Article | by Geffen Mesher

By Craig Freeman, Sherrie Smith, Aaron Lee & Colin Dosch

The recently passed “One Big Beautiful Bill Act” brings significant tax changes that directly affect professional services providers. Several key provisions present both challenges and significant planning opportunities for taxpayers.

100% Bonus Depreciation allowing an immediate deduction of qualified property has been made permanent. Previously, bonus depreciation was phasing down, with 2025 only receiving a 40% immediate deduction. This represents an immediate win for the recovery of personal property, land improvements, tenant build-outs, and most other interior commercial building improvements. The 100% deduction is available on qualifying property acquired after 1/19/2025. Note that the binding-contract rules apply: the placed-in-service date is less relevant than the date the asset was acquired by entering a binding contract. For example, if you entered a contract to buy qualified property on 1/1/2025 and placed it in service after 1/19/2025, you won’t get the 100% deduction; you will fall under the previous rules and receive only 40% bonus depreciation.

Section 179 expensing on certain qualified business property increases significantly for property placed in service starting 1/1/2025. The initial expense limit is $2,500,000 and begins to phase out at an increased threshold of $4,000,000 of assets placed in service. The limitations will be adjusted annually for inflation. Unlike bonus depreciation, Section 179 expensing can be elected on an asset-by-asset basis and is effective on the placed-in-service date. This creates a unique opportunity to analyze the benefits between Section 179 and property not yet eligible for 100% bonus depreciation (binding contract entered into before 1/20/2025). However, review the ownership structure carefully: non-grantor trusts cannot claim Section 179 deductions, so using Section 179 should be considered case by case.

Section 179D deduction for new energy efficient commercial buildings is repealed for property beginning construction after 6/30/2026.

Research and Experimental expenditures have several significant changes. The act permanently eliminates the capitalization requirement for domestic Research and Experimental (R&E) expenses effective for tax years beginning after 12/31/2024. It also allows retroactive expensing to tax years beginning after 12/31/2021 for certain taxpayers, those with average annual gross receipts of $31 million or less over the three years preceding the first tax year beginning after 12/31/2024. For more information, please see our previous post – HERE.

Qualified Business Income (QBI) Deduction was made permanent. Originally enacted in the 2017 Tax Cuts & Jobs Act (TCJA), it allows a 20% deduction (subject to limitations) for qualified business income from partnerships, S corporations, sole proprietorships, certain Real Estate Investment Trust (REIT) dividends, and publicly traded partnership income. The benefit was set to expire in 2025.

Passthrough-Entity State-Tax Deduction remains unchanged, allowing a federal deduction for state income taxes elected to be paid at the entity level. With the increased SALT itemized deduction to $40,000, the benefit of a state passthrough-entity deduction program may diminish under the new law and will require annual analysis.

Increased State & Local Tax (SALT) Deduction. A heavily negotiated change raises the itemized-deduction cap from $10,000 to $40,000. The new limit is effective for 2025, increases to $40,400 in 2026, and rises an additional 1% in 2027, 2028, and 2029. Phaseouts apply to high earners, defined as those with modified adjusted gross income (MAGI) exceeding $500,000 in 2025, $505,000 in 2026, and 1% higher each year thereafter. Though potentially limited, the deduction will never fall below $10,000 for any itemizer, and the higher cap is set to revert to $10,000 in 2030. This change should allow greater state, local, and personal-property tax deductions for most itemizers.

Business-Interest Limitation. For those subject to Section 163(j) in 2025 and beyond, the calculation reverts to the more favorable prior method. The new limitation calculation allows depreciation and amortization to be added back, applying the 30% limitation test to Adjusted Taxable Income using EBITDA (earnings before interest, taxes, depreciation, and amortization) rather than EBIT.

Limitation on Excess Business Losses was made permanent. Originally a TCJA revenue raiser set to expire in 2028, it limits the net trade- or business-loss offset against other income (wages, interest, dividends, etc.). Excess losses become net-operating-loss carryovers. The threshold for 2025 is $626,000 (joint filers), adjusted annually for inflation. This can be a trap for the unwary if large depreciation deductions are expected to wipe out taxable income but exceed the threshold.

1099-NEC and 1099-MISC Reporting threshold increases from $600 to $2,000 effective for payments after 12/31/2025. This will be indexed for inflation beginning in 2027. The threshold for 2025 remains at $600.

1099-K Reporting has been a source of confusion as it has changed several times over the last few years. The act officially restores the over $20,000 of payments and over 200 transactions thresholds.

Overtime Deduction for individuals allows for an income tax deduction for tax years 2025 through 2028 up to $12,500 for single filers and $25,000 for joint filers. The deduction is phased out by $100 for each $1,000 that exceeds $150,000 ($300,000 for joint filers). The overtime must be paid pursuant to Federal Fair Labor Standards Act and can’t include compensation paid to exempt employees. Employers will be required to file information returns with the IRS (or SSA) and furnish statements to employees showing the total amount of qualified overtime compensation paid during the year. The IRS will provide guidance for employers subject to the new reporting requirements.

Charitable Contributions by C Corporations. Effective for tax years after 12/31/2025, there is a new 1% of taxable income floor for charitable contributions. No charitable deduction is allowed for years in which total contributions don’t exceed 1% of taxable income.

Employer Payments of Student Loans under educational assistance programs are tax-free to employees. This was previously set to expire in 2025 but is made permanent by the act. It allows employees to receive a tax-free benefit of up to $5,250 in 2025 and is adjusted annually for inflation.

Paid Family and Medical Leave Credit is made permanent. It was previously set to expire at the end of 2025. Starting in 2026, the credit is available for paid family and medical leave insurance premiums as well as wages paid.

The OBBBA provides certainty for many taxpayers by permanently extending several expiring TCJA provisions, e.g. 100% bonus depreciation, QBI, etc. However, some of the separate, new provisions are temporary and may be reversed or revised in the future. We are here to help you navigate this evolving landscape by providing high quality, proactive tax planning and advisory services. Please reach out to your tax professional to learn how to optimize these provisions for your company’s benefit.

Geffen Mesher’s team is available to assist you with questions. Please contact our professionals for more information.