Greg O’Brien, CPA

OBBB Tax Law: The Top 5 Changes Every Business Owner Should Understand

The One Big Beautiful Bill (OBBB), signed into law on July 4, 2025, is the most sweeping tax legislation since the Tax Cuts and Jobs Act of 2017. While it addresses dozens of provisions, a handful stand out as critical for business owners to understand now. These changes affect depreciation, research and development (R&D), interest deductions, and overall cash flow.

This post highlights the top five OBBB tax law changes and explains how they will shape business planning for 2025 and beyond.

1. 100% bonus depreciation restored

OBBB reinstates 100% bonus depreciation for qualified property placed in service between 2025 and 2027 (IRC §168(k), as amended by OBBB §131). A new phase-out begins in 2028, reducing to 80%, then 60%, 40%, 20%, and 0% by 2032.

Key takeaway: Businesses have a three-year window to capture full deductions before the phase-out returns.

2. Section 174A: Immediate expensing of domestic R&E

OBBB created Section 174A, allowing full expensing of domestic research expenditures beginning in 2025. Taxpayers may elect amortization over 60 months instead, but foreign research remains subject to 15-year amortization under §174.

Key takeaway: OBBB strongly incentivizes keeping research activities in the U.S. with faster cost recovery.

3. Section 41 R&D credit preserved but changed in practice

The R&D credit under IRC §41 remains, but with §174A expensing, the credit base is smaller. Businesses must model whether electing amortization yields a better deduction-plus-credit result. Section 280C still requires reducing deductions by the credit amount unless a reduced credit election is made.

Key takeaway: The R&D credit is still powerful, but optimization requires balancing deductions and credits.

4. Interest limitation adjustments under §163(j)

OBBB changed how R&E amortization interacts with adjusted taxable income (ATI). Amortized R&E deductions must be added back when computing ATI under §163(j), making it easier for businesses electing amortization to preserve interest deductions.

Key takeaway: For debt-financed businesses, expensing versus amortization decisions now affect both cash flow and interest deductibility.

5. Net operating loss (NOL) carryforward rules clarified

OBBB confirmed that NOLs remain subject to the 80% limitation on taxable income, but clarified treatment for losses generated through bonus depreciation and R&E expensing. Carryforwards remain indefinite, but no carrybacks were reintroduced.

Key takeaway: NOLs remain valuable, but limits require careful forecasting for startups and cyclical businesses.

Worked example

Example
A manufacturer invests $2,500,000 in machinery and $1,000,000 in domestic R&E in 2025.

Under OBBB, it deducts $2,500,000 (100% bonus depreciation) plus $1,000,000 (expensed under §174A).
Total deductions = $3,500,000.
If income before deductions was $4,000,000, taxable income drops to $500,000.
R&D credit (assume 10% of qualified base) = $100,000.

At a 21% corporate tax rate, tax drops from $840,000 to $105,000, plus $100,000 in credits.

Assumptions

Machinery qualifies under §168(k).
R&E is fully domestic.
Credit simplified for illustration.

Action steps for business owners

Identify 2025–2027 capital purchases to maximize 100% bonus depreciation.
Decide whether to expense or amortize domestic R&E based on combined cash savings and credit optimization.
Reassess financing arrangements in light of revised §163(j) rules.
Model NOL impacts for growth or cyclical years.
Maintain strong documentation for R&D and depreciation claims.

Structured summary

OBBB restored 100% bonus depreciation for 2025–2027, phasing down after.
New §174A allows full expensing of domestic R&E; foreign remains 15-year amortization.
The R&D credit continues but must be modeled with deductions.
§163(j) rules improve interest deductibility interaction with R&E amortization.
NOL carryforwards remain capped at 80% of taxable income but clarified for OBBB-generated losses.

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