The One Big, Beautiful Bill Act
The recently enacted comprehensive tax reform legislation—The One Big, Beautiful Bill Act—delivers the most significant changes to the tax code since 2017. This landmark bill provides substantial benefits for small businesses, S corporations, partnerships, and rural communities alike:
Pass-Through Income Deduction (Section 199A)
Current: 20% deduction on QBI set to expire after 2025.
OBBB: Makes 20% QBI deduction permanent; eligibility for deduction is expanded: $150K for joint filers and $75K for all other taxpayers; includes broader qualifying business definitions.
Individual Income Tax Rates and Brackets
Current: TCJA tax rates (10%-37%) expire after 2025, reverting to pre-2018 brackets (up to 39.6%) in 2026.
OBBB: Makes TCJA brackets permanent; each tax bracket indexed for inflation and an additional year of inflation adjustments for the 10% and 12% brackets.
State and Local Tax (SALT) Deduction Cap
Current: $10,000 cap through 2025, reverting to unlimited deductions in 2026.
OBBB: Temporary increase to $40,000 cap for income under $500K for 2025; raises cap to $40,400 for income under $505K for 2026 with 1% increases to both the cap and income phasedown amounts for through 2029; cap reverts to $10,000 beginning in 2030.
New Markets Tax Credits (NMTC)
Current: 39% investor tax credit over 7 years on qualified investments; $5B in allocations available for each of 2024 and 2025; scheduled to expire in 2025.
OBBB: Makes NMTC program permanent; $5B annual allocations continue indefinitely starting in 2026.
Opportunity Zones
Current: 8,764 designated low-income census tracts; investor deferment capital gains tax until 2026 and up to 15% exemption; profits escape capital gains tax if held 10+ years; zones expire in 2028.
OBBB: Current zones expire end of 2026; new zones must be designated beginning January 2027 and renewed every 10 years; low-income threshold drops from 80% to 70% of median income; 30% capital gains reduction for rural areas vs. 10% for others; new annual reporting requirements on investments and impacts.
Low-Income Housing Tax Credit (LIHTC)
Current: Temporary 12% increase in 9% LIHTC allocations.
OBBB: Permanently increases 9% LIHTC allocations by 12% beginning in 2026; permanently reduces bond financing threshold from 50% to 25%.
R&D Expense Deduction
Current: Amortization over 5 years (15 years for foreign R&D) since 2022.
OBBB: Grants immediate expensing of domestic R&D costs beginning January 1, 2025; with retroactive application back to 2022 available for eligible small businesses; taxpayers permitted to accelerate deduction of unamortized R&D expenses.
Business Interest Deduction Limitation
Current: Limited to 30% of EBIT.
OBBB: Permanently returns to 30% of EBITDA.
Qualified Small Business Stock Exclusion
Current: Partial gain exclusion capped at greater of $10M or 10x the basis in the stock.
OBBB: Creates tiered gain exclusion for stock held less than 5 years; gain exclusion cap increased to $15M with future adjustments for inflation.
Estate and Gift Tax
Current: $13.6M exemption in 2025; reverts to $6-7M in 2026.
OBBB: Permanently raises exemption to $15M per person or $30M for MFJ, indexed for inflation beginning 2026.
The One Big Beautiful Bill Act represents a significant opportunity for businesses to reduce their tax burden and reinvest in growth. With numerous provisions taking effect immediately and enhanced benefits available through 2029, strategic planning is essential to maximize these advantages.
We encourage all business clients to review these changes carefully and consider how they may impact your operations and tax planning strategies. Our team stands ready to assist you in navigating this new landscape and developing approaches tailored to your specific circumstances.
[1] This client alert provides general information about the new tax law. Your specific situation may present unique opportunities and considerations. Please contact our office for personalized guidance and strategic tax planning.