Dear Business Owners,
As a trusted partner in navigating the intricate world of taxes and accounting, we acknowledge that new federal legislation can often feel overwhelming. The "One Big Beautiful Bill Act" introduces significant tax reforms aimed at building upon the 2017 Tax Cuts and Jobs Act. Our goal is to distill these sweeping changes into key takeaways, helping you to understand how this affects your business.
Enhanced Deductions and Depreciation
Bonus Depreciation Returns:
In a move that supports capital investment, businesses can now permanently expense 100% of qualified capital assets acquired from January 20, 2025. This includes manufacturing buildings placed in service before 2031, which offers significant benefits to those expanding their infrastructure.
Business Interest Deduction Expansion:
The return of the EBITDA-based limit provides larger deductions, crucial for businesses leveraging debt. Additionally, new guidance on capitalization interactions ensures clarity in calculating these deductions to maximize benefits.
Deduction Adjustments and Expensive Reinstatements
R&D Expensing Reinstated:
Domestic research costs are fully deductible, allowing immediate recovery for innovative enterprises. Moreover, accelerated recovery for 2022-2024 capitalized R&D costs is permitted, although foreign R&D must still be amortized.
Qualified Business Income (QBI) Deduction:
The 20% QBI deduction is now a permanent fixture, with phase-ins expanded to $75,000 for single filers and $150,000 for joint filers, offering favorable tax planning opportunities for eligible pass-through entities.
Other Notable Tax Changes
Charitable Deduction Limits:
A new 1% floor on corporate giving and a 0.5% AGI floor for individual donations ensure that charitable contributions remain an essential component of a balanced tax plan.
Meal Deduction Changes:
While deductions for on-site employer-provided meals will be limited in 2026, a specific carve-out exists for certain fishing businesses—prompting a review of meal policies for affected enterprises.
Structural and Enforcement Updates
Energy Credit Reductions:
As the phase-out or elimination of credits like the Clean Electricity Production and Investment Credits unfolds, businesses will need to reassess energy project feasibility and budgets accordingly.
ERTC Enforcement Expansion:
The IRS now has increased enforcement authority concerning erroneous ERTC claims—an essential reminder to maintain diligent record-keeping and compliance with all provisions.
The One Big Beautiful Bill Act introduces a host of tax reforms with sweeping changes affecting various aspects of business taxation. While these changes may initially seem daunting, proactive tax planning can mitigate any unwelcome surprises. We encourage you to review your tax strategy with a professional to ensure compliance and optimization under the new rules. In this evolving landscape, having a trusted CPA can make all the difference.
