New Tax Legislation Affecting Businesses
We summarize the significant new tax legislation affecting businesses signed into law on July 4, 2025. The Act is formally known as the One Big Beautiful Bill and informally as the OBBB. It includes numerous changes affecting individual taxation and is subject to clarification in the coming weeks and months.
Qualified Business Income (QBI) Deduction
The Act makes this 20% deduction permanent.
Bonus Depreciation
The Act makes additional first-year (bonus) depreciation for certain qualified property permanent at 100% (under prior law, it was to phase out to zero). This provision is effective for property acquired after Jan. 19, 2025. There is also a new 100% bonus depreciation provision for “qualified production property” (QPP, which is certain non-residential real property used in the manufacturing, production, or refining of certain tangible personal property). This QPP provision is effective for property placed in service after July 4, 2025.
179 Expensing Limits
For property placed in service after 2024, the Code Sec. 179 expensing limits are increased to $2,500,000, and the phasedown threshold is increased to $4,000,000 (both subject to inflation adjustments).
Exclusion of Gain on the Sale or Exchange of Qualified Small Business Stock (QSBS)
The Act provides that gain on the “applicable percentage” (50% for stock held for 3 years, 75% for stock held for 4 years, 100% for stock held for 5 years) is eliminated for QSBS acquired after July 4, 2025. Also, the gain exclusion threshold is increased from $10 million to $15 million, and the $50 million aggregate gross asset limit is increased to $75 million (subject to inflation adjustments).
Information Reporting, Form 1099-K
The Act retroactively reverts the Form 1099-K reporting threshold to the pre-ARPA $20,000 and 200 transaction thresholds.
Information Reporting, Forms 1099-NEC, 1099-MISC
For payments made after 2025, the reporting thresholds for Forms 1099-NEC and 1099-MISC are increased from $600 to $2,000 (adjusted for inflation after 2026).
Gain on the Sale of Certain Farmland Property
For sales or exchanges occurring after July 4, 2025, sellers of qualified farmland property may elect to pay capital gains tax on the sale in four equal annual installments. The first payment is due with the return for the year in which the sale occurs, with the remaining payments due with the successive years’ returns (but if a payment is missed, the balance is due immediately).
Corporate Charitable Contributions
The Act imposes a new 1% floor (in addition to the 10% ceiling) on corporate charitable deductions for post-2025 tax years.
Excess Business Losses
The Act makes the Code Sec. 461(l) limit on excess business losses permanent.
Energy Efficient Commercial Buildings Deduction
Under the Act, the deduction for energy efficient commercial buildings terminates for the cost of energy efficient commercial building property whose construction begins after June 30, 2026.