Business Tax Provisions from 2025 Reconciliation Act (AKA One Big Beautiful Bill)

Terms:

• The date in front refers to the effective date or the effective time period if limited

Business Taxable Income:

The Qualified Business Income Deduction [QBID] was made permanent and improved. This is substantial for most business owners, and refers to the 20% reduction in taxable business income that was set to expire on 12-31-25.

For Specified Service Trade or Businesses - such as law, accounting, health, athletics, performing arts and such - the phase-out still applies for 2025 taxable income in excess of $197,300 for single filers up to $247,300.  Double that for couples.

In 2026, the phase-out range is permanently extended another $50,000 for singles ($100,000 for couples) and each year thereafter is increased for inflation.

Credits:

1/1/2026 - Paid Leave [PFML] Credits: Credits for voluntary employer-provided paid family and medical leave are expanded beyond the 2024 law.

1/1/2026 - Paid Family and Medical Leave Insurance Credit: New credits for insurance premiums paid for employer’s purchase of PFML insurance.

1/1/2026 - Education or Student Loan Repayment Benefit: The up-to-$5,250 per-employee credit for employer-sponsored student loan repayment or college tuition for 2024/2025 is now permanent and indexed for inflation so will go up in 2026 and each year thereafter

1/1/2026 - Enhanced Employer-Provided Childcare Credit: The credit rate jumps from 25 percent in 2024 to 40 percent for most employers (50 percent for eligible small businesses), and the annual cap rises to $500,000 ($600,000 for small employers), with indexing for inflation beginning in 2026.

EV, Solar and Energy Related: These fall under the same new expiration dates as under individuals. For business building improvement energy credits (not solar), the expiration date is 6-30-2026.

1/1/2025 - [and retroactive to open years (currently 2021)] - Domestic Research and Development Credits: Expands qualifying expenses, and allows current deductibility and shorter or no amortization periods.

Business Expenses:

1/20/2025 - Total assets for which one entity can make an ‘expense election’ [Section 179] goes up to $4.0 million from $2.5 in 2024.

1/20/2025 - Section 179 (expense election) now includes a new class of property - qualified production property [QPP] This is for nonresidential real property purchased or built after January 19, 2025 which is used by the taxpayer as an integral part of operating a qualified production/manufacturing activity.

1/20/2025 - Bonus depreciation permanently set at 100% with opt-out elections by class for tax planning.

Workers:

1/20/2025 - Employers who hire, sponsor, or employ non-citizen workers: The law introduces stricter administrative requirements, imposing heightened financial and compliance burdens on employers, and imposes new or increased fees on a variety of immigration applications and processes.

1/1/2026 - 1099 floor changes for 1099NEC, 1099MISC etc. from $600 to $2,000. The $600 threshold amount remains the same for 2025 1099’s to be issued by January 31, 2026.

Investments:

1/1/2027 - QOF Qualified Opportunity Fund.  Deferral or elimination of capital gain on the sale of assets by investing all proceeds into a Qualified Opportunity Fund is expanded and improved. The 180-day requirement to invest remains the same except for gains passed through an investment entity such as a partnership, or S corporation, etc. which is longer.  Changes include new QORF locations (Qualified Opportunity Rural Zones). Some revised provisions benefit investments between 7/4/2025 and 12/31/2026.

1/20/2025-12/31/2029 - A QPP [Qualified Production Property] purchase or creation of a production business and a separate commercial building that has not been used for production/manufacturing since 2020 presents a tax strategy to deduct the entire cost of all property, including the commercial building. Specific tax strategy measures required.