New Tax Law 2025: What the One Big Beautiful Bill Changed for Business Owners

The new tax law of 2025 runs to hundreds of pages, most of them about individuals. This is the business owner's cut of Public Law 119-21, organized by the decision each rule touches. Every item is a few sentences and a link to the post that owns the rule; the section numbers are the public law's own, and the dates are the effective dates printed with each Code section.

Buying equipment and vehicles: bonus depreciation and section 179

Bonus depreciation is 100% again, and this time without a phase-down: the allowance equals “100 percent of the adjusted basis of the qualified property” for property acquired after January 19, 2025 (IRC 168(k)(1)(A); section 70301). Property acquired under a written binding contract signed before that date stays on the old schedule, and a taxpayer may elect 40% (60% for longer production period property) for its first tax year ending after January 19, 2025. Section 179 was raised to $2,500,000, phased out above $4,000,000, for tax years beginning after 2024 (IRC 179(b); section 70306); indexed, the 2026 figures are $2,560,000 and $4,090,000, with a $32,000 SUV cap (Rev. Proc. 2025-32, section 3.24). The rules live in bonus depreciation and the section 179 deduction; the choice between them is in section 179 vs bonus depreciation.

Building a plant: qualified production property under section 168(n)

New subsection 168(n) lets a taxpayer elect a 100% first-year allowance for the portion of a nonresidential building used as an integral part of manufacturing, production or refining. Construction must begin after January 19, 2025 and before January 1, 2029, original use must start with the taxpayer, and the property must be placed in service before January 1, 2031 (IRC 168(n)(2)(A); section 70307). Details and the election are in qualified production property.

Spending on research: domestic expensing under section 174A

Domestic research or experimental expenditures are deductible in the year paid or incurred for tax years beginning after December 31, 2024 (IRC 174A(a); section 70302), ending the five-year capitalization that applied to 2022 through 2024; foreign research stays on 15-year amortization (IRC 174(a)). Amounts capitalized in 2022 through 2024 can be deducted in 2025 or over two years (section 70302(f)(2)). The full treatment, including the research credit interplay, is in section 174 explained.

Taking profit from a pass-through: the QBI deduction is permanent

Section 70105 struck the sentence that ended section 199A after 2025, so the 20% deduction for qualified business income no longer has a sunset (IRC 199A, 2025 amendment notes). For tax years beginning after December 31, 2025 the phase-in range above the income threshold widens to $75,000 ($150,000 on a joint return), and a taxpayer with at least $1,000 of QBI from active businesses gets a minimum deduction of $400 (IRC 199A(i)). The 2026 thresholds are $201,750, or $403,500 on a joint return (Rev. Proc. 2025-32, section 3.26). Who qualifies and how the W-2 wage limit works is in the QBI deduction.

Borrowing: the 163(j) interest limit is back on an EBITDA base

The business interest deduction is capped at 30% of adjusted taxable income, and for tax years beginning after December 31, 2024 that income is again computed without “any deduction allowable for depreciation, amortization, or depletion” (IRC 163(j)(8)(A)(v); section 70303). Adding those deductions back raises the cap for capital-heavy borrowers. Businesses that meet the section 448(c) gross receipts test, $32,000,000 for tax years beginning in 2026, are exempt (IRC 163(j)(3); Rev. Proc. 2025-32, section 3.30). The computation and Form 8990 are in the section 163(j) interest limitation.

Losing money: the excess business loss limit is permanent

Section 461(l) caps the business loss a noncorporate taxpayer can deduct against other income in a year; the excess carries forward as a net operating loss. Section 70601 struck the “before January 1, 2029” sunset, effective for tax years beginning after December 31, 2026, and reset the inflation base so the $250,000 statutory amount is indexed from 2024 (IRC 461(l)(1), (3)(C)). The 2026 threshold is $256,000, or $512,000 on a joint return (Rev. Proc. 2025-32, section 3.31). See the excess business loss limitation and, for the carryforward, net operating loss carryforward.

Paying state taxes: the SALT cap and PTET

The individual cap on state and local tax deductions is $40,000 for tax years beginning in 2025 and $40,400 for 2026, rising 1% a year through 2029 and dropping back to $10,000 after that (IRC 164(b)(7)(A); section 70120). The cap phases down by 30% of modified AGI above $500,000 for 2025 and $505,000 for 2026, but never below $10,000 (164(b)(7)(B)). Section 70120 amends only that individual cap; the state pass-through entity tax elections, which rest on Notice 2020-75, are covered in PTET.

Paying contractors and taking card payments: 1099-NEC, 1099-MISC and 1099-K

The reporting threshold for payments to contractors and other payees rises from $600 to $2,000 for payments made after December 31, 2025, indexed for inflation after 2026 (IRC 6041(a), (h); section 70433), and the form instructions apply the same $2,000 to backup withholding (Instructions for Forms 1099-MISC and 1099-NEC). Section 70432 restored the Form 1099-K threshold to more than $20,000 and more than 200 transactions, retroactively (IRC 6050W(e)).

Giving as a C corporation: the 1% floor

For tax years beginning after December 31, 2025, a corporation deducts charitable contributions only to the extent they exceed 1% of taxable income, and still no more than 10% of it (IRC 170(b)(2)(A); section 70426). A corporation with $1,000,000 of taxable income and $8,000 of gifts deducts nothing; with $30,000 of gifts it deducts $20,000. Bunching and the year-end sequence are in year-end tax planning.

Selling the company: section 1202 stock

For qualified small business stock acquired after July 4, 2025, the exclusion is tiered by holding period: 50% after 3 years, 75% after 4 and 100% after 5 or more, against the old rule of 100% only after more than 5 years (IRC 1202(a)(1), (a)(5); section 70431). The per-issuer cap rises to $15,000,000 for that stock, and the gross assets ceiling rises to $75,000,000 for stock issued after July 4, 2025, both indexed after 2026. Only C corporation stock qualifies, which is one input to LLC vs C corp.

Energy and vehicle credits that ended: 45W, 179D, 48 and 48E

Four terminations matter to operating businesses. No 45W commercial clean vehicle credit is allowed for a vehicle acquired after September 30, 2025 (IRC 45W(g); section 70503). The 179D deduction for energy efficient commercial buildings does not apply to property whose construction begins after June 30, 2026 (IRC 179D(i); section 70507). Under section 48E, wind and solar facilities placed in service after December 31, 2027 get no credit, a rule that applies to facilities whose construction begins after July 4, 2026 (IRC 48E(e)(4); section 70513(a), (g)(5)), and the same section cut the residual section 48 rate for energy property outside the listed categories from 2% to 0%. Each has its own post: the commercial clean vehicle credit, the section 179D deduction and the investment tax credit.

Credits for benefits that grew: 45S and 45F

The paid family and medical leave credit lost its December 31, 2025 sunset and, for tax years beginning after that date, can be figured on premiums for a paid leave insurance policy as well as on wages, with an employer election to cover employees after 6 months of service instead of a year (IRC 45S; section 70304). The employer-provided child care credit rises from 25% to 40% of qualified expenses, 50% for an eligible small business, capped at $500,000 or $600,000 instead of $150,000, for amounts paid or incurred after December 31, 2025 (IRC 45F(a), (b); section 70401). See the paid family and medical leave credit and the employer-provided childcare credit.

The employee retention credit: late claims are closed

Section 70605(d) provides that no employee retention credit for the third or fourth quarter of 2021 is allowed or refunded after July 4, 2025 unless the claim was filed on or before January 31, 2024 (IRC 3134 note). The IRS confirms the cutoff applies even to otherwise eligible claims (IRS ERC FAQs). The assessment period for those quarters is at least 6 years, and promoters who failed due diligence face penalties. Open claims and audits are covered in the employee retention credit.

Tips and overtime: the employee deductions and what employers must report

Employees and self-employed workers may deduct up to $25,000 of qualified tips (IRC 224) and up to $12,500 of qualified overtime, $25,000 on a joint return (IRC 225), for tax years 2025 through 2028, phased out above $150,000 of modified AGI ($300,000 joint). The deductions are only as good as the employer's reporting: section 6051(a)(18) and (19) require the W-2 to show cash tips with the occupation and the qualified overtime amount. On the 2026 Form W-2 that is box 12 code TP for tips, code TT for overtime and box 14b for the Treasury tipped occupation code (2026 Instructions for Forms W-2 and W-3); for 2025, Notice 2025-62 waived penalties for employers that could not yet separate the amounts (IR-2025-110). Qualified overtime is the premium portion only, the half in time-and-a-half, under section 7 of the Fair Labor Standards Act, which a payroll system has to tag per pay period; Managed Payroll does that from $25 per employee per month.

The changes on one timeline

Most of these rules reward a decision made before year end: when equipment is acquired, whether research is domestic, when a plant's construction starts. Licensed tax professionals at BEG's tax partner put the ones that apply to your business into next year's plan, in writing, with your CPA, as part of Forward Tax Planning.

Sources: 26 U.S.C. 168(k) and 168(n), bonus depreciation and qualified production property (P.L. 119-21 sections 70301, 70307); 26 U.S.C. 179, election to expense (section 70306); 26 U.S.C. 174A, domestic research or experimental expenditures (section 70302); 26 U.S.C. 199A, qualified business income (section 70105); 26 U.S.C. 163(j), limitation on business interest (section 70303); 26 U.S.C. 461(l), limitation on excess business losses (section 70601); 26 U.S.C. 164(b)(7), applicable limitation amount for state and local taxes (section 70120); 26 U.S.C. 6041 and 6050W, information return thresholds (sections 70433, 70432); 26 U.S.C. 170(b)(2)(A), corporate charitable contributions (section 70426); 26 U.S.C. 1202, qualified small business stock (section 70431); 26 U.S.C. 45W(g), 179D(i) and 48E(e)(4), credit terminations (sections 70503, 70507, 70513); 26 U.S.C. 45S and 45F, paid leave and employer child care credits (sections 70304, 70401); 26 U.S.C. 3134 note, employee retention credit enforcement (section 70605); 26 U.S.C. 224, 225 and 6051(a), tips, overtime and W-2 statements (sections 70201, 70202); IRS, Rev. Proc. 2025-32 (2026 inflation adjustments); IRS, 2026 General Instructions for Forms W-2 and W-3; IRS, Instructions for Forms 1099-MISC and 1099-NEC (Rev. December 2026); IRS, Instructions for Form 1099-K (Rev. December 2026); IRS, IR-2025-110, penalty relief for 2025 tips and overtime reporting; IRS, FAQs on employee retention credits under the ERC compliance provisions of the One, Big, Beautiful Bill. Figures and rules checked against these sources on September 26, 2026. This is general information, not tax advice for your situation. Tax services are provided by licensed tax professionals under a separate engagement agreement. BEG does not provide tax advice.