Significant Business Tax Provisions in the One, Big, Beautiful Bill Act

Below is a summary of some of the most impactful provisions.

First-Year Bonus Depreciation

The OBBBA permanently restores the 100% first-year depreciation deduction for eligible assets acquired after January 19, 2025. This is an increase from the 40% bonus depreciation rate that applied to most eligible assets before the enactment of the OBBBA.

First-Year Depreciation for Qualified Production Property

The law provides an additional 100% first-year depreciation deduction for the tax basis of qualified production property, which generally refers to nonresidential real property used in manufacturing. This favorable treatment applies to qualified production property for which construction begins after January 19, 2025, and before 2029. The property must be placed in service in the United States or one of its possessions.

Section 179 Expensing

For eligible assets placed in service in taxable years beginning in 2025, the OBBBA increases the maximum amount that can be immediately expensed to $2.5 million (up from $1.25 million under prior law). A phase-out rule reduces the maximum deduction if the taxpayer places in service more than $4 million of eligible assets during the year (up from $3.13 million previously). These thresholds will be adjusted annually for inflation beginning in 2026.

R&E Expenditures

The OBBBA allows taxpayers to immediately deduct eligible domestic research and experimental (R&E) expenditures paid or incurred beginning in 2025 (reduced by any credit claimed for increasing research activities). Prior to the new law, such expenditures had to be amortized over five years. Small business taxpayers may generally apply the new immediate deduction rule retroactively to tax years beginning after 2021. Taxpayers that made R&E expenditures from 2022 through 2024 can elect to write off the remaining unamortized amounts over a one- or two-year period, starting with the first taxable year beginning in 2025.

Business Interest Expense

For tax years after 2024, the OBBBA permanently restores a more favorable rule for determining the amount of deductible business interest expense. Specifically, the law excludes depreciation, amortization, and depletion from the calculation of adjusted taxable income (ATI), which typically increases ATI and allows for a larger interest deduction.

Qualified Small Business Stock

Eligible gains from the sale of qualified small business stock (QSBS) can be excluded from income under a gain exclusion rule. Under the new law, the eligibility rules are expanded: a 50% exclusion applies to QSBS held for at least three years, a 75% exclusion applies to QSBS held for at least four years, and a 100% exclusion applies to QSBS held for at least five years. These favorable changes generally apply to QSBS issued after July 4, 2025.

Excess Business Losses

The OBBBA makes permanent an unfavorable provision that disallows excess business losses incurred by noncorporate taxpayers. Before the new law, this limitation was scheduled to expire after 2028.

Paid Family and Medical Leave

The law makes permanent the employer credit for paid family and medical leave (FML). Employers may continue to claim credits for paid FML insurance premiums or wages, along with other updates to the program. Previously, the credit was set to expire after 2025.

Employer-Provided Child Care

Beginning in 2026, the OBBBA increases the percentage of qualified child care expenses eligible for the employer-provided child care credit. The credit rate increases from 25% to 40% (and to 50% for eligible small businesses). The annual maximum credit is raised from $150,000 to $500,000 ($600,000 for eligible small businesses). These amounts will be adjusted annually for inflation after 2026.

Termination of Clean-Energy Tax Incentives

The OBBBA ends several energy-related business tax incentives, including:

• The qualified commercial clean vehicle credit, effective after September 30, 2025
• The alternative fuel vehicle refueling property credit, effective after June 30, 2026
• The energy-efficient commercial buildings deduction, effective for property whose construction begins after June 30, 2026
• The new energy-efficient home credit, effective for homes sold or rented after June 30, 2026
• The clean hydrogen production credit, effective after December 31, 2027
• The sustainable aviation fuel credit, effective after September 30, 2025

More to Come

In the coming months, the IRS is expected to issue guidance on these and other provisions in the new law. We’ll continue to provide updates, and please don’t hesitate to contact us for assistance specific to your situation.