One Big Tax Break: The Top 5 Business Cuts In The Big Beautiful Bill

Forbes

17-07-2025

WASHINGTON, DC - JULY 04: U.S. President Donald Trump, joined by Republican lawmakers, signs the ... More One, Big Beautiful Bill Act into law on the South Lawn of the White House in Washington, DC. (Photo by)
On July 4, 2025, President Donald Trump signed into law what he has called the biggest tax cut in U.S. history—the 'One Big Beautiful Bill Act' (OBBBA). The act is poised to serve as a comprehensive effort to stimulate economic growth, minimize regulatory burdens, and foster greater benefits for entrepreneurs. The Bill introduces a range of tax changes benefiting both individuals and business owners. While the legislation is broad in scope, and extends beyond tax matters, one of its key features is the slate of tax cuts targeted at American businesses, particularly those in the small and growing category. These elements are designed to reduce tax liabilities and encourage capital investment for business owners navigating a challenging
post-pandemic economy. Let's take a closer look at the top five business tax cuts in the OBBBA and what they could mean for entrepreneurs in 2025 and beyond.
Permanent Extension of the Qualified Business Income Deduction
The Act makes a major, permanent change to the tax code by securing the Section 199A pass-through deduction—commonly known as the Qualified Business Income (QBI) deduction—as a permanent feature of U.S. tax law. Originally introduced under the Tax Cuts and Jobs Act (TCJA) of 2017 during President Trump's first term, the QBI deduction allows eligible owners of pass-through entities—such as sole proprietorships, partnerships, S corporations, and certain trusts and estates—to deduct up to 20% of their qualified business income from taxable income. The deduction was a significant tax benefit designed to level the playing field between pass-through businesses and C corporations, which had received a substantial corporate tax rate cut under the same legislation.
Under the original TCJA, however, the QBI deduction was scheduled to sunset at the end of 2025, creating uncertainty for millions of small business owners and entrepreneurs who relied on the deduction to reduce their effective tax rate. The expiration would have effectively raised taxes on pass-through businesses, many of which are the backbone of the American economy. By making the QBI deduction permanent, the OBBBA eliminates that looming uncertainty and ensures long-term tax stability for a wide range of businesses.
In addition to making the deduction permanent, the OBBBA also raises the income thresholds at which the deduction begins to phase out. Joint filers with taxable income up to $494,600 are now eligible to claim the full deduction, an increase of more than $10,000 over previous limits. This change expands access to higher-earning business owners who were previously limited or excluded from the deduction. Notably, these expanded thresholds will be indexed to inflation beginning in 2026, helping the deduction maintain its value and reach over time.
The Act also introduces a minimum deduction safeguard for the smallest businesses. Under the new provision, businesses with at least $1,000 in qualified business income from an active trade or business are guaranteed a minimum deduction of $400, ensuring that even the smallest entrepreneurs benefit. Like the income thresholds, this minimum deduction will also be adjusted for inflation starting in 2026, providing lasting relief to microbusinesses and sole proprietors.
Together, these updates to the QBI deduction reflect the OBBBA's broader goal of supporting small businesses, reducing tax burdens, and encouraging long-term investment in the U.S. economy. By removing the expiration date and enhancing accessibility, the Act strengthens a vital tool for American business owners and brings a new level of predictability to tax planning for years to come.
Increases Research and Development Deductions
The OBBBA introduces a significant change to how businesses handle domestic research and development (R&D) expenses by permanently restoring immediate expensing. This means that companies can now deduct the full cost of their qualified R&D expenditures in the year those expenses are incurred, rather than amortizing them over several years—a requirement that had been in place since 2022 under the TCJA.
For small businesses—defined as those with average annual gross receipts of $31 million or less—the law goes a step further. These businesses are allowed to retroactively apply immediate expensing for domestic R&D costs incurred after December 31, 2021, offering a valuable opportunity to amend past returns and recover tax benefits that were previously deferred under the amortization rules.
For larger businesses, or those with gross receipts above the $31 million threshold, the legislation allows for a transition period. Domestic R&D expenses incurred between December 31, 2021, and January 1, 2025, that were previously amortized can now be accelerated and deducted over a shortened period of one or two years, depending on the company's choice or eligibility criteria. This acceleration provides meaningful near-term tax relief while phasing in the return to full expensing.
Together, these changes are aimed at incentivizing innovation, easing cash flow constraints, and reversing the chilling effect the TCJA's R&D amortization requirement had on business investment in domestic research. The provision is especially beneficial for startups and small tech-driven enterprises, which often rely on R&D investment but lack the capital to wait years for tax benefits to materialize.
Increases Business Interest Deductions
The new legislation permanently reinstates the EBITDA-based limitation on business interest deductions. EBITDA stands for earnings before interest, taxes, depreciation, and amortization. In 2017, TCJA introduced a limit on business interest expense deductions to 30% of adjusted taxable income (ATI). Initially, from 2018 to 2021, ATI was calculated using an EBITDA-based approach. However, for tax years starting after December 31, 2021, the calculation shifted to an EBIT-based approach (earnings before interest and taxes), which excludes depreciation and amortization. This change generally resulted in stricter limitations and increased tax liability for businesses, particularly capital-intensive companies. In short, by permanently restoring the EBITDA-based limitation, the OBBBA provides many business owners with a greater ability to deduct business interest expenses. This is because the EBITDA-based ATI calculation typically yields a higher ATI amount, enabling a larger interest deduction. This will create some relief for capital-intensive businesses that invest a significant amount into long-lived assets like equipment and machinery. The previous EBIT-based limitation had a negative impact on capital-intensive businesses due to their significant depreciation and amortization expenses. The shift back to EBITDA may alleviate some of the tax burden on these companies in industries like farming and manufacturing.
Restores 100 Percent Bonus Depreciation
The OBBBA permanently restores 100% bonus depreciation for short-lived investments. Purchases of business assets, such as equipment and vehicles, are now 100% deductible in the year they are purchased and/or put into service for the business. Congress first introduced 100% bonus depreciation as part of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010. This allowed for a temporary 100% bonus depreciation rate from September 2010 through the end of 2011. More recently, the TCJA of 2017 allowed businesses to deduct 100% of the cost of eligible property placed in service after September 27, 2017, and before January 1, 2023. The TCJA required bonus depreciation began phasing out in 2023, resulting in a reduction in the percentage deductible, decreasing to 80% for 2023, 60% for 2024, and now 40% for 2025. With the BBB, the deduction will be restored to 100% for 2025 and remain at 100% permanently.
Plus, for vehicles purchased in your personal name, the law now provides a deduction for auto loan interest of up to $10,000 for purchases of new vehicles that are assembled in the United States. If the vehicle is purchased personally but used in the business, you can take advantage of the deduction for bonus depreciation and the auto loan interest deduction.
Provides 100 percent expensing of new business buildings
The Act includes a targeted incentive aimed at stimulating domestic industrial investment through a special provision for structures classified as qualified production property (QPP). These are buildings and facilities that are primarily used in the manufacturing, production, or refining of tangible personal property within the United States. The goal is to encourage companies to expand or modernize their physical infrastructure to support domestic industrial activity and strengthen U.S. supply chains.
To qualify for the 100% immediate expensing benefit, certain timing and use conditions must be met. Construction of the QPP structures must commence after January 19, 2025, and before January 1, 2029, offering a defined window during which businesses must begin their projects to be eligible. Additionally, the property must be placed in service no later than January 1, 2031, ensuring that the economic benefits are realized within a reasonable timeframe.
However, this tax benefit is not universally available to all types of property within a facility. The provision explicitly excludes parts of a structure that are used for non-production activities, such as office space, administrative functions, employee cafeterias, parking garages, and other ancillary or support areas. Only the portions of the structure that are directly involved in qualifying industrial processes—like assembly lines, fabrication areas, or refining equipment spaces—are eligible for the accelerated deduction.
This distinction is critical, as it ensures the tax benefit is narrowly tailored to incentivize core production investments rather than general corporate expansion. By doing so, the OBBBA aims to maximize the economic impact of the expensing provision, driving capital investment directly into the sectors and activities that are central to domestic manufacturing competitiveness and economic resilience.
The One Big Beautiful Bill Act marks a sweeping shift in U.S. tax policy, particularly for the business community. By making key provisions permanent—like the Qualified Business Income deduction, 100% bonus depreciation, and EBITDA-based interest deductions—while expanding incentives for research, innovation, and industrial infrastructure, the Act seeks to reduce financial friction for businesses of all sizes. It delivers targeted relief to small businesses and capital-intensive industries alike, while sending a clear message: the U.S. is doubling down on domestic growth, productivity, and entrepreneurship. As business owners look ahead, these tax cuts are poised to not only lower costs but also fuel reinvestment, expansion, and innovation in an economy still reshaping itself in the post-pandemic years ahead. Whether you're a startup founder, manufacturer, or seasoned entrepreneur, the OBBBA's top five tax breaks represent new opportunities—and new responsibilities—to plan smart and grow strong.