{"id":38635,"date":"2025-11-18T12:02:30","date_gmt":"2025-11-18T17:02:30","guid":{"rendered":"https:\/\/www.glensfalls.com\/glensfallsbusinessjournal\/?p=38635"},"modified":"2025-11-18T13:25:06","modified_gmt":"2025-11-18T18:25:06","slug":"new-federal-tax-law-overhauls-business-deductions-and-incentives-under-obbba","status":"publish","type":"post","link":"https:\/\/www.glensfalls.com\/glensfallsbusinessjournal\/2025\/11\/new-federal-tax-law-overhauls-business-deductions-and-incentives-under-obbba\/","title":{"rendered":"New Federal Tax Law Overhauls Business Deductions And Incentives Under OBBBA"},"content":{"rendered":"
\"\"
Kevin Hedley is board chairman for the Saratoga Prosperity Partnership.
Courtesy Hedley & Co. CPAs<\/figcaption><\/figure>\n

By Kevin M. Hedley, MS, CPA, PFS<\/p>\n

The One Big Beautiful Bill Act (OBBBA), enacted in July 2025, represents a sweeping overhaul of U.S. business taxation, with significant implications for federal and state tax planning, and corporate investment strategy. This article is a brief summary of some of the key business tax law updates introduced by OBBBA, focusing on the most impactful provisions for corporations and their practical implications.<\/p>\n

100% Bonus Depreciation Made Permanent<\/p>\n

OBBBA permanently restores 100% bonus depreciation for qualified property. This allows businesses to immediately deduct the full cost of most tangible property placed in service after January 19, 2025. This provision, which had been scheduled to phase down under prior law, now provides a powerful incentive for capital investment by enabling immediate expensing rather than requiring depreciation over several years. The law also introduces a transitional 40% bonus depreciation rate for property placed in service in the first tax year ending after January 19, 2025, if the taxpayer elects this treatment.<\/p>\n

New 100% Deduction for Qualified Production Property (QPP)<\/p>\n

A major innovation is the creation of Section 168(n), which allows a 100% immediate deduction for certain nonresidential real property used in qualified production activities\u2014primarily manufacturing, production, or refining of tangible personal property. This deduction is available for property placed in service after January 19, 2025, and before January 1, 2031. The provision is elective and subject to recapture if the property ceases to be used in a qualified production activity within 10 years. This is a significant departure from the traditional 39-year straight-line depreciation for nonresidential real property, and it is designed to spur domestic manufacturing investment.<\/p>\n

<\/span><\/span><\/strong><\/span><\/b>Immediate Expensing of Domestic R&E Expenditures<\/p>\n

OBBBA introduces Section 174A, which allows taxpayers to immediately deduct domestic research and experimental (R&E) expenditures for tax years beginning after December 31, 2024. This reverses the Tax Cuts and Jobs Act (TCJA) requirement to capitalize and amortize R&E expenses over five years (for domestic) or 15 years (for foreign) under Section 174. Taxpayers may now elect to either expense these costs immediately or continue to capitalize and amortize them. The law also provides a mechanism to write off previously capitalized and unamortized R&E amounts from 2022\u20132024, either in full or ratably over two years.<\/p>\n

More Favorable Business Interest Deduction Limitation<\/p>\n

OBBBA amends Section 163(j) to permanently allow the addback of depreciation, amortization, and depletion in the calculation of adjusted taxable income (ATI) for purposes of the business interest expense limitation. This change is increasing the amount of deductible interest for many businesses. The law also clarifies ordering rules and allows for more flexible application of the limitation.<\/p>\n

Energy Credit Modifications<\/p>\n

OBBBA curtails and modifies many energy tax credits introduced by the Inflation Reduction Act (IRA), imposing new domestic content and foreign entity restrictions, and phasing out or repealing several credits, such as residential energy credits and clean vehicle credits. This is expected to affect investment decisions in the energy sector and supply chains, especially for companies relying on federal energy incentives.<\/p>\n

Creation of \u201cTrump Accounts\u201d for Children<\/p>\n

For tax years beginning after December 31, 2025, the OBBBA establishes \u201cTrump Accounts,\u201d a new type of tax-advantaged savings account for children under 18. These accounts have a $5,000 annual contribution limit, allow employer and charitable contributions, and include a government-funded $1,000 pilot for newborns from 2025\u20132028. The law sets out new reporting, rollover, and penalty rules for these accounts. An interesting provision is employers may contribute up to $2,500 per year per employee (or their dependents) to Trump Accounts, excluded from the employee\u2019s gross income.<\/p>\n

State Tax Conformity and Planning<\/p>\n

OBBBA\u2019s federal changes do not automatically apply at the state level. States vary in their conformity to the Internal Revenue Code, and many have historically decoupled from provisions like bonus depreciation and R&E expensing. Make sure you, or your tax preparer, are aware of how your state filings will be impacted by the provisions of the OBBBA.<\/p>\n

Retirement planning<\/p>\n

Business retirement plans are tax-advantaged arrangements employers can establish to help employees (and often themselves) save for retirement. Common types include SEP IRAs, SIMPLE IRAs, 401(k) plans, and defined benefit plans. The OBBBA permanently extends lower individual tax rates, increases the standard deduction, and enhances the qualified business income deduction, which may improve after-tax retirement savings for employees and business owners. Although the OBBBA did not directly alter the fundamental aspects of most retirement plans, the changes in the law may make reviewing your current retirement plan worthwhile.<\/p>\n

Conclusion<\/p>\n

The OBBBA represents a major shift in U.S. business taxation, with permanent 100% bonus depreciation, immediate expensing for domestic R&E, and a new deduction for production property. The law\u2019s impact will vary by industry, with manufacturing and tangible production sectors seeing the largest benefits. However, the complexity of state conformity requires careful planning because businesses must closely analyze the law\u2019s provisions to maximize benefits and ensure compliance.<\/p>\n","protected":false},"excerpt":{"rendered":"

By Kevin M. Hedley, MS, CPA, PFS The One Big Beautiful Bill Act (OBBBA), enacted in July 2025, represents a sweeping overhaul of U.S. business taxation, with significant implications for federal and state tax planning, and corporate investment strategy. This article is a brief summary of some of the key business tax law updates introduced […]<\/p>\n","protected":false},"author":89,"featured_media":38670,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[52],"tags":[],"class_list":["post-38635","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-year-end-tax-planning"],"yoast_head":"\r\nNew Federal Tax Law Overhauls Business Deductions And Incentives Under OBBBA - Glens Falls Business Journal<\/title>\r\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\r\n<link rel=\"canonical\" href=\"https:\/\/www.glensfalls.com\/glensfallsbusinessjournal\/2025\/11\/new-federal-tax-law-overhauls-business-deductions-and-incentives-under-obbba\/\" \/>\r\n<meta property=\"og:locale\" content=\"en_US\" \/>\r\n<meta property=\"og:type\" content=\"article\" \/>\r\n<meta property=\"og:title\" content=\"New Federal Tax Law Overhauls Business Deductions And Incentives Under OBBBA - Glens Falls Business Journal\" \/>\r\n<meta property=\"og:description\" content=\"By Kevin M. Hedley, MS, CPA, PFS The One Big Beautiful Bill Act (OBBBA), enacted in July 2025, represents a sweeping overhaul of U.S. business taxation, with significant implications for federal and state tax planning, and corporate investment strategy. 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