Quick Summary of Business Aspects of the One Big Beautiful Bill Act

The One Big Beautiful Bill Act signed into law in 2025, delivers significant tax relief and planning opportunities for businesses. While it reinstates several favorable rules from prior law (e.g., full expensing of domestic R&D and 100% bonus depreciation), it also introduces expansions that can reduce your current and future tax liabilities, improve cash flow, and influence entity choice, debt decisions, and capital investments.

Key business-friendly changes effective mostly for tax years beginning after December 31, 2024 (or in 2025+):

• Business Interest Deduction (Sec. 163(j)): Permanently restores the pre-2022 calculation of adjusted taxable income (ATI) by excluding depreciation, depletion, and amortization. This often increases the 30% ATI limitation, allowing more (or full) interest deductibility in debt-financed growth—especially valuable for capital-intensive businesses.
• Qualified Small Business Stock (QSBS, Sec. 1202): Expanded incentives for C corporations. For stock acquired after July 4, 2025: 50% gain exclusion after 3+ years, 75% after 4+ years, 100% after 5+ years. The per-issuer exclusion limit rises to $15 million (indexed from 2027), and the gross assets threshold increases to $75 million (indexed from 2027). Consider C corp status (or conversion/restructuring) for startups, growth companies, or exits—despite double taxation risks.
• R&D Expenses (Sec. 174A): Repeals mandatory capitalization/amortization. Domestic R&D costs are now fully deductible when incurred (foreign costs still amortized over 15 years). Small businesses (≤$31M avg. gross receipts) can retroactively deduct unamortized 2022–2024 domestic R&D via amended returns or a 2025/2026 deduction (Form 3115 for the latter).
• Depreciation & Expensing:
  • Sec. 179 limit doubled to $2.5M (phaseout starts at $4M in purchases).
  • 100% bonus depreciation restored for qualifying property (generally acquired after Jan. 19, 2025, with no pre-Jan. 20, 2025 binding contract).
  • New 100% bonus for qualified production property (U.S. manufacturing/production/refining facilities meeting specific criteria).
  • Combine Sec. 179 and bonus strategically; consider cost segregation studies for real estate.
• Qualified Business Income (QBI) Deduction (Sec. 199A): Made permanent for pass-through entities (20% deduction). Enhanced for 2026+: higher phase-in ranges for limitations (including SSTBs), plus a minimum $400 deduction if QBI ≥$1,000. Review entity choice—pass-throughs now have long-term certainty.

5 FAQs for Business Owners

1. How does the OBBBA help if my business has significant debt? By excluding depreciation/amortization from ATI, the business interest limitation under Sec. 163(j) often allows full or much larger interest deductions starting in 2025—making borrowing more tax-efficient for expansion (unless you’re a small business exempt from the limit).
2. Should I switch to (or stay as) a C corporation to use QSBS benefits? The expanded Sec. 1202 rules (higher limits, shorter holding periods for partial exclusions) make C corps more attractive for growth-oriented or exit-focused businesses. Weigh this against double taxation and basis step-up loss in pass-throughs—conversions or F reorganizations may unlock benefits.
3. Can I get tax relief for past R&D spending? Yes, if your business qualifies as small (≤$31M avg. gross receipts), you can amend 2022–2024 returns to fully deduct previously capitalized domestic R&D (by mid-2026 deadline) or deduct remaining amounts in 2025/2026 via Form 3115. Larger businesses have the 2025/2026 option.
4. What’s the best way to handle 2025 capital purchases? Use the doubled Sec. 179 ($2.5M max) for selective expensing and 100% bonus depreciation for broad immediate write-offs. Combine them, evaluate buy-vs-lease, and consider cost segregation or qualified production property for manufacturing investments.
5. Does the QBI deduction still matter long-term? Yes—it’s now permanent (not expiring after 2025), with improvements starting 2026 (e.g., wider phase-in ranges, minimum deduction). For pass-through owners, this supports keeping (or choosing) S corp/partnership/sole prop status in many cases.

The information presented here should not be construed as legal, tax, accounting, or valuation advice. No one should act on such information without appropriate professional advice and after a thorough examination of the particular situation.