New Tax Bill Brings Changes and Planning Opportunities
null • Author: Martin P. Mathias
The recently passed tax legislation, the "One Big Beautiful Bill," delivers significant benefits for business owners. From expanded deductions to enhanced depreciation allowances, these changes create new opportunities to optimize your tax strategy and improve cash flow.
Understanding these provisions is important to maximizing their impact on your business. Let's examine the key changes and how they can benefit your company.
Qualified Business Income Deduction Gets Permanent Status
The Section 199A qualified business income (QBI) deduction for pass-through entities is now permanent, providing long-term certainty for tax planning. This deduction allows eligible business owners to continue to deduct up to 20% of their qualified business income from their taxable income.
Enhanced Income Thresholds
The new law expands the phase-in ranges for the QBI deduction limitations:
- Single filers: Increased from $50,000 to $75,000
- Married filing jointly: Increased from $100,000 to $150,000
This expansion means more businesses can qualify for the deduction, particularly specified service trade or businesses (SSTBs) that were previously limited by lower income thresholds.
Strategic Planning Opportunities
With permanence comes predictability. Under prior legislation, the C-Corp tax rate was permanently reduced to 21%, while the QBI deduction was scheduled to sunset after 2025. Business owners can now make long-term strategic decisions knowing the QBI deduction will remain available to them.
Estate and Gift Tax Exemptions Reach Historic Levels
The One Big Beautiful Bill significantly increases estate and gift tax exemptions, providing more guidance for business succession planning.
New Exemption Amounts
Starting in 2026, the lifetime estate exemptions increase to:
- $15 million for single filers
- $30 million for married couples filing jointly
Prior to the One Big Beautiful Bill, these amounts had been set to revert to approximately $5 million (single) and $10 million (married). These new limits will be indexed for inflation, ensuring continued growth in exemption levels.
Business Succession Planning Benefits
These enhanced exemptions create significant opportunities for transferring business ownership to the next generation. Family business owners can now transfer substantially more value without triggering estate or gift taxes.
Consider implementing gifting strategies now to take advantage of current exemption levels while planning for the even higher future exemptions.
Bonus Depreciation Becomes Permanent at 100%
The Section 168 bonus depreciation provision is now permanent, with the allowance increased to 100% for qualifying property.
Expanded Coverage
The 100% bonus depreciation applies to property acquired and placed in service on or after January 19, 2025. Over the past several years, the eligible bonus depreciation percentage had decreased to 60% of qualifying property.
Cash Flow Advantages
This provision allows businesses to deduct the full cost of qualifying property in the year it's placed in service, rather than spreading the deduction over multiple years. This creates immediate tax benefits and improved cash flow.
Manufacturing businesses and those with significant equipment needs will see the most substantial benefits from this provision.
Section 179 Expensing Limits Increase
The maximum Section 179 expensing amount increases to $2.5 million, with the phase-out threshold rising to $4 million in qualifying property costs.
Strategic Equipment Purchases
This increase allows businesses to immediately expense more equipment and property purchases. Combined with bonus depreciation, businesses have multiple tools to accelerate deductions for capital investments.
Plan equipment purchases strategically to maximize these benefits while supporting business growth objectives.
Research and Development Expenses Get Immediate Relief
The new law addresses a major pain point for many businesses by allowing immediate deduction of domestic research and experimental expenditures.
Immediate Deduction Rules
For tax years beginning after December 31, 2024:
- Domestic research expenses can be immediately deducted
- Foreign research expenses must still be capitalized and amortized over 15 years
Retroactive Benefits for Small Businesses
Small business taxpayers with average annual gross receipts of $31 million or less can apply this change retroactively to tax years beginning after December 31, 2021.
Acceleration Elections
All taxpayers who made domestic research expenditures between January 1, 2022, and December 31, 2024, can elect to accelerate remaining deductions over one or two years.
This provision provides significant relief for technology companies, manufacturers, and other businesses that invest heavily in research and development.
Manufacturing Gets Special Treatment
The new qualified production property provision allows 100% first-year depreciation for nonresidential real property used in manufacturing.
Immediate Benefits for Manufacturers
This provision enables manufacturers to immediately deduct the full cost of qualifying real property, creating substantial tax savings and cash flow benefits.
Consider timing manufacturing facility investments to maximize these benefits while supporting operational expansion.
Implementation Strategies for Your Business
These tax changes create numerous opportunities, but proper implementation requires strategic planning.
Immediate Action Items
- Review your current tax structure to identify QBI deduction optimization opportunities
- Assess upcoming capital investments to maximize depreciation and expensing benefits
- Evaluate research and development expenses for potential retroactive benefits
- Consider estate planning implications of the enhanced exemptions
Long-term Planning Considerations
The permanence of many provisions allows for multi-year tax planning strategies. Work with your tax advisor to develop a comprehensive approach that aligns with your business goals.
Documentation Requirements
Ensure proper documentation for all elections and deductions. The retroactive provisions and acceleration elections require careful record-keeping to support your tax positions.
Maximizing Your Tax Strategy Moving Forward
These legislative changes represent significant opportunities for business owners who act strategically. The combination of enhanced deductions, improved depreciation allowances, and increased exemptions creates a more favorable tax environment for business growth and succession planning.
Success requires understanding how these provisions interact with your specific business situation. Consider conducting a comprehensive tax planning review to identify all available benefits and develop an implementation strategy that maximizes your tax savings while supporting your business objectives.
The key to maximizing these benefits lies in proactive planning and strategic implementation. Don't wait until tax season to explore these opportunities—start planning now to capture the full value of these significant tax advantages.
Disclaimer:
The information provided in this blog post is for general informational purposes only and should not be construed as tax, legal, or financial advice. You should consult with a qualified tax professional or advisor regarding your specific situation before making any decisions.
