There are many tax changes in the One Big Beautiful Bill Act (OBBBA) that affect middle-market business executives. For example, among the provisions that will have the biggest impact and deserve the most attention are the permanent reinstatement of 100 percent bonus depreciation and the enhanced Section 179 expensing. This allows businesses to immediately deduct the full cost of most new and used equipment and certain qualified production property in the year it’s placed in service. For businesses looking to invest in capital assets, expand operations or upgrade technology, this provides an immediate and substantial tax benefit, which should improve cash flow and encourage growth. It removes the uncertainty of past phase-outs, giving businesses a clear incentive for long-term investment planning.
Smart Business spoke with Kristin Krabacher, a Shareholder at Brady Ware, about the provisions in the OBBBA that likely matter most to middle-market businesses.
What tax provisions in the OBBBA require business to take action sooner than later?
The permanent return of 100 percent bonus depreciation and increased Section 179 expensing should be looked at sooner than later. With it being mid-year, it helps with tax and business planning, especially for those looking at capital expenditures such as new equipment or machinery. Doing so now — assuming any equipment or machinery was acquired after January 19, 2025 — allows a business to fully deduct those costs immediately. This can significantly reduce a company’s current tax liability and free up cash flow for reinvestment. Then, the immediate expensing of domestic Research & Experimentation (R&E) costs effective in 2025 and going forward is critical. Businesses that invest in R&E no longer have to amortize these expenses over five years. Small businesses can even apply this retroactively to 2022.
Finally, while the Qualified Business Income (QBI) deduction is now permanent, it’s always wise for companies to re-evaluate their entity structure with a tax adviser. These provisions offer certainty, but proactively aligning a business strategy with these tax changes will ensure getting the most out of the OBBBA.
What’s happened with the state and local tax (SALT) deduction?
The cap was raised from the previous $10,000 to $40,000 for tax years 2025 through 2029. This is great news, especially for taxpayers in high-tax states, as it allows them to deduct much more of their state and local taxes. However, there’s a phase-out for higher-income earners (starting at $500,000 for joint filers in 2025). But, the cap is set to revert to $10,000 in 2030.
Which OBBBA tax changes will affect how employees are taxed and what incentives or exemptions in this category have been made available to employers?
There are some notable changes for employees, particularly temporary deductions for qualified overtime pay and tips (effective from 2025 through 2028). Employees can also deduct up to $12,500 in FLSA-required overtime premiums ($25,000 for joint filers) and $25,000 in qualified tips, though these phase out for higher earners. Of note for employers, the OBBBA offers incentives such as the permanent exclusion from employee gross income for employer-paid student loan assistance (up to $5,250, inflation-adjusted). It also increases the employer-provided childcare tax credit and makes the employer credit for paid family and medical leave permanent. Employers need to adjust payroll systems to report these amounts separately on W-2s.
As always, it’s imperative to start consulting with a qualified tax professionals now. Everyone’s situation is different and, while there are some obvious advantages coming out of this new tax legislation, it is always best to strategize and plan ahead. With just under half of 2025 left, now is a great time to schedule that review. ●
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