On July 4, 2025, President Trump signed the "One Big Beautiful Bill Act" (H.R. 1), delivering major tax reforms to spur investment. A core change is how businesses write off (depreciate) the cost of their assets more quickly. Below is a plain‑English guide to help everyday business owners understand these updates.
Key Terms for Everyday Business Owners
1. 100% Bonus Depreciation (Section 168(k))What You Can Do Now:
2. Expanded Section 179 ExpensingWhat You Can Do Now:
3. Full Expensing for Manufacturing Buildings (Section 168(n))What You Can Do Now:
4. R&D Expensing Made Easy (Section 174A)What You Can Do Now:
5. Better Interest‑Expense Rules (Section 163(j))What You Can Do Now:
6. Sunsetting Energy‑Efficiency Deductions What You Can Do Now:
7. Changes to "SALT" deducting state and local taxes on your personal tax returns:
One significant change is to the state and local tax (SALT) deduction, a provision that has inspired major debate in Congress since TCJA imposed a $10,000 cap on SALT deductions in 2018.
Effective for 2025:
The law increases the $40,000 SALT cap and $500,000 income threshold by 1% each year from 2026 through 2029, with the cap reset to $10,000 from 2030 onwards.
Here’s how the SALT cap and phasedown threshold would be adjusted from 2026 through 2030:
Table 1. SALT Cap and Threshold Amounts Under H.R. 1, 2025-2030
SALT Cap Income Threshold at Which SALT Cap Begins Phasing Down:
2025$40,000/$500,000
2026$40,400/$505,000
2027$40,804/$510,050
2028$41,212/$515,151
2029$41,624/$520,302
2030 and subsequent years $10,000
How will the SALT changes interact with other parts of the tax code?
Much like the $10,000 SALT cap for individuals and families in TCJA, the new $40,000 SALT cap interacts with several other provisions of the tax code:
Key Terms for Everyday Business Owners
- Tangible Property: Any physical item your business uses—things like machinery, office furniture, computers, vehicles, and equipment. If you can touch it and it helps you run your business, it’s tangible property.
- Qualified Improvement Property (QIP): Upgrades you make to the inside of a nonresidential building—think new lighting, flooring, interior walls, or HVAC systems—that don’t change the building’s overall footprint or add new rooms. It’s simply making the inside of your existing business space better or more efficient.
1. 100% Bonus Depreciation (Section 168(k))What You Can Do Now:
- Write off everything immediately. For almost all new or used equipment and furniture (any tangible property with a normal life of 20 years or less) placed in service after January 19, 2025, you can deduct the full cost in the year you buy it.
- Who’s Eligible? Most machinery, computers, office furniture, land improvements (like fencing or parking lots), and qualified improvement property (interior building fixes).
- Why It Matters: Buying or upgrading equipment late in the year? You can get a big tax break immediately rather than waiting for several years of depreciation.
2. Expanded Section 179 ExpensingWhat You Can Do Now:
- Deduct up to $2.5 million of the cost of qualifying tangible property in the year you put it in service (up from $1.25 million).
- Phase‑out Rule: If you buy more than $4 million of Section 179 property in a year, your maximum deduction starts to shrink dollar‑for‑dollar.
- Who’s Eligible? Tangible property (machinery, vehicles, furniture), off‑the‑shelf software, and qualified improvement property.
- Why It Matters: If you’re buying a lot of business equipment in a year, Section 179 helps you accelerate those write‑offs and reduce your taxable income immediately.
3. Full Expensing for Manufacturing Buildings (Section 168(n))What You Can Do Now:
- Deduct 100% of certain building costs. If your business manufactures, refines, or grows products in a nonresidential building, you can elect to expense all construction or improvement costs done between January 19, 2025, and December 31, 2030.
- Who’s Eligible? Only the portions of a building directly used for production (e.g., assembly lines, processing areas). Office spaces, storage, and sales areas do not qualify.
- Why It Matters: Constructing or extending a factory? You can fully expense those specific costs instead of depreciating over 39 years.
4. R&D Expensing Made Easy (Section 174A)What You Can Do Now:
- Fully deduct domestic R&D costs in the year you incur them.
- Small Business Catch‑Up: If you did domestic R&D in 2022–2024, you can amend past returns to claim these write‑offs now.
- Why It Matters: Investing in new product development, software, or process improvements? Your tax deduction comes when you spend, improving cash flow.
5. Better Interest‑Expense Rules (Section 163(j))What You Can Do Now:
- Exclude depreciation from interest limits. Depreciation and amortization no longer count against your business’s taxable income when calculating the limit on deducting interest expense.
- Why It Matters: If you rely on loans for growth, this change may allow you to deduct more of your interest costs than before.
6. Sunsetting Energy‑Efficiency Deductions What You Can Do Now:
- Plan ahead if you’re improving energy use. Deductions for making buildings or homes energy‑efficient will expire after June 30, 2026.
- Why It Matters: If you’re adding solar, better insulation, or efficient HVAC after mid‑2026, these deductions won’t be available.
7. Changes to "SALT" deducting state and local taxes on your personal tax returns:
One significant change is to the state and local tax (SALT) deduction, a provision that has inspired major debate in Congress since TCJA imposed a $10,000 cap on SALT deductions in 2018.
Effective for 2025:
- Increases the $10,000 SALT cap to $40,000.
- Phases down the $40,000 SALT cap (to $10,000) at a 30% rate for taxpayers making over $500,000.
The law increases the $40,000 SALT cap and $500,000 income threshold by 1% each year from 2026 through 2029, with the cap reset to $10,000 from 2030 onwards.
Here’s how the SALT cap and phasedown threshold would be adjusted from 2026 through 2030:
Table 1. SALT Cap and Threshold Amounts Under H.R. 1, 2025-2030
SALT Cap Income Threshold at Which SALT Cap Begins Phasing Down:
2025$40,000/$500,000
2026$40,400/$505,000
2027$40,804/$510,050
2028$41,212/$515,151
2029$41,624/$520,302
2030 and subsequent years $10,000
How will the SALT changes interact with other parts of the tax code?
Much like the $10,000 SALT cap for individuals and families in TCJA, the new $40,000 SALT cap interacts with several other provisions of the tax code:
- The standard deduction: Taxpayers can either itemize deductions (including SALT) or claim the standard deduction. In 2022, 90% of taxpayers claimed the standard deduction. OBBB increases the standard deduction by $750 for single taxpayers and $1,500 for married taxpayers in 2025, adjusting for inflation after 2025. Despite this increase, the bill’s $40,000 SALT cap will likely induce some households that currently take the standard deduction to itemize instead.
- The alternative minimum tax (AMT): Before TCJA, the AMT applied to more than 5 million taxpayers (around 3%) and took a bite out of SALT for many six-figure households by requiring them to pay a minimum rate of tax. After TCJA, the AMT is still in place but applies to far fewer taxpayers, only 200,000 or so (around 0.1%). OBBB largely continues TCJA’s AMT relief, such that the bill’s SALT cap phasedown should affect SALT deductions far more than the AMT.
- Overall cap on itemized deductions: OBBB replaces the pre-TCJA overall limit on itemized deductions (called the “Pease” limit) with a 5% haircut to SALT deductions for taxpayers in the top (37%) tax bracket. For a taxpayer in that bracket, a $10,000 SALT deduction would instead be worth $9,459, which when applied to taxable income equals a $200 tax increase.