One Big Beautiful Bill Act: What Business Owners Need to Know (2025-2026)

The One Big Beautiful Bill Act (OBBBA), signed into law in July 2025, permanently changed or extended eight tax provisions that directly affect business owners. Several were expiring from the 2017 Tax Cuts and Jobs Act; others were new policy. The result: more certainty, more planning runway, and in some cases — like the retroactive R&D election — a hard deadline that is still open but closing fast.

Summary of OBBBA changes for business owners

1. Permanent 100% bonus depreciation

Under TCJA, 100% bonus depreciation was always meant to phase down: 80% in 2023, 60% in 2024, 40% in 2025 for most property. Businesses purchasing equipment were watching their year-one write-offs shrink each year. OBBBA restored 100% depreciation permanently for property placed in service after January 19, 2025.¹

What qualifies for immediate expensing:

• 5-year MACRS property: computers, technology, certain vehicles
• 7-year MACRS property: office furniture, equipment, most business machinery
• 15-year MACRS property: land improvements, qualified leasehold improvement property
• Qualified film and television production (§181)

Interaction with QBI: Immediate expensing reduces your current-year qualified business income, which reduces your §199A deduction. For owners near the SSTB phaseout threshold, large bonus depreciation in one year can also shift the W-2 wage limitation calculation. Model both effects before front-loading depreciation on a single large asset.

2. §199A QBI deduction — permanent, with a $400 minimum

The 20% pass-through deduction was the largest business tax benefit in the TCJA — and was set to expire December 31, 2025. OBBBA made it permanent. For business owners with S-corps, partnerships, or sole proprietorships, this is a major shift from "plan around an expiration" to "build strategy around a permanent feature."²

2026 parameters (per IRS Rev. Proc. 2025-32):

• 20% deduction on qualified business income
• For specified service trades and businesses (SSTBs): phaseout begins at $403,500 MFJ / $201,750 single
• Full SSTB phaseout at $553,500 MFJ / $351,750 single
• W-2 wage limitation applies above phaseout threshold: deduction capped at the greater of 50% of W-2 wages or 25% W-2 wages + 2.5% of qualified property basis
• New (OBBBA): $400 minimum deduction even if otherwise phased out

The permanence also changes retirement planning for business owners near the SSTB income threshold. Strategies that reduce taxable income — large retirement plan contributions, cost segregation, bonus depreciation — now permanently preserve more QBI deduction, not just a deduction that would have disappeared after 2025. Use the QBI deduction calculator to see what the 20% deduction is worth in your specific situation.

3. QSBS §1202 — $15M exclusion, tiered holding

QSBS was already one of the most valuable tax benefits available to C-corp founders and small business owners. OBBBA made it more valuable — and more accessible to owners who exit before the 5-year mark.³

Old rule (stock issued and sold under prior law): $10M exclusion (or 10× adjusted basis), required 5-year hold for 100% exclusion.

New rule (OBBBA):

• $15M exclusion cap (or 10× adjusted basis, whichever is greater)
• Tiered exclusion by holding period:
  • 3-year hold: 50% of gain excluded from federal tax
  • 4-year hold: 75% of gain excluded from federal tax
  • 5-year hold or more: 100% of gain excluded from federal tax
• $75M gross assets test at time of issuance remains unchanged
• C-corporation requirement remains unchanged
• Excluded industries (health, law, financial services, etc.) remain unchanged
• The non-excluded gain (at the 50% or 75% tiers) is taxed at a 28% alternative rate under IRC §1(h)(4), not the standard 20% LTCG rate

For business owners who had been avoiding C-corp structures because of the 5-year hold requirement, the tiered approach creates new flexibility. A 3-year hold for a 50% exclusion could mean $7.5M of federal tax-free gain on a $15M C-corp exit. See the complete QSBS guide and the QSBS exclusion calculator.

4. Estate and gift exemption — $15M permanent

The TCJA doubled the estate, gift, and GST exemption to roughly $11.2M per person (indexed to $13.99M by 2025). Without OBBBA, that exemption would have sunset back to approximately $7M after December 31, 2025. Business owners who were rushing to use the elevated exemption before it disappeared can now plan more deliberately.⁴

2026 estate planning parameters:

• Federal estate/gift/GST exemption: $15M per person ($30M for married couples)
• Annual gifting exclusion: $19,000 per recipient (2026)
• §7520 hurdle rate: 4.6% (2026) — relevant for GRATs, CLATs, IDGTs
• §2032A special-use valuation for farm/business real property: $1.16M (2026)

For business owners planning family succession, the permanent $15M exemption opens the full toolkit without a countdown:

• Grantor Retained Annuity Trusts (GRATs): "Zeroed out" GRATs can transfer appreciation in excess of the §7520 hurdle to heirs estate-tax free. With a 4.6% hurdle and a growing business, most of the upside escapes.
• Intentionally Defective Grantor Trusts (IDGTs): Sell business interests to a trust in exchange for an installment note. Growth above the AFR accrues to heirs without gift tax.
• Family Limited Partnerships: Valuation discounts of 15-40% on minority interests can stretch the effective use of the $15M exemption significantly.
• Dynasty trusts: GST exemption permanence means multigenerational trusts can shelter wealth from estate tax for 100+ years in states with no rule against perpetuities.

See the estate planning guide and succession planning guide for detailed mechanics.

5. §174A — immediate R&D deductions restored (retroactive deadline July 6)

This is the most time-sensitive OBBBA provision. Under TCJA, starting in 2022, domestic research and experimental costs under §174 had to be capitalized and amortized over 5 years (foreign R&D: 15 years). For any business spending money on product development, software engineering, manufacturing process improvement, or qualifying research, this created a significant cash flow mismatch — you paid the expense in year one but only deducted it 20% per year.⁵

OBBBA created new §174A, which restores immediate deductibility of domestic research and experimental costs for tax years beginning after December 31, 2024. For most calendar-year businesses, this means 2025 and forward are on the better rule.

The retroactive election: Businesses with average gross receipts of $31 million or less over the three prior tax years may be eligible to make a retroactive election — effectively switching their 2022, 2023, and 2024 returns from 5-year amortization to immediate deduction. This could generate significant refunds for companies that were amortizing meaningful R&D costs during those years.

The deadline is July 6, 2026 — less than one week from today. If you believe your business had qualifying R&D expenditures in 2022-2024 and your average gross receipts were $31M or below, call your CPA today. The retroactive election requires filing Form 3115 with a §481(a) catch-up adjustment, and preparation takes time your accountant may not have if you wait past this week.

Related: the §41 R&D tax credit — which can offset payroll taxes for businesses with under $5M in gross receipts — interacts with §174A expensing in ways that require careful coordination. See the R&D tax credit guide for full mechanics.

6. SALT cap raised to $40,400

The $10,000 state and local tax deduction cap from TCJA was particularly painful for business owners in high-tax states paying $30-60K+ per year in state income tax. OBBBA raised the cap to $40,400 for 2026, with a phaseout beginning at $505,000 MAGI (reducing at 30%, with a floor of $10,000).²

What this means for business owners:

• Below $505K MAGI: The full $40,400 SALT deduction is available. If your state income taxes are under $40,400, the cap no longer binds — no need for PTET as a workaround.
• Above $505K MAGI: The cap phases down. At very high incomes, the floor remains $10,000. High-income S-corp and partnership owners in states like California, New York, and New Jersey may still benefit from the pass-through entity tax (PTET) workaround, which shifts the state tax deduction to the entity level and bypasses the individual SALT cap.
• PTET analysis: With a higher SALT cap, the PTET calculation changes. Model your total state tax liability vs. the phased-out SALT deduction before electing PTET. In many cases PTET is still advantageous, but the math is now different. Use the PTET savings calculator.

7. Opportunity Zone 2.0 — rolling deferral for future exits

The original Qualified Opportunity Zone program required investors to deploy capital into a QOF by December 31, 2026 to capture any deferral benefit. After 2026, the old program effectively closes to new investments. OBBBA created OZ 2.0, which applies to most designated opportunity zones going forward:¹

• Rolling 5-year deferral: Invest capital gains into a qualified opportunity fund at any time; hold the QOF investment for 5 years to defer recognition of the original gain
• 10% basis step-up: After the 5-year hold, 10% of the deferred gain is permanently excluded (not just deferred)
• Rural bonus: Rural Qualified Opportunity Funds receive a 30% step-up instead of 10%
• 10-year appreciation exclusion: Gains on the QOF investment itself (appreciation of the opportunity zone investment) remain excludable after a 10-year hold

For business owners who will sell after January 1, 2027, OZ 2.0 provides a structured deferral that didn't exist under the old program's hard cutoff. It's most powerful when combined with other exit strategies — installment sales, QSBS, or ESOP — to manage the total tax bill across multiple years. See the Opportunity Zone guide for the original vs. OZ 2.0 comparison.

8. AMT — higher phaseout threshold, fewer business owners affected

The TCJA temporarily set the AMT exemption phaseout to begin at $500,000 MFJ ($1M under prior law). OBBBA permanently reverted the phaseout threshold to $1M MFJ, with a 50% phaseout rate. The exemption itself is $137,000 MFJ (2026, indexed).²

In practice, this means the AMT exemption survives to much higher income levels before it begins to phase out. Fewer business owners are subject to AMT in 2026 than in 2024. The main AMT exposure remaining for business owners:

• Incentive stock option (ISO) exercises — spread at exercise is an AMT preference item
• Large QSBS exclusions can trigger AMT on the excluded gain (for stock issued before September 28, 2010, only 50% was excluded, creating a 7% effective AMT hit)
• Very high-income pass-through owners with significant timing preferences (accelerated depreciation, tax-exempt interest income)

Additional OBBBA provisions affecting business owners

Charitable deduction floor (new): OBBBA introduced a 0.5% of AGI floor on itemized charitable deductions, with a 35% benefit cap on itemized charitable deductions for high earners. For business owners who use pre-sale charitable strategies — Donor Advised Funds or Charitable Remainder Trusts — this changes the deduction arithmetic. A $1M charitable contribution is no longer always fully deductible dollar-for-dollar; model the floor and cap before committing. See the CRT guide for updated mechanics.

§67(g) permanent repeal: OBBBA permanently repealed the §67(g) miscellaneous itemized deduction, which had been suspended since TCJA. This means W-2 employees can no longer deduct unreimbursed business expenses. For business owners who structure as S-corp employees, this reinforces the importance of accountable plans for home office, vehicle, and other business expenses. See the accountable plan guide.

What business owners should do before year-end 2026