On July 4, 2025, President Trump signed the One Big Beautiful Bill Act (the “OBBB”) into law. While technically a budget reconciliation law, the OBBB is a significant piece of legislation that prioritizes this administration’s second-term agenda. The provisions partially eliminating taxes on tips and overtime may have garnered significant headlines, but the most impactful portions of the OBBB are (i) the permanent extension of parts of the 2017 Tax Cuts and Jobs Act that were scheduled to sunset next year and (ii) other new deductions and investment incentives for companies. A few provisions of this new law that may affect you and your business are as follows:
- Current Corporate Tax Rate Remains Unchanged: The current 21% corporate tax rate remains unchanged.
- 100% Bonus Depreciation Restored and Extended: The Section 168 bonus depreciation deduction is permanently extended. For “qualified property” acquired and placed in service after January 19, 2025, businesses can once again immediately expense 100% of the cost.
- Qualified Business Income (QBI) Deduction Permanent and Expanded: The 20% deduction for qualified business income (26 U.S.C. § 199A) is now permanent, and the income thresholds for phase-outs have been expanded by $25,000 for non-joint returns and $50,000 for joint returns.
- Immediate Expensing for Domestic Research & Experimental Costs: Companies may immediately expense U.S. research and experimental (R&E) expenditures, reversing the requirement to amortize these costs over fifteen years. R&E expenditures outside the U.S. will continue to be amortized over 15 years.
- Section 179 Expensing: The small-business expensing allowance under 26 U.S.C. § 179 rises to $2.5 million (phase-out begins at $4 million) and is indexed for inflation.
- Real Property Expensing for Domestic Manufacturing: A new “qualified production property” deduction allows full expensing of certain nonresidential real property used in domestic manufacturing (i) if construction begins after January 19, 2025 and before January 1, 2029 and (ii) is placed in service by January 1, 2031.
- Expanded Income Exclusion for Qualified Small Business Stock: The qualified small business stock (Section 1202) gain exclusion is increased to $15 million per shareholder. Additionally, partial exclusions of gain for stock acquired after January 1, 2025 are allowed for holding periods of at least three years.
- Business Interest Limitation Adjustment: The limitation on interest deductions (26 U.S.C. § 163(j)) reverts to a calculation based on EBITDA (earnings before interest, taxes, depreciation, and amortization) for taxable years beginning after December 31, 2024, which generally allows for a larger deduction.
- Clean Energy Credits Rolled Back: The phase-out of many clean energy tax incentives introduced by the Inflation Reduction Act is accelerated.
- Advanced Manufacturing Investment Credit: For property placed in service after December 31, 2025, the advanced manufacturing investment credit increases for 25% to 35%.
- SALT Cap: The limit on federal deductions for state and local taxes (i.e., “SALT”) increases to $40,000 (from $10,000) and is adjusted for inflation. The SALT Cap reverts back to $10,000 in 2030.
The OBBB is a significant business tax legislation. While the law creates opportunities for growth and investment, it also introduces new complexities requiring careful attention. If you have any concerns about the OBBB and its potential impact on your company, Butler Snow is here to help.
