If you’ve been waiting for more certainty before making a major investment, hiring decision, or acquisition, Congress changed the playing field. On July 4, 2025, when the One, Big, Beautiful Bill Act (OBBBA) was signed into law, it reshaped several core business tax rules—many of which had been scheduled to expire or phase down. Below are a few of the most important updates business owners and finance teams should be thinking about now—especially as you plan budgets, capital expenditures, and growth strategies for 2025 and 2026.
The flat 21% federal corporate tax rate and the 20% deduction for pass-through business taxation (S-corporations, partnerships, and sole proprietorships) are now permanent. Both changes bring welcome predictability to long-term planning. For example, with the set 21% corporate tax rate, depending on your structure and goals, there may be situations where retaining earnings at the corporate level is more efficient than distributing profits.
OBBBA permanently reinstates 100% “additional first-year depreciation” for qualifying property—meaning many businesses can immediately deduct the full cost of eligible equipment and machinery in the year it’s placed into service (subject to the rules and elections). This can meaningfully change the economics of equipment purchases, technology upgrades, and facility improvements, especially for capital-intensive businesses.
Under the updated rules, the business interest expense limitation under Section 163(j) is calculated using EBITDA again (instead of EBIT). For many companies, that change can increase the amount of interest you can deduct each year, especially if you’re investing heavily or carrying meaningful debt.
Starting in 2026, the employer-provided childcare credit cap increases substantially to $500,000 annually (or $600,000 for eligible small businesses). Because employers are competing on benefits and retention—especially in tight labor markets—this is a rare opportunity to align workforce strategy with a major tax incentive.
OBBBA allows full expensing of domestic research & development costs again (rather than multi-year amortization). Some commentary and summaries of OBBBA suggest that you may expense such costs incurred in 2025 before the OBBBA was passed and became effective, but you should consult with your tax advisor. Deduction limits are now calculated based on earnings before interest, taxes, depreciation, and amortization (EBITDA), rather than just EBIT, which suggests that businesses may be able to deduct additional costs.
A “tax change” isn’t just a tax change—it impacts cash flow, capex timing, entity structure, debt strategy, compensation/benefits, and even M&A decisions. The businesses that benefit most are the ones that plan early and document carefully.
