The tax impact of the One Big Beautiful Bill Act on businesses and owners
Below are some of the most significant areas that impact businesses and their owners from the OBBBA.
Permanent key business tax provisions: Key business tax provisions enacted in the 2017 Tax Cuts and Jobs Act (TCJA) that were set to either expire or had hit milestones included in the TCJA that had negative tax implications for businesses and their owners.
These include:
Bonus depreciation: The bill revives 100% bonus depreciation for property acquired and placed in service on or after Jan. 19, 2025. Businesses planning capital investments may benefit from bonus depreciation, which allows them to reduce taxable income and improve cash flow — freeing up funds to reinvest in growth.
Section 179 expense: Section 179 previously allowed businesses to expense up to $1.16 million of qualifying property, with a phase-out threshold beginning at $2.89 million, both indexed for inflation. The OBBBA increased the maximum amount a taxpayer can expense to $2.5 million and increased the phase-out threshold amount to $4 million.
Domestic research and experimental (R&E) expenditures: Businesses were previously required to capitalize and amortize domestic research and experimental expenses (Section 174 expenses) from Jan. 1, 2022, onward. This put stress on businesses and startups that had significant investment in R&D. The OBBBA suspends the required capitalization of domestic research and experimental expenditures for amounts paid or incurred in taxable years beginning after Dec. 31, 2024, and before Jan. 1, 2030, allowing for immediate expensing. Foreign R&E expenditures must still be capitalized and amortized over 15 years. The bill provides small businesses with the option to apply this change retroactively back to 2022 through amended returns. It also allows taxpayers to accelerate any remaining Section 174 deductions in 2025 or over 2025 and 2026.
Business interest deduction limitation (Section 163(j)): Businesses were subject to a limitation on deducting interest expense based on adjusted taxable income (ATI) that did not allow for an add-back of depreciation and amortization for tax years beginning after Dec. 31, 2021. The OBBBA changes this for taxable years beginning after Dec. 31, 2024, the adjusted taxable income for purposes of the Section 163(j) limitation regarding ATI will be computed by reference to earnings before interest, taxes, depreciation and amortization (EBITDA), rather than EBIT, potentially allowing for larger interest deductions for many taxpayers.
Section 199A qualified business income (QBI) deduction: The 20% QBI deduction for pass-through businesses is made permanent. This allows business owners of pass-through entities to deduct up to 20% of their qualified business income on individual tax returns.
Other key business tax provisions: Several additional changes were made in the OBBBA that are temporary or have an impact to specific businesses.
These include:
Lower international rates: The bill extends lower tax rates on international income with other modifications. The anticipated future rates were effectively higher as there were scheduled increases that will not be implemented due to changes established in the OBBBA.
Opportunity Zones: The bill establishes a permanent Opportunity Zone policy while also modifying and expanding the program. Significant new reporting requirements were also included.
Expensing of manufacturing property: Allows for the bonus depreciation of qualified production property 'manufacturing property' through 2031.
Clean energy tax credits: The bill rolls back or phases out significant green energy tax credits from the Inflation Reduction Act (IRA), including those for electric vehicles, home energy upgrades, wind and solar. The roll-back or phase-out dates are important as any purchases must be made or projects must be placed in service prior to these dates for businesses to take advantage of these tax credits.
Form 1099 reporting: The OBBBA increases the information reporting for payments made to certain persons engaged in a trade or business from $600 to $2,000 with the amount to be indexed annually for inflation in calendar years after 2026.
Section 1202, Qualified Small Business Stock exclusion: The OBBBA expands eligibility for the exclusion by raising the cap on a corporation's aggregate gross assets at the time of issuance from $50 million to $75 million and modifies the exclusion to provide a tiered approach based on the year the taxpayer disposes of the stock.
Tips credit: The OBBBA expanded this credit to include the beauty service industry starting in 2025. The tips credit previously applied only to the food and beverage industry and provides a credit for the FICA paid by the employer on tips.
Careful consideration should be given to plan for the implementation of these changes. There are options for qualified businesses to apply some of these changes retroactively or on a go-forward basis. Tax planning should also consider the interaction of any elective changes on other tax deductions along with the overall impact on taxable income. With proactive planning with your Brady Ware team, your business can maximize tax savings strategies with the new OBBBA. Learn more on our website.
There are also benefits and changes for individuals that are discussed in our related article on the OBBBA, ' The One Big Beautiful Bill Act: An individual taxpayer perspective.'
Brady Ware is a top 200 CPA and advisory firm serving clients from our Dayton (OH), Columbus (OH), Atlanta (GA) and Richmond (IN) office locations focused on serving small- to middle-market privately held companies, high-net-worth families and nonprofit organizations.
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17 hours ago
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Trump-backed 'big beautiful bill' unleashes billions for Big Tech. How four of our megacaps benefit
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Forbes
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Real Estate Set To Soar After Trump's One Big Beautiful Bill
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However, for those in the commercial real estate industry, the bill is a potential game-changer. New tax provisions offer clarity and long-term stability for developers and investors, setting the stage for what could be the next major boom in the sector. While the provisions of the OBBBA will have significant implications for the entire commercial real estate market, two sectors stand to benefit particularly: low-income multifamily housing and industrial development. A Permanent Boost for Affordable Housing There is a growing housing shortage in the United States, especially in the low-income end of the market. The lack of affordable units drives homelessness, deepens poverty, strains public services, and weakens the economy by limiting workforce mobility and long-term social stability. The OBBBA specifically targets this crisis with the new incentives and provisions to jumpstart development. According to DLP Capital, a private real estate investment company specializing in affordable housing development, the gap between qualified income and actual income has grown to 54.6% from -3.7% since 2021. DLP believes the new incentives will have a significant impact on the market. "The OBBBA may be the most pro-housing CRE legislation in a generation," says DLP's head of growth, Bo Parfet. The OBBBA includes a significant boost to the Low-Income Housing Tax Credit program, which is the nation's primary tool for creating affordable housing. Before the OBBBA, it operated with annual allocations that were subject to congressional approval and extension. While effective, this approach created uncertainty for long-term project planning and limited states' ability to address the housing shortage with consistent, predictable funding. The OBBBA provides a permanent 12% increase in the annual amount of 9% LIHTC allocations. Another provision created under the OBBBA is the Fast-Track Permitting Fund, which allows developers to pay a fee to expedite federal environmental reviews under the National Environmental Policy Act. This fund is particularly beneficial for low-income housing projects that rely on federal funding or tax-exempt bonds, as it helps reduce delays that often derail or inflate the development costs. By streamlining the approval process, the fund enables affordable housing projects to meet financing deadlines more easily, improve predictability, and bring much-needed units to market more quickly. The hope is that the Fast-Track Permitting Fund will put political and market pressure on states and cities to follow suit, further reducing bottlenecks. The lengthy permitting process is often a deal-killer for developers, and reducing the timeline to construction should improve investment returns. "Multifamily—especially workforce housing—is the clear winner. More deals will move forward, faster," says Parfet. In addition to adjustments to the Low-Income Housing Tax Credit program and the introduction of the Fast-Track Permitting Fund, changes to opportunity zones are also expected to fuel growth in affordable housing. The Qualified Opportunity Zone program, designed to incentivize long-term investments in low-income communities, was created with a sunset date of December 31, 2026, for capital gain deferral. The OBBBA makes the deferral feature permanent. It also introduces new 10-year designation periods for new zones, starting in 2027, and includes provisions for rural opportunity zones with enhanced benefits. The introduction of rural opportunity zones should help direct capital into underserved rural areas, potentially spurring new industrial and multifamily developments in these regions. Investors who may have been hesitant due to the previous program's limited lifespan will likely re-evaluate Qualified Opportunity Zone projects, leading to new capital flowing into underserved communities and regions. Ben Reinberg, CEO of real estate investment firm Alliance Consolidated Group of Companies, believes the new legislation will re-energize OZ investments. "For long-term investors looking to reduce exposure and amplify yield, OZs just became very relevant again," he says. Massive Incentives For Domestic Manufacturing The Trump administration has made domestic manufacturing a central focus, using tariffs to try to shift supply chains and incentivize production at home. The OBBBA complements that strategy, combining new tax incentives with the renewal of other programs to accelerate industrial development and attract capital back to U.S. soil. The biggest incentive in the bill targets Qualified Production Property. Before the OBBBA, nonresidential buildings, such as factories, were typically depreciated over a lengthy 39-year period. While equipment and other tangible personal property qualified for bonus depreciation, the buildings themselves did not. The OBBBA introduces a new, temporary provision that allows for a 100% immediate deduction of the cost of QPP. To qualify, construction must be completed before January 1, 2029, and the property must be placed in service before January 1, 2031. QPP excludes offices, administrative areas, lodging, and parking within the building. The ability to immediately deduct the cost of eligible manufacturing facilities provides a powerful tax incentive. The QPP provision should stimulate the construction of new factories, assembly plants, and processing facilities across the U.S., encouraging companies to reshore production from overseas or nearshore from other countries to the U.S. The growth of manufacturing facilities should lead to increased demand for other logistics assets such as distribution centers and warehousing. "The opportunity lies in overlooked industrial corridors, characterized by land availability, low regulation, and favorable tax structures," Reinberg notes. "Industrial CRE is the sleeping giant. This bill just woke it up." Permanent 100% bonus depreciation, which allowed businesses to deduct the full cost of eligible qualified property immediately, was also introduced in the OBBBA. The previous law had 100% bonus depreciation phasing down. For property placed in service in 2025, the rate was set at 40%, declining further in subsequent years. The phase-down created urgency for capital expenditures to take advantage of the higher deduction rates. Another positive provision for commercial real estate is the change to the deductibility of interest costs. The previous law restricted the deduction of business interest expense to 30% of adjusted taxable income and excluded the add-back of depreciation and amortization from the calculation, lowering the amount of deductible interest for capital-intensive businesses. The OBBBA permanently amends the calculation for the business interest expense limitation to include depreciation and amortization. By including these expenses in the determination of adjustable taxable income, real estate businesses will generally be able to deduct a larger portion of their business interest expense, increasing cash flow and improving the overall profitability of debt-financed projects. In a higher-interest-rate environment, this change makes borrowing more attractive. The Revival of Commercial Real Estate The OBBBA is undoubtedly positive for the commercial real estate market. By enhancing incentives such as 100% bonus depreciation, LIHTC, fast-track permitting, and opportunity zones, the OBBBA can provide clarity and predictability to investors and developers, ultimately helping to address the affordable housing problem. Meanwhile, the new Qualified Production Property deduction is expected to reinvigorate the industrial market and promote domestic manufacturing. The OBBBA is indeed beautiful, especially for commercial property.
