Journal of Financial Planning: October 2025
NOTE: Please be aware that the audio version, created with Amazon Polly, may contain mispronunciations.
Randy Gardner, J.D., LL.M, CPA, RLP, CFP®, AEP (Distinguished), is the founder of Goals Gap Planning, LLC and the Gardner Foundation.
Julie Welch, CPA/PFS, CFP®, AEP (Distinguished), is the managing shareholder of Meara Welch Browne, P.C., an accounting firm in the Kansas City area.
They are co-authors of 101 Tax Saving Ideas, 11th Edition.
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The One Big Beautiful Bill Act (OBBBA) was signed into law on July 4, 2025, after significant effort over the previous months by the House and Senate to arrive at an agreement on provisions to be included in the massive legislation. In July, we covered the key provisions affecting individuals. This month we are highlighting the key tax provisions affecting businesses.
Changes Taking Effect in 2025
Bonus Depreciation
The OBBBA reinstates 100 percent bonus depreciation for new or used tangible personal property acquired and placed in service after January 19, 2025, and before January 1, 2030. Without this change the bonus depreciation rate would have been 40 percent of the cost of the property in 2025. Taxpayers who have already made purchases planning to use the 40 percent rate may elect to use 40 percent first-year bonus depreciation in 2025. For 2025, taxpayers will have several options for deducting costs of eligible property. When purchasing $50,000 of eligible five-year business equipment in 2025 after January 19, generally there are three options: expense the full $50,000 under OBBBA; elect to expense the entire $50,000 under Section 179 if taxable income allows; or elect to apply 40 percent bonus depreciation ($20,000) along with depreciating the remaining 60 percent ($30,000), for a total deduction of $26,000 ($20,000 bonus + $6,000 MACRS). These choices let a business optimize the first-year deduction based on the business income and tax strategy.
Section 179 Immediate Expensing of Property
The OBBBA increases the Section 179 expense limitation to $2.5 million reduced by the amount by which the cost of qualifying property exceeds $4 million, effective for years beginning after December 31, 2024.
The C Corporation Tax Rate
The OBBBA retains the 21 percent corporate tax rate. This rate was made permanent in the Tax Cuts and Jobs Act (TCJA) and will not sunset in 2026. There was extensive congressional debate about whether to retain the low rate. In his presidential campaign, President Donald J. Trump mentioned reducing the corporate tax rate to 15 percent for domestic corporations by re-enacting the domestic production activities deduction, which expired in 2017. This re-enactment did not occur in the OBBBA, but it could still be considered by Congress.
Qualified Business Income (QBI) Deduction
The OBBBA extends the QBI deduction permanently at a 20 percent rate, with a minimum deduction of $400 (indexed for inflation after 2026) for those with at least $1,000 of QBI from active businesses in which they materially participate, beginning in 2025. The QBI deduction is still available for specified service trades or businesses (SSTBs) providing personal services in fields like law, healthcare, accounting, financial advising, and consulting and, to the taxpayers’ advantage, the OBBBA expands the deduction limit phase-in range for SSTBs and other entities subject to the wage and investment limitation to $150,000 joint and $75,000 single (up from $100,000 joint and $50,000 single).
Deduction For Domestic R&E Expenditures
The OBBBA reinstates the immediate expensing of domestic R&E expenditures, giving businesses the choice of immediately expensing or amortizing the expense for years beginning after December 31, 2024. Since years beginning after December 31, 2021, businesses had been required to capitalize and amortize R&E expenditures. Unamortized amounts capitalized in years beginning after December 31, 2021, and before January 1, 2025, can be deducted over a one- or two-year period at the taxpayer’s option. Small taxpayers (with average annual gross receipts of $31 million or less) have an additional option to file amended returns and be permitted retroactive application to years beginning after December 31, 2021, as long as the election is made before July 5, 2026.
Rev. Proc. 2025-28, published August 29, 2025, provides IRS guidance on handling elections, making accounting method changes, and filing amended returns. The revenue procedure allows for claiming the correct deductions on originally filed and superseded 2024 returns.
Example: A business that incurred and capitalized $600,000 of R&E expenditures ($200,000 annually) during the affected years would have amortized $180,000 of the costs by December 31, 2024, leaving $420,000 in unamortized costs. The business can choose to deduct the entire $420,000 in 2025 or spread the deduction by deducting $210,000 in both 2025 and 2026. If the business qualifies as a small business, it can elect to file amended returns to retroactively deduct $100,000 for 2022, $140,000 for 2023, and $180,000 for 2024, provided the election is made before July 5, 2026.
Noncorporate Excess Business Losses
The OBBBA makes permanent the disallowance of deductions for noncorporate excess business losses. This provision was originally set to expire after 2028. The OBBBA also modifies the indexing years for the inflation adjustment calculation effective for years beginning after December 31, 2025. For 2025, the excess business loss threshold (which was in place before OBBBA) is $313,000 for single filers or $626,000 for joint filers. When the aggregate business deductions exceed these limits, the excess amount cannot be deducted in the current year, and, instead, it is disallowed and carried forward as a net operating loss carryforward.
Qualified Production Property Deduction
The OBBBA creates a 100 percent bonus depreciation deduction for qualified production property (generally nonresidential real property used in manufacturing) placed in service after July 4, 2025, and before 2031. This provision enables companies investing in U.S. production facilities to immediately deduct the full cost of such qualified property, encouraging onshoring and capital investment in manufacturing.
Section 1202 Stock
The OBBBA revises the current 100 percent exclusion for qualified small business stock (Section 1202 stock) held over five years to an exclusion from gross income of 50 percent of gains from the sale of Section 1202 stock held for at least three years, 75 percent for at least four years, and 100 percent for at least five years for stock acquired after July 4, 2025. The exclusion limit is also increased from $10,000,000 to $15,000,000, effective July 4, 2025, adjusted for inflation for years beginning after 2026.
Form 1099-K Rules
The OBBBA restores the previous threshold for third-party settlement organizations to issue Form 1099-K only when the payee receives over $20,000 and the aggregate number of transactions exceeds 200, effective as if included in the American Rescue Plan Act of 2021.
Installment Sales to Qualified Farmers
The OBBBA enacts an election for installment tax payments over four years for sales of farmland to a qualified farmer effective for sales in years beginning after July 4, 2025. This provision is designed to encourage farmland to stay in the hands of farmers rather than being sold for development or other non-agricultural uses by reducing the immediate tax burden on such sales.
The State and Local Tax (SALT) Limitation and Pass-Through Entities Tax (PTET) Workaround
The OBBBA raises the SALT cap from $10,000 to $40,000 from 2025 through 2029 while maintaining the tax planning strategy used by business owners who pay state taxes through PTET to maximize state tax deductions at the entity level. These changes will benefit advisers and clients who have been limited by the SALT limitation since 2018. The $40,000 SALT limit will increase by 1 percent annually through 2029 before reverting to $10,000 in 2030. These increases will allow more taxpayers to itemize deductions rather than using the standard deduction, particularly if the non-SALT itemized deductions, such as mortgage interest and charitable contributions, are substantial.
Taxpayers with modified adjusted gross income (MAGI) below $500,000 ($250,000 for married filing separately) may deduct up to $40,000 ($20,000 if married filing separately) of their state and local income taxes, real estate taxes, and personal property taxes. If the taxpayer’s income exceeds these MAGI limits, the $40,000 ($20,000 if married filing separately) limit is phased down at the rate of 30 percent of every dollar of income above the threshold. For example, if a client’s income is $520,000, they are $20,000 over the threshold, and their SALT deduction limit is reduced by $6,000 (30 percent of $20,000), leaving up to $34,000 ($40,000 − $6,000) as a potential deduction. This phasedown continues until the deduction limit reaches a minimum of $10,000 at $600,000 ($300,000 for married filing separately) of income. The deduction limit cannot be reduced below $10,000 regardless of income level.
For business owners of pass-through entities (partnerships and S corporations), the PTET survives under OBBBA! Contrary to some expectations, the new law did not eliminate this strategy for payment of state income taxes. In many states, business owners in pass-throughs can elect for the entity to pay state and local income tax at the entity level. These taxes are deductible by the entity for federal tax purposes and reduce the flow-through income taxed to the business owner personally. This treatment allows the effective deduction of state and local taxes without being subject to the federal SALT limitations, saving the owner significant federal tax.
For example, a Kansas S corporation manufacturing company with $2 million of pre-tax income elects to pay the Kansas PTET at 5.7 percent, resulting in $114,000 (0.057 × $2 million) in Kansas tax at the entity level. The business owner is then taxed federally on only $1,886,000 ($2,000,000 − $114,000), not $2 million. The $114,000 is not counted as state and local tax on the individual’s income tax return. It is deducted by the business, reducing taxable income for the owner who, in this example, is at the top marginal federal rate of 37 percent, resulting in $42,180 (0.37 × $114,000) federal savings on this amount. Additionally, the business owner may still deduct up to $10,000 of other state and local taxes, such as real estate tax, personal property tax, or state income tax on other income if itemizing deductions.
Changes Taking Effect in 2026
Business Interest Expense Deduction
The OBBBA reinstates the earnings before interest, taxes, depreciation, and amortization (EBITDA) limitation (which favorably disregards the deductions allowable for depreciation, amortization, and depletion) in the calculation of adjusted taxable income in determining the business interest deduction limitation permanently for years beginning after December 31, 2025. Since 2021, the depreciation and amortization deductions were not allowed, meaning businesses were more likely to be subject to the limitation.
Charitable Contributions
The OBBBA reduces the charitable contribution deduction for C corporations by 1 percent of the corporation’s taxable income, effective for years beginning after December 31, 2025. The charitable contribution deduction cannot exceed the current 10 percent of taxable income limit. If a C corporation has taxable income of $100,000 before deducting charitable contributions and makes $7,500 of charitable contributions, $1,000 of the charitable contributions are not deductible, and the remaining $6,500 ($7,500 – $1,000) can be deducted in full since $6,500 is less than $10,000 (10 percent of the corporation’s taxable income).
Employer-Provided Meals
The OBBBA enacts an exception to the scheduled 2026 disallowance of deductions for employer-provided meals and de minimis food and beverage fringe benefits (such as snacks and coffee provided to employees), allowing a 100 percent deduction for meals provided to employees after December 31, 2025, by restaurants and businesses in parts of the Alaskan fishing industry.
Dependent Care Assistance Program
The OBBBA increases dependent care assistance program contributions to $7,500 ($3,750 married separate), up from $5,000 ($2,500 married separate), for years beginning after December 31, 2025.
Employer Payments of Student Loans
The OBBBA extends and makes permanent the $5,250 student loan repayment exclusion, ensuring employer-paid student loan assistance remains tax-free to employees beyond 2025. The OBBBA also adds an annual inflation adjustment to the $5,250 limit for tax years after December 31, 2026.
Opportunity Zones
The OBBBA permanently extends the Opportunity Zone benefits of a five-year gain deferral and 10 percent basis step-up after five years for gains invested after December 31, 2026.
Clean Electricity Production Credit
The OBBBA terminates the clean electricity production credit for wind and solar facilities placed in service after December 31, 2027, and the electricity investment credit for wind and solar facilities for construction beginning after July 4, 2026.
Information Reporting
The OBBBA increases the information-reporting threshold for certain payments for services from $600 to $2,000, indexed annually after 2026, effective for payments made after December 31, 2025.
Foreign Tax Changes
The OBBBA changed terminology, tweaked tax rates, and revised the structure of several international taxes.
Global Intangible Low-Taxed Income (GILTI)
The tax on global intangible low-taxed income (GILTI) is now on net controlled foreign corporation (CFC) tested income. GILTI, which was created to prevent U.S. companies from shifting profits to low-tax countries where they had no significant business assets, required U.S. shareholders of a CFC to pay U.S. federal income tax on otherwise active foreign earnings, even if those profits are not brought back to the United States. The OBBBA permanently sets the deduction rate at 40 percent, eliminates the 10 percent return exclusion for tangible (depreciable) assets, and increases the foreign tax credit that can be used to 90 percent for foreign income taxes paid.
The Foreign-Derived Intangible Income (FDII)
The deduction for foreign-derived intangible income (FDII) is now referred to as foreign derived deduction eligible income (FDDEI). The deduction was designed to encourage domestic companies to sell goods and services to foreign customers from within the United States rather than shifting operations overseas. The OBBBA permanently reduces the deduction rate for foreign-derived intangible income (FDII) from 37.5 percent to 33.34 percent and adjusts the base amount by excluding income or gains from dispositions of amortizable and depreciable property, and limiting interest and research and development expense deductions.
Remittance Tax
The OBBBA imposes a new 1 percent remittance tax on certain electronic cash transfers (wire transfers, money orders, cashier’s checks, and similar physical instruments) in excess of $15 by an individual in the United States to a recipient in a foreign country. The tax is intended to curb remittance outflows that may encourage illegal immigration or create economic overdependence in some foreign jurisdictions. The tax is collected by wire transfer providers and applies to all individuals sending money abroad, with certain exceptions for bank account and card-based transfers.
$15 Million Estate Tax Exemption for Certain Foreign Decedents
Foreign decedents with assets in the United States in excess of the $60,000 exemption who are covered under U.S. bilateral estate tax treaties may be eligible for the recently increased $15 million estate and gift exemption. For example, Canada’s income tax treaty with the United States and the United Kingdom’s estate tax treaty with the United States allow prorated exemptions based on the proportion of U.S. situs assets to worldwide assets. Decedents from Canada, the United Kingdom, and dozens of other countries are eligible for the larger exemption if they properly report the value of their worldwide assets to the IRS.
Conclusion
There are numerous provisions in OBBBA affecting businesses. Significant planning opportunities are available, so planners should begin evaluating strategies to maximize client benefits.