Changes in Business Taxation: Deductions, Credits and New Provisions Business Owners Should Be Aware Of
The One Big Beautiful Bill Act (“OBBBA”), enacted July 4, 2025, provides opportunities for business tax optimization. From enhanced depreciation provisions to variations in reporting requirements, these changes affect all business owners in some way or another. Whether a business operates as a sole proprietor, a multi-facility operation, or something in between, these are some of the changes to be aware of.
Enhanced Depreciation Provisions
Increased § 179 Expensing – I.R.C. § 179 offers tax deductions to eligible business owners for qualifying business purchases, such as machinery and equipment. Prior to the OBBBA, up to $1 million of these qualifying business purchases were deductible in the year the purchases were put into service, rather than depreciating over time. This deduction cap was further reduced by the amount the property exceeded $2.5 million. Under the OBBBA the dollar limitation increased from $1 million to $2.5 million, and this amount is now subject to reductions for amounts exceeding $4 million, rather than $2.5 million.
Domestic Research and Development Deduction – Previously, research and development expenditures were amortized over a five-year period. The OBBBA allows business owners to immediately deduct 100% of any and all qualifying domestic research or experimental expenditures in the year in which they were incurred.
Manufacturing and Business Property – This new allowance under the OBBBA permits taxpayers to deduct 100% of a company’s adjusted basis in qualified production property in the first year, rather than depreciating the property over time.
Small Businesses and Pass-through Entities
Qualified Small Business Stock (”QSBS”) – In general, the QSBS rules are intended to encourage investment in qualifying small businesses by allowing tax-free realization on some or all of the gains from the sale of Qualified Small Business Stock. The OBBBA increases the amount taxpayers can exclude from their capital gains on the sale of QSBS. Previously, taxpayers could exclude the greater of $10 million or 10 times the cost basis from their capital gains but can now exclude the greater of $15 million or 10 times the cost basis.
Qualified Business Income (“QBI”) Deduction – The QBI Deduction was created under the Tax Cuts and Jobs Act of 2017, allowing eligible self-employed individuals and small-business owners to claim a 20% income deduction from a qualified trade or business. While the OBBBA does not change deduction amount, it makes the QBI Deduction permanent, ensuring individuals and small businesses can continue to rely on the deduction.
Business with Employees and Independent Contractors
Forms 1099-NEC and 1099-MISC – The OBBBA increased the reporting threshold for independent contractors from $600 to $2,000. While independent contractors should still report all income received, this may lighten the administrative burden on businesses contracting small jobs out to third parties.
Paid Family and Medical Leave Act – The Paid Family and Medical Leave Act, which previously allowed businesses to credit up to 25% of the wages paid to employees on leave, is now permanent and expands the credit to include certain money paid for family leave premiums.
As always, changes in the tax code bring about a variety of questions and considerations: What do these provisions mean for a business? To what extent should a company utilize these new or accelerated deductions? Is a company’s current structure bringing about its desired outcomes? The answers to these questions depend largely on a company’s goals, a company’s business plans (i.e., whether there are plans to sell a business in the near future), and the specific operations of the company.
For questions about these changes or related issues, contact Rachel E. Keathley at 513.629.9489 or rekeathley@strausstroy.com or Marshall K. Dosker at 513.768.9713 or mkdosker@strausstroy.com. Both Rachel and Marshall are licensed in Ohio and Kentucky.
