In early July 2025, Congress enacted the One Big Beautiful Bill Act (“OBBB”), ushering in one of the most significant federal tax overhauls since the Tax Cuts and Jobs Act of 2017, during Donald Trump’s first term in the White House. While the bill touches many provisions of the tax code, small and medium-sized business owners, as well as moderate to high-earning individuals, stand to be among the most impacted. With several provisions already in effect and others set to apply beginning in calendar year 2026, understanding how these changes affect your personal and business finances and tax planning is critical.
If you are a business owner or an individual with moderate to high-income, this legislation creates a renewed opportunity to optimize deductions, reevaluate your entity structures, and plan for long-term tax efficiency. This blog post provides a breakdown of the most important provisions that business owners and individuals should be focused on. Over the coming months, we will provide in-depth looks into these and other tax changes from the OBBB.
Permanent Bonus Depreciation and Section 179 Expensing
One of the most favorable changes for businesses in the OBBB is the permanent extension of 100% bonus depreciation. Business owners can now fully and immediately deduct the cost of qualified property, including equipment, qualifying machinery, and improvements to nonresidential real estate. This change represents a significant planning opportunity for businesses investing in capital assets and large equipment purchases.
Additionally, the bill also secures expanded Section 179 expensing limits, which provides more flexibility for smaller businesses. Making these provisions permanent eliminates the prior uncertainty about phaseouts and gives business owners the ability to plan investments over multiple years with tax timing in mind.
R&D Expensing Made Permanent
The OBBB also brings back and makes permanent the ability to immediately expense domestic research and development costs. Prior law, which required businesses to amortize R&D expenses over five years, created significant cash flow and compliance burdens for businesses that heavily invest in technical advancements. Though, it is important to note that R&D that is conducted outside of the United States is still subject to capitalization rules.
With the passage of OBBB, small and medium-sized businesses engaged in innovation, including software development, process improvement, and product design, can now benefit from immediate deductions that boost cash flow. This provision also reduces the complexity associated with R&D amortization schedules and aligns deductions more closely with business cycles.
Pass-Through Deduction Secured
The 20% Qualified Business Income (QBI) deduction under Section 199A, first introduced by the 2017 Tax Cuts and Jobs Act, is now made permanent. This is a major win for pass-through entities like S corporations, partnerships, and sole proprietorships and their individual owners.
Though, it is important to note that eligibility limitations and thresholds still apply. The deduction phases out for certain service-based businesses (such as law, accounting, and healthcare) when income exceeds specified limits. Business owners must also pay close attention to wage and capital investment requirements, which can limit the deduction for higher-earning entities. For eligible businesses, locking in the QBI deduction ensures ongoing rate relief and reaffirms the tax code’s preferential treatment for pass-through structures.
Outbound Remittance Tax
A provision that has attracted less attention but carries substantial implications is the new 1% excise tax on outbound remittances, including transfers of funds abroad by individuals and businesses. While the tax is framed as a tool to reduce money flowing out of the U.S. economy, it introduces a new compliance requirement for business owners who make international payments.
While many business taxpayers may be exempted from the remittance tax, it will impact some companies and nearly all individuals aiming to send money overseas. How Treasury will implement this law remains to be seen, but it will likely impact a large swatch of the American population who currently make electronic payments outside of the U.S.
New Deduction for Tip and Overtime Pay
The OBBB also creates a new deduction for employers offering overtime pay and tipping income to workers. The deduction is capped at $25,000 per employee per year. This provision, in effect from 2025 through 2028, aims to reward employees who are in industries that have lower base wages but higher potential for tips and overtime.
This change should be welcomed by hospitality, construction, farm, and other manual labor workers. However, the provision introduces a new layer of documentation requirements and increases the risk of IRS inquiry if employer records do not align with employee-reported income.
Auto Loan Interest Deduction for U.S.-Assembled Vehicles
For both individuals and business owners, the return of the auto loan interest deduction is a potentially valuable tax planning opportunity. Taxpayers will be able to deduct up to $10,000 in annual interest on loans for U.S.-assembled vehicles, though phaseouts begin at $100,000 in adjusted gross income for single filers and $200,000 for married couples filing jointly.
For business owners who purchase vehicles for mixed personal and business use, this provision could interact with depreciation rules, business-use percentage calculations, and fringe benefit reporting. It will be critical to ensure vehicle purchases meet the “U.S.-assembled” requirement and that documentation supports any deduction taken.
Charitable Planning and Trust Scrutiny
Although it is not the centerpiece of the bill, OBBB also includes enforcement and policy changes that affect individuals who use trusts and charitable foundations as part of their long-term planning. Private foundations and charitable trusts are likely to face increased scrutiny as the bill imposes new transparency requirements and funding restrictions in response to perceived abuses.
For high-income individuals relying on complex estate planning vehicles, the post-OBBB environment will require a more cautious and proactive approach. Strategies that previously flew under the radar may now trigger IRS interest, and planners should reassess how these structures are documented and reported.
The Bottom Line: Planning Starts Now
The One Big Beautiful Bill Act has fundamentally altered the landscape for both individuals and businesses. Many of the most impactful provisions, such as full expensing, expanded deductions, and new compliance traps, are already in effect or will be within the next tax year.
If you are a small or medium-sized business owner or a high-income taxpayer, these changes create both opportunities and risks. Whether you are investing in equipment, compensating employees, managing cross-border payments, or navigating your own tax reporting, it is essential to have a clear understanding of how OBBB affects your specific situation.
The best time to revisit your tax strategy is now. If you have questions about compliance, tax planning around the new deductions, or long-term structuring, consult with a qualified tax attorney who can help you develop a personalized and legally sound path forward.
