OBBBA makes significant changes to business tax rules, and we are here to help break it down for you. Below are some of the most impactful business tax provisions and how they might benefit your organization.
- Research & Development (R&D) Expensing
OBBBA restores full deductions for domestic research costs while foreign R&D remains at 15-year amortization under Sec. 174. Small businesses may have the option to apply this change retroactively for tax years 2022 through 2024 by filing amended returns by July 4, 2026. It also allows taxpayers to accelerate their remaining Sec. 174 deductions.
- Business Interest Limitation (Sec. 163j)
OBBBA reinstates the EBITDA limitation for tax years beginning after December 31, 2024. Currently, amortization, depreciation and depletion are excluded from adjusted taxable income calculations. This change will increase the limitation allowing for more substantial interest deductions.
- 100% Bonus Depreciation
The bonus depreciation allowance is increased to 100% for property acquired and placed in service on or after January 19, 2025. Businesses may permanently deduct the entire cost of qualified production property including buildings used in manufacturing, refining or similar activities constructed after January 19, 2025 and before January 1, 2029.
- Sec. 179, Enhanced Small Business Expensing
OBBBA increases the maximum amount a business may expense under Sec 179 to $2.5 million and increases the phaseout limit to $4 million, indexed for inflation.
- Section 199A Qualified Business Income Deduction (QBI)
The law makes the qualified business income deduction permanent and keeps the deduction rate at 20%.
These five provisions are only a small portion of the Act. We anticipate the IRS and other agencies will issue further guidance over the weeks and months ahead.
The tax professionals at AGH will continue to provide updates as more details emerge.
Executive Vice President
Tax Services
Shawn leads the firm’s tax group and serves on AGH’s board of directors. In addition to enhancing business performance to minimize tax consequences, he has extensive experience in mergers and acquisitions, international tax and business structuring. Shawn has public and private experience in the fields of tax and accounting and works frequently with clients in the manufacturing, automotive, wholesale distribution, real estate development and construction industries.
A certified public accountant, Shawn is a member of the American Institute of Certified Public Accountants, the Kansas Society of Certified Public Accountants (KSCPA) and chairs the KSCPA Committee on Taxation.
NOTE: Any advice contained in this material is not intended or written to be tax advice, and cannot be relied upon as such, nor can it be used for the purpose of avoiding tax penalties that may be imposed by the IRS or states, or promoting, marketing or recommending to another party any transaction or matter addressed herein.