The One Big Beautiful Bill Act: What Businesses Need to Know About New Tax Changes
The One Big Beautiful Bill Act (OBBBA), or H.R.1, enacted on July 4, 2025, brings significant changes to the U.S. tax code, designed to boost economic growth and encourage investment across all business sizes. These reforms aim to spur domestic investment, foster innovation, and reduce the overall tax burden on companies, from startups to large corporations. Understanding these updates is crucial for strategic financial planning and ensuring your business can leverage the new incentives effectively.
For small businesses and large corporations, the OBBBA offers substantial advantages. It permanently reinstates 100% bonus depreciation (Sec. 70301) for eligible business property, allowing immediate write-offs for investments in equipment and facilities. This is a game-changer for capital-intensive industries. Additionally, domestic Research & Development (R&D) expenditures (Sec. 70302) can now be immediately deducted, with retroactive options for some small businesses, fostering innovation. The Act also enhances the Qualified Small Business Stock (QSBS) (Sec. 70431) gain exclusion, making it more attractive for investors in growing companies by increasing exclusion caps and introducing tiered benefits for shorter holding periods. Furthermore, the 20% Qualified Business Income (QBI) deduction (Sec. 70105) for pass-through entities is made permanent and even increased to 23% for many small business owners, providing direct tax relief.
Employers will also find that the OBBBA includes expanded and permanent tax credits for employer-sponsored benefits that can help to attract and retain talent. Through the OBBBA, Employers have access to enhanced tax credits for offering paid family and medical leave (Sec. 70304) and boosted credits for providing childcare services (Sec. 70401), alongside a permanent, inflation-adjusted exclusion for student loan assistance (Sec. 70412). These measures aim to support employee well-being and workforce participation. Furthermore, businesses can benefit from increased Section 179 expensing limits (Sec. 70306) for asset purchases and a stronger Advanced Manufacturing Investment Credit (Sec. 70308), encouraging domestic production. The Act also simplifies reporting for many small online businesses by reinstating higher 1099-K thresholds (Sec. 70432).
Navigating these comprehensive tax changes requires careful consideration. To ensure your business fully leverages the new provisions and remains compliant, we highly recommended that you consult with a qualified tax professional who can help you plan for the future. If you have questions about optimizing your business tax strategy, feel free to contact us.
Business Tax Provisions At-A-Glance
Overview of some of the key business related tax changes as outlined in H.R. 1 - One Big Beautiful Bill
| Tax Provision | Key Change | Effective Date | Impact |
|---|---|---|---|
| BUSINESS DEDUCTIONS & INCENTIVES | |||
| Qualified Business Income (QBI) Deduction (Sec. 70105) | Permanent extension, increased from 20% to 23% (plus $400 minimum deduction) | Permanent (23% increase/minimum deduction details vary) | BENEFIT Direct benefit to pass-through entities, encourages entrepreneurship |
| Bonus Depreciation/Full Expensing (Sec. 70301) | Permanent 100% bonus depreciation for eligible property | Property acquired after Jan 19, 2025 | BENEFIT Encourages significant capital investment and modernization across industries |
| Research & Development (R&D) Expensing (Sec. 70302) | Permanent immediate deduction for domestic R&D | Taxable years beginning after Dec 31, 2024 (retroactive election for small businesses to 2021) | BENEFIT Boosts domestic innovation and R&D investment by reducing immediate tax burden |
| Business Interest Deduction Limitation (Sec. 70303) | Reverts to 30% of Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) limitation | Taxable years beginning after 2024 | BENEFIT Greater flexibility for businesses to finance operations and investments through debt |
| Business Meal Deductions (Sec. 70305) | Permanently disallowed for employer-provided meals (with limited exceptions) | Amounts paid or incurred after Dec 31, 2025 | COST Reduces deductible business expenses for employers |
| Increased Dollar Limitations for Expensing of Certain Depreciable Business Assets (Sec. 70306) | Increases Section 179 deduction limit to $2,500,000 and phase-out threshold to $4,000,000 (inflation adjusted) | Property placed in service in taxable years beginning after Dec 31, 2024 | BENEFIT Allows small and medium businesses to immediately deduct more asset purchases, encouraging investment |
| MANUFACTURING & PRODUCTION INCENTIVES | |||
| Qualified Production Property Expensing (Sec. 70307) | 100% immediate expensing for qualified production property (including factories) | Varies; generally 2025+ | BENEFIT Supports domestic manufacturing and production capabilities |
| Enhancement of Advanced Manufacturing Investment Credit (Sec. 70308) | Increases credit from 25% to 35% for advanced manufacturing investments | Property placed in service after Dec 31, 2025 | BENEFIT Provides stronger incentive for U.S. investment in high-tech manufacturing |
| Sound Recordings Expensing (Sec. 70434) | Deduction up to $150,000 for U.S.-produced sound recordings | Taxable years beginning after July 4, 2025 | BENEFIT Incentivizes domestic creative industries, supports local production |
| EMPLOYEE BENEFITS & FAMILY SUPPORT | |||
| Enhancement of Employer-Provided Child Care Credit (Sec. 70401) | Increases credit to 40% (50% for eligible small business) and max credit to $500,000 ($600,000 for small business), expands eligibility | Amounts paid or incurred after Dec 31, 2025 | BENEFIT Strongly encourages employers to provide or subsidize childcare, supporting working parents |
| Enhancement of the Dependent Care Assistance Program (Sec. 70404) | Increases max exclusion for employer-provided dependent care to $7,500 ($3,750 for Married Filing Separately (MFJ)) | Taxable years beginning after Dec 31, 2025 | BENEFIT Increases tax-free benefit for employer-provided dependent care, valuable for employees |
| Exclusion for Employer Payments of Student Loans (Sec. 70412) | Makes the $5,250 annual exclusion permanent and inflation-adjusted | Payments made after Dec 31, 2025 | BENEFIT Provides permanent, tax-free benefit for employees receiving student loan assistance |
| Extension and Enhancement of Paid Family and Medical Leave Credit (Sec. 70304) | Expands employer credit for paid family/medical leave, including for insurance premiums; clarifies "qualifying employee" | Taxable years beginning after Dec 31, 2025 | BENEFIT Incentivizes employers to offer paid leave, supporting employee well-being and retention |
| INVESTMENT & SMALL BUSINESS SUPPORT | |||
| Qualified Small Business Stock (QSBS) Gain Exclusion (Sec. 70431) | Increased caps ($75M gross assets, $15M exclusion), tiered exclusion (50% for 3 yrs, 75% for 4 yrs, 100% for 5+ yrs) | QSBS issued after July 4, 2025; other changes after July 4, 2025 | BENEFIT Increased investor incentive for small business growth, accelerates capital formation |
| Repeal of Revision to De Minimis Rules for Third-Party Network Transactions (Sec. 70432) | Reinstates higher Form 1099-K reporting threshold of $20,000 and 200 transactions (reversing $600 threshold) | Retroactive to American Rescue Plan Act for 1099-K; calendar years beginning after Dec 31, 2024 for backup withholding | BENEFIT Reduces reporting burden for payment platforms and small-scale online transactions |
| CHARITABLE & INSTITUTIONAL PROVISIONS | |||
| Corporate Charitable Contributions (Sec. 70426) | Deduction limited to amounts >1% of modified taxable income, capped at 10% | Varies; generally 2026+ | Modifies corporate giving incentives, encourages more substantial contributions |
| University Endowment Tax (Sec. 70415) | Increased tax rate on net investment income for institutions with large endowments | Varies; generally 2025+ | COST Increases tax burden on wealthy educational institutions |
| TERMINATED CREDITS & NEW TAXES | |||
| Termination of Qualified Commercial Clean Vehicles Credit (Sec. 70503) | Credit terminated earlier than planned | Property placed in service after Sep 30, 2025 | COST Removes tax incentive for businesses to purchase clean commercial vehicles |
| Termination of Alternative Fuel Vehicle Refueling Property Credit (Sec. 70504) | Credit terminated earlier than planned | Property placed in service after June 30, 2026 | COST Removes tax incentive for installing alternative fuel refueling infrastructure |
| 1% Excise Tax on Remittance Transfers (Sec. 70604) | 1% excise tax on transfers from U.S. to international jurisdictions | 2026 and beyond | COST Funds border security, increases cost of sending money abroad |
Recommended Sources:
Official Text of the One Big Beautiful Bill Act (H.R.1): https://www.congress.gov/bill/119th-congress/house-bill/1/text/eh
Considerations for Employers (ADP): H.R.1, The One Big Beautiful Bill Act, Enacted July 4, 2025 | ADP Spark Blog
Legal and Tax Firm Summaries:
WilmerHale: https://www.wilmerhale.com/en/insights/client-alerts/20250714-one-big-beautiful-bill-act
JD Supra: https://www.jdsupra.com/legalnews/understanding-the-one-big-beautiful-4745183/
Tax Bill Changes 1099 Reporting Thresholds | Littler Mendelson P.C.
National Law Review (Employer Focus): https://natlawreview.com/article/what-employers-should-know-about-one-big-beautiful-bill-act-obbba
