The One Big Beautiful Bill Act makes provisions for businesses that will take effect in 2025 and extend beyond 2025. Based on our understanding of this new law, we’ve collected the following information. Our interpretation of these provisions will continue to evolve as more details are revealed.
The following items will affect businesses for the 2025 tax year:
1. Tips and overtime reporting. The legislation provides a transition rule for the reporting of qualified tips and overtime for 2025. Rather than having to report on W-2s or 1099s, employers will be able to provide a “separate accounting” of the tips or overtime, the format for which will come in subsequent guidance from the IRS. For tips, the legislation also requires the reporting of the recipient’s occupation.
2. Withholding tables adjustment for tips deduction. The legislation directs the IRS to update the withholding tables.
3. Tips credit. The credit for portion of the employer social security taxes paid with respect to employee cash tips under § 45B is extended to beauty service businesses (barbering and hair care, nail care, esthetics and body and spa treatments) if the tipping of employees providing such services is customary.
4. Car loan interest reporting. The legislation requires lenders to furnish statements to taxpayers regarding the amount of interest paid if it exceeds $600. Guidance will be issued on the statements by the IRS.
5. 1099- K reporting threshold. For payments made after Dec. 31, 2024, the threshold for reporting is $20,000 and more than 200 transactions.
6. Qualified small business stock (QSBS). The legislation increases the gross asset limitation, thereby making more companies eligible to issue QSBS, for stock issued after July 4, 2025.
7. Bonus depreciation. The 100% deduction is permanently reinstated for qualified property acquired after Jan. 19, 2025.
8. Business interest expense. The calculation of adjusted taxable income (ATI) for purposes of the business interest expense limitation is permanently restored to earnings before interest, taxes, depreciation and amortization (EBITDA).
9. Domestic research and experimental (R&E) expenses. Domestic R&E may be expensed. The deduction is permanent. For small business taxpayers (those who meet the gross receipts test, currently average annual gross receipts of $31 million or less), the change is effective for tax years beginning after Dec. 31, 2021, permitting those taxpayers to file amended returns for 2021–2024 by July 4, 2026, to claim the deduction. All others may deduct the unamortized amount over one or two years.
10. Section 179 expensing. The maximum deduction is $2.5 million, reduced dollar-for-dollar for assets placed in service in excess of $4 million. Both the deduction amount and threshold will be adjusted for inflation after 2025.
11. Energy credits. The qualified commercial clean vehicles credit (§ 45W(g)) is eliminated for vehicles acquired after Sep. 30, 2025.
12. Employee retention credit (ERC). The IRS is barred from paying out ERC claims filed after Jan. 31, 2024, In addition, the statute of limitations for assessments is increased to six years. These two items apply after July 4, 2025. Finally, promoter penalties are increased, which apply to aid or advice provided after July 4, 2025.
The following items will affect businesses for tax years beginning after December 31, 2025:
1. 1099 reporting threshold. For payments made in 2025 (reportable in 2026), the threshold for Forms 1099-MISC and 1099-NEC is $2,000. The threshold will be adjusted for inflation after 2026 (i.e., for payments made in 2027).
2. Trump savings accounts. After July 4, 2026, employers may contribute up to $2,500 to the Trump accounts of employees or their dependents. The amount will be adjusted for inflation after 2027. Employer contributions are excluded from gross income.
3. Business interest expense. Certain foreign amounts of income and deductions are included in the calculation of ATI. In addition, the limitation on the deduction for business interest is calculated prior to the application of any interest capitalization provision.
4. Corporate charitable contributions. Corporate charitable contributions are subject to a 1% floor before the application of the 10% of taxable income limitation. If contributions exceed 10%, the carryover includes the amount disallowed due to the 1% floor.
5. Business meal expenses. The legislation clarifies that employers may deduct “entertainment sold to customers” (§ 274(e)(8)) and modifies § 274(n)(2)(C) to allow 100% deduction for food and beverages provided to crews of certain fishing vessels.
6. Qualified business income (QBI) deduction. The QBI deduction, scheduled to expire after 2025, is permanent and remains at 20%. The legislation increased the phase-in amount to $75,000 ($150,000 MFJ). These amounts will not be adjusted for inflation. The legislation also added a minimum deduction of $400 if QBI is at least $1,000. The $400 and $1,000 amounts will be adjusted for inflation after 2026.
7. Energy credits. The new energy efficient home credit (§ 45L) is eliminated for property acquired after June 30, 2026. Numerous other credits have been terminated early.
8. New markets tax credit. This credit, scheduled to expire at the end of 2025, is permanent. The legislation also modifies the carryover from its scheduled end in 2030 to five years.
9. Paid family and medical leave credit. This credit, scheduled to expire at the end of 2025, is permanent.