The 2025 tax reform, enacted through P.L. 119-21, Republicans’ “One Big Beautiful Bill Act,” ushers in a new era of tax policy with sweeping implications for the professional services sector. While much of the public discourse has centered on broad business provisions, several targeted updates, such as the permanent Section 199A deduction, reinstated bonus depreciation, and the termination of Section 179D and research and development (R&D) expensing, are poised to reshape how firms in law, architecture and engineering (A&E), and business consulting operate and grow.
This article outlines the most impactful provisions and what they mean for each segment of the professional services sector.
To explore the full scope of changes introduced in the 2025 Final Budget Reconciliation Bill, refer to this in-depth article.
Stay ahead of tax policy changes by joining Cherry Bekaert’s CPE-eligible webinar series, Tax Horizons: Planning Ahead After the Reconciliation Bill. Leaders in professional services firms can gain insight and practical strategies to help their organizations navigate upcoming challenges with confidence.
|
Provision |
Pre-2025 Law |
2025 Tax Reform |
Impact |
|
Section 199A (QBI) Deduction |
Temporary 20% deduction for pass-through income | Made permanent | Long-term planning certainty for partnerships, S corps and sole proprietors |
|
Bonus Depreciation |
Phased out after 2022 | 100% expensing reinstated for property placed in service on January 20, 2025, and beyond | Immediate write-offs for qualifying tech, equipment and infrastructure |
|
Section 179 Expensing Cap |
$1 million (indexed for inflation) | Increased to $2.5 million (indexed for inflation) | Greater upfront deductions for capital investments |
|
R&D Expensing |
Amortization required under TCJA (post-2021) | Immediate expensing of domestic costs restored (with credit coordination) | Boosts innovation and digital transformation |
|
Section 179D Energy Efficient Commercial Building Deduction |
Available for A&E firms designing qualifying government/nonprofit buildings | Eliminated for projects beginning construction after June 30, 2026 | Loss of a key incentive for sustainable design and public-sector work |
|
Section 163(j) Business Interest Limitation |
30% of EBIT (post-2021) | 30% of EBITDA (restored and made permanent) | Expands deductibility of interest for leveraged firms and capital-intensive investments |
Strategic Implications by Segment
Law Firms: Entity Structure and Partner Planning in Focus
Law firms, especially those structured as partnerships or S corps, benefit from the permanent extension of the Section 199A deduction. However, the continued exclusion of specified service trades or businesses (SSTBs) from full benefits above certain income thresholds means that entity structure and income planning remain critical.
The restoration of the EBITDA-based limitation under Section 163(j) also improves interest deductibility for financing associated with partner buy-ins or expansion strategies. This change enhances after-tax cash flow and may support more flexible capital structuring.
The temporary increase in the SALT deduction cap also offers modest relief for partners in high-tax jurisdictions, though pass-through entity tax (PTET) elections will still require careful coordination.
Architecture and Engineering: Capital Investment Gains but 179D Loss Looms Large
A&E firms are well-positioned to capitalize on the reinstated 100% bonus depreciation and expanded Section 179 expensing cap. These provisions support investment in qualifying design software, modeling tools and infrastructure upgrades.
However, the termination of Section 179D, a deduction for energy-efficient commercial building design, represents a significant loss. For years, 179D has served as a valuable incentive for A&E firms working on government and nonprofit projects, particularly those focused on sustainability and LEED certification. Its removal may:
- Reduce the financial viability of public-sector and green building projects.
- Shift firm focus toward private-sector work with stronger tax incentives.
- Require pricing adjustments or renegotiation of contracts already in progress.
The restoration of immediate R&D expensing, paired with the option to elect a reduced credit, still offers flexibility for firms pursuing innovation in sustainable design, digital twin modeling or AI-driven project management.
Additionally, the reinstated EBITDA-based interest deduction under Section 163(j) allows A&E firms with capital-intensive operations or leveraged investments to deduct more interest expense, improving cash flow and supporting long-term infrastructure planning.
Business Consulting: Innovation, Equity Planning and Talent Strategy
Consulting firms, particularly those in IT, strategy and digital transformation, will benefit from the dual boost of R&D expensing and expanded capital investment incentives. The reinstated bonus depreciation and higher Section 179 limit support firms investing in technology infrastructure, AI tools and client-facing platforms.
The restoration of the EBITDA-based limitation under Section 163(j) is especially impactful for consulting firms with private equity backing or leveraged growth strategies. It increases the amount of deductible interest, improves tax efficiency, and supports more aggressive investment in expansion and innovation.
Additionally, the expanded business interest deduction and changes to the excess business loss calculation improve cash flow planning for leveraged firms, while the SALT cap relief may ease partner-level tax burdens in high-cost states.
Strategic Priorities for Professional Services Firms in 2025
- Reevaluate entity structure in light of permanent QBI rules and evolving partner tax dynamics.
- Model R&D strategies to optimize between expensing and credit elections.
- Accelerate capital investments to take advantage of bonus depreciation and Section 179.
- Adjust project pricing and pipeline in response to the loss of 179D for A&E firms.
- Coordinate SALT and PTET strategies to maximize partner-level tax efficiency.
- Review debt structures to capitalize on the restored EBITDA-based interest deduction under Section 163(j).
Your Guide Forward: Planning for Sector-specific Success
The 2025 tax reform presents both challenges and opportunities for professional services firms. Whether navigating entity structure decisions, maximizing R&D tax credits or adapting to the loss of 179D, firms must act now to stay ahead of the curve.
Connect with your Cherry Bekaert professional today. Our industry-focused tax advisors can help you interpret the new rules, optimize your structure, and align your strategy for long-term success.
Upcoming Webinars
Please join Cherry Bekaert for our webinar series, Tax Horizons: Planning Ahead After the Reconciliation Bill, where we will explore the reconciliation bill in more detail and bring you insights that will help you adjust to changes in the tax landscape.
Sessions:
- July 30: Tax Credits & Incentives Unlocked: R&D and Energy Tax Opportunities
- August 13: Your Financial Legacy: Key Individual and Estate Tax Shifts
- August 27: Business Tax in Motion: Corporate and PTE Developments
- September 10: New Global Playbook: International Game Changers
- September 24: From Capitol to County: State & Local Tax in Focus
Related Insights
- Article: Tracking Tax Reform: A Closer Look at the Final Budget Reconciliation Bill
- Article: Trump's Tax Bill: Bonus Depreciation & Cost Segregation in 2025
- Article: R&E Expensing Returns in 2025: What Is Changing and How To Prepare
- Article: Energy Incentives in Transition: Impacts of the 2025 Tax Reform on Section 179D & IRA Credits
