2025 Business Tax Changes Under the One Big Beautiful Bill Act: What You Need to Know
On July 4, 2025, President Trump signed the One Big Beautiful Bill Act (OBBBA) into law. This sweeping reconciliation package introduces significant federal tax changes for businesses, individuals, and international taxpayers.
This article highlights the most important 2025 business tax changes business owners need to know to prepare for the upcoming tax year. Additional IRS guidance is expected and will clarify reporting and compliance obligations.
Key Business Tax Provisions
Qualified Business Income (QBI) Deduction
The 20% QBI deduction is made permanent, offering continued tax savings for owners of pass-through entities and other qualifying businesses.
Bonus Depreciation
100% bonus depreciation is reinstated for qualified property placed in service after January 19, 2025. This allows businesses to fully deduct eligible asset costs in the year of acquisition.
Section 179 Expensing
Effective for tax years starting after December 31, 2024, the Section 179 expensing limit increases to $2.5 million with a $4 million phaseout threshold. Both will be indexed for inflation beginning in 2026.
Research and Experimental (R&E) Expenditures
Businesses may immediately deduct domestic R&E expenses paid or incurred in 2025. R&E expenses for research conducted outside the U.S. must continue to be capitalized and amortized over 15 years.
Excess Business Loss Limitation
This limitation is made permanent for tax years starting after December 31, 2024. Existing loss carryforward rules remain unchanged.
Business Interest Deduction
Interest expense limitations will now be based on EBITDA (earnings before interest, taxes, depreciation, and amortization), rather than EBIT, beginning in 2025.
Changes to FDII and GILTI Deductions
Starting in 2026, deduction percentages are reduced to:
- FDII: 33.34%
- GILTI: 40%
Form 1099-K Reporting Threshold
Reporting thresholds return to pre-2022 rules: reporting is required only if total transactions exceed $20,000 and transaction count exceeds 200.
General Form 1099 Reporting Threshold
In 2026, the service reporting threshold will increase to $2,000 per year (up from $600) and be indexed for inflation starting in 2027. The $600 threshold still applies for 2025.
Opportunity Zones
Opportunity Zone incentives are made permanent, with changes that narrow the definition of “low-income community.” These updates take effect in 2027.
Clean Energy and IRS Credits
Several clean energy credits from the Inflation Reduction Act have been terminated. For full details, refer to previous IRS guidance and communications.
Final Thoughts
The One Big Beautiful Bill Act introduces a wide range of business tax changes that will affect planning strategies, deductions, and compliance. Business owners should begin evaluating the impact of these provisions now to make informed financial decisions.
Further IRS guidance is expected and will provide additional clarity. Staying informed will be essential to maximizing benefits and ensuring compliance in the 2025 tax year.
Need help understanding how these tax changes apply to your business? Schedule a consultation with Berndt CPA today and get expert guidance tailored to your needs.
