On July 4, 2025, a sweeping new tax law – the One Big Beautiful Bill Act, referred to in this article as the OB3 – was signed into law. The legislation makes permanent several expiring provisions, introduces new deductions and credits, and imposes updated reporting and compliance requirements that impact how companies manage payroll, plan benefits, and structure compensation.
Below is a breakdown of the most relevant changes for business owners, leadership teams, and finance professionals as they prepare for 2025 and beyond.
Key Tax Changes for Businesses
1. Qualified Business Income (QBI) deduction made permanent
The 20% deduction for Qualified Business Income (QBI), introduced in 2017, was originally set to expire after 2025. Under the new law, this deduction is now permanent.
The OB3 also introduces a new minimum deduction amount: if your total QBI from all “active” trades or businesses is at least $1,000, you’re guaranteed a minimum $400 deduction. Phase-in thresholds are raised to $75,000 for single filers and $150,000 for joint filers, which will allow more owners of profitable pass-through businesses to benefit without hitting income-based limits.
If you operate as a partnership, S corp, or sole proprietorship, it’s worth reviewing your entity structure and taxable income projections to see how this deduction can be optimized.
2. Bonus depreciation extended at 100%
This law restores and makes permanent the 100% bonus depreciation for qualified property. This applies to assets acquired after January 19, 2025, and placed into service during the tax year.
This change is especially beneficial for companies investing in equipment, hardware, and other tangible property, allowing the full cost to be deducted in the year of purchase rather than depreciated over time. The law also introduces a new provision for “qualified production property,” which includes non-residential real property used in manufacturing or production processes.
Strategically timing asset purchases may provide significant cash flow benefits in future years.
3. Section 179 expensing expanded
The maximum amount a business can immediately expense under Section 179 has increased to $2.5 million, while the phase-out threshold increased to $4 million. Both amounts are indexed for inflation in future years.
This continues to make Section 179 a useful tool for growing teams investing in infrastructure.
4. Payroll and compensation reporting changes
Several payroll-related provisions will require updates to internal systems and processes:
- Tip income and overtime reporting: Employees will be allowed to deduct up to $25,000 in tips and $12,500 in overtime pay from their taxable income. Employers must begin reporting these separately on Form W-2.
- Fringe benefits: The exclusion for bicycle commuting reimbursements is eliminated, and the qualified transportation fringe benefit structure is simplified.
- Student loan repayment: The tax-free treatment of employer-paid student loan assistance up to $5,250/year is made permanent and indexed for inflation, effective for payments made after December 31, 2025, with inflation adjustments beginning after 2026.
These changes take effect for tax years beginning after December 31, 2024. Employers will need to update payroll software and onboarding documentation accordingly.
5. Changes to 1099 reporting thresholds
The threshold for issuing Forms 1099-NEC and 1099-MISC increases from $600 to $2,000 for payments made after 2025. This should reduce the administrative burden on smaller payments, but may require businesses to adjust their contractor payment tracking methods.
Form 1099-K reporting thresholds also revert to pre-American Rescue Plan Act (“ARPA”) levels ($20,000 in payments and 200 transactions). For companies using third-party payment processors (like PayPal or Stripe), this change impacts how and when forms are triggered.
6. Corporate charitable giving rules tightened
The OB3 introduces a new floor for corporate charitable deductions: businesses must now donate at least 1% of taxable income to qualify for any deduction, in addition to the existing 10% ceiling. This may change how companies structure their annual giving strategies.
7. QSBS (Qualified Small Business Stock) gains expanded
The gain exclusion thresholds for QSBS are increased under the new law, and eligibility is expanded:
- The gain exclusion now ranges from 50% to 100%, depending on the length of time the stock was held (50% for stock held for three years, 75% for stock held for four years, 100% for stock held for five years).
- The exclusion threshold increases from $10 million to $15 million.
- The company’s gross asset limit to qualify as a small business rises from $50 million to $75 million.
If your business is structured as a C corporation and you’re seeking investment or planning for a potential exit, this change may be important for long-term tax planning.
8. Key credits and deductions phasing out
The OB3 also sunsets or limits several credits that had been popular in recent years, particularly in clean energy and manufacturing:
- Credits for clean vehicles, EV charging stations, and energy-efficient home improvements phase out between 2025 and 2026.
- The energy-efficient commercial building deduction terminates for construction beginning after June 30, 2026.
- Advanced energy project and production credits are scaled back or capped.
If you’ve been planning to or if you currently invest in sustainability-focused infrastructure, coordinating timelines with your tax advisor may help preserve eligibility under current rules.
9. Special rules for farmland and installment sales
Businesses selling qualified farmland after July 4, 2025, can now elect to spread capital gains taxes over four years in equal installments. While niche, this may be relevant for certain landholders and rural-based operations.
10. Opportunity Zones are now permanent
Instead of a one-time designation, new Qualified Opportunity Zones (QOZs) will be selected every 10 years, starting July 1, 2026. This creates ongoing opportunities for communities and investors to benefit from OZ incentives.
Investors can now permanently exclude post-acquisition capital gains on Qualified Opportunity Fund (QOF) investments held for at least 10 years, with a maximum exclusion period of 30 years. This makes long-term OZ investments even more attractive.
Other changes include:
- Expanded Eligibility: The Act allows for new types of eligible census tracts, including “qualified rural opportunity funds,” making it easier to invest in both urban and rural projects.
- Revised Deferral and Basis Rules: For investments made after July 4, 2025, deferred gain is only available if the QOF interest is held for at least five years. The basis step-up is now 10% for standard QOZs and 30% for qualified rural funds, providing a bigger incentive for rural investments.
- Stricter Compliance: New rules require QOFs to reinvest proceeds from the sale of QOZ property within 12 months and impose tougher reporting requirements and penalties for noncompliance.
What Business Owners Should Do Now
1. Update payroll systems
The new rules around tip and overtime reporting, fringe benefits, and student loan assistance will require payroll updates starting in 2026. Begin coordinating with your provider now to ensure a smooth transition, and keep employees informed of any changes.
2. Review benefits and compensation
Consider how the changes to student loan assistance, dependent care, and executive compensation deductions could affect your benefit programs. Small adjustments now may improve your tax position later. Ensure you coordinate with benefit providers to stay compliant with new limits and credits.
3. Evaluate equipment and capital investments
If your company is considering large purchases, now may be a good time to revisit your depreciation strategy. With 100% bonus depreciation restored and Section 179 limits increased, there may be significant advantages to acquiring and placing assets into service before year-end.
4. Align charitable contributions with new limits
If you make corporate donations, keep the new 1% floor in mind when planning giving strategies. Falling below this threshold could make charitable contributions non-deductible.
5. Revisit entity structure and long-term tax strategy
Permanent changes to the QBI deduction and QSBS rules may make certain structures (like C corps or S corps) more or less favorable depending on your goals. It’s worth having a conversation with your tax advisor to assess your strategy.
How You Can Plan Ahead
Some of these changes apply immediately, while others phase in over the next one to two years. It’s important to note that several provisions, including changes to 1099 reporting and payroll reporting, will require operational updates well in advance of filing deadlines.
WG clients can expect proactive outreach and tailored guidance from our team as IRS guidance is released and implementation deadlines approach.
If you’d like to talk through any of the new provisions, we’re here to help. We’ll help make sure you’re set up to stay compliant and to make the most of what’s available for your business.
