The One Big Beautiful Bill Act (OBBBA), passed in 2025, introduces several substantial tax-law changes for business owners that will apply in the 2025–2026 tax years. These changes affect depreciation, pass-through income, interest deductibility, and more — and they could materially change how you plan capital investments and structure your business.
One of the biggest shifts is the return and permanence of 100% bonus depreciation. For qualified property (like certain machinery, equipment, and other tangible assets) placed in service on or after January 19, 2025, businesses can fully expense the cost in the first year.
Also under OBBBA, a new first-year depreciation rule applies to “qualified production property” (QPP), which generally refers to non-residential real property used in manufacturing, production, or refining. Eligible QPP placed in service between July 4, 2025, and December 31, 2030, may qualify for 100% expensing.
“The 20% QBI deduction is now permanent, and there’s a new $400 minimum deduction for small businesses with at least $1,000 of qualified business income.”
The Qualified Business Income (QBI) deduction, also known as Section 199A, is made permanent at 20% under the new law. The bill raises the phase-in thresholds for the wage and investment limitation: for single filers, they go from $50,000 to $75,000, and for joint filers, from $100,000 to $150,000. In addition, active business owners who have at least $1,000 of QBI will now be eligible for a minimum $400 deduction (adjusted for inflation).
Interest deductibility rules also change. Under OBBBA, the Section 163(j) business interest limitation formula is adjusted. Starting for tax years after 2024, the limit calculation will incorporate EBITDA (earnings before interest, taxes, depreciation, and amortization) — allowing more flexibility and potentially higher interest deductions for capital-intensive businesses.
Other Important Business Tax Changes
- Section 179 Expensing Increase: The maximum amount businesses can deduct under Section 179 has been raised to $2.5 million, with a phase-out threshold of $4 million.
- Domestic R&D (Research & Experimental) Costs: OBBBA restores the ability to fully expense domestic R&D costs immediately (rather than amortizing over years), especially benefiting small businesses.
- Qualified Production Real Estate Bonus Depreciation: As noted, nonresidential real property used in manufacturing may qualify for the 100% first-year depreciation if placed in service before 2031.
- Excess Business Loss (EBL) Rules: The OBBBA retains limits on excess business losses for non-corporate taxpayers, carrying forward disallowed losses as net operating losses (NOLs) rather than allowing immediate full deductions.
For business owners, these changes mean that capital investments (equipment, manufacturing property) are more tax-efficient than ever, and pass-through structures (LLCs, S-corporations, partnerships) benefit from more stable and predictable deductions. But the complexity and timing are critical — it’s essential to work with a CPA or tax advisor to model how these changes will affect your business planning and cash flow.
