Understanding the One Big Beautiful Bill Act (OBBBA)

The One Big Beautiful Bill Act (OBBBA) introduces several significant changes to the tax landscape for businesses. These reforms aim to simplify tax compliance and enhance deductions for various business expenses. Understanding these changes is crucial for effective financial planning.

Key Tax Provisions for Business: What You Need to Know

Bonus Depreciation Made Permanent

Businesses can permanently expense 100% of qualified property placed in service after January 1, 2025. This change allows for immediate tax relief, helping companies invest in their growth without the burden of depreciation schedules.

Section 179 Expensing Increased

The deduction limit for Section 179 has been raised to $2.5 million, with a $4 million phaseout. This increase enables businesses to write off more of their capital investments in the year they are made, enhancing cash flow.

R&D Expensing Restored

Full expensing of domestic research is allowed beginning in 2025. Small businesses may apply retroactively to 2022–2024. Foreign R&D costs will remain amortized. Qualified small businesses, defined as those with gross receipts of $31 million or less, can recover prior deductions early, providing a significant financial boost.

Qualified Business Income (QBI) Deduction Expanded

The 20% pass-through deduction is now permanent. Service businesses will benefit from expanded phaseout thresholds:

• Single: $75,000

• Joint: $150,000

  
  

Additionally, a new minimum QBI deduction of $400 is introduced for taxpayers with at least $1,000 QBI from active trades. This amount will be indexed after 2026, ensuring that it keeps pace with inflation.

Business Interest Deductions Enhanced

Interest limitations will revert to a more favorable EBITDA-based standard, increasing allowable deductions. This change allows businesses to deduct more interest expenses, improving their overall tax position.

Family Leave & Hiring Credits Extended

• The Paid Family/Medical Leave credit, set at 12.5%, is now permanent.

• Opportunity Zone and New Markets Tax Credits have been extended, providing ongoing incentives for businesses to invest in underserved areas.

  
  

Qualified Small Business Stock (QSBS) - Section 1202 Gains Exclusion Increased

The exclusion for gains on QSBS has been significantly enhanced:

• 75% exclusion after 4 years of holding (previously was 50%).

• 100% exclusion after 5 years.

• The per-issuer cap has been raised from $10 million to $15 million, indexed for inflation.

  
  

Auto Loan & Overtime Deductions for Pass-Through Owners

Owners of eligible businesses can now deduct tip income, overtime, and car loan interest, subject to income limits. This change provides additional tax relief for business owners, allowing them to better manage their personal and business finances.

Planning for the Future

These tax reforms present new opportunities for businesses to optimize their tax strategies. It is essential to stay informed about these changes and how they may affect your specific situation.

Additional Considerations

The above summary highlights select tax provisions. The OBBBA includes numerous additional rules and nuances that may apply to your business circumstances. It is advisable to consult with a tax professional to ensure compliance and maximize potential benefits.

Please schedule a time to review your 2025 strategy. These changes present planning opportunities and potential tax savings.