The 2025 “One Big Beautiful Bill Act” (OBBB or BBB) introduces several substantial changes to the
Internal Revenue Code that directly affect business owners. We’ve analyzed four of the most significant
provisions of the Act, focusing on its practical and legal implications for business operations, tax
planning, and compliance.
KEY PROVISIONS
Permanent Full Expensing for Qualified Business Property (Bonus
Depreciation)
The Act makes 100% bonus depreciation for qualified business property a permanent feature of the tax
code. As of now, businesses can immediately deduct the full cost of eligible property placed in service,
rather than depreciating it over several years. This provision applies to most tangible property with a
recovery period of 20 years or less, including machinery, equipment, and certain improvements.
How This Impacts You:
- Immediate expensing improves cash flow and reduces taxable income in the year of purchase.
- Particularly beneficial for capital-intensive businesses and those planning significant equipment or property investments: buying vehicles/heavy equipment; expansion or business realty purchase; refurbishment of existing offices, spaces, structures or infrastructure (computers, software, etc.)
- May incentivize increased capital investment by reducing the after-tax cost of acquiring business assets.
- Some property types remain excluded, and businesses with losses may not fully benefit immediately due to limitations on net operating losses.
Increased Section 179 Expensing Limits
The maximum deduction under Section 179 increases to $2,500,000 per year. The phase-out threshold
was raised to $4,000,000. Both amounts are indexed for inflation. Section 179 allows businesses to
expense the full cost of qualifying property up to the annual limit, with the deduction reduced dollar-
for-dollar by the amount by which total qualifying property placed in service exceeds the phase-out
threshold.
How This Impacts You:
- Expands the ability of small and medium-sized businesses to fully expense investments in equipment, machinery, and certain improvements.
- Simplifies tax compliance by reducing the need for depreciation schedules for many/multiple assets.
- The deduction is limited to taxable income from active trades or businesses, with excess amounts carried forward.
Enhanced Qualified Business Income (QBI) Deduction (Section 199A)
The QBI deduction is now more generous, with the phase-in threshold increased to $75,000 for single
filers and $150,000 for joint filers. A new minimum deduction of $400 is established for active business
income, with inflation adjustments. The deduction remains at up to 20% of qualified business income
from pass-through entities.
How This Impacts You:
- Increases the benefit and accessibility of the QBI deduction for more business owners, especially those at moderate income thresholds.
- The higher phase-in ceiling allows more owners to avoid wage and property limitations on the deduction.
- The minimum deduction provides a baseline benefit for small active businesses.
- The deduction is not available for income from specified service trades or businesses above certain income thresholds and does not reduce self-employment or net investment income tax.
Eased Business Interest Deduction Limitation (Section 163(j))
The limitation on the deductibility of business interest expense is relaxed by permanently restoring the
EBITDA add-back, rather than EBIT, as the basis for the limitation. This allows businesses to deduct
more interest expense, especially those with significant depreciation and amortization.
How This Impacts You:
- Businesses with substantial depreciation and amortization (e.g., manufacturing, real estate) can deduct more interest expense.
- Improves cash flow and reduces the after-tax cost of debt financing.
- May encourage investment and expansion by reducing the tax penalty on borrowing.
- The limitation still applies to large businesses, with exemptions for small businesses under the gross receipts threshold.
Reporting and Compliance Changes
The threshold for requiring information reporting on Forms 1099-MISC/NEC was increased from $600
to $2,000, indexed for inflation. The de minimis threshold for third-party network transactions (e.g.,
payment apps) is restored to $20,000 and 200 transactions. There are also new and expanded
reporting requirements for certain deductions and qualified opportunity funds.
How This Impacts You:
- Reduces the administrative burden of issuing 1099s for small payments.
- Eases compliance for gig economy and small business platforms.
- New reporting requirements for certain deductions may require updated payroll and accounting systems.
- Failure to comply with new reporting requirements can result in penalties.
Summary Table of Key Provisions
CONCLUSION
The OBBB Act of 2025 delivers substantial, permanent tax relief and simplification for business owners. The
Act’s provisions allow for immediate expensing of most business property, expand Section 179 expensing,
enhance the QBI deduction, ease the business interest deduction limitation, and reduce reporting burdens
for small payments and online transactions. Business owners should review their capital investment,
financing, and compliance strategies to maximize the benefits of these changes and ensure adherence to
new reporting rules.
For a detailed review of how these changes may affect your specific business, please contact our office. You can download this in pdf format here.