New opportunities and critical updates for business owners
Running a privately-held business means keeping a sharp eye on the evolving tax landscape—and the recently passed “One Big Beautiful Bill Act” (OBBBA or the Act) brings a sweeping set of changes. From bonus depreciation to new reporting thresholds to energy incentive changes, it’s crucial for your business to understand this legislation to benefit from tax planning and saving opportunities.
Below is an overview of key tax provisions that could impact your business.
Bonus depreciation: The Act permanently extends the Sec. 168 additional first-year (bonus) depreciation deduction. The allowance is increased to 100% for property acquired and placed in service on or after January 19, 2025, as well as for specified plants planted or grafted on or after January 19, 2025.
Sec. 179 expensing: The Act increases the maximum amount a taxpayer may expense under Sec. 179 to $2.5 million, reduced by the amount by which the cost of qualifying property exceeds $4 million.
Research and development expenses: The OBBBA allows taxpayers to immediately deduct domestic research or experimental expenditures paid or incurred in tax years beginning after December 31, 2024. However, research or experimental expenditures attributable to research that is conducted outside the United States will continue to be required to be capitalized and amortized over 15 years under Sec. 174.
Small business taxpayers with average annual gross receipts of $31 million or less will generally be permitted to apply this change retroactively to tax years beginning after December 31, 2021. And all taxpayers that made domestic research or experimental expenditures after December 31, 2021, and before January 1, 2025, will be permitted to elect to accelerate the remaining deductions for those expenditures over a one- or two-year period.
Limitation on business interest: The OBBBA reinstates the EBITDA limitation under Sec. 163(j) for tax years beginning after December 31, 2024. Therefore, for purposes of the Sec. 163(j) interest deduction limitation for these years, adjusted taxable income would be computed without regard to the deduction for depreciation, amortization, or depletion. The Act would also modify the definition of “motor vehicle” to allow interest on floor plan financing for certain trailers and campers to be deductible.
Qualified small business stock: The Act increases the Sec. 1202 exclusion for gain from qualified small business stock. For qualified small business stock acquired after the date of enactment of the OBBBA and held for at least four years, the percentage of gain excluded from gross income will rise from 50% to 75%. If it is held for five years or more, the exclusion percentage will go up to 100%.
Excess business losses: OBBBA makes Sec. 461(l)(1) limitation on excess business losses of noncorporate taxpayers permanent. It was scheduled to expire after 2028.
Farmland sales: The Act adds a new Sec. 1062 that allows income tax resulting from the sale of farmland to a qualified farmer to be paid in four annual installments. This is a new provision.
Charitable Contributions: Businesses can deduct charitable contributions only if the total equals at least 1% of their taxable income, with a maximum deduction capped at 10% annually. Any disallowed deductions can be carried forward for up to five years.
Clean energy incentives
A significant number of clean energy tax incentives are set to expire under the provisions of OBBBA.
| Section | Credit/Deduction Name | Termination Date |
|---|---|---|
| 25E | Previously owned clean vehicle credit | After September 30, 2025 |
| 30D | Clean vehicle credit | For vehicles acquired after September 30, 2025 |
| 45W | Qualified commercial clean vehicle credit | After September 30, 2025 |
| 30C | Alternative fuel vehicle refueling credit | After June 30, 2026 |
| 25C | Energy-efficient home improvement credit | After December 31, 2025 |
| 25D | Residential clean energy credit | For expenditures made after December 31, 2025 |
| 179D | Energy-efficient commercial buildings deduction | For property the construction of which begins after June 30, 2026 |
| 45L | New energy-efficient home credit | After June 30, 2026 |
| 45V | Clean hydrogen production credit | After January 1, 2028 |
| 6426(k) | Sustainable aviation fuel credit | After September 30, 2025 |
| Provision | Details | Termination Date | Extension Date | Additional Notes |
|---|---|---|---|---|
| Sec. 168(e)(3)(B)(vi) | Cost recovery for certain energy property and qualified clean energy facilities, property, and technology | After December 31, 2025 (energy property); after date of enactment (qualified clean energy facilities, property, and technology) | ||
| Sec. 45Y clean electricity production credit | Terminated for wind and solar facilities placed in service | After December 31, 2027 | ||
| Sec. 48E clean electricity investment credit | Terminated for wind and solar facilities placed in service | After December 31, 2027 | ||
| Sec. 45Z clean fuel production credit | Extended | Through 2029 | Prohibitions on use of foreign feedstocks |
Opportunity zones and community incentives
Opportunity zones: The Act makes opportunity zones permanent but with several changes, including narrowing the definition of “low-income community.” The changes would generally take effect January 1, 2027.
New Markets Tax Credit: The Act makes the Sec. 45D New Markets Tax Credit permanent.
Construction and manufacturing incentives
Advanced manufacturing investment credit: Under the OBBBA, the advanced manufacturing investment credit rate increases from 25% to 35%, effective for property placed in service after December 31, 2025.
Percentage-of-completion method: The Act provides an exception to the Sec. 460(e) requirement to use the percentage-of-completion accounting method for certain residential construction contracts entered into after the date of the OBBBA’s enactment.
Special depreciation allowance for qualified production property: The Act allows an additional first-year depreciation deduction equal to 100% of the adjusted basis of “qualified production property.” Qualified production property is generally nonresidential real property used in manufacturing.
Excess business losses: The Act makes Sec. 461(l)(1) limitation on excess business losses of noncorporate taxpayers permanent. It was scheduled to expire after 2028.
Employer provisions
Employer-provided child care credit: OBBBA increases the amount of qualified child care expenses taken into account for purposes of the Sec. 45F employer-provided child care credit from 25% to 40%. The maximum amount of the credit increases from $150,000 to $500,000 ($600,000 for eligible small businesses) and will be adjusted for inflation.
Paid family and medical leave credit: Under the OBBBA, Sec. 45S is amended to make the employer credit for paid family and medical leave permanent.
SSN requirements: The Act imposes an SSN requirement for claiming an American opportunity or lifetime learning credit under Sec. 25A.
No tax on tips: OBBBA provides a temporary deduction of up to $25,000 for qualified tips received by an individual in an occupation that customarily and regularly receives tips. The deduction will be allowed for both employees receiving a Form W-2, Wage and Tax Statement, and independent contractors who receive Form 1099-K, Payment Card and Third Party Network Transactions, or Form 1099-NEC, Nonemployee Compensation, or who report tips on Form 4317, Social Security and Medicare Tax on Unreported Tip Income. This temporary deduction will be available for tax years 2025 through 2028. A transition rule will allow employers required to furnish statements enumerating an individual’s tips for tax year 2025 to use “any reasonable method” to estimate designated tip amounts.
The Act also extends the Sec. 45B credit for a portion of employer Social Security taxes paid with respect to employee cash tips to certain beauty service businesses.
No tax on overtime: OBBBA defines qualified overtime compensation as overtime compensation paid to an individual required under Section 7 of the Fair Labor Standards Act of 1938 that is in excess of the regular rate (as used in that section) at which the individual is employed. Overtime deductions would only be allowed for qualified overtime compensation if the total amount of qualified overtime compensation is reported separately on Form W-2 (or Form 1099, if the worker is not an employee). This temporary deduction will be available for tax years 2025 through 2028.
Trump accounts: OBBBA provides Trump accounts, a form of individual retirement account (IRA) under Sec. 408 for the exclusive benefit of individuals under 18. Contributions can only be made in calendar years before the beneficiary turns 18. Trump accounts will have to be designated as such when they are set up, and the OBBBA does not allow Trump account contributions until 12 months after the date of enactment of the OBBBA.
Under the OBBBA, Treasury can set up Trump accounts for individuals that it identifies as eligible and for which no Trump account has already been created.
Eligible investments in Trump accounts would generally be mutual funds and indexed ETFs. Contributions (other than qualified rollover contributions) will be capped at $5,000 a year (adjusted for inflation after 2027). State, local, and tribal governments and charitable organizations could make “general funding contributions,” which would be contributions made to a specified qualified class of Trump account beneficiaries. Qualified classes include beneficiaries under the age of 18, and the general funding contribution can specify geographical areas or specific birth years of beneficiaries whose accounts will receive the contributions.
The Act creates a new employee benefit where employers may contribute up to $2,500 pear year (indexed) into employee or dependents Trump accounts on a tax-free basis. The $5,000 contribution limit does still apply.
Administrative provisions and excise taxes
Third-party network transaction reporting threshold: The Act reverts to the prior rule for Form 1099-K reporting, under which a third-party settlement organization is required to report, unless the aggregate value of third-party network transactions with respect to a participating payee for the year exceeds $20,000 and the aggregate number of such transactions with respect to a participating payee exceeds 200. The threshold had been phasing down and was scheduled to be $600 starting next year.
Form 1099 reporting threshold: The Act increases the information-reporting threshold for certain payments to persons engaged in a trade or business and payments of remuneration for services to $2,000 in a calendar year (from $600), with the threshold amount to be indexed annually for inflation in calendar years after 2026.
Remittance transfer tax: The Act imposes a 1% tax on “remittance transfers,” imposed on the sender. A remittance transfer for these purposes is a transfer of cash, a money order, a cashier’s check, or similar physical instrument. It does not include funds withdrawn from an account held with a financial institution or charged to a credit or debit card.
Under Section 919(g) of the Electronic Fund Transfer Act, a remittance transfer is an electronic transfer of funds requested by a sender to a designated recipient that is initiated by a remittance transfer provider. A remittance transfer provider is any person or financial institution that provides remittance transfers for consumers in the normal course of its business, whether or not the consumer holds an account with the financial institution.
Employee retention credit enforcement: The Act requires employee retention credit (ERC) promoters to comply with due diligence requirements with respect to a taxpayer’s eligibility for (or the amount of) an ERC. The Act applies a $1,000 penalty for each failure to comply. It also extends the penalty for excessive refund claims to employment tax refund claims. It also prevents the IRS from issuing any additional unpaid claims under Sec. 3134, unless a claim for a credit or refund was filed on or before January 31, 2024.
Next steps for business owners
OBBBA ushers in new opportunities—and complexities—for privately-held businesses. With enhanced and permanent credits, expanded deduction ceilings, and shifts in compliance and reporting, now is the time to review your business’s tax strategies and long-term plans.
- Meet with your tax advisor or CPA to tailor these new rules to your unique business goals.
- Take advantage of time-limited energy incentives before they expire.
- Use bumped-up expensing limits to modernize equipment and facilities.
- Evaluate your accounting methods and reporting systems to stay compliant and capture new benefits.
Change is coming fast—make sure your privately-held business is prepared to thrive under the new law. This is an ideal time to consult your Keiter Opportunity Advisor. Email | Call: 804.747.0000
Stay tuned for more details on business tax planning opportunities and updates as the IRS releases guidance.
