Top 10 Tax Strategies Manufacturers Must Know in 2025

Recent changes have restored immediate deductions for R&D expenses instead of amortizing them over several years. Properly documenting and classifying qualifying activities—such as product design, software development, and process improvements—can unlock substantial tax credits and improve your cash flow.

Take advantage of Section 179 and bonus depreciation provisions to deduct the full cost of equipment and machinery in the year of purchase, accelerating your tax savings and freeing capital for reinvestment.

Certain domestic manufacturing activities qualify for additional tax deductions under IRC Section 199A, reducing your effective tax rate on qualified business income.

Selecting the right inventory accounting method—such as FIFO, LIFO, or weighted average—based on your production cycles and market conditions can significantly affect your taxable income and tax timing.

Federal and state incentives reward investments in energy-saving equipment and sustainable processes, lowering your tax liability while supporting your Environmental, Social, and Governance (ESG) goals.

Strategic debt structuring helps maximize allowable interest deductions, effectively reducing taxable income while securing necessary capital.

Carefully track internally developed software and other intangible assets, electing amortization schedules that best balance tax benefits with your financial reporting needs.

Conduct engineering-based cost segregation studies to identify building components and specialized manufacturing equipment eligible for faster depreciation, accelerating upfront tax deductions.

Many states offer targeted incentives for manufacturing growth, job creation, and capital investment. Claiming these credits can enhance your tax savings and improve your competitive position.

For family-owned manufacturing businesses, early estate and succession planning reduces potential capital gains and estate tax liabilities, preserving wealth and business continuity.