On July 4, 2025, President Trump signed the One Big Beautiful Bill Act into law. For business owners, it delivers both permanent enhancements to depreciation and expensing and expanded tax credits, along with a significantly broader capital‑gains exclusion for certain C Corporation stock.

1. Permanent Bonus Depreciation & Increased Expensing

• 100 Percent Bonus Depreciation Becomes Permanent
  Under current law, bonus depreciation phases down 20 percent per year after 2023. The new law makes 100 percent immediate expensing permanent for qualified property placed in service after January 19, 2025. This provision may allow eligible businesses to reduce taxable income in the year of acquisition, depending on their specific circumstances.
• Higher Section 179 Expensing Threshold
  The maximum annual Section 179 deduction rises from $1 million to $2.5 million, with the phase‑out threshold increasing from $2.5 million of equipment purchases to $4 million (indexed for inflation after 2025). This change may enable more small to mid-sized firms to expense the full cost of qualifying assets in the year purchased.

2. Expanded Research, Workforce & Energy Credits

• R&D Expense Deduction Restored
  Previously, domestic research costs had to amortize over five years. The Act reinstates immediate expensing of R&D outlays and allows eligible small businesses (≤ $31 million in gross receipts) to elect retroactive deductions for 2022–2024. This may improve cash flow for innovation-focused firms.  
• Business Interest Deduction Cap Raised
  For 2025 and beyond, “adjusted taxable income” for purposes of the interest‑expense limitation will exclude depreciation, amortization, and depletion. This change may allow businesses with high capital costs to deduct a larger share of interest in the current year.
• Paid Family & Medical Leave Credit Made Permanent
  The credit, which covers up to 25 percent of wages paid to employees on qualified leave, now becomes permanent. It also expands to include family‑leave insurance premiums, potentially lowering the net cost of offering leave benefits.
• Other Notable Credit Extensions & Increases
• 50 percent deduction for business‑meal expenses remains permanent.
• Enhanced advanced‑manufacturing investment credit rises from 25 percent to 30 percent for property placed in service after December 31, 2025.
• Employer child‑care credit increases to $500,000 (40 percent of expenses) and adds a small‑employer credit up to $600,000 (50 percent of expenses).
• Student‑loan assistance exclusion becomes permanent and indexed for inflation.
• Paid Overtime Tax Credit of up to $12,500 ($25,000 joint filers) introduced.
• New Markets Tax Credit and certain rural‑loan interest exclusions are extended or introduced.

3. Enhanced Qualified Small Business Stock (QSBS) Exclusion

According to Husch Blackwell, the Act confirms three major updates to IRC § 1202 that may influence your choice of entity selection and capital‑gains planning (Husch Blackwell):

1. Tiered Holding‑Period Exclusions

• ≥ 3 years held → 50 percent exclusion
• ≥ 4 years held → 75 percent exclusion
• ≥ 5 years held → 100 percent exclusion

1. Higher Per‑Issuer Cap

• The exclusion limit increases from the greater of $10 million or 10× basis to $15 million, with annual inflation adjustments.

1. Increased Gross‑Asset Threshold

• Qualifying C Corps may now have up to $75 million in assets (up from $50 million), indexed for inflation.

These changes may make C Corporation status more attractive for startups and growth companies planning liquidity events three or more years out. However, the benefits depend on a variety of factors, including timing, structure, and exit strategy.

4. Next Steps for Business Leaders

Buttonwood Financial Group works with our clients to align their business and personal financial strategies. Here are a few ways we can support you in light of this new legislation;

1. Model Your 2025 Tax Profile
2. We’ll work with you and your CPA to project taxable income, evaluate bonus depreciation vs. Section 179 elections, and assess credit phase‑out impacts.
3. Revisit Entity & Capital Structure
4. We can coordinate with legal and tax professionals to evaluate whether the expanded QSBS expansion makes C Corp status more favorable for your long-term objectives.
5. Time Major Purchases & Elections
6. Strategically timing equipment or R&D investments may allow you to maximize deductions and credits in 2025.  
7. Monitor IRS & Treasury Guidance
8. As we have done for more than 20 years, we remain aware of regulations that may refine definitions, phase-in rules, or eligibility criteria – and keep you informed.

Let’s Talk Strategy

If you’d like to explore how these provisions might apply to your business or personal tax strategy, our Team stands ready to assist. We’ll work alongside your tax and legal advisors to ensure your plan is both compliant and aligned with your goals. Contact us today to learn more.

Please note: This summary is for informational purposes only and does not constitute tax or legal advice. Individual outcomes may vary. We recommend consulting with tax, legal, and other advisors before making any decisions. If you don’t already have these professionals in your network, please let us know as we work with many on a regular basis.

Sources:

1.      https://www.bizjournals.com/kansascity/news/2025/07/03/slew-of-small-business-tax-cuts-set-to-become-law.html

2.      https://www.huschblackwell.com/newsandinsights/one-big-beautiful-bill-act-expands-qualified-small-business-stock-exclusion

3.      https://www.congress.gov/bill/119th-congress/house-bill/1