One Big Beautiful Bill Act - Business Update

The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, introduces some of the most substantial tax changes in recent years. These reforms will directly impact the way many businesses operate and plan financially. Below is a breakdown of the key provisions most relevant to the businesses we support.

Restoration of Bonus Depreciation

Bonus depreciation has permanently been restored to 100% for qualified property acquired and placed into service after January 19, 2025. Before the OBBBA was passed, bonus deprecation would have decreased to 40% in 2025, 20% in 2026 and then phased out in 2027.
Acquisitions made on or before January 19, 2025 are still limited to the lower deduction of 40%.

Continuation of Qualified Business Tax Deduction

The OBBBA also permanently extended the 20% qualified business deduction. This tax benefit reduces income for qualifying pass-through entity business owners (S-Corps, Partnerships, and multi-member LLCs), as well as sole proprietors. This provision was set to expire after December 31, 2025.
The provision also expanded the deduction limit phase-in range which will benefit more taxpayers exceeding the taxable income limit.
In addition, this provision creates a new minimum deduction of $400, for taxpayers with at least $1,000 of qualifying business income.

No Tax on Tips & Overtime

Individuals will be receiving a deduction on their tax returns for certain tips and overtime compensation that they earn through your business starting in calendar year 2025. This means you must be prepared to track tips and overtime amounts per employee in order to provide them with the information needed to calculate and claim the proper deductions.
Guidance on the implementation of this provision will be needed since historically this type of record-keeping and recording was not required.
On August 7^th, the IRS announced they will not be making any changes to the 2025 W2s or withholding tables to reflect these provisions so it is unclear at this time how the information will need to be reported to the employee.

Full Expensing of Domestic Research and Experimental Expenditures (R&E)

Since 2022, R&E expenses were required to be capitalized and amortized over 5 years (15 years for foreign expenditures). Prior to that, these expenses were allowed to be deducted as incurred. This shift from immediate expensing to their capitalization created a large tax burden for many small businesses.
The OBBBA restored the immediate expensing of domestic R&E expenses effective January 1, 2025. Foreign research costs are still subject to the capitalization rules.
This provision also provided a method for qualifying small businesses to elect to apply the change retroactively. All businesses can deduct the remaining unamortized amounts over one or two years beginning in the 2025 tax year.

Modification of the Limitation on Business Interest

Before the OBBBA, business interest expense was limited to a more severe calculation and negatively affected many businesses, especially those in real estate who frequently utilize bank loans to fund property purchases. Interest expense was limited to 30% of the “adjusted taxable income” (ATI) which is calculated as earnings before interest and taxes (EBIT).
While business interest expense is still being limited, the OBBBA changed the calculation of ATI to earnings before interest, taxes, depreciation, and amortization (EBITDA). The removal of depreciation and amortization expenses from the calculation, which normally are optimized to reduce tax burden, will allow a much larger interest expense deduction for many businesses.

Excess Business Loss Limitation Made Permanent

Before the OBBBA, the excess business loss limitation was set to expire in 2028. The bill makes the rules permanent, effective 2027.
Excess business losses continue to be limited to $626,000 ($313,000 single) per year; any excess losses rollover as a net operating loss.
It does not appear these limits will be adjusted for inflation.

Renewal of Opportunity Zones

The OBBBA enhanced the Qualified Opportunity Zones (QOZ) program and made it permanent. The QOZ program provides tax deferrals and increased basis for contributions of qualified capital gains and potential tax-free gains from the investments themselves. The current program is set to expire December 31, 2026 and was not set to be renewed.
A new round of OZs will begin on Jan 1, 2027, providing deferral of tax on eligible capital gains until 2033.
New zones will be identified every 10 years.
The provision also establishes a Rural Qualified Opportunity Fund (RQOF) with additional tax benefits.

Expansion of Qualified Small Business Stock Gain Exclusion (Section 1202)

The OBBBA revised the original 5-year holding period requirement of Section 1202.
Effective July 4, 2025, new issuances of Qualified Small Business Stock (QSBS) will be eligible for at least a partial exclusion of gain after 3 years.
This provision also increased the exclusion ceiling to $15 million ($7.5 million married separately) or 10 times the adjusted basis and increased the asset limit to $75 million.

Resources:

The White House – One Big Beautiful Bill

Provisions

View the Full Bill

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