What You Should Know about the One Big Beautiful Bill
On May 18th, The One Big Beautiful Bill (yes, that’s literally what the comprehensive tax package is called), cleared a key vote in the House Budget Committee. The Bill will now go before the House Rules Committee before it moves to the entire lower chamber for a vote. While there is a lot of discussion surrounding its cost and the radical changes to the ways individuals are taxed (no taxes on Tips?) business owners should be aware of the Bill’s contents.
Here are 4 things that business owners should know about what’s in the bill so far.
- Extends 100% Bonus Depreciation
In 2017, the Tax Cuts and Jobs Act (TCJA) brought us 100% bonus depreciation on all qualified property. This means that if you owned a building and performed a cost segregation study to increase 5-year deductions, you could deduct 100% of the savings in the first year. However, since 2022, bonus depreciation has been phased down, with 2025 allowing for 40% bonus. The new bill will restore 100% expensing on qualified property acquired on or after Jan 20, 2025 (in effect until 2030).
Restores R&D Expensing
One of the most harmful provisions of the TCJA was the sunsetting of the ability to expense R&D costs in the year incurred, a provision that has been in effect since the 1950s. Since 2022, businesses have been forced to amortize R&D costs and deduct them over 5 years, thus resulting in artificially higher income. The bill restores immediate deductions for R&D costs for costs incurred after 2024 (in effect until 2030).
100% expensing for new “production” factories
This is a big one. Under current law any nonresidential real property is placed on a 30-year depreciation recovery period. This new Bill proposes a 100% immediate write off for “qualified production property.” This would apply to the construction of or improvements to any building that manufactures or refines products in the agricultural or chemical space.
Extension and expansion of the Qualified Business Income Deduction (QBI)
The TCJA introduced a provision that allowed owners of qualified pass through entities to reduce their business income by 20%. This was welcomed by small businesses since the tax rate for corporations was cut from 35% to 21%. However, the QBI deduction is set to expire in 2026. The Bill will make the QBI deduction permanent and increase it from 20% to 23%.
There are many more provisions that will impact businesses and individuals in this bill. Some expire in 5 years, others are permanent. The Bill has produced heavy infighting amongst Republicans. ATS will be keeping watch to see what type of markup it gets if and when it makes it to the Senate.
For questions on how proposed tax changes could impact your business please contact the experts at ATS.
