The One Big Beautiful Bill Act (OBBBA) signed into law on July 4, 2025, marks one of the most sweeping overhauls of U.S. tax policy in recent history. Family business owners and operators need to know what this means for their business, finances, and day-to-day operations.  

The provisions not only apply to your business but also to your individual tax situation. As the provisions have different effective dates, including being retroactive to previous years, you should start tax planning now.  

Here are key highlights that provide more additional detail. 

Business-related Tax Provisions 

1. Bonus depreciation allows full expensing of qualified property and expands eligible property to include qualified production property subject to certain requirements.  

• Full expensing applies to qualified property acquired and placed in service on or after January 20, 2025. 
• Construction of the qualified production property must also begin before January 1, 2029, and be placed in service before January 1, 2031  
• Consider cost segregation studies for real estate.  

2. Increases Section 179 expensing to $2.5 million and increases the phase-out threshold amount to $4 million starting for property placed in service after December 31, 2024.

3. Domestic research and experimental expenses are fully deductible.

• In previous years, the domestic expenses were required to be capitalized and amortized over five years.  
• Subject to a gross receipts test, small business taxpayers can amend tax returns to retroactively expense or elect to accelerate deductions of their capitalized amounts over a one-to-two-year period starting in 2025. 
• Research expenditures Section-174 

4. Excess business loss limitation is made permanent starting in 2026, but careful tax planning would allow utilization of any losses by accelerating income in 2025.

5. Qualified business income deduction (QBI) is made permanent.

• Deduction reduces trade or business top effective tax rate to 28.5% instead of 37%. 
• Carefully consider grouping related activities to expand the deduction.  

6. Business interest limitation is expanded so that depreciation and amortization are added back resulting in smaller interest limitations for businesses. 

7. No tax on tips and no tax on overtime.

• Taxpayers may elect on their personal return to deduct these types of income, limited to income thresholds. 
• Businesses will have extra reporting requirements effective for tax years 2025 to 2028. 
• Taxing tips and overtime 

8. Information return, Form 1099, reporting threshold increased from $600 to $2,000 starting in tax year 2026. 

9. Establishments that sell food and beverages will continue to be able to deduct the cost of employee shift meals provided.

10. Long-term contracts that are allowed to use the percentage of completion method have been expanded to include residential construction contracts.

• Effective for contracts entered into in the tax years beginning after July 4, 2025. For calendar year filers, this means tax year 2026. 
• Careful consideration must be given for contract start dates.  

11. Work Work opportunity tax credit is set to expire on December 31, 2025, and was not renewed in the bill. We could see this addressed in a bipartisan year-end tax extenders bill. 

12. Employer provided fringe benefits made noteworthy changes and employers should carefully consider these items.

Employer provided fringe benefit changes in OBBBA 

Individual-related Tax Provisions 

1. Tax Cuts and Jobs Act (TCJA) tax rates and brackets are made permanent, limiting the highest tax bracket to 37% in 2025. It was set to increase to 39.6%.

2. Increased standard deduction is made permanent effective January 1, 2025.

• Married filing jointly (MFJ) $31,500 
• Head of household (HOH) $23,625 
• Single of married filing separately (MFS) $15,750 

3. Personal exemption is permanently terminated.

4. Cash charitable contributions are allowed for those who do not itemize up to $1,000 for single and $2,000 for MFJ for tax year 2026.

5. Itemized deductions are limited to 35% instead of the highest bracket of 37% for tax year 2026.

6. Charitable contributions for those who itemize are subject to a new floor and updated ceiling amount starting in tax year 2026.

• Only contributions exceeding .5% of adjusted gross income (AGI) will be deducted.  
• Contributions are deductible up to 60% of AGI. 
• Tax planning should be considered in 2025 to bunch charitable contributions and avoid the new floor and permanent loss of charitable contributions.

7. State and Local Tax deduction is increased to $40,000 from $10,000, subject to filing status and income thresholds for tax year 2025 with a cap and phase-down threshold increase 1% annually through 2029, before reverting to $10,000 for the 2030 tax year.

8. Qualified mortgage interest deduction is permanently limited to $750,000 MFJ ($375K MFS) and eliminates an interest deduction on home equity interest in tax year 2026.

9. Car loan interest on qualified vehicles purchased after December 31, 2024, and before December 31, 2028, are deductible up to $10,000 subject income thresholds.

10. Section 529 accounts can now be used on qualified expenses for K-12 and homeschool up to $20,000 annually. 

Estate and Gift-related Tax Provisions 

1. Trust and estate income tax top bracket is set at 37% for 2025 instead of reverting to 39.6%.

2. Estate and gift tax exemption of $15 million per individual is made permanent beginning in 2026, with future annual adjustments for inflation.

Investment Opportunities 

1. Expanded Section 1202 qualified small business stock benefits. 1202 stock or QSBS provides opportunities for gain exclusion. 

1202 qualified small business 

2. Opportunity Zones are permanent with rolling 10-year zones so gain deferral and possible exclusion is back on the table starting January 1, 2027. Remember, gains deferred during the original OZ deferral are taxable on December 31, 2026! 

Opportunity zones  

If you would like more information on the topics above, reach out to Baker Tilly experts Brooke Weitzer or Brigid Elliott-Boger.