Summary Overview of The One Big Beautiful Bill
On July 4th, 2025, President Trump signed The One Big Beautiful Bill (OBBB) into law, which passed Congress through the reconciliation process. The legislation includes several tax changes and updates that build upon the Tax Cuts and Jobs Act of 2017, which was passed in Trump’s first term. The major updates include changes to the R&D Tax Credit, expansion of the Section 199a deduction, return of 100% bonus depreciation, increase in the SALT Cap, permanent extension of the New Markets Tax Credit, and much more. To help clients, prospects, and others, Klatzkin has provided a summary of some of the key details below.
Key Business Tax Changes
- Section 174 R&D Expensing – Since 2022, many businesses have been reluctant to conduct a Research and Development (R&D) tax credit study. The reason is that any eligible expenses could no longer be deducted but rather had to be capitalized and amortized over a period of five years (and longer for international companies). The inability to immediately deduct eligible expenses meant that companies had to wait much longer to receive the tax benefit. The OBBB has changed this requirement, allowing companies to immediately deduct such expenses. The change is effective starting January 1, 2025. It is important to note, however, that research conducted outside the U.S. must continue to be capitalized and amortized over a 15-year period.
- Section 174 R&D Expensing Retroactive Relief – Eligible small businesses – those with average gross receipts under $31 million over the past 3 years – can elect to immediately deduct R&D expenses incurred in 2022, 2023, and 2024. Other businesses can still elect a catch-up deduction in 2025 for 2022-2024. The IRS is expected to issue election procedures soon.
- Section 199a Deduction – This popular 20% deduction was originally included in the Tax Cuts and Jobs Act of 2017 to help pass-through entities receive the same tax savings that other businesses received with the original tax rate cuts. The recent update expands the deduction limit phase-in range by increasing the $50,000 qualified business income limit ($100,000 for joint returns) to $75,000 ($150,000 for joint returns). There will also be a new minimum deduction of $400 so eligible businesses will be guaranteed a deduction of no less than $400.
- 100% Bonus Depreciation – Under current regulations, bonus depreciation is currently undergoing a phase-out period with the current year bonus depreciation set at 40%. The temporary change, which was included as part of the Tax Cuts and Jobs Act of 2017, was set to expire soon. However, the OBBB changes this by making 100% bonus depreciation permanent starting in 2025. This depreciation can be taken on qualified assets in the year placed into service. This creates new tax savings and planning opportunities for companies to capture.
- Corporate Charitable Deductions – The OBBB has added a provision allowing companies to claim a new charitable deduction. A business will only be able to claim these incentives when the aggregated deduction amount exceeds 1% of taxable income. This runs concurrently with the existing 10% ceiling. It is important to note that contributions above the ceiling can still be carried forward for five years.
- State and Local Tax Deduction Cap — The SALT deduction cap increases from $10,000 to $40,000 beginning in 2025 and is indexed for inflation. In 2026, the indexed cap will be $40,400. The deduction phases out for taxpayers with an income of over $500,000. Unless Congress acts again, the cap returns to $10,000 in 2030. While the Senate’s draft of the bill proposed limits on SALT cap workarounds such as the passthrough entity tax (PTET), the final law does not include a restriction.
- Manufacturing Incentives – A new provision under Section 168(n) allows 100% expensing of Qualified Production Property, providing a huge boost for U.S.-based production. Qualified production property generally refers to nonresidential real property used as an integral part of a domestic qualified production activity.
- New Market Tax Credits – This tax credit is designed to encourage investment in low-income areas by providing a tax incentive for those investing in Community Development Entities (CDE). These entities then use the capital to fund businesses and projects in disadvantaged communities, sparking economic development. Originally set to expire at the end of the year, the OBBB has made the credit permanent.
- Clean Energy Tax Credits – Many of the clean energy tax credits implemented in the Inflation Reduction Act of 2022, including the Clean Energy Production, Clean Energy Investment, Advanced Manufacturing Production, and the Clean Vehicle Tax Credit, will be phased out early. Most of these incentives will end starting in September 2025 (for clean energy vehicles) while others will expire at the end of 2026.
Contact Us
The changes arising from The One Big Beautiful Bill are comprehensive and the information provided is only a summary overview of the most prominent business tax changes. Given the tax saving opportunities now available, it is essential to consult with a qualified tax advisor to determine how your business may be impacted. If you have questions about the OBBB changes or need assistance with another tax or accounting issue, Klatzkin can help. For additional information call 609-809-9189 or click here to contact us. We look forward to speaking with you soon.