Client Alert: “One Big Beautiful Bill” and Its Sweeping Changes to Individual, Business, and Estate/Gift Taxation and What You Need to Know 

On July 4, 2025, the One Big Beautiful Bill Act (the “OBBBA”) was signed into law, ushering in sweeping changes to individual, business, and estate/gift taxation. This client alert highlights the most impactful changes and provides practical insights into how they may apply to your personal or business tax planning strategy.

• Bonus Depreciation – The OBBBA restores and permanently extends 100% first-year bonus depreciation for eligible property acquired after January 19, 2025. Eligible property generally includes tangible personal property with a class life of 20 years or less. In addition, the OBBBA temporarily permits full expensing of certain “qualified production property” placed in service before January 1, 2031, provided specific requirements are met.

Our Insights– The reinstatement of 100% bonus depreciation for eligible capital expenses—like machinery and equipment—may offer businesses a valuable opportunity to improve after-tax cash flow and reallocate funds to other priorities. Additionally, manufacturers, refiners, and producers may benefit from a temporary provision allowing full expensing of construction and purchase costs related to “qualified production property” that previously wouldn’t have qualified due to having a longer class life.

• Section 179 – The OBBBA increases the maximum amount that can be deducted under Section 179 to $2.5 million which will then be phased down when a business’s qualifying property placed in service for the tax year exceeds $4 million. The $2.5 million max and $4 million phasedown will receive annual inflation adjustments.

Our Insights – Section 179 deductions may have different tax implications compared to bonus depreciation and can apply to property that isn’t eligible for bonus depreciation treatment. Given the nuances between the two, it’s a good idea to work with a tax professional to determine which approach—or combination—best aligns with your business goals and cash flow strategy.

• Qualified Business Income Deduction– Effective for tax years beginning after December 31, 2025, the OBBBA makes the qualified business income deduction, which was set to expire at the end of this year, permanent and increases the phase-in range from $50,000 to $75,000 for single filers and $100,000 to $150,000 for joint filers.

Our Insights – The mechanics of the Qualified Business Income deduction remain largely unchanged.

• R&D Expenditures – The OBBBA permanently reinstates the immediate expensing of domestic research and development (R&D) costs, effective January 1, 2025. Businesses with average gross receipts of $31 million or less over the prior three years (as of December 31, 2024) may retroactively deduct domestic R&D expenses incurred after December 31, 2021, either by amending prior tax returns or electing a change in accounting method. Additionally, all taxpayers may choose to accelerate the amortization of domestic R&D expenses previously capitalized between December 31, 2021, and January 1, 2025, over a one- or two-year period.

Our Insights – This change offers smaller businesses a valuable opportunity to receive relief for historic domestic R&D costs incurred between December 31, 2021, and January 1, 2025—potentially improving cash flow— by amending past returns or opting for a more streamlined accounting change. As always, it’s wise to work with a tax advisor to determine the most beneficial path. Note that the treatment of non-domestic R&D expenses remains unchanged and must still be capitalized and amortized over 15 years.

• Section 163(j) Interest Deduction Limitation – The OBBBA changes the calculation of adjusted taxable income to more closely reflect a taxpayer’s earnings before interest, tax, deductions, and amortization (“EBITDA”) rather than EBIT as was the case before the OBBBA effective beginning after December 31, 2025. Furthermore, the Section 163(j) limitation now applies to both deductible interest expenses and capitalized interest expenses with an exception for interest expenses capitalized under Sections 263A(f) and 263(g) beginning after December 31, 2025. Any interest expense not capitalized under this ordering rule can be carried forward to future tax years as a deductible interest expense.

Our Insights – By aligning the calculation of adjusted taxable income with EBITDA rather than EBIT, many businesses may see an increase in their allowable annual interest deductions under Section 163(j). In addition, the possible ability of carrying forward interest expenses that otherwise would have been capitalized as deductible interest expenses due to the Section 163(j) limitation could provide opportunities to recognize tax benefits sooner. Working with a tax professional can help you determine how these changes might enhance your overall tax strategy and cash flow planning.

• Qualified Small Business Stock (“QSBS”) – The OBBBA increases the per issuer gain limitation of Section 1202(b) from $10 million to $15 million through 2026 after which the amount will be indexed for inflation. The aggregate gross assets limit of Section 1202(d)(1)(B) is also increased from $50 million to $75 million. Lastly, the OBBBA no longer requires taxpayers to hold their QSBS stock for five years to receive any benefits from Section 1202 by providing a 50% exclusion for QSBS that has been held for at least three years and a 75% exclusion for QSBS that has been held for at least four years.

Our Insights – The increased $15 million per-issuer gain exclusion applies only to QSBS issued after July 4, 2025. If you hold QSBS from the same issuer that was acquired both before and after this date, it’s important to carefully plan the timing and order of any future sales to fully maximize the available exclusions. Additionally, with the higher asset threshold and the new partial gain exclusions available before the five-year mark, entrepreneurs and early-stage investors may want to give renewed consideration to forming businesses as corporations to take advantage of these enhanced benefits.

• State and Local Tax (“SALT”) Deduction – The OBBBA increases the SALT deductions cap from $10,000 to $40,000 ($20,000 for married persons filing separately) beginning in 2025 through 2029 with an increase in the cap every year by 1%. The increase in the cap is phased down for taxpayers with a modified adjusted gross income of over $500,000 but not below $10,000. After tax year 2029, the SALT deduction cap will revert back to $10,000.

Our Insights – Previous iterations of the OBBBA had restricted the use of pass-through entity taxes (“PTET”) as a way to circumvent the SALT deductions cap. The OBBBA, as enacted, removed all such limitations and PTET deductions should work the same as before the OBBBA. Taxpayers should be aware of their local state laws enabling such deductions. For example, California’s PTET election was originally set to expire at the end of 2025 but recently passed S.B. 132 will extend the ability to make California PTET elections until 2030.

• Estate, Gift, and Generation-Skipping Transfer Tax – The OBBBA permanently increase the lifetime exemption amount per individual from $10 million to $15 million for estates, gifts, and generation-skipping transfers effective January 1, 2026. The $15 million exclusion will be indexed for inflation for transfers made after 2026.

Our Insights – The increase in lifetime extension amount will allow taxpayers to transfer a greater amount of assets to their decedents before such transfers are subject to estate or gift taxes.

• Qualified Opportunity Zones (“QOZ”) – The OBBBA removes the December 31, 2026, cut off on transactions that can result in gain that is eligible for QOZ investment. The bill also and creates a new (and permanent) recurring redesignation cycle that starts on July 1, 2026, and repeats every 10 years. In order for a tract to be certified as a new qualified opportunity zone by the Treasury, the tract must meet the enhanced and stricter income requirement to qualify. Pre OBBBA designated QOZs are still expected to expire December 31, 2028. For qualifying investments in Qualified Opportunity Funds (QOF) (generally, funds that invest in QOZs) made after December 31, 2026 (e., in 2027 and beyond), the OBBBA provides for a potential five-year gain deferral period for investments in QOFs whereby the deferred gain will be recognized at the earlier of their five-year holding period or sale of their QOF investment. Investments in QOFs that are held for the entire five-year period will only realize 90% of their deferred gain due to a deemed increase in basis by 10%. This 10% basis adjustment is further increased to 30% if the investment was in a Qualified Rural Opportunity Fund as defined by the OBBBA. In addition, the OBBBA removed the December 31, 2047, sell date for investments in QOFs made after December 31, 2026, and held for ten years or more to receive tax free gain treatment on the ultimate sale of the investment. Instead, the OBBBA now provides that any appreciation before an investment’s 30-year mark may be excluded if the sale occurs after an investment’s 10-year mark through a deemed increase in basis to fair market value. Any sale after the 30-year mark may exclude the amount of appreciation that the investment had at its 30-year mark through a deemed increase in basis to fair market value at the investment’s 30-year mark.

Our Insights – The OBBBA changes allow taxpayers to take a long term investment approach to QOZs. Further guidance should be provided regarding the interaction between transactions involving investments made prior to December 31, 2026 and those after. Furthermore, additional guidance from the IRS should be provided regarding the treatment of investments in designated QOZs that lose their QOZ designation in later years. The OBBBA also provides additional reporting requirements for a taxpayer’s investment in a QOZ. Given the nuances of the new QOZ rules and its increased reporting requirements, it’s a good idea to work with a tax professional to guide you through any investment in a QOZ.

These changes present new planning opportunities—and potential pitfalls. Businesses and individuals alike should work with tax counsel to determine the best course of action based on their specific circumstances.