By: Jiaguang Zhu | August 3, 2026
The enactment of the One Big Beautiful Bill Act (OBBBA) represents the most significant federal tax legislation since the Tax Cuts and Jobs Act (TCJA) of 2017.
The legislation makes many previously temporary tax provisions permanent, introduces new deductions and incentives, and modifies several business tax rules. Although additional Treasury regulations and IRS guidance continue to be issued, businesses should begin evaluating how these changes affect their tax planning strategies.
1. Permanent 100% Bonus Depreciation
One of the most beneficial changes for businesses is the permanent restoration of 100% bonus depreciation for qualified property acquired after January 19, 2025. This allows businesses to immediately deduct the full cost of qualifying machinery, equipment, computers, furniture, and certain improvements, rather than depreciating those assets over several years.
Businesses considering capital expenditures may wish to accelerate purchases to maximize immediate deductions. While bonus depreciation significantly improves cash flow, taxpayers should evaluate whether immediate expensing or regular depreciation better aligns with projected taxable income.
2. Immediate Deduction for Domestic Research and Experimental (R&E) Expenditures
Beginning in 2022, IRC Section 174 generally required businesses to capitalize and amortize domestic research and experimental expenditures over a five-year period.
The OBBBA eliminates this requirement for many taxpayers, restoring the ability to immediately deduct qualifying domestic R&E expenditures, thereby reducing compliance burdens and improving cash flow for companies investing in innovation.
Industries that may benefit include:
Companies that previously capitalized research costs should consult their tax advisors regarding transition rules and potential accounting method changes.
3. Business Interest Expense Limitation Modified
The OBBBA also revises the business interest expense limitation under IRC Section 163(j).
The calculation of adjusted taxable income once again resembles EBITDA, allowing depreciation, amortization, and depletion deductions to be added back when computing the limitation. As a result, many capital-intensive businesses may deduct a larger portion of their interest expense than under prior law.
Businesses with leveraged financing structures should revisit their financing strategies and evaluate whether previously disallowed interest deductions may now become deductible.
4. Qualified Business Income (QBI) Deduction Made Permanent
The legislation permanently extends the 20% Qualified Business Income deduction under IRC Section 199A for eligible pass-through entities, including:
This deduction was previously scheduled to expire after 2025. Its permanent extension provides greater certainty for long-term entity selection and business succession planning. Eligibility, however, continues to depend on taxable income levels, W-2 wages, qualified property, and the nature of the business.
5. Expanded Section 179 Expensing
The OBBBA also substantially increases the Section 179 expensing limits. Eligible businesses may elect to expense a larger amount of qualifying equipment and business property, with both the deduction limit and phase-out thresholds increased and indexed for inflation. This provides additional flexibility, particularly for small and mid-sized businesses that may not rely solely on bonus depreciation.
6. Certain Clean Energy Tax Incentives Phased Out
Several clean energy tax incentives will become unavailable sooner than expected under the OBBBA, including credits for electric vehicles, residential energy improvements, and certain commercial energy projects.
Businesses planning renewable energy investments should review project timelines carefully, as eligibility may depend on when construction begins or property is placed in service.
For guidance on how these tax law changes may affect your business, please contact the Chugh LLP accounting team.
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