July 12, 2025

On July 4, 2025, President Trump signed into law the One Big, Beautiful Bill Act of 2025 (“OBBBA”). Of particular interest to business owners and investors are a series of major updates to key tax provisions. Below is a summary of the most impactful changes relevant to business taxation, depreciation, and investment incentives.

Section 199A: Qualified Business Income Deduction Extended and Expanded

The popular 20% Qualified Business Income (QBI) deduction under Section 199A, originally enacted under the Tax Cuts and Jobs Act (“TCJA”) was set to sunset this year. OBBBA not only makes the deduction permanent but also expands its availability by:

• Increasing the phase-in thresholds to $75,000 for single filers and $175,000 for joint filers (previously $50,000 and $100,000, respectively).
• Establishing a minimum deduction of $400 (adjusted for inflation) for taxpayers earning at least $1,000 of QBI from eligible businesses.
• Continuing to exclude certain high-income professional service providers—such as CPAs, physicians, architects, and consultants—above specified income limits.

Qualified Small Business Stock (QSBS): More Generous Gains Exclusions

OBBBA enhances the tax benefits of investing in small businesses by amending Section 1202:

• The capital gains exclusion increases from $10 million to $15 million for eligible sales.
• The size cap for qualifying businesses rises from $50 million to $75 million.
• A reduced holding period of three years (down from five) is introduced for partial exemption eligibility.

100% Bonus Depreciation Reinstated Permanently

One of the most significant changes is the permanent restoration of 100% bonus depreciation under Section 168(k), effective for qualified property placed in service after January 19, 2025. Businesses can now:

• Fully expense qualifying capital equipment and tangible property in the year placed in service.
• Benefit from increased Section 179 expensing limits: the deduction cap rises from $1 million to $2.5 million, with phaseouts beginning at $4 million.
• Claim full expensing on qualified production structures placed in service before January 1, 2031.

EBITDA-Based Interest Deduction Returns

Reversing a key limitation from the TCJA, OBBBA reinstates the more favorable EBITDA-based cap on business interest deductions beginning in 2025. By calculating the limitation based on earnings before interest, taxes, depreciation, and amortization, businesses—particularly those with high capital investments—will have greater capacity to deduct financing costs.

More Flexibility for Research and Development (R&D) Expenditures. OBBBA provides a significant shift in the tax treatment of R&D expenses:

• Taxpayers may elect to either immediately deduct or amortize domestic R&D expenses incurred after December 31, 2024.
• Enhanced R&D tax credits are now available for a broader scope of activities, including software development and engineering.
• Startups and small businesses may receive refundable credits—allowing cash benefits even without taxable income.
• Note: The treatment of foreign R&D costs remains unchanged (15-year amortization).

Expanded Business Interest Deduction & New Floor Plan Rules.The bill also improves the deductibility of business interest by:

• Excluding depreciation, amortization, and depletion from adjusted taxable income (ATI) calculations—thereby increasing deductible interest amounts.
• Amending the definition of “motor vehicle” to allow interest deductions for floor plan financing on trailers and campers.

Excess Business Loss (EBL) Limitation Made Permanent

OBBBA permanently codifies the limitation on excess business losses under Section 461(l). For 2025, noncorporate taxpayers may only deduct business losses up to the threshold of $313,000 (indexed for inflation). Losses exceeding that amount are treated as net operating losses in subsequent years. Our prior Insight discussiong the previous limitation of Section 461(l) can be found here. 

Opportunity Zone Program Permanently Extended

The Qualified Opportunity Zone (QOZ) program, designed to incentivize investment in economically distressed areas, receives a major overhaul:

• Made permanent, with rolling 10-year QOZ designations and revised eligibility standards.
• Gains reinvested into Qualified Opportunity Funds (QOFs) on or after January 1, 2027, are deferred until the earlier of sale or five years post-investment.
• Investments held for at least five years receive a 10% basis increase (i.e., only 90% of deferred gain is taxed).
• New provisions apply for rural opportunity funds, with an enhanced 30% basis increase after five years.
• If held for 10 to 30 years, the investment's appreciation is completely excluded from taxation.
• Compliance measures include expanded reporting requirements and heightened penalties for QOFs.

SALT Deduction Cap Temporarily Raised

The deduction cap on state and local taxes (SALT) rises:

• From $10,000 to $40,000 for tax years beginning after 2025.
• Indexed for inflation through 2029, before reverting back to $10,000 in 2030.

Final Thoughts

The One Big, Beautiful Bill Act of 2025 introduces one of the most substantial overhauls of business tax policy since the TCJA. Business owners and investors should evaluate how these changes may affect current planning strategies, investment decisions, and compliance obligations. For tailored advice regarding how these provisions apply to your specific business or investment situation, please contact our office.