Understanding the Impact of New Tax Reforms
The One Big Beautiful Bill Act introduces sweeping federal tax reforms reminiscent of the monumental changes of the 2017 Tax Cuts and Jobs Act. As with any new legislation, the complexities can feel overwhelming for business owners trying to understand the nuances and their practical implications. This guide is here to help unravel these changes, providing clear takeaways for those seeking to navigate the new landscape.
Bonus Depreciation Returns
Beginning January 20, 2025, businesses can permanently expense 100% of qualified capital assets. This includes manufacturing buildings placed in service before 2031, allowing companies to make substantial capital investments with favorable tax treatment.
Business Interest Deduction Expansion
Excitingly, the EBITDA-based (Earnings Before Interest, Taxes, Depreciation, and Amortization—a measure of a company’s operating performance before non-cash charges and financing costs) limit on business interest deductions makes a return, offering larger deductions. With new guidance on capitalization interactions, businesses can better navigate their interest expenses.
Qualified Business Income (QBI) Deduction
The popular 20% QBI deduction is now permanent, with phase-ins expanding to $75,000 for single filers and $150,000 for joint filers. This is a welcome development, offering more predictable tax planning for small businesses.
R&D Expensing Reinstated
Domestic research costs are once again fully deductible, offering relief to companies that invest heavily in innovation. Furthermore, accelerated recovery of 2022–2024 capitalized R&D is allowed, keeping American businesses competitive. However, note that foreign R&D must still be amortized.
Charitable Deduction Limits
For corporations, a new 1% floor for giving has been set, complemented by a 0.5% Adjusted Gross Income floor for individuals itemizing deductions. These measures encourage giving while maintaining a practical tax shield for philanthropic activities.
Excise Tax on Remittances
The legislation introduces a 1% excise tax on certain cash-based transfers abroad. However, transfers made via bank or card methods remain exempt, minimizing administrative burden.
Meal Deduction Changes
In 2026, the on-site employer-provided meal deductions will be limited, although certain fishing businesses will benefit from specific carve-outs.
Qualified Small Business Stock (QSB) Updates
QSB stock issued after July 4, 2025, will fall under a new tiered gain exclusion schedule. The per-issuer cap increases to $15 million with a new $75 million threshold for QSB stock, enhancing opportunities for investment in smaller enterprises.
Proactive Planning is Key
While the One Big Beautiful Bill Act undoubtedly introduces significant changes, proactive planning and a thorough review of your current tax strategy can mitigate potential surprises.
Still confused? We encourage business owners to reach out to us. We are tax professionals who will ensure operations remain optimized and compliant under the new regulations. Contact us now.
