Demystifying the One Big Beautiful Bill Act for Businesses

In the world of business, change is constant, and nowhere is this more evident than with federal legislation. The One Big Beautiful Bill Act introduces an array of significant tax reforms that build upon the 2017 Tax Cuts and Jobs Act. These changes can be daunting, but understanding them is crucial for businesses to navigate the landscape effectively. Here's a handy guide to help you make sense of what's new.

Bonus Depreciation Returns

One of the most notable changes is the reinstatement of bonus depreciation, allowing businesses to permanently expense 100% of qualified capital assets acquired from January 20, 2025. This includes manufacturing buildings placed in service before 2031. It's a substantial opportunity for companies to invest back into their growth with immediate tax benefits.

Qualified Business Income Deduction

The popular 20% QBI deduction is now a permanent fixture, with phase-in thresholds expanded to $75,000 for single filers and $150,000 for joint filers. This stability offers predictable planning for business owners seeking tax relief.

R&D Expensing Reinstated

Domestic research costs are fully deductible once more, and accelerated recovery is now available for 2022–2024 capitalized R&D. However, be aware that foreign-based R&D must still be amortized.

Expansion of Business Interest Deductions

With the return of the EBITDA-based limit, businesses can enjoy larger deductions. Additionally, guidelines on capitalization interactions are clarified, making it easier for companies to manage their finances effectively.

Changes in Charitable and Meal Deductions

Charitable deduction limits now include a 1% floor for corporate giving, along with a 0.5% AGI floor for individual itemizers. Meanwhile, on-site employer-provided meal deductions will face limitations in 2026, though some exemptions exist for particular fishing businesses.

Effects on REITs and QSBs

For Real Estate Investment Trusts (REITs), the limit on taxable subsidiary holdings will rise from 20% to 25% in 2026. Qualified Small Business (QSB) stock sees updates with a new tiered gain exclusion schedule and increased asset thresholds for stock issued post-July 4, 2025.

Other Significant Changes

Employers should be aware of the increased enforcement authority regarding erroneous ERTC claims. Permanent changes also apply to disaster loss relief and Opportunity Zone definitions. Energy Credit reductions will see phase-outs affecting specific green initiatives.

While the One Big Beautiful Bill Act brings substantial changes, businesses can mitigate potential surprises through proactive planning. Reviewing and adjusting your tax strategy with an advisor can ensure compliance and optimal benefits under these new regulations.