Responding to pressure from members in high-tax states, the bill proposes raising the State and Local Tax (SALT) deduction cap from $10,000 to $30,000. While still subject to negotiation, this increase could provide substantial relief to higher-income taxpayers in states like New York, California, and New Jersey.

2) Permanent Individual Rate Reductions

The bill locks in the current individual tax brackets, including the top 37% rate, and permanently extends the higher standard deduction introduced by the TCJA. It also includes a temporary boost to the deduction from 2025 through 2028.

3) Child Tax Credit Changes

The $2,000 child tax credit becomes permanent, with a temporary increase to $2,500 and tightened eligibility rules that require valid Social Security numbers and legal status for dependents.

Real Estate and Clean Energy Impacts

1) Full Expensing for Industrial Facilities

The bill allows manufacturers and industrial producers to fully expense the cost of nonresidential real estate used for manufacturing, refining, or production. Qualifying property must begin construction between January 19, 2025, and December 31, 2028, and be placed in original use by the taxpayer.

This is a notable change for real estate investors and developers focused on industrial assets.

2) Clean Energy Tax Incentive Rollbacks

The bill proposes significant cuts to clean energy tax credits introduced under the Inflation Reduction Act, including:

Elimination of credits for EV charging stations, residential solar, and energy-efficient upgrades after December 31, 2025

End of the 45L tax credit for energy-efficient homes unless construction begins before May 12, 2025

Other Noteworthy Provisions

Estate & Gift Tax Exemption: Keeps the doubled exemption amount, increasing it to $15 million.

Opportunity Zones Revamp: Introduces a new round of designations, active from 2027 to 2033, with nominations submitted by state governors.

What’s Next?

The path forward is anything but guaranteed. Here are the key factors to watch:

Spending Cut Requirements: The House budget allows $4.5 trillion in tax cuts only if $2 trillion in mandatory spending cuts are passed. Otherwise, the tax cut ceiling drops to $4 trillion.

Inter-party Disagreements: With divisions among House Republicans—particularly between deficit hawks and moderates—some provisions may be scaled back or made temporary to reach consensus.

Debt Ceiling Deadline: Treasury warns the U.S. could hit the debt ceiling by mid-July 2025, putting pressure on lawmakers to finalize negotiations before the July 4 recess.

Final Thoughts from National Tax Group

While this legislation is still in flux, it signals Congress’s intent to tackle some of the most pressing tax challenges facing businesses and individuals—especially around R&D expensing and depreciation.

If passed, this could create time-sensitive opportunities for tax planning in 2025 and beyond. Now is the time to model scenarios, revisit capital expenditure timelines, and evaluate your exposure to R&D amortization and SALT limitations.

As always, National Tax Group will continue monitoring developments and helping clients maximize their tax benefits. Reach out to our team to discuss how these changes may impact your tax strategy.

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