The One Big Beautiful Bill Act (OBBBA) introduces major tax changes that affect how businesses handle purchases, research expenses, investments, and international profits. Whether you run a corporation, a partnership, or an S-corporation, this guide will help you understand the biggest updates that will affect your business.
The OBBBA is a large and complex tax bill, while we summarize some of the potential impacts this bill may have on your business, we are unable to cover all scenarios. This guide is for informational purposes and does not replace professional tax advice. Consult your Pivot CPAs advisor for guidance tailored to your situation.
1. Writing Off New Equipment Faster
OBBBA makes it permanent for businesses to deduct the full cost of new or used equipment in the year it’s put into service. In everyday terms, if you buy a machine or tools for your company, you no longer have to spread that cost over several years. You can count the entire purchase price as an expense right away. The law also raises the limit to $4,000,000 for what you can immediately deduct under Section 179, meaning more equipment purchases qualify for this instant write-off. Together, these measures help lower your taxable income in the year you make investments in equipment.
2. Deducting Research and Development Costs Sooner
Before OBBBA, companies had to spread their research and development (R&D) expenses over five or even fifteen years. Now, starting in 2025, you can choose to deduct all R&D costs in the same year they occur, making it easier for businesses that spend heavily on new products or processes to reduce taxable income sooner. For smaller businesses, there’s even an option to apply this choice back to 2022, 2023 and 2024, which could mean extra refunds or credits on recent tax returns.
3. Better Tax Breaks for Startup Investors
If your business issues stock in a qualifying small company, your investors can exclude a large share of their profits when they sell that stock—provided they hold it long enough. Under the new rules, half of the gain can be tax-free if held for three years, three-quarters tax-free at four years, and fully tax-free at five years. The maximum amount of profit exempt from taxes per company has also increased, so this benefit is even more generous. In plain terms, these changes make your company’s stock a more attractive option for investors who plan to support you for the long haul.
4. Simplified Rules for Foreign Profits
OBBBA renames the tax on certain foreign-earned income and adds new international agreements to reduce double taxation. If your business owns foreign subsidiaries, you’ll now follow the “Net CFC Tested Income” rules. These updates remove some deductions but also coordinate U.S. tax policy with other major economies. The result is a clearer, more unified framework—but you’ll need to adjust your accounting and transfer-pricing practices to fit the new global standards.
5. Smaller Deductions on Foreign-Source Income
For U.S. corporations, the deduction you could take on certain foreign profits has been reduced. Previously, a larger portion of foreign dividends or intangible income could be deducted, but OBBBA caps those deductions at lower percentages. This effectively raises the tax rate on money earned overseas. To cope, you may want to compare different tax strategies, such as using the dividends-received deduction or reevaluating which foreign entities you operate through.
6. Expanded 199A Deduction for Pass-Throughs
The 20% deduction for qualified business income (QBI) under Section 199A is now more accessible and permanent. OBBBA raises the income thresholds and creates a new minimum $400 deduction for taxpayers with at least $1,000 of income.
7. Stricter 1099 Reporting Requirements
OBBBA increases the threshold for 1099 reporting from $600 to $2,000. It also indexes to inflation, so that $2,000 will continue to increase. This may decrease or even eliminate your reporting requirements for 2026 and beyond.
8. New Limits on Interest Deductions (Section 163(j))
Businesses that borrow money will change how they calculate the limit on their interest expense deduction. The calculation is now taken before interest, taxes, depreciation and amortization whereas from 2022-2024 it was just income before interest and taxes. Thus it is likely you can take a larger interest deduction on your taxes if you were limited before. This change especially affects capital-intensive businesses or those with significant debt.
9. Boosted Incentives for Opportunity Zones
This tax act extends the deferral period for capital gains reinvested in QOZs and increases the exclusion percentages for long-term holdings. If you hold a QOZ investment for 10 years, you may now exclude up to 100% of the gain. These changes aim to drive more capital into underserved communities while offering generous tax breaks to investors.
10. Clarified Rules for State Tax Nexus
OBBBA provides clearer guidelines on when a business has to pay income or franchise taxes in a state. The IRS clarifies that solicitation of orders, which will not create nexus in a state, to confirm that even if solicitation may also serve some independently valuable business function it still does not create nexus. This affects online sellers, service providers, and remote businesses. You’ll need to track where your customers are and possibly register in more states to stay compliant.
Final Thoughts
OBBBA’s mix of permanent bonus depreciation allowance, faster R&D write-offs, enhanced startup-stock incentives, and revamped international tax rules rewards businesses that plan ahead. To make the most of these changes, update your budgets and projections, revisit how you structure purchases and investments, and work with your tax advisors to ensure your accounting systems reflect the new law. With the right adjustments, your business can save on taxes now and reinvest those savings into growth.
This guide is for informational purposes and does not replace professional tax advice. Consult your Pivot CPAs advisor for guidance tailored to your situation.