One Big Beautiful Bill Act has passed just before July 4th weekend. Here are five key benefits you can take away from this tax law change and apply for your business.
1. Expanded Section 179 Deduction Limits
Under the new law, the Section 179 deduction limit increases from $1.22 million in 2024 to $2.5 million in 2025. That means small businesses can immediately expense a greater portion of the cost of equipment, machinery, software, and qualifying improvements. It has a higher phase-out threshold: the tax break starts phasing out when total purchases exceed $4 million (up from $2.5 million). Inflation adjustments will also kick in based on 2024 inflation data. All purchases made after December 31, 2024, would qualify for Sec 179 deductions.
2. 100% Bonus Depreciation Extended Through 2030
Under the pre-law change, the bonus depreciation for 2025 was limited to 40% of the total acquisition cost. OBBBA now reinstates 100% bonus depreciation through 2030, which is what business communities have been seeking. There is a peculiar cut-off date coinciding with the administration change, and any purchases made from January 1st through the 19th are only eligible for the pre-law change 40% bonus depreciation. Any purchases made on or after the 20th will qualify for 100% depreciation. Given the Sec. 179 deduction available, this timeframe would not prevent most businesses from enjoying immediate deductions on big purchases of machinery, equipment, and qualified leasehold improvements.
3. Qualified Business Income (QBI) Deduction Made Permanent
The Qualified Business Income (QBI) deduction, created under the 2017 tax reform law, lets owners of certain pass-through businesses (like sole proprietors, partnerships, and S corporations) deduct up to 20% of their business profits from their taxable income. This tax break was originally set to end after 2025.
Under OBBBA, the QBI deduction is made permanent. Business owners can continue claiming this valuable deduction beyond 2025. However, the deduction remains capped at 20% of eligible business income—it doesn’t increase as some earlier proposals suggested.
4. R&D Immediate Expensing Back
Under the old tax law (TCJA), businesses had to spread out (amortize) their U.S. research and development (R&D) expenses over five years. That meant you couldn’t write off all your costs in the year you spent the money.
The OBBBA changes that rule:
Starting in 2025, businesses can fully deduct 100% of their U.S. R&D expenses in the year they’re paid or incurred. No more waiting five years to claim the full write-off.
Extra good news for small businesses:
If your business averages $31 million or less in revenue over the past three years, this new rule applies retroactively back to 2022.
You can go back and amend your 2022, 2023, and 2024 tax returns to claim bigger deductions for R&D costs you previously had to spread out over five years.
That might mean you’re due for a tax refund.
For larger businesses (over $31 million in average revenue):
You can speed up deductions for any R&D costs still left over from 2022-2024.
Beginning in 2025, you can choose to deduct those costs over just one or two years instead of five.
5. Enhanced Opportunity Zone
The Qualified Opportunity Zone (QOZ) program was originally created to encourage investment in lower-income communities by offering tax breaks to people who invest through Qualified Opportunity Funds (QOFs).
The OBBBA makes this program permanent and brings some important updates:
New Zones Every 10 Years
Governors will select new Opportunity Zones on July 1, 2026, which will take effect on January 1, 2027.
Each zone’s designation will last 10 years, with new zones picked every decade after that.
New Rules for Investors Starting 2027
If you invest capital gains into a QOF starting January 1, 2027, you can defer paying tax on those gains until you either sell your investment or hold it for five years—whichever comes first.
After five years, you’ll get a bonus increase in your investment’s tax basis:
10% for investments in regular QOFs
30% for investments in Qualified Rural Opportunity Funds (QROFs)
Potential Tax-Free Gains After 10 Years
If you hold your QOF investment for at least 10 years, you can sell it completely tax-free, including gains that would normally be taxed due to depreciation recapture.
Stricter Eligibility and Reporting
OBBBA slightly changes which areas can qualify as Opportunity Zones by lowering the maximum income level allowed in eligible communities.
Investors will also have to file new IRS forms to report their QOF or QROF investments.
We are still unpacking other provisions from OBBBA and will provide a webinar for the audience. If you want to learn more about how you can take advantage of these provisions, go ahead and register the webinar through the link below:
