4 Key Business Tax Changes in the One Big Beautiful Bill (2025)

What You Should Know about the One Big Beautiful Bill

On May 18th, The One Big Beautiful Bill (yes, that's literally what the comprehensive tax package is called), cleared a key vote in the House Budget Committee. The Bill will now go before the House Rules Committee before it moves to the entire lower chamber for a vote. While there is a lot of discussion surrounding its cost and the radical changes to the ways individuals are taxed (no taxes on Tips?) business owners should be aware of the Bill's contents.

Here are 4 things that business owners should know about what's in the bill so far.

1. Extends 100% Bonus Depreciation

In 2017, the Tax Cuts and Jobs Act (TCJA) brought us 100% bonus depreciation on all qualified property. This means that if you owned a building and performed a cost segregation study to increase 5-year deductions, you could deduct 100% of the savings in the first year.

However, since 2022, bonus depreciation has been phased down, with 2025 allowing for 40% bonus.

The new bill will restore 100% expensing on qualified property acquired on or after Jan 20, 2025 (in effect until 2030).

What This Means for Your Business:

Full immediate deduction for equipment, machinery, and qualified improvements
Cash flow boost in the year of purchase instead of spreading over multiple years
Cost segregation studies become valuable again for real estate investors
Effective through 2030 - 5+ years of planning certainty

Who Benefits Most:

Manufacturing companies investing in new equipment
Real estate investors doing property improvements
Transportation companies buying vehicles and fleets
Technology firms purchasing servers and infrastructure

If you've been delaying capital investments waiting for bonus depreciation to return, now is the time to act.

2. Restores R&D Expensing

One of the most harmful provisions of the TCJA was the sunsetting of the ability to expense R&D costs in the year incurred, a provision that has been in effect since the 1950s.

Since 2022, businesses have been forced to amortize R&D costs and deduct them over 5 years, thus resulting in artificially higher income.

The bill restores immediate deductions for R&D costs for costs incurred after 2024 (in effect until 2030).

Why This Matters:

The forced capitalization of R&D expenses created a massive cash flow problem for innovative companies. You paid engineers, bought supplies, and hired contractors to develop new products - but couldn't deduct those costs immediately.

Instead, you had to:

Spread deductions over 5 years (15 years for foreign R&D)
Pay taxes on "phantom income" you didn't actually have
Watch your effective tax rate skyrocket

The Impact of Restoration:

With immediate R&D expensing restored:

Lower tax bills in the year you invest in innovation
Better cash flow for growth-stage companies
Enhanced R&D tax credits - you get both the deduction AND the credit
Competitive advantage for U.S. companies vs foreign competitors

Important Limitation:

This provision only extends through 2030. It's NOT permanent like the full repeal that came later in the July budget reconciliation bill.

3. 100% Expensing for New "Production" Factories

This is a big one.

Under current law any nonresidential real property is placed on a 30-year depreciation recovery period. This new Bill proposes a 100% immediate write off for "qualified production property."

This would apply to the construction of or improvements to any building that manufactures or refines products in the agricultural or chemical space.

What Qualifies:

Qualified production property includes:

Manufacturing facilities
Refineries and chemical plants
Agricultural production buildings
Processing and packaging facilities
Improvements to existing production facilities

The Numbers:

Imagine you build a $10 million manufacturing plant:

Old Law:

Depreciate over 39 years
Annual deduction: ~$256K
Year 1 tax benefit at 21% rate: ~$54K

New Law:

Deduct 100% in Year 1
Year 1 deduction: $10M
Year 1 tax benefit at 21% rate: $2.1M

That's $2+ million in immediate tax savings instead of waiting 39 years.

Strategic Implications:

This provision is designed to:

Incentivize domestic manufacturing
Bring production back to the U.S.
Accelerate facility construction
Support reshoring initiatives

If you're considering building or expanding U.S. manufacturing capacity, this is a game-changing incentive.

4. Extension and Expansion of the Qualified Business Income Deduction (QBI)

The TCJA introduced a provision that allowed owners of qualified pass-through entities to reduce their business income by 20%.

This was welcomed by small businesses since the tax rate for corporations was cut from 35% to 21%. However, the QBI deduction is set to expire in 2026.

The Bill will make the QBI deduction permanent and increase it from 20% to 23%.

Current QBI Rules (2025):

20% deduction on qualified business income
Available to sole proprietors, partnerships, S-corps, and LLCs
Phase-out thresholds apply for service businesses
Expires December 31, 2025

Proposed Changes:

Increased deduction: 20% → 23%
Made permanent (no expiration date)
Expanded eligibility (details TBD)

Real-World Example:

Software Consulting Firm (S-Corp):

Qualified business income: $500K

Current Law (2025):

QBI deduction: $100K (20%)
Taxable income: $400K
Tax at 37% rate: $148K

Proposed Law:

QBI deduction: $115K (23%)
Taxable income: $385K
Tax at 37% rate: $142.5K
Annual savings: $5,550

That might not sound like a huge difference, but:

It's permanent savings every year
It's a 3% increase in the deduction
Combined with other provisions, it adds up

Who Benefits:

Virtually all pass-through businesses benefit, including:

Professional services firms
Consulting businesses
Real estate companies
Manufacturing partnerships
Retail and e-commerce businesses
Family-owned companies

The permanence is arguably more important than the 3% increase. Businesses can now plan long-term knowing this deduction won't disappear.

What Happens Next?

There are many more provisions that will impact businesses and individuals in this bill. Some expire in 5 years, others are permanent.

The Bill has produced heavy infighting amongst Republicans. Key concerns include:

Overall cost of the package
Which provisions should be permanent vs temporary
How to pay for the tax cuts
Trade-offs between business and individual provisions

Timeline:

✅ Passed House Budget Committee (May 18, 2025)
Next: House Rules Committee (pending)
Then: Full House vote (expected late May/early June)
Then: Senate consideration (where significant changes may occur)
Final: Presidential signature

ATS will be keeping watch to see what type of markup it gets if and when it makes it to the Senate. The Senate version could look significantly different from what passed the House committee.

Important Context

It's worth noting that the July 3rd budget reconciliation bill that passed later made some of these provisions permanent or modified them further. Specifically:

R&D expensing was made permanent (not just through 2030)
Retroactive relief was added for small businesses

This May bill was an important stepping stone to the final legislation.

How to Prepare

Even though legislative outcomes are uncertain, you can prepare by:

Reviewing planned capital expenditures - timing matters for bonus depreciation
Assessing your R&D activities - document everything for potential credits
Evaluating manufacturing expansion - the production facility incentive is significant
Optimizing your entity structure - to maximize QBI deductions
Working with tax professionals - to model scenarios under different legislative outcomes

Get Expert Guidance

Tax legislation is complex and constantly evolving. The interaction between bonus depreciation, R&D credits, QBI deductions, and other provisions requires sophisticated planning.

For questions on how proposed tax changes could impact your business, please contact the experts at ATS.

We specialize in:

R&D tax credit studies
Cost segregation for bonus depreciation
Entity structure optimization
Strategic tax planning
Multi-year projection modeling
Legislative change monitoring

Don't leave money on the table. Contact us to ensure you're positioned to take full advantage of these tax provisions as they become law.

4 Key Business Tax Changes in the One Big Beautiful Bill (2025)