The One Big Beautiful Bill Act (OBBBA), enacted in July 2025, represents the most sweeping overhaul of U.S. tax law since the Tax Cuts and Jobs Act. For business owners, the OBBBA delivers a mix of tax relief, new incentives, and compliance challenges. Below are the top five to ten changes most relevant to business owners, along with their practical implications for tax planning and compliance in 2026 and beyond.
- Permanent 100% Bonus Depreciation for Capital Investments
- What Changed: The OBBBA makes permanent the ability for businesses to immediately deduct 100% of the cost of most tangible personal property (with a recovery period of 20 years or less) and certain other qualified property placed in service after January 19, 2025. This includes a new category—“qualified production property”—which allows 100% expensing for certain nonresidential real property used in manufacturing, production, or refining, provided construction begins after January 19, 2025, and before January 1, 2029, and the property is placed in service before January 1, 2031. Leased property and property acquired from related parties are excluded.
- Impact: Businesses can accelerate deductions for capital expenditures, improving cash flow and making it more affordable to invest in equipment, machinery, and qualifying real estate. This change encourages capital investment and may influence decisions to purchase rather than lease assets.
- Immediate Expensing of Domestic R&D Expenditures
- What Changed: The OBBBA restores and makes permanent the immediate deduction for domestic research and experimental (R&E) expenditures, reversing the prior requirement to amortize these costs over five years. This applies to amounts paid or incurred in tax years beginning after December 31, 2024. Foreign R&E expenses must still be amortized over 15 years.
- Impact: Companies investing in innovation, product development, or process improvements can now deduct these costs in the year incurred, reducing taxable income and improving cash flow. This change is especially beneficial for technology, manufacturing, and other R&D-intensive industries.
- Permanent and Enhanced Qualified Business Income (QBI) Deduction
- What Changed: The 20% QBI deduction for owners of pass-through entities (partnerships, S corporations, LLCs, and sole proprietorships) is made permanent. The OBBBA also increases the phase-in threshold for the wage and property limitation and introduces a $400 minimum deduction for active business income, indexed for inflation.
- Impact: Pass-through business owners can continue to benefit from a lower effective tax rate on qualified business income, supporting reinvestment and growth. The minimum deduction ensures even small business owners with modest profits can benefit.
- More Favorable Business Interest Deduction Limitation
- What Changed: The OBBBA restores the EBITDA-based calculation for the Section 163(j) business interest deduction limitation, allowing businesses to deduct up to 30% of adjusted taxable income before interest, taxes, depreciation, and amortization. This is a return to the more generous pre-2022 rule.
- Impact: Businesses that rely on debt financing, especially capital-intensive companies, can deduct more interest expense, reducing taxable income and the after-tax cost of borrowing.
- Expansion of Qualified Small Business Stock (QSBS) Exclusion
- What Changed: For stock acquired after July 4, 2025, the OBBBA increases the per-issuer gain exclusion cap from $10 million to $15 million (indexed for inflation), raises the gross asset test for issuers from $50 million to $75 million, and introduces phased gain exclusions: 50% after three years, 75% after four years, and 100% after five years of holding.
- Impact: C corporation owners, founders, and investors can exclude more gain from federal tax when selling QSBS, making equity investment in qualifying small businesses more attractive and tax-efficient. This is a significant planning opportunity for startups and growth companies.
- Changes to Clean Energy and Sustainability Incentives
- What Changed: The OBBBA accelerates the phase-out and imposes new restrictions on many clean energy credits, including the Section 45Y production tax credit and Section 48E investment tax credit for wind and solar. Projects must begin construction by July 5, 2026, or be placed in service by December 31, 2027, to qualify. There are also new domestic content and anti-foreign-influence requirements, and several credits for clean vehicles and energy-efficient property are terminated or curtailed.
- Impact: Businesses in the renewable energy sector must act quickly to secure credits before deadlines and ensure compliance with new sourcing and ownership rules. Companies should review project timelines, supply chains, and financing structures to preserve eligibility.
- Expanded and Permanent Paid Family and Medical Leave Credit
- What Changed: The paid family and medical leave (PFML) credit is made permanent and expanded to include insurance premiums and employer-funded leave in excess of state mandates. The minimum employment period for eligibility is reduced from one year to six months.
- Impact: More employers can claim the credit, including those in states with mandatory PFML programs, increasing the federal tax benefit for offering paid leave.
- New Floor on Charitable Contribution Deductions for Corporations
- What Changed: For tax years beginning after December 31, 2025, corporations may only deduct charitable contributions that exceed 1% of taxable income, up to the existing 10% cap. Disallowed contributions can only be carried forward from years in which the 10% ceiling is exceeded.
- Impact: Corporations must plan charitable giving to meet the new floor and maximize deductions, potentially by “stacking” contributions in a single year.
- International Tax Overhaul: GILTI, FDII, and CFC Rules
- What Changed: The OBBBA renames and modifies the global intangible low-taxed income (GILTI) regime as “net CFC tested income” (NCTI) and the foreign-derived intangible income (FDII) regime as “foreign-derived deduction eligible income” (FDDEI). The Section 250 deduction for NCTI is reduced to 40% (12.6% effective rate), and for FDDEI to 33.34% (14% effective rate). The foreign tax credit haircut for NCTI is reduced from 20% to 10%. The CFC look-through rule is made permanent, and downward attribution rules are restored with new targeted anti-abuse provisions .
- Impact: Multinational businesses face a more predictable, but still complex, international tax regime. The changes generally reduce U.S. tax on foreign earnings and provide more certainty for cross-border planning, but require careful review of entity structures and income sourcing.
- Compliance and Reporting Changes
- What Changed: The OBBBA introduces new information reporting requirements for certain deductions (e.g., tips, overtime, car loan interest), expands penalties for noncompliance, and requires electronic filing for more returns. There are also new rules for reporting and substantiating eligibility for energy credits and opportunity zone investments.
- Impact: Businesses must update payroll, HR, and accounting systems to comply with new reporting standards and avoid penalties. Early engagement with tax advisors and technology providers is recommended to ensure readiness for 2026 and beyond.
Conclusion
The OBBBA offers substantial tax relief and new incentives for business owners, but also introduces new compliance obligations and planning considerations. To maximize benefits and minimize risks, business owners should:
- Review capital investment and R&D plans to take advantage of immediate expensing.
- Reassess entity structure and compensation strategies in light of permanent QBI deductions and expanded QSBS exclusions.
- Evaluate debt financing in light of the restored EBITDA-based interest deduction.
- Act quickly on clean energy projects to secure expiring credits and comply with new restrictions.
- Update compliance systems for new reporting and deduction requirements.
Contact us and staying abreast of IRS guidance will be essential as the new law is implemented.
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