One Big Beautiful Bill Act: Tax Planning Opportunities for Businesses

In Summary

• The OBBBA reinstates 100% bonus depreciation for qualified property placed in service after January 19, 2025, and significantly increases the Section 179 deduction limit from $1 million to $2.5 million. It also allows for the immediate expensing of domestic Research and Experimental (R&E) costs starting in 2025, which can be applied retroactively for small businesses from 2022 to 2024.
• The Act introduced a powerful incentive by allowing 100% bonus depreciation for Qualified Production Property (QPP), which now includes nonresidential real property like new manufacturing facilities, provided construction begins between January 19, 2025, and January 1, 2029.
• The OBBBA permanently restores the EBITDA-based calculation for the business interest expense deduction ($163(j)), increases the individual SALT deduction cap to $40,000, and makes the Pass-Through Entity Tax (PTET) deduction permanent. Crucially, it sets accelerated hard sunsets for multiple major energy and clean vehicle tax credits, requiring businesses to act quickly to utilize them before their 2025 and 2026 expiration deadlines.

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Signed into law on July 4, 2025, the One Big Beautiful Bill Act (OBBBA) contains numerous favorable tax provisions for businesses. The OBBBA restores 100% bonus depreciation, expands Section 179 expensing, returns Section 174 (Research and Development) to immediate deductions, and sets hard sunsets for multiple energy credits. The key deadlines aren’t December 31—they’re contract dates, construction starts, and placed-in-service cutoffs that often come months earlier. Business owners can unlock six- and seven-figure tax savings in 2025 to 2026, but only with the right timing and planning. Here’s a brief overview of the changes and how to take advantage of these tax savings opportunities. 

Bonus Depreciation and Section 179 Deduction Increases 

Starting in 2025, the OBBBA reinstates 100% bonus depreciation for qualified property acquired and placed in service after January 19, 2025. The OBBBA also increases the Section 179 deduction limit from $1 million to $2.5 million, with a phase-out threshold starting at $4 million for property placed in service after December 31, 2024.  

Organizations can deduct the full cost of eligible assets in the year they’re placed in service, utilizing either Section 179 or bonus depreciation. For instance, a business purchasing $1.2 million of equipment at a 35% tax rate could save about $420,000 in the first year with 100% bonus depreciation compared to only $84,000 under regular depreciation. While both provisions provide significant tax benefits for business owners, they require a thorough understanding of tax law to maximize savings. 

Qualified Production Property Eligible for Bonus Depreciation 

The OBBBA significantly changed how Qualified Production Property (QPP) is treated for tax purposes, creating a powerful new incentive for domestic manufacturing investment. Before the OBBBA, manufacturing buildings were considered non-residential real property and were depreciated over 39 years (bonus depreciation was generally limited to tangible personal property, like equipment, not buildings). 

The OBBBA introduced Section 168(n) of the Internal Revenue Code, which redefined and expanded QPP and allowed for 100% bonus depreciation on qualifying real estate. QPP now includes nonresidential real property (such as manufacturing facilities) used directly in a Qualified Production Activity (QPA). Taxpayers can deduct 100% of the cost of QPP immediately, rather than depreciating it over decades. This applies to new construction and certain unused existing properties. Eligibility requirements include: 

• Construction must begin between January 19, 2025, and January 1, 2029 
• Property must be placed in service before January 1, 2031 
• Must be initially used by the taxpayer (not leased or acquired from a related party) 
• Must be located in the U.S. or its possessions 

Take Advantage of the State-level Pass-Through Entity Tax 

The pass-through entity tax (PTET) deduction refers to the opportunity that many states (currently 36, including Maryland and Virginia) provide for partnerships and S Corporations to pay state income tax on behalf of their partners and shareholders. This workaround allows business owners to fully deduct any state income taxes paid and avoid the individual state and local tax (SALT) deduction limitation. The IRS has allowed this, and OBBBA has made the PTET tax permanent.  

The OBBBA also increased the SALT deduction cap from $10,000 to $40,000 (phased out for high-earning taxpayers and indexed for inflation through 2029). Since the OBBBA retains an individual SALT limitation (although higher for many taxpayers), businesses should continue to take advantage of the PTET tax. 

IRC 174 R&E Expenditures: Amend or Expense Amortization 

Starting in 2022, businesses were required to capitalize direct and indirect research and experimental (R&E) expenditures and amortize them over five years (15 years for foreign expenditures), rather than expensing them directly. Starting in 2025, the OBBBA allows for the permanent and immediate expensing of domestic R&E (foreign R&E must still be amortized over 15 years).  

Small businesses (those with average annual gross receipts of less than $31 million) can apply the change retroactively by amending their 2022-2024 returns for refunds by July 4, 2026, or by choosing to take a catch-up deduction in 2025. Small businesses have one year to file amended returns, or they can take them prospectively in 2025. All businesses, regardless of size, can accelerate remaining amortization on capitalized domestic R&E costs from 2022 to 2024 over one or two years, starting in 2025, by filing a change in accounting method.     

If you’re a small business considering whether to amend or expense R&E amortization, it’s essential to speak with your tax professional, as there are many factors to consider. For example, if you have a partnership with 50 partners and want to go back and amend three years of returns, and all 50 of your partners must go back and amend their returns, you may want to rethink your strategy. On the other hand, if your business has two partners and there’s a significant benefit, amending may be beneficial. If your company incurs substantial R&E costs, considerable planning is required to decide whether to move forward prospectively.  

Business Interest (§163j): Relief in 2025, New Limits in 2026 

The One Big Beautiful Bill Act significantly changed the business interest expense deduction rules under Section 163(j) of the Internal Revenue Code. These changes are effective for tax years beginning after December 31, 2024, and significantly impact how businesses calculate and deduct interest expenses. 

From 2022 to 2024, businesses had to calculate Adjusted Taxable Income (ATI) using an EBIT approach (excluding depreciation, amortization, and depletion), which reduced the amount of deductible interest, especially for capital-intensive businesses. The OBBBA permanently restores the EBITDA (earnings before interest, taxes, depreciation, and amortization)-based calculation of ATI. Businesses can now add back depreciation, amortization, and depletion to taxable income when calculating the 30% limit, increasing the deductible interest for many companies. 

The OBBBA also closes two tax planning gaps. First, multinational groups can no longer include certain foreign earnings from controlled foreign corporations in adjusted taxable income. This change may reduce the amount of deductible interest for companies that previously took advantage of this election. Second, beginning in 2026, interest capitalized into inventory or property will remain classified as interest and still count toward the §163(j) limitation. This ends a strategy some businesses used to sidestep the interest cap. 

Utilize Energy Credits Before Expiration 

The OBBBA has significantly modified or eliminated many renewable energy credits enacted under the Inflation Reduction Act of 2022, especially wind and solar energy provisions. The OBBBA accelerates the phaseout of the Internal Revenue Code (IRC) Section 45Y production tax credit and IRC Section 48E investment tax credit for wind and solar projects, requiring: 

• Construction to begin before July 5, 2026, or  
• The projects to be placed in service before January 1, 2028.  

Section 45Y and Section 48E credits remain available for all other types of projects through 2033, including energy storage. In addition, the five-year cost recovery period for particular solar and wind energy property has been eliminated for property whose construction began after December 31, 2024. Thus, businesses hoping for a five-year depreciation period may now have a 39-year depreciation period for wind and energy property. 

Clean Vehicle Credits 

Many tax credits for new and used electric vehicles (EVs), commercial EVs, EV charging stations, and other alternative fuel vehicles are set to expire, including: 

• Clean vehicle credits under IRC Sections 25E, 3OD, and 45W are eliminated as of September 30, 2025 
• IRC Section 25E previously owned clean vehicle credit is eliminated for vehicles acquired after September 30, 2025 
• IRC Section 30C alternative fuel refueling property credit is eliminated for property placed in service after June 30, 2026 
• IRC Section 45W credit for qualified commercial clean vehicles is eliminated for vehicles acquired after September 30, 2025 
• IRC Section 30D clean vehicle credit is eliminated for vehicles acquired after September 30, 2025 

Energy Efficient Building Incentives 

The following business incentives are being phased out:  

Energy efficient commercial buildings deduction (Section 179D)  

• Available for energy-efficient interior lighting systems, HVAC systems, and building envelopes, up to $5.81 per square foot  
• No previous phase-out date  
• No longer available for buildings where construction begins after June 30, 2026  

New energy-efficient home credit (Section 45L)  

• Up to $5,000 per unit available for new homes and multifamily projects meeting energy efficiency standards  
• Previously scheduled to sunset at the end of 2032  
• No longer available for homes acquired after June 30, 2026 

Additional complex rules limit the ability to claim energy incentive credits for projects owned, controlled, or funded by certain foreign entities. If your business performs any type of development that foreign entities contribute to or own, you may have an issue taking these credits in the future. Businesses heavily invested in or considering the production of clean energy should be aware of how the credits they’re utilizing are affected and take advantage of these tax credits now, before they’re eliminated. 

Review OBBBA State Conformity Provisions 

Taxpayers must carefully analyze their state’s conformity laws and legislative actions to understand the impact of the OBBBA provisions on their tax obligations. Many states will decouple from this. It’s essential to monitor how states respond to this law, and we may need to wait a few months to assess their reactions. You may not actually see a reduction in your state tax, even if you do see a decrease in federal taxes. 

90 Day Implementation Roadmap  

Immediate (30 days): 

• Review 2025–2026 capital expenditures and align contracts with the post-January 19 bonus depreciation rule 
• Document any vehicles acquired by September 30, and plan electric vehicle charging projects early 

Days 31–60: 

• Quantify 2022–2024 R&D, decide to amend versus catch-up, and file method change if accelerating 
• Evaluate QPP facility feasibility and engage cost-segregation professionals 

Days 61–90: 

• Finalize energy project timelines to meet 2026 cutoffs 
• Revisit PTET elections for 2025 

Business Tax Planning Opportunities 

OBBBA’s changes create some of the most valuable business tax opportunities in years, but they’re easy to miss if you treat them like regular year-end planning. Many benefits are tied to signing dates, construction starts, and placed-in-service cutoffs well before December 31, so it’s crucial to act now to take advantage of these opportunities. If you have any questions or require assistance, please don’t hesitate to contact us using the form below.