Tax Reform Highlights: What the One Big Beautiful Bill Act Means for Your Business

July 10, 2025

The One Big Beautiful Bill Act (Pub. L. No. 119-21), signed into law on July 4, 2025, introduces changes to corporate taxation and business incentives through key amendments and new provisions affecting credits and business deductions. These changes aim to encourage domestic manufacturing, reduce reliance on foreign entities and enhance tax efficiency for U.S.-based businesses.

Deductions

• Business interest: Permanently restores the business interest deduction limit to an EBITDA-type calculation for tax years beginning after Dec. 31, 2024.

• Charitable contributions: C corporations now face a minimum contribution floor. Only contributions exceeding 1% of taxable income are deductible, up to a maximum of 10%. This applies to tax years beginning after Dec. 31, 2025.

• Section 179D deduction: The deduction for energy-efficient commercial building property expires for property that begins construction after June 30, 2026.
• Research and development: Permanently allows immediate expensing of domestic research expenses. Foreign research must still be capitalized with a 15-year amortization period. Also allows acceleration of remaining unamortized amounts of previously capitalized research costs incurred in 2022–2024.
• Qualified business income deduction: Permanently extends the current 20% deduction.

Depreciation

• Bonus depreciation: Permanently reinstates 100% expensing of qualified assets for property acquired after Jan. 19, 2025.
• Sec 179 expensing: Increased the amount of qualified property that can be expensed from $1 million to $2.5 million with phaseouts beginning at $4 million for property placed in service after Dec. 31, 2024.
• Qualified production property depreciation: Allows 100% expensing for nonresidential real property used in manufacturing, agriculture or chemical production, or refining activities.  This applies to property placed in service after July 4, 2025, and before Jan. 1, 2031, for construction that begins after Jan. 19, 2025, and before Jan. 1, 2029.

Credits

• Paid Family Medical Leave Credit: Permanently extended and enhanced. Changes affect insurance premiums, eligibility and aggregation rules. Effective for tax years beginning after Dec. 31, 2025.
• FICA Tip Credit: Expanded to include beauty and personal care service industries for tax years beginning after Dec. 31, 2024. Previously limited to taxpayers in the food and beverage industries.
• New Markets Tax Credit: Permanently extended (originally set to expire at the end of 2025).
• New Energy Efficient Home Credit: Eliminated for developers of new energy-efficient homes acquired after June 30, 2026.
• Commercial Clean Vehicle Credit: Eliminated for vehicles acquired after Sept. 30, 2025.
• Clean Electricity Production Credit and Investment Credit: Eliminated for wind and solar facilities placed in service after Dec. 31, 2027, and for non-wind and non-solar facilities after Dec. 31, 2032.

Payroll Provision

• Overtime pay deduction: Individual taxpayers may deduct up to $12,500 ($25,000 for married filing jointly) per year in qualified overtime compensation defined as overtime pay required under Section 7 of the Fair Labor Standards Act of 1938 that is in excess of the regular rate. This is effective for taxable years beginning after Dec. 31, 2024, and before Jan. 1, 2029. Employers must track and report this on Form W-2s.

Miscellaneous Provisions

• Form 1099 information reporting: Increases the threshold to $2,000 (from $600) for calendar years beginning after Dec. 31, 2024. The threshold will be indexed annually for inflation starting in 2026.
• IRC 1202 exclusion: Enhanced to allow noncorporate taxpayers to exclude all or part of the gain from the sale of qualified small business stock. Expanded gain exclusion: 50% for stock held 3 years, 75% for 4 years and 100% for 5 years (previously only 5 years).  Aggregate gross asset limitations and aggregate amount of gain limitations were also expanded.