Decoding the One Big Beautiful Bill Act for Business
The introduction of new federal legislation can often leave business owners feeling overwhelmed. The "One Big Beautiful Bill Act" represents a significant shift in tax laws, building on the reforms introduced by the 2017 Tax Cuts and Jobs Act. This guide aims to provide business owners with clear insights into the new changes and what they mean for your company.
Bonus Depreciation Permanence
One of the most impactful changes is the permanent allowance for businesses to expense 100% of qualified capital assets. This includes manufacturing buildings acquired from January 20, 2025, and placed in service before 2031. This provision is designed to encourage investment and growth by reducing the upfront cost associated with capital expenditures.
Increased Business Interest Deductions
The reinstatement of the EBITDA-based limit offers more generous deductions on business interest. Additionally, new guidance on capitalization interactions means businesses can navigate these deductions with greater clarity.
Revived R&D Expensing
The full deductibility of domestic research costs is back, along with accelerated recovery for 2022–2024 capitalized R&D. However, it's important to note that foreign R&D costs must still be amortized, impacting businesses with international research operations.
Permanent QBI Deduction
The Qualified Business Income (QBI) deduction remains a fixture, with the 20% deduction now made permanent. Phase-ins have been increased to $75,000 for single filers and $150,000 for those filing jointly, which could result in substantial tax savings for many business owners.
Charitable and Miscellaneous Deduction Changes
New guidelines introduce a 1% floor for corporate charitable giving and a 0.5% AGI floor for individuals who itemize. Additionally, moving expenses are no longer deductible except for active-duty military personnel, and changes to meal deductions for on-site employer meals will take effect in 2026, with some exceptions for certain industries.
Regulatory Adjustments & Opportunities
There's an increase in the limit on taxable REIT subsidiary holdings from 20% to 25% starting in 2026. Also, the Qualified Small Business Stock (QSB) will see new tiered gain exclusion schedules and higher caps, actively encouraging small business investments. On a cautionary note, the IRS has ramped up its authority to enforce penalties on erroneous ERTC claims, underscoring the need for compliance.
As these reforms take shape, it's crucial that businesses engage in proactive tax planning to adjust to these changes. Understanding and adapting to the One Big Beautiful Bill Act's provisions can enable companies to optimize their tax strategy and ensure compliance.
Seek Professional Guidance
While the Act introduces several challenges, it also presents opportunities for strategic tax planning. We encourage business owners to consult with tax professionals to navigate these changes effectively, ensuring your business maximizes its potential under the new legislation.