The “One Big Beautiful Bill Act” (OBBBA) introduces several important tax changes for businesses starting in 2025. Here’s a simplified summary of the key provisions:
Depreciation & Expensing
- 100% Bonus Depreciation
- Bonus Depreciation for Production Property: Applies to nonresidential real estate used in manufacturing, agriculture, or refining.
- Section 179 Expensing: Businesses can expense up to $2.5 million in qualified assets annually (adjusted for inflation). Phase-out begins at $4 million in asset additions.
Research & Development
- Immediate Expensing
- Retroactive Expensing: Businesses can expense research costs from 2022–2024 by amending returns or deducting in 2025–2026.
Energy & Clean Technology Credits (Ending Soon)
- Clean Vehicle Credits (New, Used, Commercial): End Sept 30, 2025.
- Alternative Fuel Refueling Credit: Ends June 30, 2026.
- Energy Efficient Commercial Buildings Credit: Ends June 30, 2026.
- Clean Hydrogen Production Credit: Facility must begin construction by Dec 31, 2027.
- Clean Electricity Credits (PTC & ITC): Solar/Wind must be in service by Dec 31, 2027. Other facilities have until 2032 or 2033 depending on the credit.
- Advanced Clean Energy Investment Credit: Funding begins July 4, 2025.
Other Business Provisions
- Business Interest Limitation: Depreciation, amortization, and depletion are added back to adjusted taxable income. Effective for tax years after Dec 31, 2024.
- 1099 Reporting Threshold: Increased to $2,000 for payments made after Dec 31, 2025.
- Dependent Care Assistance: Increased to $7,500 per year starting in 2026.
- Charitable Deduction Floor: Only contributions exceeding 0.5% of taxable income (1% for C-corps) are deductible. Effective for tax years after Dec 31, 2025.
- Qualified Small Business Stock (Section 1202): C-corp stock acquired after July 3, 2025 may qualify for partial or full capital gains exclusion depending on holding period (3–5 years).
- Qualified Business Income (QBI) deduction made permanent: The deduction which allows eligible taxpayers to deduct up to 20% of their qualified business income, set to expire at the end of 2025 was made permanent. Phase-in ranges were expanded, and an inflation-adjusted minimum deduction was added.
