The One Big Beautiful Bill Act, signed into law on July 4, 2025, introduces sweeping changes to business taxation and operations. With over 35 major provisions affecting everything from capital investments to reporting requirements, understanding these changes could be essential for informed business decision-making. This overview examines the key provisions and their practical implications for business owners.

Qualified Business Income (QBI) Deduction – Section 199A Enhancement

The QBI deduction has been a valuable tax break for pass-through business owners since 2018, but it was set to expire. Section 199A of H.R.1 not only makes it permanent but enhances it.

Key changes under Section 199A:

• The 20% QBI deduction for pass-through entities is now permanent, providing more certainty to long-term planning. Future legislatures could overhaul some of the changes to the tax code under the BBB.
• Income thresholds have increased to $75,000 for single filers and $150,000 for joint filers (up from $50,000 and $100,000, respectively)
• A new minimum deduction of $400 is available for taxpayers with at least $1,000 in qualified business income from active trades or businesses
• These enhanced benefits begin in 2026 and are indexed for inflation

Business owners may want to consider how these permanent changes affect their entity structure decisions and long-term tax planning strategies.

Full Expensing (Bonus Depreciation) – Section 168(k)

Cash flow is king for growing businesses, and immediate expensing of equipment purchases can provides significant advantages over spreading deductions across multiple years.

Section 168(k) of H.R.1 establishes:

• 100% bonus depreciation for qualified business property is now permanent for property acquired and placed in service after January 19, 2025
• Businesses can immediately deduct the full cost of eligible equipment, machinery, and other qualifying property in the year it’s placed in service
• For property placed in service during the first taxable year ending after January 19, 2025, taxpayers may elect to use 40% bonus depreciation if preferred
• The Section 179 expensing limit has increased to $2.5 million, with the phase-out threshold raised to $4 million, both indexed for inflation

The timing of equipment purchases and capital investments may become an important factor in year-end tax planning and cash flow management.

Expensing of Domestic R&D Expenditures – Section 174A

Since 2022, businesses have been required to spread R&D costs over five years, creating cash flow challenges for innovation-focused companies. Section 174A of H.R.1 reverses that challenge problematic change.

Under Section 174A:

• Domestic research and experimental expenditures can now be fully expensed in the year incurred, rather than amortized over five years
• Foreign R&D expenditures must still be amortized over 15 years
• Small businesses with gross receipts of $31 million or less can apply this favorable treatment retroactively to tax years beginning after December 31, 2021
• All taxpayers can elect to accelerate remaining deductions for 2022-2024 R&D expenses over a one- or two-year period

Companies with significant research activities may want to review their expense categorization and consider the potential benefits of retroactive applications or acceleration elections.

Manufacturing Property Incentive – Section 168(n)

This new provision specifically encourages domestic manufacturing by allowing immediate expensing of production facilities, which traditionally had to be depreciated over 39 years.

Section 168(n) of H.R.1 creates:

• 100% immediate expensing for “qualified production property” used in manufacturing, production, or refining activities
• Construction must begin after January 19, 2025, and before January 1, 2029
• Property must be placed in service before January 1, 2031
• This provision encourages domestic manufacturing investment and reshoring operations

The narrow window for this incentive means that manufacturing expansion plans may need to consider these specific timing requirements in their project planning.

Business Interest Deduction Enhancement – Section 163(j)

For businesses that carry debt to finance operations or growth, the ability to deduct interest payments can impact cash flow and profitability.

Section 163(j) modifications in H.R.1:

• The business interest deduction limitation is now permanently based on EBITDA (earnings before interest, taxes, depreciation, and amortization)
• This allows businesses to deduct more interest expense by adding back depreciation and amortization to their income calculation
• The change applies to tax years beginning after December 31, 2024
• Floor plan financing is expanded to include campers and trailers

Capital-intensive businesses and those with significant debt loads may see meaningful improvements in their interest deductibility under this change.

Qualified Small Business Stock (QSBS) Expansion – Section 1202

QSBS can be one of the most powerful tax benefits for startup investors and entrepreneurs, allowing tax-free gains on qualifying small business investments.

Section 1202 enhancements in H.R.1:

• For stock acquired after enactment, a tiered exclusion applies: 50% at 3 years, 75% at 4 years, and 100% at 5 years
• The per-issuer exclusion limit increases from $10 million to $15 million, indexed for inflation after 2027
• The gross assets threshold increases from $50 million to $75 million, also indexed for inflation after 2027
• These changes provide more flexibility and higher caps for startup investors and entrepreneurs

The tiered exclusion structure may influence decisions about exit timing and investment strategies for qualifying businesses.

Enhanced Small Business Benefits – Section 45F

Attracting and retaining quality employees is challenging for many businesses, and enhanced childcare benefits can be a significant differentiator in the job market.

Section 45F modifications in H.R.1:

• The employer child care credit increases from 25% to 40% (up to $500,000 maximum), with small businesses eligible for a 50% credit up to $600,000 maximum
• To claim the full $500,000 credit, a business must spend at least $1.25 million on childcare services; small businesses need $1.2 million in eligible spending for the full $600,000 credit
• An eligible small business is one with gross receipts of $31 million or less (inflation-adjusted) based on 5 years
• Expanded eligibility includes third-party arrangements and joint facilities, making it easier for smaller employers to participate
• Credit amounts are indexed for inflation after 2026, effective for amounts paid after December 31, 2025

The inclusion of third-party arrangements may make these benefits accessible to smaller businesses that previously couldn’t justify the administrative complexity.

Reporting and Compliance Changes

Administrative burden is a real cost for small businesses, and these changes reduce paperwork requirements while maintaining appropriate oversight.

H.R.1 reporting modifications:

• The 1099-MISC/NEC reporting threshold increases from $600 to $2,000, reducing compliance burdens for small businesses
• Third-party payment settlement organizations must issue 1099-K forms only for transactions exceeding $20,000 from more than 200 transactions
• These changes return to pre-2021 levels and are effective starting in 2022 retroactively
• Extended audit periods apply specifically to Employee Retention Credit (ERC) claims, giving the IRS six years (instead of three) to audit ERC claims for 2020-2021 and any ERC claims filed after July 4, 2025

Businesses should note that while reporting requirements are reduced in many areas, certain items now face extended audit periods, which may influence record-keeping practices.

Estate and Gift Tax Changes – Section 2010

For some family business owners, estate planning has been complicated by uncertainty about exemption levels, making it difficult to plan multi-generational transfers.

Section 2010 changes in H.R.1:

• Beginning in 2026, the estate and gift tax exemption increases to $15 million per person ($30 million for married couples)
• The exemption is permanent and indexed for inflation, providing more certainty for business succession planning
• This replaces the scheduled reversion to approximately $7 million that would have occurred without this legislation

Family business succession planning may benefit from the increased certainty around exemption levels and the higher transfer amounts available.

Energy Credit Modifications

The business environment for clean energy investments is shifting rapidly, with accelerated phase-outs affecting planning timelines for various green initiatives. The BBB provisions for energy credit changes could significantly impact business in the electric car and solar power industries.

Energy credit changes in H.R.1:

• Electric vehicle credits under Section 30D end September 30, 2025
• EV charging station credits end June 30, 2026
• Clean electricity production and investment credits for wind and solar continue through December 31, 2027, for qualifying projects
• Clean fuel production tax credits are extended through 2031, while methane emissions fees are postponed for 10 years

The compressed timelines for certain credits may require businesses to accelerate their decision-making processes for fleet electrification and charging infrastructure projects.

Excess Business Losses – Section 461(l)

Section 461(l) in H.R.1 establishes:

• The excess business loss limitation is now permanent for non-corporate taxpayers
• For 2025, the threshold is $626,000 for married couples filing jointly and $313,000 for other filing statuses
• Excess losses continue to be carried forward as net operating losses, subject to the 80% limitation

This permanent limitation may affect tax planning strategies for high-income business owners, particularly those with volatile income patterns.

While the BBB provides several benefits to businesses and could significantly stimulate economic growth, we should also consider the potential downside. The Congressional Budget Office has estimated the BBB will add $3.4 trillion to the national debt over the next decade, sparking concern about the impact to the economy and the strength of the US dollar. Moody’s Ratings recently downgraded the U.S.’s AAA rating, citing doubts about the country’s ability to maintain fiscal discipline.

Implementation Timeline

Immediate Effect (July 4, 2025):

• Enhanced audit provisions
• Various reporting requirement changes

Effective January 19, 2025:

• 100% bonus depreciation for new property (Section 168(k))
• Qualified production property eligibility begins (Section 168(n))

Effective 2025 Tax Years:

• Domestic R&D expense expensing (Section 174A)
• Enhanced business interest deduction (Section 163(j))

Critical Deadlines:

• September 30, 2025: Last day for EV credit eligibility (Section 30D)
• June 30, 2026: EV charging credit phase-out
• December 31, 2027: Wind/solar credit deadline

Effective 2026:

• QBI deduction enhancements (Section 199A)
• Estate tax exemption increase (Section 2010)
• Enhanced child care credit (Section 45F)

Questions About These Changes?

The One Big Beautiful Bill Act represents significant changes that could have an impact on your business. Understanding how these provisions apply to your specific business situation requires careful analysis of your operations, industry, and financial structure.

Whether you have questions about qualifying for specific provisions, timing considerations for equipment purchases, or how these changes fit into your overall financial planning, we’re here to help you understand the landscape.

Ready to discuss how these tax changes might relate to your business planning? Contact LightForce Financial today to schedule a consultation.

Phone: (817) 717-4400
Email: gerald@lightforcefinancial.com
Contact us: https://lightforcefinancial.com/contact-us/

Source: H.R.1 – One Big Beautiful Bill Act, 119th Congress

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