The One Big Beautiful Bill Act (OBBBA) brings broad changes that will affect businesses of all types—family-owned companies, professional services firms, and large corporations alike.
The law touches everything from pass-through income and depreciation to employee benefits and international tax rules. In addition to new opportunities for tax planning, the OBBBA also prevented significant tax increases that were set to take effect on 1/1/2026. Additionally, the rates from the Tax Cuts and Jobs Act were made permanent.
Every business should review the new rules, model potential impacts, and update tax strategies accordingly.
Here are the highlights.
Key Takeaways
- Major tax hikes avoided: The OBBBA prevents the significant business tax increases that were scheduled to begin on January 1, 2026.
- Lower rates preserved: Businesses continue to benefit from the lower tax rates originally introduced under the TCJA.
- Pass-through deductions remain: The 20% Qualified Business Income (QBI) deduction and the state passthrough entity (PTE) tax deduction both remain in place, providing ongoing relief for owners of S corporations, partnerships, and LLCs.
- Return of bonus depreciation: The law reinstates 100% bonus depreciation and permanently expands Section 179 expensing limits, allowing businesses to fully deduct the cost of new equipment and property.
- Green energy incentives sunset: Credits for electric vehicles, chargers, and other energy-related projects begin to phase out between 2025 and 2027.
- Expanded credits and deductions: Several business incentives, including those for R&D and employee benefits, increase to support reinvestment and growth.
Tax Rates
One of the most attention-grabbing aspects of the OBBBA was its potential impact on business taxes. While the law does not change the federal corporate income tax rate for C-corporations, adjustments to pass-through entity rules could reduce the effective tax liability of many businesses, depending on their structure and activities.
- C-Corporations: The federal corporate income tax rate remains a flat 21%, unchanged by OBBBA.
- Pass-Through Entities (S-corporations, partnerships, or LLCs): The OBBBA makes the 20% QBI deduction permanent for many pass-through entities, bringing some long-term certainty to business owners. It also expands the phase-in ranges (single filers from $50,000 up to $75,000; joint filers from $100,000 up to $150,000). This helps more businesses remain eligible for some or all of the QBI benefit. Additionally, a new minimum deduction of $400 is available for qualifying business income. The phase-in range increases and minimum QBI deduction applies beginning in the 2026 tax year.
OBBBA does not impact the continued viability of PTE regimes which are intended as a work-around to the federal SALT cap with respect to business owners’ state and local income taxes imposed on the pass-through entities’ income.
What this means for you: If you operate as a pass-through, structure decisions matter more than ever. Consult your advisor to see whether continuing with your current structure still maximizes your tax benefit under these new thresholds.
Business Deductions and Credits
The OBBBA makes several changes to common deductions and credits that directly affect business owners’ bottom lines.
- Research & Development (R&D): The OBBBA restores immediate expensing of domestic R&D costs. However, expensing may reduce eligibility for the R&D tax credit, so weighing the options is essential.
- Business interest expense limitation is back to being based on 30% of EBITDA instead of 30% of EBIT. This should allow more businesses to fully deduct their interest expense while still taking advantage of bonus depreciation.
- Green energy credits winding down
- Credits for new, used and commercial electric vehicles all expire on 9/30/2025
- Credit for electric vehicle chargers expires 6/30/2026
- Energy efficient commercial buildings deduction expires for projects beginning construction after 6/30/2026
- Clean electricity investment and clean electricity production credits end for projects placed in service after 12/31/2027
- Meals and Entertainment: – Employee meals provided on-site for the benefit of the employer will be 100% nondeductible beginning in 2026. They were previously 50% deductible.
What this means for you: Businesses should investigate whether to expense or amortize R&D
Depreciation & Capital Investment
If you’re planning to purchase equipment, vehicles, or property, the OBBBA includes important changes to how you write off those investments.
- 100% Bonus Depreciation: The bill reintroduces 100% bonus depreciation for qualified property placed in service after Jan. 19, 2025. This means you can deduct the entire cost of eligible assets upfront.
- Section 179 Expensing: The Section 179 deduction limit is now raised to $2.5 million, with the phaseout threshold beginning at $4 million. This provision applies to property placed in service after Dec. 31, 2024, and covers qualifying property such as equipment, machinery, and production facilities.
What this means for you: If you’re planning major capital investments, the timing of purchases is crucial and will impact cash flow and tax savings.
Estate Planning
The OBBBA also delivers certainty for estate and succession planning. Provisions from the Tax Cuts and Jobs Act that were set to expire at the end of 2025 have been made permanent, eliminating the sharp drop in exemptions that many business owners were rushing to plan around. The estate tax exemption is now increased to $15 million ($30 million for married couples splitting gifts), indexed for inflation, and the step-up in basis remains intact. While it is still wise to address estate planning as soon as possible, the risk of a sudden exemption decrease on January 1, 2026, is no longer on the table.
What this means for you: If you are considering succession planning or transfers of ownership, you now have more time and higher exemption levels to work with. Take advantage of today’s favorable rules to protect your business and family, and consult your advisor to design a strategy that maximizes long-term benefits.
Employee Benefits & Payroll
The OBBBA also adjusts how certain benefits and payroll-related items are treated.
- Student Loans: Employers can now continue to pay or reimburse up to $5,250 per employee per year toward student loans on a tax-free basis. This exclusion becomes permanent starting in 2026 and the amount will be adjusted for inflation.
- Retirement Plans: The OBBBA slightly increases contribution limits for retirement plans. Defined contribution limits have increased from $69,000 in 2024 to $70,000 in 2025.
- Payroll Tax Credits: OBBBA makes the tax credit for offering Paid Family and Medical Leave (PFML) permanent. Starting in 2026, employers can choose between a credit based on a percentage of wages paid during leave (up to 25%), or a credit tied to premiums paid for PFML insurance.
- No Tax on OT and No Tax on Tips: The OBBBA includes provisions to reduce taxes on overtime pay and tips which are both subject to limitations and phase-outs based on amount and adjusted gross income. The IRS has released proposed guidance with a list of occupations that qualify for the tips deduction.
Statute of limitations on ERC claims for 3rd and 4th quarters of 2021 was increased to 6 years from the date that the ERC claim was filed. There is no change to the statue of limitations on ERC claims for earlier periods.
What this means for you: These updates give you powerful tools to boost benefits packages and attract and retain talent. Plan ahead for student loan reimbursements, PFML credit modeling, and retirement contributions to get the best tax advantages.
1099 Reporting
- Information reporting (MISC, NEC): Starting in 2026, the dollar threshold for information reporting increased from $600 to $2,000. The amount will be adjusted for inflation after 2025.
- De minimis payments by third parties (K): The original threshold for third-party settlement payment reporting has been reinstated.
- Gross payments of $20,000 or more AND more than 200 transactions.
What this means for you: The increased 1099 reporting thresholds under OBBBA will reduce the administrative burden for many small businesses, as they will no longer receive or issue forms for smaller transactions.
Take Charge of Your Business Tax Strategy
The OBBBA is broad and complex, touching nearly every aspect of business taxation. Companies should be able to find new opportunities to reduce their tax burden. What’s certain is that every business should review its strategy now.
CBM can help you navigate the changes, from entity choice and capital investments to employee benefits and international rules, so you don’t miss out on valuable savings. Connect with us today to optimize your tax strategy under OBBBA.
