The One Big Beautiful Bill Act (OBBBA) delivers several headline‑grabbing tax breaks, but their real‑world value depends on your income level, business structure, and investment plans. Below is a concise overview for business owners, with a reminder that most phase‑outs begin once taxable income exceeds roughly $250,000 (single) or $500,000 (joint). Work closely with your tax preparer to confirm your eligibility before you restructure income or accelerate purchases.
1. Permanent Qualified Business Income (QBI) Deduction
What changed?
The popular 20 percent deduction for Qualified Business Income—originally set to expire after 2025—is now permanent. Pass‑through owners (sole proprietors, partnerships, S corps, most LLCs) can continue writing off up to 20 percent of QBI (or 20 percent of qualified REIT dividends) indefinitely.
Higher, but still limited, phase‑out ranges
- Phase‑out thresholds rise to $250,000 (single) / $500,000 (joint) in 2026 (inflation‑indexed).
- Within a $75,000 single / $150,000 joint “phase‑in window” above those thresholds, deductions shrink.
- Above the top of the window, QBI deductions are capped by W‑2 wages or tangible property or eliminated outright for “specified service” businesses (consulting, most professional services, investment advice, etc.).
New minimum deduction
Active owners with at least $1,000 of QBI now get a $400 minimum QBI deduction—a modest but guaranteed benefit that protects very small businesses.
Action step
Estimate 2025–26 taxable income. If you expect to hover near or above $250k/$500k, coordinate with your preparer on W‑2 wages, retirement deferrals, depreciation choices, or income deferral to preserve some (or all) of the deduction.
2. 100 Percent Bonus Depreciation Reinstated
What changed?
Full first‑year bonus depreciation returns—permanently—for eligible new and used assets placed in service on or after January 20, 2025. The previous step-down schedule (80% in 2023, 60% in 2024, 40% in early 2025, and 20% thereafter) is repealed.
Eligible property
- Most tangible personal property with a ≤ 20‑year life: machinery, equipment, computers, furniture, certain vehicles.
- Qualified Improvement Property (QIP)—interior non‑structural improvements to commercial buildings—now enjoys full expensing again.
Strategy
Bonus depreciation is not limited by taxable income. Therefore, if you need large deductions or expect fluctuating profits, claiming a 100 % bonus often beats Section 179 expensing (see below).
3. Bigger Section 179 Expensing Limits
- Maximum write‑off jumps to $2.5 million for assets placed in service in tax years beginning in 2025.
- The phase-out threshold rises to $4 million in total purchases.
- Everything from software to roof replacements and security systems can qualify.
- Heavy SUVs (6,001–14,000 lbs GVWR) remain subject to a $31,300 Section 179 cap.
Planning tip: Section 179 is limited to business income and, for pass-throughs, can be restricted at both the entity and owner levels. Run projections with your preparer before relying on them.
4. New 100 Percent Depreciation for Qualified Production Property (QPP)
Businesses constructing or substantially renovating U.S. manufacturing facilities get a unique boost:
- 100 % write‑off for non‑residential buildings used mainly in manufacturing, production, or refining.
- Construction must start between Jan 20 2025 and Dec 31 2028 and be placed in service by 2030.
- Office, sales, or R&D areas inside the same building do not qualify.
This is a powerful incentive to accelerate plant construction, but documentation is critical. Engage tax counsel early in the design phase.
5. Practical Next Steps
- Revisit 2025–26 income forecasts. If pass‑through income will exceed roughly $250k/$500k, fine‑tune wages, retirement contributions, or entity choice to maximize the QBI deduction.
- Refresh capital‑expenditure budgets. Full expensing returns—evaluate equipment upgrades or QIP remodels sooner rather than later.
- Compare bonus vs. Section 179. A bonus is simpler for large outlays; Section 179 can target niche assets or real-property improvements, but has more limitations.
- Plan major builds carefully. If a new factory or processing facility is on the horizon, starting construction by 2028 could result in a significant upfront deduction.
- Coordinate with your tax advisor. The new rules offer substantial opportunities—but only if you qualify. Given the income‑based limits, partner early with your preparer to model eligibility and cash‑flow impact.
OBBBA’s permanent extensions and expanded expensing rules can reduce tax bills for years, but the benefits taper off sharply once income climbs above new thresholds. Work with your tax professional to evaluate whether you qualify and to build a long‑term strategy that maximizes these incentives while aligning with your growth plans.