Understanding the New Tax Terrain

As any business owner knows, navigating new federal legislation is no small feat. The One Big Beautiful Bill Act introduces significant tax reforms, building upon the 2017 Tax Cuts and Jobs Act. This legislation can feel overwhelming, but understanding these changes is crucial for maintaining compliance and optimizing your tax strategy.

Increased Opportunities for Bonus Depreciation

One of the most notable updates is the permanent allowance for businesses to expense 100% of qualified capital assets purchased after January 20, 2025. This includes buildings used for manufacturing, which are placed in service before 2031, providing a significant boon to capital-intensive businesses.

Expanding Business Interest Deductions

The EBITDA-based limitation on business interest deductions has returned, offering larger deductions for eligible businesses. Additionally, guidance on interactions with capitalization is provided, which can alter financial planning for many businesses.

R&D Costs and Other Key Tax Reforms

The act reinstates the full deductibility of domestic research costs, with an accelerated recovery for capitalized R&D expenses from 2022-2024. However, foreign R&D costs must still be amortized. The Qualified Business Income (QBI) Deduction also receives a permanent extension, with expanded phase-in limits to $75,000 for single filers and $150,000 for joint filers.

Charitable and Meal Deduction Adjustments

Corporations will now encounter a new 1% floor for charitable giving deductions, while individuals itemizing deductions face a 0.5% AGI floor. Meal deduction limits, affecting on-site employer-provided meals, will take effect in 2026, with specific exceptions for certain fishing businesses.

Changes to Moving Expense and REIT Holdings

The moving expense exclusion is permanently repealed for most except active-duty military. Concurrently, the limit on taxable REIT subsidiary holdings will rise from 20% to 25% starting in 2026.

New Landscape for Qualified Small Business Stock

Qualified Small Business Stock sees updates with a new tiered gain exclusion schedule, a heightened $15M per-issuer cap, and an increased $75M threshold for gross assets, effective for stock issued after July 4, 2025.

Additional Tax Implications

The IRS now has expanded authority and a longer statute of limitations for erroneous Employee Retention Tax Credit (ERTC) claims. The Disaster Loss Relief from the TCJA is made permanent, covering state-declared disaster losses. Meanwhile, Opportunity Zone updates bring enhanced incentives, revised definitions, and new reporting requirements starting in 2027.

Addressing Excise Taxes and Energy Credits

A new 1% excise tax on certain international money transfers is introduced, with exemptions for bank and card transfers. Energy credits face reductions, affecting Clean Electricity Production and Investment Credits.

A Call to Action

The One Big Beautiful Bill Act marks substantial shifts in tax policy that require careful attention. By engaging in proactive planning, businesses can mitigate surprises and adapt to these sweeping changes. Review your business's tax strategy with a professional to ensure compliance and optimize your approach under the new rules.