The passage of new federal legislation can feel overwhelming for any business owner. The One Big Beautiful Bill Act
introduces significant tax reforms, building upon the 2017 Tax Cuts and Jobs Act. As these changes come into effect, understanding the intricacies becomes crucial for maintaining compliance and optimizing tax strategies. Here's a clear and concise look at what these reforms mean for your business.
Bonus Depreciation Returns & Business Interest Deduction Expansion
Businesses can now permanently expense 100% of qualified capital assets acquired from January 20, 2025. This includes significant infrastructure such as manufacturing buildings placed in service before 2031.
Moreover, the return of the EBITDA-based limit in the business interest deduction provides larger deductions. Guidance on capitalization interactions offers further clarity in optimizing financial planning.
R&D Expensing Reinstated & Qualified Business Income Deduction
Domestic research costs are now fully deductible, and there's an accelerated recovery allowance for capitalized R&D from 2022–2024. However, note that foreign R&D costs must still be amortized.
Additionally, the 20% Qualified Business Income (QBI) deduction is now permanent, with phase-ins expanded to income levels of $75,000 for single filers and $150,000 for joint filers.
Charitable Deduction Limits & Meal Deduction Changes
A new era in charitable giving emerges with a 1% floor for corporate giving and a 0.5% AGI floor for itemized individual deductions.
As for meal deductions, on-site employer-provided meal deductions will be limited starting 2026. Notably, there is a carve-out for specific fishing businesses.
REIT Subsidiary Changes & Qualified Small Business Stock (QSB) Updates
The limit on taxable REIT subsidiary holdings rises from 20% to 25% in 2026, presenting new opportunities for real estate investors.
For QSB, the Act introduces a tiered gain exclusion schedule, a higher $15M per-issuer cap, and an increased $75M gross assets threshold for stock issued after July 4, 2025.
ERTC Enforcement Expansion & Disaster Loss Relief
Be aware of the IRS's expanded authority regarding erroneous Employee Retention Tax Credit (ERTC) claims. Vigilance and accuracy in claims filing are more crucial than ever.
The permanence of TCJA casualty loss deduction rules means state-declared disaster loss deductions are now a guaranteed entitlement.
Opportunity Zone Updates & Excise Tax on Remittances
The Act redefines Opportunity Zones with enhancements, rural incentives, and new reporting rules, alongside 10-year rolling designations starting in 2027.
Meanwhile, a new 1% excise tax on specific cash-based transfers abroad will be implemented, with exemptions including methods like banks and cards.
Energy Credit Reductions
Expect a gradual phase-out of credits like the Clean Electricity Production and Investment Credits as the focus shifts within the energy sector under this new legislation.
While the One Big Beautiful Bill Act introduces sweeping tax changes, proactive planning can help mitigate surprises. It's wise to consult with a tax professional to review strategies, ensure compliance, and optimize under the new rules. This proactive approach will ensure your business navigates the complexities of the new tax landscape smoothly.