By Cristy Andrews, CPA, CGMA, Warren Averett
Under the One Big Beautiful Bill Act (OBBBA), many of the expiring provisions from the Tax Cuts and Jobs Act of 2017 have been modified, extended or made permanent. In addition, the OBBBA has introduced several new tax provisions of its own. Each of these provisions comes with its own effective and expiration dates, making the overall tax landscape even more complex.
Among the recent tax law updates, the following highlights are particularly relevant for businesses:
Bonus Depreciation
The bill reinstates 100% first-year depreciation for qualifying property placed in service after January 19, 2025. This does not apply if a binding contract existed before that date.
Section 179 Expensing
The maximum Section 179 deduction increases to $2.5 million, with a phase-out beginning at $4 million for tax years starting after December 31, 2024. These limits will adjust annually for inflation starting in 2026.
Charitable Deductions
Charitable deductions made by corporations incurred significant changes, including a 1% floor and a 10% ceiling. The carry forward of disallowed deductions expires after five years.
R&D Expenditures
Domestic R&D can be fully expensed again starting in 2025 or amortized over 60 months. Small businesses can amend prior returns to retroactively expense capitalized R&D.
Qualified Business Income Deduction
The 20% QBI deduction for pass-through entities is now permanent. Beginning in 2026, phase-in thresholds increase, and a $400 inflation-adjusted minimum deduction is added.
Interest Expense Limitation
The bill restores the EBITDA-based limitation for interest expense deductions starting in 2025. New rules for calculating EBITDA, including treatment of capitalized interest, take effect in 2026.
Qualified Small Business Stock
For stock issued after July 4, 2025, the gain exclusion limit increases to $15 million, and the asset threshold rises to $75 million. The holding period requirement has also been relaxed.
Partnership Sale Rules
The bill tightens sale rules for partnerships, broadening their applicability to more transactions.
Business Tax Credits
Several business tax credits, especially in green energy, are phased out or modified.
Overtime Pay Deduction
Premium overtime pay up to $12,500 (single) or $25,000 (joint) is deductible. Phase-outs begin at $150,000 for single filers and $300,000 for joint filers.
SALT Deduction Cap
The state and local tax deduction cap increases to $40,000 in 2025, with phase-downs for incomes over $500,000. The cap reverts back to $10,000 after 2029.
Opportunity Zones 2.0
OZ 2.0 offers capital gain deferral, a 10% exclusion after five years and full appreciation exclusion after 10 years. The program includes new criteria and enhancements.
International Tax Changes
The bill lowers effective tax rates for U.S. entities with controlled foreign corporations.
1099 Reporting Threshold
The 1099 reporting threshold increases to $2,000 for payments made starting in 2026, reducing compliance burdens. The $600 threshold remains in place for 2025.
As your business navigates these tax changes, understanding which provisions apply (and when) is key to making informed tax decisions. Consult your tax advisor about how these provisions will impact your organization’s tax strategy.
Visit Warren Averett’s resource page for more: https://warrenaverett.com/obbb-resources/.
