Aloe Advisors CPA Inc.

The “One Big Beautiful Bill Act” (OBBBA), signed into law on July 4, 2025, has fundamentally reshaped the tax landscape for American businesses. Moving beyond temporary fixes, this legislation makes several key provisions of the 2017 Tax Cuts and Jobs Act permanent while introducing significant updates to capital investment, innovation incentives, and small business stock exclusions.

Whether you run a pass-through entity, a startup, or a large corporation, here is your definitive guide to the new rules effective for the 2025 tax year and beyond.

1. Section 199A Pass-Through Deduction: Permanent & Expanded

For S-Corp owners, partners, and sole proprietors, the anxiety over the expiring 20% Qualified Business Income (QBI) deduction is over. The OBBBA makes the Section 199A deduction permanent.

• Expanded Phase-in Ranges: The bill reduces the “cliff effect” for high earners by widening the income range where the deduction phases out. The phase-in range has increased by $50,000 for single filers and $100,000 for joint filers.
• New Minimum Deduction: A new $400 minimum deduction is available for taxpayers with at least $1,000 in QBI, ensuring even the smallest micro-businesses see a benefit.
• Planning Insight: While the deduction is permanent, “Specified Service Trades or Businesses” (SSTBs) like doctors, lawyers, and consultants still face income limitations—though the wider phase-in offering slightly more breathing room.
• Effective Date: Tax years beginning after December 31, 2025.

2. Capital Investment: A Double Win for Growth

The OBBBA aggressively incentivizes purchasing equipment and property by enhancing both Section 179 and Bonus Depreciation.

• Bonus Depreciation Restored to 100%: The scheduled phase-down (which had dropped to 40% for 2025 under prior law) is eliminated. You can now deduct 100% of the cost of eligible property (assets with a recovery period of 20 years or less) placed in service after January 19, 2025.
• Section 179 Limits Doubled: For small to mid-sized businesses, the Section 179 expensing cap has been raised to $2.5 million, with the phaseout threshold starting at $4 million.
• Construction Incentive: A temporary 100% expensing provision applies to qualifying non-residential structures if construction began between Jan 20, 2025, and Jan 19, 2029.

3. R&D Expensing: Immediate Write-Offs Are Back

In a massive win for tech and manufacturing, the OBBBA repeals the unpopular requirement to amortize domestic research and development (R&D) expenses over five years.

• Domestic R&D: You can now immediately expense 100% of domestic R&D costs in the year they are incurred.
• Retroactive Fix: Small businesses (gross receipts ≤ $31 million) can retroactively expense R&D costs incurred after December 31, 2021.
• Foreign R&D: Research conducted outside the U.S. must still be amortized over 15 years.

4. Qualified Small Business Stock (QSBS): Faster Exclusions

Section 1202, which allows investors to sell startup stock tax-free, has been supercharged to encourage investment in larger companies and shorter holding periods.

• Tiered Exclusions: You no longer have to wait 5 years to get a tax break.
  • 3 Years: 50% gain exclusion.
  • 4 Years: 75% gain exclusion.
  • 5+ Years: 100% gain exclusion.
• Higher Caps: The gross asset limit for an eligible corporation has been raised from $50 million to $75 million. Additionally, the per-taxpayer gain exclusion cap has increased to $15 million.
• Effective Date: Applies to QSBS acquired after July 4, 2025.

5. Opportunity Zones 2.0: Permanent & Reset

The Qualified Opportunity Zone (QOZ) program has been made permanent with a new “rolling” structure.

• New Timeline: For investments made after December 31, 2026, investors get a rolling 5-year deferral period (recognizing gain at the earlier of 5 years or sale).
• Basis Step-Up: A 10% step-up in basis is available if the investment is held for at least 5 years (boosted to 30% for Rural Opportunity Zones).
• Designation Reset: Zones will be re-designated every 10 years starting in 2026 to ensure capital flows to areas that still need it.

6. The “Gotcha”: Corporate Charitable Contribution Floor

One restrictive change to watch is the new “floor” on corporate giving.

• The Rule: Corporations can only deduct charitable contributions that exceed 1% of their taxable income.
• The Impact: If your corporation has $1,000,000 in taxable income, the first $10,000 of donations are non-deductible. Only donations above that $10,000 floor (and below the 10% ceiling) are deductible.
• Effective Date: Taxable years beginning after December 31, 2025.

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Summary Table: Key Business Limits for 2025

Provision	New 2025 Limit / Rule	Effective Date
Section 179 Cap	$2.5 Million	Jan 1, 2025
Section 179 Phaseout	$4 Million	Jan 1, 2025
Bonus Depreciation	100% (No Phase-down)	Jan 20, 2025
Domestic R&D	100% Immediate Expensing	Jan 1, 2025
QSBS Asset Limit	$75 Million	July 5, 2025
Corp. Charity Floor	Non-deductible up to 1% of Income	Jan 1, 2026

Disclaimer: Tax laws are complex and subject to interpretation. Please contact our office to discuss how these specific changes apply to your business strategy.