Summary of Business Provisions of the New Tax Act (the Act) (formally known as One Big Beautiful Bill or, informally, OBBB, or OB3), signed into law July 4, 2025

Qualified Business Income (QBI) deduction: The Act makes this deduction permanent. It also sets a minimum deduction for active QBI for “applicable taxpayers” at $400; defines an applicable taxpayer as one whose aggregate QBI for all active qualified trades or businesses for the tax year is at least $1,000; and establishes inflation adjustments for the new minimums starting in post-2026 tax years.

Also, the phase-in amounts are increased from $50,000 to $75,000 for single filers and from $100,000 to $150,000 for joint filers.

Bonus depreciation: The Act makes additional first year (bonus) depreciation for certain qualified property permanent at 100% (under prior law, it was to phase out to zero). This provision is effective for property acquired after Jan. 19, 2025. There is also a new 100% bonus depreciation provision for “qualified production property” (QPP, which is certain non-residential real property used in the manufacturing, production or refining of certain tangible personal property). This QPP provision is effective for property placed in service after July 4, 2025.

179 Expensing limits:

For property placed in service after 2024, the Code Sec. 179 expensing limits are increased to $2,500,000 and the phaseout threshold is increased to $4,000,000.

Both limits are subject to inflation adjustments.

Business interest:

For post-2025 tax years, the Act modifies the definition of adjusted taxable income for purposes of the Code Sec. 163(j) limitation on business interest.

The new rule makes the limitation less restrictive by allowing depreciation and amortization to be added back, resulting in a higher adjusted taxable income, and potentially a larger allowable interest deduction.

The small business exemption remains for businesses (other than tax shelters) with average annual gross receipts below the inflation-adjusted threshold (e.g., $31 million for 2025).

Real property trades or businesses and farming businesses can elect out of the limitation if they use the alternative depreciation system (ADS) for applicable property

Deduction limitation for compensation of publicly held corporation executives:

For post-2025 tax years, all members of a publicly held corporation’s controlled group and affiliated service group are subject to the $1 million per year compensation deduction limits of certain top executives.

Foreign tax credit (FTC) Allocation of deductions to foreign source net CFC tested income (formerly known as GILTI):

The Act, which renames GILTI to net CFC tested income, limits the deductions that may be allocated to income in the net CFC tested income category to (i) the deduction for net CFC tested income itself as well as for taxes imposed on that income and (ii) any other deductions directly allocable to net CFC tested income. Also, no amount of interest expense or R&E expense may be allocated to this category. Deductions which would have been allocated to the net CFC tested income category but for this provision must instead be allocated to U.S. source taxable income for purposes of the FTC limitation. This provision is effective for tax years beginning after 2025.

Exclusion of gain on the sale or exchange of qualified small business stock (QSBS):

The Act provides that gain on the “applicable percentage” (50% for stock held for 3 years, 75% for stock held for 4 years, 100% for stock held for 5 years) is eliminated for QSBS acquired after July 4, 2025.

Also, the gain exclusion threshold is increased from $10 million to $15 million, and the $50 million aggregate gross asset limit is increased to $75 million.

All thresholds will be adjusted for inflation.

Enhanced manufacturing investment credit:

The advanced manufacturing investment credit (also known as the semiconductor credit or the CHIPS credit) on qualified investments in an advanced manufacturing facility built before Jan. 1, 2027 is increased  to 35% (up from 25%) for property placed in service after 2025.

Information reporting, Form 1099-K:

The Act retroactively reverts the Form 1099-K reporting threshold back to the pre-ARPA $20,000 and 200 transactions threshold.

Information reporting, Forms 1099-NEC, 1099-MISC:

For payments made after 2025, the reporting thresholds for Forms 1099-NEC and 1099-MISC are increased from $600 to $2,000 (adjusted for inflation after 2026).

Gain on the sale of certain farmland property:

For sales or exchanges occurring after July 4, 2025, sellers of qualified farmland property may elect to pay capital gains tax on the sale in four equal annual installments.

The first payment is due with the return for the year in which the sale occurs, with the remaining payments being due with the successive years’ returns. 

If any payment is missed, the balance is due immediately.

Corporate charitable contributions:

• The annual charitable contribution deduction is generally limited to 10% of taxable income, but  the deduction is reduced by 1% of taxable income for tax years after 2025.
• There is a new 1% floor: only the aggregate amount of contributions exceeding 1% of taxable income is deductible.

Excess business losses: The Act makes the Code Sec. 461(l) limit on excess business losses permanent for noncorporate taxpayers.

• Threshold Amounts: For 2025, the threshold is $313,000 for single filers and $626,000 for joint filers. For tax years after 2025, these amounts are adjusted for inflation using 2024 as the base year.
• Definition: An “excess business loss” is the excess of aggregate trade or business deductions over the sum of aggregate gross income or gain from those trades or businesses plus the threshold amount.
• Treatment of Disallowed Losses: Any excess business loss disallowed under Code Sec. 461(l) is treated as a net operating loss (NOL) carryforward to subsequent tax years.
• The Act also permanently suspends the separate excess farm loss limitation so all business losses (including farming) are subject to the excess business loss limitation.
  • The limitation applies at the partner or shareholder level for partnerships and S corporations.

Energy efficient commercial buildings deduction:

Under the Act, the energy efficient commercial building deduction terminates for any cost of energy efficient commercial building property whose construction begins after June 30, 2026.

Cost recovery for energy property:

The Act eliminates 5-year MACRS classification for energy property effective for property for which construction begins after 2024.

Advanced energy project credit:

Effective July 4, 2025, “add backs” in the event of the revocation of a project certification are discontinued.

Advanced manufacturing production credit:

The Act terminates the credit for wind energy components produced and sold after Dec. 31, 2027. It also subjects pre-Act applicable critical minerals to a new phaseout schedule and tightens the rules regarding foreign entities.

Energy efficient home improvement and new energy efficient home credits:

The energy efficient home improvement credit under Code Sec. 25C is terminated for property placed in service after 2025.

The new energy efficient home credit under Code Sec. 45L terminates for any qualified new energy efficient home acquired after June 30, 2026.

Residential clean energy credit:

The residential clean energy expenditures credit is terminated for any expenditures made after 2025.

Clean vehicle credits:

The credits for new and previously owned clean vehicles terminate for vehicles acquired after Sept. 30, 2025.

The credit for qualified commercial clean vehicles also terminates for vehicles acquired after Sept. 30, 2025.

Alternative fuel vehicle refueling property credits:

The credit for “alternative fuel vehicle refueling property” (such as an EV charger) terminates for property placed in service after June 30, 2026.

No Income Tax on Tips – For Employers:

• The provision does NOT exempt employers from payroll tax (FICA) obligations on tips. Employers must continue to withhold and pay Social Security and Medicare taxes on all reported tips, as before.
• Starting in 2025, employers must separately report the amount of qualified tips and the employee’s occupation on Forms W-2 (for employees) and 1099 (for independent contractors).
• For tips received before January 1, 2026, employers may use any reasonable method to approximate designated tip amounts due to the retroactive effective date.
• Only cash and credit card tips in customary tipping occupations qualify, and service charges are excluded.
• Employers must ensure payroll systems can track and report qualified tips and occupations for W-2 reporting, including for the retroactive portion of 2025.

No Tax on Overtime: 

For the 2025 tax year, employers are required to report the total amount of qualified overtime compensation on employees’ Forms W-2 and, for non-employees, on applicable 1099 forms.

Because most payroll systems do not currently separate out qualified overtime, the law provides transition relief for 2025: employers may use any reasonable method to estimate and report qualifying overtime amounts for this year.

There are no changes to the W-2, 1099, or federal income tax withholding tables for 2025; employers should continue using current reporting procedures. Updates to forms and withholding procedures reflecting the new law will take effect for tax year 2026 and beyond.