As 2025 draws to a close, businesses and their owners have an opportunity to optimize their tax positions before the calendar flips to 2026. This year’s planning is especially important because of changes made by the One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025. OBBBA makes permanent many provisions of the 2017 Tax Cuts and Jobs Act (TCJA) and introduces new incentives and limitations that will shape tax strategies for years to come. Here’s what you need to know, and what you can do before year-end.

1. Take Advantage of Permanent Business Incentives

The OBBBA made permanent several tax benefits for business owners that were otherwise scheduled to sunset under TCJA, including:

• Qualified Business Income Deduction: The 20% qualified business income (QBI) deduction for owners of pass-through entities (i.e., limited liability companies, partnerships, and S corporations) is now permanent. Business owners should determine whether their business is a qualified trade or business and, if so, consider whether the business’ structure or operations can be modified to maximize the QBI deduction.
• Bonus Depreciation and Section 179 Expensing: OBBBA reinstates 100% bonus depreciation, makes such depreciation permanent for qualifying property placed in service after January 19, 2025, and doubles the limit to $2.5 million from $1.25 million, allowing businesses to deduct the full cost of equipment and software immediately. If you are planning to make a significant capital investment in 2026, doing so before January 1, may, in effect, allow you to accelerate deductions in 2025.
• R&D Expensing: Domestic research and development expenses are once again fully deductible, retroactive to 2025, and permit businesses to amend prior years’ returns to deduct such costs immediately. Thus, businesses can not only apply the new rule when filing their 2025 tax returns, but should also review prior years’ returns to determine whether amending a prior year’s return may yield tax savings. Combining the deductibility of research expenses with the permanent research and development tax credit provides companies with the opportunity to maximize tax benefits associated with innovative activities performed in the US. However, several states have decoupled from the OBBBA and require the continued amortization of expenses over a multi-year period, creating some harsh results, such as in PA and MI. Understanding the interaction between federal and relevant state laws will remain crucial to effective tax planning.
• Qualified Production Property Expensing: Investment in qualified production facilities is a new provision allowing for the full deductibility of production or manufacturing facilities. The investment must be associated with construction beginning after January 19, 2025, and before January 1, 2029 and relate to the manufacturing, production or refinement of a qualified product or tangible personal property. At the election of a taxpayer making such an investment, the expense associated with the eligible property is 100% deductible in the year it is placed in service. But the property must remain in use for 10 years, or it will be subject to recapture.

2. Review Entity Choice and Exit Strategies

OBBBA enhances the Qualified Small Business Stock (QSBS) rules, increasing the gain exclusion cap from $10 million to $15 million per taxpayer, introducing a partial exclusion for sales after less than five years, and making more businesses eligible to be Qualified Small Businesses. For entrepreneurs forming or investing in new businesses, the changes could make C corporations more attractive relative to pass through entities like partnerships, S corporations, or LLCs. For businesses already operating as C corporations, the changes make it easier to qualify for gain exclusion, potentially making business sales more enticing.

3. Consider Opportunity Zone Investments to Defer Capital Gains

OBBBA transforms the Qualified Opportunity Zone (QOZ) program, which permits taxpayers to defer and in some instances eliminate tax on capital gains by investing in Opportunity Zones.  The OBBBA makes this a permanent tax incentive, removing the prior sunset date and establishing a 10‑year renewal cycle, during which governors may nominate and the Department of Treasury will certify new zones every decade.  OBBBA also tightens eligibility of OZ designations by reducing the low-income threshold to 70% of area median income (from 80%) and eliminating contiguous tract designations. For investments in QOZs made after 2026, the deferral of capital gains becomes a new rolling 5‑year period with a permanent 10% basis step-up (and a new heightened 30% step-up in rural zones), enhancing the long‑term appreciation benefits. Collectively, these changes transform a limited, temporary deferral opportunity into a new, and potentially permanent reduction in capital gains and enhanced incentive for investments in Opportunity Zones.

4. Plan for Charitable Giving Before New Limits Apply

Starting in 2026, charitable deductions face tighter restrictions:

• A new 0.5% adjusted gross income floor (for individuals) and 1% taxable income floor (for corporations) means only contributions above the applicable threshold will be deductible.
• For high-income taxpayers, the benefit of itemized deductions, including charitable gifts, will be capped at 35%, effectively imposing a 2% tax on deductions.

If philanthropy is part of your year-end tax planning strategy, consider accelerating gifts into 2025 to maximize current rules.

5. Manage SALT and Itemized Deductions

The state and local tax (SALT) deduction cap jumps from $10,000 to $40,000 through 2029, offering temporary relief for taxpayers in high-tax states. This benefit phases out for taxpayers with incomes above $500,000, however, meaning that the increased SALT cap may be of limited practical benefit.

6. Don’t Overlook Personal Planning Opportunities

For business owners thinking about their personal income tax situation:

• The standard deduction remains high and is permanently indexed for inflation, with an extra $6,000 for seniors through 2028.
• The estate and gift tax exemption increases to $15 million per person ($30 million per couple), creating opportunities for wealth transfer and trust planning.
• The annual gift tax exclusion is $19,000 per recipient per person each year ($38,000 per recipient from a married couple). This will stay the same in 2026.

Action Steps Before December 31, 2025:

• Review compensation and distributions for QBI eligibility.
• Accelerate purchases of equipment and software to leverage bonus depreciation and Section 179.
• Evaluate business entity structure for QSBS and long-term goals; in some instances, businesses may benefit from QSBS even if they were not originally formed as C corporations.
• Finalize charitable contributions under current rules.
• Coordinate with advisors on estate planning and liquidity strategies.

Bottom Line: The OBBBA introduces stability, in the form of permanent extensions of some previously temporary tax provisions, and opportunity, in the form of sunsetting or expiring benefits, but timing is critical. Some of the OBBBA’s permanent provisions allow for long-term planning, while some temporary enhancements, like the SALT cap and charitable contribution deduction rules, create a short window for action.