In July 2025, Congress passed and the President signed the One Big Beautiful Bill Act (OBBBA), a significant federal tax law that brings meaningful changes for business owners. Building on the framework of the Tax Cuts and Jobs Act (TCJA), the legislation restores, extends, and expands several business-focused tax provisions that were previously set to phase down or expire.
Below are the key provisions of OBBBA that directly impact business owners, along with planning considerations to keep in mind for 2025 and beyond.
1. Restoration of 100% Bonus Depreciation
One of the most impactful changes for businesses is the restoration of 100% bonus depreciation.
Under prior law, bonus depreciation was scheduled to continue phasing down, limiting the portion of asset costs that could be deducted in the year an asset was placed into service. The OBBBA restores full expensing (100%) for qualified property placed in service beginning in 2025.
What this means for business owners:
- Qualifying assets – including equipment, machinery, furniture, and certain software – may be fully deducted in the year they are placed into service
- Immediate expensing can significantly improve cash flow and reduce current-year taxable income
- Unlike Section 179, bonus depreciation is not subject to a dollar cap
Planning consideration:
Many states do not fully conform to federal bonus depreciation rules. Businesses should evaluate both federal and state tax impacts before making major capital investments.
2. Expanded Section 179 Expensing Limits
The OBBBA also expands Section 179 expensing, providing additional flexibility for small and mid-sized businesses.
For 2025:
- The maximum Section 179 deduction increases to $2.5 million
- The deduction begins to phase out once total qualifying asset purchases exceed $4 million
- Once purchases exceed $6.5 million, the Section 179 deduction is fully phased out
Section 179 differs from bonus depreciation in that it:
- Is subject to taxable income limitations
- Is often more favorable for businesses operating in states that do not conform to federal bonus depreciation
Planning consideration:
Determining the optimal mix of Section 179 and bonus depreciation requires careful modeling to maximize tax efficiency across both federal and state returns.
3. R&D Tax Incentives: Immediate Expensing and Credits
A major benefit for innovation-focused businesses under the OBBBA is the restoration of immediate expensing for domestic research and development (R&D) costs, combined with continued access to the federal R&D tax credit.
Under prior rules, businesses were required to capitalize and amortize R&D costs over:
- 5 years for domestic research
- 15 years for foreign research
The OBBBA allows businesses to once again:
- Fully deduct domestic R&D costs in the year incurred, beginning with tax years starting after December 31, 2024
At the same time, the R&D tax credit remains available, providing a dollar-for-dollar reduction of federal tax liability for qualified research activities. When properly coordinated, businesses may benefit from both immediate expensing and tax credits related to R&D investments.
Why this matters for business owners:
- Faster recovery of R&D costs improves cash flow
- Reduced timing differences between economic costs and tax deductions
- Stronger incentives for businesses investing in innovation, technology, and product development
Foreign R&D expenses generally remain subject to longer amortization periods under current law.
Planning consideration:
Proper documentation of qualified research activities, wages, supplies, and contractor costs is essential to maximizing both deductions and credits and supporting the position in the event of IRS review.
4. Extension of the Qualified Business Income (QBI) Deduction for Pass-Through Businesses
Another key provision for business owners is the extension of the Qualified Business Income (QBI) deduction under Section 199A.
Section 199A allows eligible owners of pass-through businesses — including S corporations, partnerships, and sole proprietorships — to deduct up to 20% of qualified business income, subject to income levels and other limitations. Under prior law, this deduction was scheduled to expire after 2025, creating uncertainty for long-term tax planning.
The OBBBA extends the availability of the QBI deduction, giving business owners greater predictability when making decisions related to entity structure, compensation strategies, and capital investments.
Why this matters for business owners:
- The QBI deduction can significantly reduce the effective tax rate on pass-through income
- Eligibility and deduction amounts are influenced by W-2 wages paid by the business and investment in qualifying assets
- The deduction remains a central factor when evaluating pass-through taxation versus C-corporation structures
Planning consideration:
Because the QBI rules are complex and highly fact-specific, business owners should periodically review compensation levels, asset purchases, and entity structure to ensure they are positioned to maximize the deduction.
Key Takeaways for Business Owners
The One Big Beautiful Bill Act delivers meaningful tax planning opportunities by:
- Restoring 100% bonus depreciation
- Expanding Section 179 expensing
- Reinstating immediate expensing of domestic R&D costs, while preserving the R&D tax credit
- Extending the Qualified Business Income deduction for pass-through businesses
These provisions can significantly reduce taxable income and improve cash flow — but only when paired with proactive planning and careful consideration of federal and state tax rules.
How Rohloff Associates Can Help
At Rohloff Associates, we partner with business owners to:
- Optimize depreciation and expensing strategies
- Identify and document qualifying R&D activities
- Coordinate federal and state tax planning decisions
- Align tax strategies with long-term business goals
If you’d like guidance on how these changes apply to your business, our team is here to help you navigate the new law with clarity and confidence.
