The House of Representatives passed President Trump’s comprehensive tax package by a razor-thin 215-214 vote early morning on Thursday, May 22, 2025, sending the “One Big Beautiful Bill Act” to the Senate. This sweeping legislation could reshape how you pay taxes on both your business income and personal finances.
For business owners, the bill offers significant opportunities, but it’s important to understand that these provisions represent only the starting point for Congressional negotiations. The Senate has already indicated it will make substantial changes to many provisions before final passage, meaning the tax benefits that ultimately become law may differ significantly from what the House approved. Any planning decisions should account for this legislative uncertainty, and business owners should work closely with their tax advisors as the bill evolves through the Senate process.
The Big Picture for Business Tax Services
The legislation makes permanent many provisions from the 2017 Tax Cuts and Jobs Act (TCJA) that were set to expire at the end of this year. More importantly for business owners, it enhances several key deductions and restores valuable tax breaks that have been scaled back in recent years.
The Congressional Budget Office estimates the bill would reduce federal tax revenue by $3.8 trillion over the next decade. While that’s created political debate, the practical impact for businesses could be substantial tax savings and increased cash flow for reinvestment and growth.
Enhanced Pass-Through Business Deduction
The most notable change for most business owners involves the Section 199A qualified business income deduction. Currently at 20 percent, the bill increases this deduction to 23 percent and makes it permanent.
This change affects more than 95 percent of all U.S. businesses — partnerships, S corporations, sole proprietorships, and limited liability companies. For a business owner with $200,000 in qualified business income, this enhancement means an additional $6,000 deduction annually.
The expanded deduction also applies to dividends from business development companies and real estate investment trusts, extending these tax benefits to a broader range of investment structures.
Restored Business Expensing Benefits
The bill brings back 100 percent bonus depreciation for equipment purchases made between January 19, 2025, and December 31, 2029. This means you can immediately deduct the full cost of qualifying business assets rather than depreciating them over several years.
Section 179 expensing limits also increase substantially from $1 million to $2.5 million, with the phase-out threshold rising from $2.5 million to $4 million. This change particularly helps small and mid-sized businesses making significant equipment investments.
For companies investing in research and development, the bill allows immediate expensing of domestic research and development costs for tax years 2026 through 2029, reversing the current requirement to spread these deductions over five years.
Manufacturing and Production Incentives
Manufacturers gain access to an immediate 100 percent deduction for “qualified production property” costs, essentially the expenses for building or buying commercial real estate used directly in manufacturing operations. This applies to newly constructed or acquired nonresidential property used for manufacturing, agricultural and chemical production, or refining in the United States.
The bill also modifies business interest deduction limitations, using the more favorable EBITDA (earnings before interest, taxes, depreciation, and amortization) calculation instead of EBIT through 2028. This change allows businesses to deduct more of their interest expenses, particularly helping companies with significant debt financing.
Individual Tax Changes That Affect Business Owners
Beyond business-specific provisions, several individual tax changes impact business owners personally.
Standard Deduction Increases: For 2025 through 2028, standard deductions increase by $2,000 for married joint filers, $1,500 for heads of household, and $1,000 for single filers. These amounts are in addition to the permanently higher TCJA levels.
State and Local Tax Relief: The contentious state and local tax (SALT) deduction cap increases to $40,000 for incomes up to $500,000, with phase-downs for higher earners. This change particularly benefits business owners in high-tax states.
Estate Tax Planning: The estate and gift tax exemption increases to $15 million per person starting in 2026, indexed for inflation. This provides significantly more flexibility for business succession and wealth transfer planning.
New Deductions and Credits
Several new temporary deductions run from 2025 through 2028:
- Tax exemptions on tip income and overtime pay for employees
- Deductions for up to $10,000 in personal vehicle loan interest annually
- Additional $4,000 standard deduction for taxpayers 65 and older
- Restored charitable deduction for non-itemizers
The child tax credit temporarily increases to $2,500 through 2028, then returns to a permanent $2,000.
What Gets Eliminated
The bill phases out various clean energy tax credits from the Inflation Reduction Act, generating about $500 billion in revenue over a decade. Electric vehicle credits, residential energy efficiency credits, and many renewable energy production credits face elimination or significant reductions. For businesses that have been counting on these credits for equipment purchases or energy improvements, this is a substantial shift in planning assumptions and potential increased costs for green energy investments.
Timeline and Next Steps
The Senate must now craft its own version of the legislation. Several senators have already indicated they want changes, particularly around social program modifications and the overall approach to combining tax cuts with spending changes.
While this analysis is based on the House-passed version of the legislation, business owners should remember that Senate Republicans have already signaled their intent to modify key provisions. As Senator John Thune noted, the Senate wants to ‘write our own bill.’ This means the final legislation could look substantially different from what the House approved, and tax planning strategies should remain flexible until Congress reaches a final agreement.
Speaker Mike Johnson has indicated Congress needs to pass final legislation by July 4 to address debt ceiling concerns. Given the narrow Republican majority in the Senate, any changes could require the bill to return to the House for another vote.
If the legislation passes in a substantially similar form, most provisions will take effect for the 2025 tax year. If it stalls or fails, the 2017 tax cuts expire as scheduled on December 31, 2025, meaning tax rates would return to pre-2017 levels for most taxpayers and businesses.
Planning Opportunities Right Now
Even before final passage, business owners should consider several immediate actions:
Review Your Business Structure: The enhanced Section 199A deduction makes pass-through entities even more attractive. If you’re operating as a C corporation, evaluate whether conversion makes sense.
Accelerate Equipment Purchases: If bonus depreciation returns as expected, consider timing major equipment acquisitions to maximize tax benefits.
Evaluate Compensation Plans: With potential tax exemptions on tips and overtime, review how you structure employee compensation.
Estate Planning Updates: The higher exemption amounts create new opportunities for business succession and wealth transfer planning.
Your Next Steps
Tax legislation this comprehensive requires careful analysis of your specific situation. The opportunities are significant, but the details matter enormously in determining actual benefits.
Our experienced business tax services team is monitoring development in this legislation and analyzing how changes will affect different business structures and industries. We’re also updating our insights and resources as new information becomes available.
Rea is here to help you make informed decisions that support your business goals. Have specific questions about how this legislation might impact your business? Contact your Rea advisor directly, or reach out to discuss your situation in detail.
