How the New Tax Law Affects Your Business

President Trump has signed the One Big Beautiful Bill Act (OBBBA) into law on July 4, bringing sweeping tax changes for businesses. The legislation builds on key provisions from the 2017 Tax Cuts and Jobs Act (TCJA), while introducing several new benefits aimed at reducing business tax burdens and encouraging investment, manufacturing, and innovation. 

The following highlights the new or modified provisions but is not an exhaustive list.

100% bonus depreciation is back

Under prior law, bonus depreciation was scheduled to phase out, reaching 0% by 2027. The new law restores 100% bonus depreciation for eligible property placed in service on or after January 19, 2025. This change allows businesses to fully deduct the cost of qualifying equipment and other assets in the year of purchase, substantially improving cash flow. The section 179 expensing provision limit is boosted to $2.5 million, indexed for inflation, with a phase-out beginning at $4 million for the cost of qualifying property.

Additionally, the definition of qualified property is expanded to include certain production-related property, but only for property beginning construction after January 25, 2025 and placed in service before January 1, 2031.

Qualified small business stock

The updated rules for Qualified Small Business Stock (QSBS) under Section 1202 offer expanded tax benefits for investors. Now, capital gains on QSBS can be excluded on a tiered basis: 50% for stock held over three years, 75% after four years, and a full 100% exclusion after five years. These changes apply to stock issued or acquired after the law takes effect.

The per-issuer gain cap increases from $10 million to $15 million, with inflation adjustments starting in 2027. Additionally, companies can now qualify as small businesses with up to $75 million in gross assets (up from $50 million), also indexed to inflation beginning in 2027. 

Expanded R&D expensing

Domestic research and development costs incurred beginning after December 31, 2024 can now be fully expensed rather than amortized. Additionally, the expanded rules allow for immediate expensing of any domestic research costs. This temporarily reverses the TCJA provision that required R&D expenses to be spread over five years. Businesses must still comply with documentation and accounting method requirements, including attaching a whitepaper statement to returns. Further guidance from treasury is expected in regards to implementation.

Interest limitation calculation reverts to EBITDA

Another important shift: the new law returns the business interest deduction limitation to an EBITDA-based calculation for tax years beginning after December 31, 2024. Previously, the calculation was basically based on EBIT, but now with the law change, businesses can add back Depreciation and Amortization to the interest limitation calculation, thus potentially increasing the deductible amount of interest expense.

The new rule requires businesses to calculate the interest deduction limit before applying any rules that require interest to be capitalized, except in two specific cases: interest related to straddles (IRC 263(g)) and self-produced property (IRC 263A(f)). This change significantly reduces planning opportunities that previously allowed businesses to capitalize interest into inventory, property, or accounts receivable under provisions like IRC 266 or IRC 263A. In short, businesses will have less flexibility to shift interest expenses to the balance sheet in order to preserve deductibility.

Reforms to international taxation

Under the new rules for multinational businesses, the Section 250 deduction now allows a 40% deduction for GILTI—renamed Net CFC Tested Income (NCTI)—and a 33.34% deduction for FDII, now called Foreign-Derived Deduction Eligible Income (FDDEI). The prior benefit of the "net deemed tangible income return," which reduced GILTI and FDII, has been eliminated. The BEAT (Base Erosion and Anti-Abuse Tax) rate also increases to 10.5%. 

Additionally, businesses face tighter limits on using deductions to offset foreign income: only deductions directly tied to NCTI may be used for the foreign tax credit, and FDDEI can no longer be reduced by interest or R&D expenses, which narrows the potential tax benefits.

Other notable business tax law changes

• Establishes a 1% floor on corporate charitable deductions

• Makes the 20% passthrough entity deduction permanent

• Limits disallowance of on-premises meal deductions starting in 2026

• Makes the excess business loss provisions permanent

• Terminates many of the clean energy tax incentives previously introduced by the Inflation Reduction Act

Check in with your tax advisor today!

The new tax law significantly enhances many of the TCJA’s most business-focused provisions, while adding new incentives aimed at capital investment, research, and manufacturing. Whether you own a small local business or operate internationally, these updates may offer new opportunities for savings and planning.