Turning the Page: Understanding the OBBBA’s New Tax Landscape

Current image: Close up image of One Big Beautiful Bill with Glasses

On July 4, 2025, President Trump signed the “One Big Beautiful Bill Act” (OBBBA). The legislation brings notable tax changes for businesses, individuals, and those involved in clean energy projects. Our Tax team has assembled a concise, client-focused overview for business and individual taxpayers of what’s new, who is impacted, and the actions you may want to consider to adapt.

Key Tax Law Changes at a Glance

100% Bonus Depreciation Restored

What’s Changed: Full expensing is now available for qualifying assets placed in service after January 19, 2025. This means businesses can deduct the full cost of these assets in the year they’re acquired, rather than over several years.
Who’s Affected: All businesses acquiring qualifying equipment or property.

Additional Bonus Depreciation for Manufacturing

What’s Changed: Qualified production property (QPP) in the manufacturing sector will receive 100% bonus depreciation through 2032.
Who’s Affected: Domestic manufacturers and supply-chain businesses.

R&D Expensing Made Immediate for U.S. Research

What’s Changed: Domestic research and development costs are now fully deductible under new rules. Companies with capitalized R&D expenses from 2022–2024 can take a catch-up deduction. Small businesses can apply full expensing retroactively for tax years after 2021.
Who’s Affected: Businesses engaged in research and innovation, especially those with recent R&D expenses.

Clean Energy Incentive Changes

What’s Changed: Several clean energy tax credits—including those for energy-efficient buildings and electric vehicles—will terminate for projects starting after June 30, 2026. Some credits for energy production must be claimed sooner, as eligibility ends for projects placed in service after December 31, 2027.
Who’s Affected: Real estate developers, energy companies, and those involved in green energy projects.

Section 179 Expensing Cap Increased

What’s Changed: The Section 179 expensing limit rises to $2.5 million, with the phase-out threshold now at $4 million.
Who’s Affected: Small businesses purchasing qualifying equipment or property.

State and Local Tax (SALT) Deduction Adjustments

What’s Changed: The SALT deduction cap has been increased from $10,000 to $40,000 for most taxpayers, with the benefit phased out for households with adjusted gross income over $500,000. Existing workarounds via pass-through entity taxes remain available in many states.
Who’s Affected: Taxpayers in high-tax states, pass-through business owners, and higher earners.

Other Noteworthy Provisions

Section 899 “Retaliatory Tax” is repealed.
Excess Business Losses: Plans to permanently separate active pass-through losses from other income are not included.
Section 163(j): Deduction limitations are now based on EBITDA, rather than EBIT.
International Tax: GILTI and FDII provisions are tightened, with new terminology.
Affordable Housing: The Low-Income Housing Tax Credit (LIHTC) ceiling is increased.
New Middle-Class Deductions: Deductions are introduced for overtime pay, car loan interest, and tips.

Summary of Key Provision Changes Under the OBBBA

PROVISION	NEW LAW	PRIOR LAW
Bonus Depreciation	100% immediate expensing, made permanent	40% bonus depreciation
R&D Expensing (Section 174)	All U.S. research expenses can be fully deducted in the year incurred (foreign: 15-year rule)	Domestic R&D must be amortized over 5 years
Manufacturing Deductions	Full expensing for specific domestic manufacturing buildings (168(n))	Not available (N/A)
179D Deduction	Expires for projects starting construction after June 30, 2026	Up to $5.81/sq ft for qualifying property
45L Energy Efficient Home Credit	Expires for homes acquired after June 30, 2026	Up to $5,000 per qualifying home
SALT Deduction	Cap increased to $40,000, phased out for incomes above $500,000	$10,000 cap
Section 179 Expensing	Expensing limit is $2.5M with phase-out at $4M; threshold and index reset to 2024 amounts	$1M expensing limit, $2.5M phase-out (2019 base)
PTET (Pass-Through Entity Tax)	Owners can deduct state taxes at entity level, avoiding the $40K SALT cap on their returns	Deduction allowed but subject to $10K SALT cap
199A Deduction (Pass-throughs)	20% deduction is now permanent	20% deduction, not permanent
163(j) Interest Deduction	Limit based on EBITDA (earnings before interest, taxes, depreciation, and amortization)	EBIT (earnings before interest & taxes) standard
Clean Electricity Credit (48E/45Y)	Ends tax credits for projects not starting within 12 months after new law, or placed after 2027	Credits available for projects in service by 2032
Advanced Manufacturing Credit	35% credit	25% credit
Estate Tax Exemption	$15M per person ($30M for couples), inflation-adjusted, permanent	$13.99M per person, inflation-adjusted; could decrease after 2026
Standard Deduction	$15,750 (single), $31,500 (married), inflation-indexed	$15,000 (single), $30,000 (married)
Child Tax Credit	$2,200 per child, inflation-adjusted, some portion refundable	$2,000 per child
No Tax on Tips & Overtime	Up to $25,000 in qualified tips and OT pay is deductible	Not available
Auto Loan Interest Deduction	Deduct up to $10,000 in interest for new U.S.-built cars (with income limits)	Not available
Adoption Credit	$5,000 of the credit is refundable, inflation-adjusted	Up to $17,280, non-refundable
Senior Deduction	$6,000 extra for those 65+ (single: $150k income cap, married: $300k cap)	$1,600 extra for age 65+
1099-K Threshold	Reporting required for $20,000 or more and 200+ transactions	Reporting required at $2,500

Next Steps for Businesses and Individuals

Review Your Plans: If you’re considering large purchases, R&D, or real estate projects, these changes may affect the timing and potential related deductions.
Assess Cash Flow: Immediate write-offs and changes to credit availability could impact your tax payments and financial planning.
Communicate Internally: Make sure stakeholders and teams are aware of how these updates might influence your strategies.
Plan for Changes: Some provisions require elections or amended filings—be proactive in consulting with your advisor.

Get in Touch

It is natural to have questions about these big changes. Our tax team is ready to help discuss your specific situation. We’re here to help you identify the best steps forward for your business or family. Contact your advisor or contact our helpful team for assistance.