Since its passage and signing, the One Big Beautiful Bill Act (OBBBA) will have an impact on many businesses moving forward. Some of the most impactful provisions will affect depreciation, R&D, and other deductions. Although this legislation deals with much more than tax law, as CPAs, we will only discuss those tax law changes. OBBBA’s tax laws affect individuals, businesses, non-profits and governmental agencies; some affect each of those entities simultaneously. To read about individual tax provisions, read part one of this blog. This second installment will cover some of the provisions of OBBBA that affect businesses.

Part Two: Businesses

Depreciation:

• Bonus depreciation was revised to allow for 100% first year deduction purchased and put in service after January 19, 2025. This change was also made permanent.
• The 179 deduction has been increased from $1,220,000 to $2,500,000 beginning in 2025.
• Introduced a new 100% deduction for qualified real property that is used in manufacturing, production, or refining of tangible, personal property. Construction must begin after December 31, 2024 and the property needs to be put in service before January 1, 2034.

Research and Development: Effective 2025, research and development costs can now be deducted immediately provided that the research is completed in the US, rather than amortizing the costs as in the past. Small business (receipts of less than $31 million) will have the option of accelerating any remaining, unamortized research and development expenditures from years 2022 through 2024.

• Foreign R & D costs must still be amortized.
• As in the past, any Research and Development credits claimed will reduce the Research and Development costs expensed.

Excess Business Loan Deduction: For non-corporate businesses, deductible business losses are limited to $610,000 for MFJ filers and $305,000 for single filers. This provision was set to expire after 2028. It has now been made permanent and for 2025 the amounts will be $626,000 and $313,000.

Business Interest Deduction Limitation Section 163J: Business interest expense, as per the old rule, was limited to 30% of adjusted taxable income (ATI) and currently does not add back depreciation, amortization, and depletion, making the ATI lower and the deduction lower. Beginning in 2025, depreciation, amortization, and depletion will now be added back, increasing the ATI and increasing the deductible amount of interest. Floor interest (applicable to vehicles held for sale or lease) is 100% deductible.

If you have business tax inquiries for our experts, contact us using the button below, or by submitting a form on the “contact us” page of our website. This article does not encompass all provisions of the OBBBA, just some of the key changes that affect a broader range of businesses.

Visit the IRS here, or read the full Act here from the US Congress.

This article was drafted by Bowman tax experts Dave Evans, Amber Schober, Amy Arena, and Alyssa Griffith.