What the One Big Beautiful Bill Act Means for Businesses

The One Big Beautiful Bill Act (OBBBA) introduces sweeping tax updates for businesses — from making key provisions of the Tax Cuts and Jobs Act (TCJA) permanent to launching entirely new savings opportunities. While some changes modernize existing breaks, others offer new benefits designed to ease your business’s tax liability.

Accelerated Bonus Depreciation

The OBBBA makes 100 percent first-year bonus depreciation permanent for qualified new and used assets placed in service after January 19, 2025. Under the TCJA, this deduction was scheduled to phase down to 40 percent in 2025, 20 percent in 2026, and disappear entirely in 2027. The law also allows a 100 percent deduction for “qualified production property” placed in service after July 5, 2025, and before 2031. Additionally, it raises the Section 179 expensing limit to $2.5 million and the phaseout threshold to $4 million for 2025, with both amounts adjusted for inflation. These changes are designed to encourage capital investment, particularly in manufacturing, construction, agriculture, and real estate, and give businesses confidence to invest without fearing reduced deductions.

Clean Energy Tax Incentives

The OBBBA rolls back numerous clean energy tax incentives, with many credits, such as those for clean vehicles, energy-efficient buildings, and hydrogen production, set to expire between 2025 and 2028. It also ends clean electricity credits for wind and solar facilities after 2027 and restricts eligibility for entities with foreign ownership. The clean fuel production credit is extended through 2029 and bans the use of foreign feedstocks.

Employee Retention Tax Credit

If you filed an Employee Retention Tax Credit claim after January 31, 2024, you may not receive the refund you expected. The OBBBA prohibits the IRS from issuing refunds for specific claims submitted after that date and allows the IRS at least six years from the filing date to review and challenge these claims.

Employer Tax Provisions

The new law permanently excludes employer payments of student loans from employees’ taxable income and from employers’ payroll taxes. It stipulates that the maximum annual exclusion of $5,250 will be adjusted annually for inflation starting after 2026.

Additionally, the OBBBA permanently increases the maximum employer-provided child care credit from 25 percent to 40 percent of qualified expenses, up to $500,000 per year. For eligible small businesses, these rates rise to 50 percent and up to $600,000, respectively. The maximum dollar amounts will also be adjusted annually for inflation beginning after 2026. Furthermore, it makes permanent the employer credit for paid family and medical leave (FML) beyond 2025. Starting in 2026, employers can claim the credit for a portion of premiums paid for FML insurance.

Excess Business Losses

The bill makes the Section 461(l)(1) limitation on excess business losses of non-corporate taxpayers permanent.

Limitation on Business Interest

The bill reinstates the EBITDA-based limitations under Section 163(j) for tax years starting after December 31, 2024. For these years, adjusted taxable income is calculated without considering depreciation, amortization, or depletion deductions. Additionally, the bill expands the definition of “motor vehicle” to allow interest on floor plan financing for certain trailers and campers to be deductible.

New Markets Tax Credit

The bill permanently extends the Section 45D New Markets Tax Credit.

Opportunity Zones

The TCJA established the Qualified Opportunity Zone (QOZ) program to encourage investment in distressed communities by allowing taxpayers to defer, reduce, or exclude unrealized capital gains when reinvested in qualified opportunity funds (QOFs). The OBBBA builds on this program by creating a permanent policy that preserves the existing benefits while introducing incremental reductions in gains starting from the first anniversary of the investment. Under the new policy, taxpayers must recognize their initial gains in the seventh year, adjusted by any step-up in basis, which varies based on the length of the investment. The first round of QOFs under this framework will be available starting January 1, 2027. Additionally, the OBBBA introduces a new type of QOF specifically for rural areas, where investments receive triple the step-up in basis compared to the standard funds.

Percentage-of-Completion Method

The bill exempts residential construction contracts signed after enactment from the Section 460(e) requirement to use the percentage-of-completion method.

Qualified Business Income (QBI) Deduction

The Tax Cuts and Jobs Act (TCJA) created the Section 199A deduction for qualified business income (QBI), benefiting owners of pass-through entities and sole proprietorships. The OBBBA makes the QBI deduction permanent and raises the income phase-in thresholds for specified service businesses and others subject to wage and investment limits from $50,000 to $75,000 for individual filers and from $100,000 to $150,000 for joint filers. Additionally, it introduces a $400 inflation-adjusted minimum QBI deduction for taxpayers with at least $1,000 of QBI from active businesses in which they materially participate.

Qualified Small Business Stock

The bill increases the Section 1202 gain exclusion for qualified small business stock. Stock acquired after the bill’s enactment and held for at least four years qualifies for a 75 percent exclusion of gain from gross income. If held for five years or more, the exclusion rises to 100 percent.

Research & Development Expense Deduction

Beginning in 2022, the TCJA required businesses to amortize Section 174 research and development (R&D) expenses over five years for costs incurred within the United States, or 15 years for those incurred abroad. The OBBBA permanently allows businesses to fully deduct domestic R&D expenses in the year they are incurred. Additionally, it enables small businesses with average annual gross receipts of $31 million or less to retroactively claim this immediate deduction starting from 2022. Businesses that incurred domestic R&D expenses between 2022 and 2024 may also elect to accelerate the remaining amortization of those expenses over a one- or two-year period.

Here to Help You Navigate the One Big Beautiful Bill Act

If you have any questions, we are here to help. We build value-added relationships with each client to understand their business structure and provide solid solutions. Our approach offers direct access to the firm's decision-makers. Our innovative cross-functional services help businesses address the challenges ahead.