Business Tax Provisions of the Big Beautiful Bill

By Kory Reynolds July 9, 2025

Note:  This article is one of many that BNN is publishing to cover the tax features of the so-called “Big Beautiful Bill.”  Each one is authored by one of BNN’s own tax professionals.  Our coverage includes a summary article that briefly describes many of the bill’s features and many more that are deeper dives into specific areas of interest to our clients.  A topical list of those in-depth articles may be found at the front of our summary article.

On July 3, 2025, the House, following the Senate, passed the One Big Beautiful Bill (BBB), a sweeping piece of tax legislation that reshapes several key provisions originally introduced under the Tax Cuts and Jobs Act of 2017 (commonly referred to as TCJA). The bill was signed into law by President Trump on July 4^th, 2025. While much of the media coverage has focused on the permanence of popular deductions, the real story lies in how these changes affect planning strategies for business owners, investors, and advisors alike.

This article breaks down the most impactful provisions of the BBB—IRC 199A, 461, 163(j), 168(k), 179, and the new Qualified Production Property deduction—not just in terms of what changed, but what those changes mean. Whether it’s the expanded phase-out ranges for the Qualified Business Income Deduction or the restoration of more favorable interest expense rules, the BBB offers both opportunities and complexities that demand thoughtful interpretation.

Below, we explore each provision in detail, highlighting not only the legislative updates but also the planning implications that matter most to our clients and readers.

IRC 199A Qualified Business Income Deduction

Current State:

The Qualified Business Income Deduction under IRC Section 199A was introduced as part of the TCJA in 2017 and became effective for tax year 2018. This deduction allows owners of pass-through entities (including sole proprietorships) to deduct up to 20% of their qualified business income. The provision was designed to address differences in effective tax rates compared to the 21% corporate tax rate established simultaneously.

The deduction is subject to a phase-out based on adjusted taxable income levels, which for 2024 begin at $191,950 for single taxpayers and $383,900 for married individuals filing jointly. Taxpayers above these thresholds are subject to further limitations, with the deduction capped at the lesser of 20% of qualified business income or an amount determined by either 50% of W-2 wages paid by the business, or 25% of W-2 wages plus 2.5% of the unadjusted basis of qualified property. The transition from the standard 20% deduction to the wage and asset-based limit occurs over a phase-in range of $50,000 ($241,950) for single filers and $100,000 ($483,900) for joint filers. Detailed aspects of this calculation are not covered here, but can be found in an earlier article written when Sec. 199A was rolled out.

Additional elements of the original legislation include a scheduled expiration date after December 31, 2025. There is also a restriction for “Specified Service Trades and Businesses” (SSTB), such as attorneys, consultants, financial advisors, and accountants, who are ineligible for the deduction if their income exceeds specified limits.

BBB:

The BBB extends the Qualified Business Income Deduction indefinitely, removing the previously scheduled expiration. Changes under BBB include increasing the phase-out range to $75,000 for single filers and $150,000 for joint filers. It also introduces a minimum deduction amount, ensuring the deduction cannot be reduced below $400 (for taxpayers with at least $1,000 of qualified business income) due to limitation calculations or other factors.

For taxpayers in Specified Service Trades or Businesses, including those working in professional services, the expanded phase-out range may affect eligibility and planning strategies. Previously, individuals exceeding income limits were excluded from the deduction, but the new thresholds under BBB allow more flexibility for managing income and maintaining eligibility.

The broader phase-out ranges may also impact non-SSTB businesses that were close to previous limits, reducing the immediate need for more advanced planning such as converting to S-Corp status to establish a wage base. The expansion provides additional capacity for growth before additional tax planning measures become necessary.

BNN Commentary: While many were expecting an extension of some sort for Section 199A, it certainly was no guarantee. Some people may have done some planning that incorporated the potential expiration of the deduction as previously scheduled for 2026. Anyone who planned for a potential expiration likely needs to re-visit those plans and react accordingly.

IRC 461 – Excess Business Loss Limitation

Current State:

The excess business loss provision under IRC 461 was implemented as part of the TCJA, primarily to increase federal revenue to balance many of its revenue cutting measures. We explained this in detail in an article published in August of 2018.  This provision prevents individual taxpayers from offsetting non-business income (such as wages and investment income) with business losses beyond a certain threshold—$313,000 for single filers and $626,000 for married couples filing jointly in 2025 (both amounts are indexed for inflation). Originally slated to sunset, the provision’s expiration has been postponed multiple times due to COVID-related tax legislation, now extending through the end of 2028.

BBB:

The BBB permanently extends this limitation by removing the 2028 sunset date but leaving all other aspects of the provision unchanged. Although this permanence may initially be viewed unfavorably, it provides long-term certainty that enables clients to plan with confidence, knowing excess business losses cannot offset non-business income above the established cap. This may influence decisions on entity structuring or how income is allocated across business and investment portfolios.

BNN Commentary: Permanency brings assurance regarding the treatment of disallowed losses. While losses exceeding the cap are not deductible in the year incurred, they are carried forward as Net Operating Losses (NOL), which may then offset up to 80% of taxable income in subsequent years without being subject to the same excess business loss limitations. During legislative discussions, proposals were considered to create a separate class of carryforwards specifically for excess business losses, but these were not included in the final bill. Potential future changes remain possible based on shifts in political priorities, but for now, taxpayers have a stable framework to support ongoing planning efforts.

IRC 163(j) Business Interest Expense Limitations

Current State:

The 163(j) Business Interest Expense Limitations were introduced under the TCJA as a permanent revenue raising measure. We addressed this at the time in an article published in January of 2018.  The limitation applies to taxpayers or groups exceeding certain gross receipts thresholds or meeting other specified criteria, restricting the deductibility of interest expense to 30% of Earnings Before Interest & Taxes, Depreciation, and Amortization (EBITDA). Beginning in 2022, depreciation and amortization addbacks were removed, so the limitation became 30% of earnings before interest & taxes, altering the calculation method.

BNN Commentary:  The 2022 change lowered ATI, which in turn reduced the amount of the allowable interest deduction.  Even with otherwise consistent revenue and expenses, this caused many businesses or their owners to pay increased taxes in the year of the change.

This code section also established an election for Real Property Trades or Businesses, allowing eligible taxpayers to avoid the limitation if specific requirements are met; however, this election changes depreciation methods for residential and non-residential real property to less accelerated approaches.

BBB:

The BBB restores the 163(j) calculation to the EBITDA formula, which broadens the deduction and lowers the number of affected taxpayers. This change is permanent and effective for tax years beginning after December 31, 2024.

The BBB introduces additional modifications to the 163(j) calculation that address industry-specific concerns, such as expanded exemptions for floor plan financing related to camper and RV dealers. New rules have been added regarding the treatment and limitations for interest expense required to be capitalized to an asset, including some exceptions. These rules clarify that capitalized interest must be included in the business interest expense limitation calculation and provide an ordering rule between capitalized and deducted interest. Taxpayers with international investments must adjust their business interest expense limitation calculations by excluding income reported under IRC 951(a) (Controlled Foreign Corporations), 951A(a) (Global Intangible Low Taxed Income), and Sec. 78 (gross up for deemed paid foreign tax credits).

BNN Commentary: The reversion to the EBITDA standard may affect cash flows and project feasibility for businesses involved in capital-intensive activities such as real estate development or manufacturing. Clarification regarding capitalized interest is relevant for taxpayers with long-term construction or infrastructure projects, where the timing of interest expense impacts financial modeling. There remain unresolved issues regarding the legislation, particularly for taxpayers who previously made the irrevocable Real Property Trade or Business Election under IRC 163(j) in exchange for less accelerated depreciation methods. The BBB does not specify how these situations will be addressed, or whether future regulations will allow revocation of prior elections following these legislative changes.

IRC 168(k) Bonus Depreciation

Current State:

Bonus Depreciation under IRC 168(k) has existed in various forms for more than two decades, typically ranging from 50% to 100%. These provisions have historically included sunset dates or phased reductions. Bonus depreciation enables taxpayers to accelerate depreciation deductions on eligible assets during their first year of use. For example, if a qualifying five-year asset costs $100,000 and the bonus depreciation rate is 40%, the taxpayer may immediately deduct $40,000, with the remaining $60,000 depreciated over the standard five-year period. The TCJA introduced a temporary 100% bonus depreciation rate, with a scheduled phase-down starting in 2023, reducing by 20% per year and eliminating the provision by the end of the 2026 tax year.

BBB:

The BBB introduces a significant change to bonus depreciation, making the 100% allowance permanent and removing all phase-outs and sunset provisions. This enhanced 100% bonus depreciation applies to property acquired and placed in service after January 19th, 2025. For assets purchased during the first 19 days of that year, the legislation specifies a reversion to the original 40% rate applicable for calendar year 2025 (assuming it is placed in service during 2025).

BNN Commentary: The permanence of 100% bonus depreciation is a substantial policy shift with the potential to significantly influence capital investment decisions. Clients contemplating major equipment acquisitions, facility upgrades, or real estate development projects can now benefit from a compelling tax incentive. In real estate, when combined with cost segregation studies to isolate short-lived assets, this provision may result in accelerated deductions that could even exceed annual cash outflows for moderately leveraged properties. Furthermore, similar to the permanent excess business loss limitations, this measure provides greater certainty for long-term planning by eliminating concerns about future phase-outs or timing of purchases.

IRC 168 Special Depreciation Allowance for Qualified Production Property

The BBB introduces a new subsection to IRC 168 that establishes a special deduction for “Qualified Production Property (QPP).” Distinct from previous provisions, this is an entirely new incentive rather than an extension or amendment of existing regulations. Eligible property under this subsection may be immediately expensed as a depreciation deduction, representing a new form of bonus depreciation. It is important to note that this deduction is exclusively available to taxpayers engaged in qualified production activities, but does not extend to lessors of the subject property.

Applicable property is defined as assets that will be used by the taxpayer in a qualified production activity within the United States, with construction commencing after January 19, 2025, and before January 1, 2029, and placed in service after the date of enactment and no later than January 1, 2031. “Qualified production activities” include manufacturing, production, or refining of qualified products—generally referring to tangible property, subject to certain exclusions.

The provision includes detailed limitations, recapture rules, definitions pertaining to qualified activities, and various other requirements applicable to qualifying projects which is beyond the scope of this article.

BNN Commentary: Previously, investment in such facilities would require the taxpayer to depreciate a significant portion of the expenditure over several decades, precluding immediate expensing. When combined with existing incentives—such as 100% bonus depreciation on equipment and Domestic Research and Development Cost expensing—taxpayers operating in qualified businesses may now have the opportunity to fully and immediately expense their entire investment in new eligible facilities.

The new law elaborates extensively on limitations, recapture provisions, definitions of qualified activities, and additional details relevant to qualifying projects. Further guidance and regulatory clarification from the Treasury Department are expected to complete the legislative framework.

IRC 179 Election to Expense Certain Depreciable Business Assets

Current State:

The election under IRC 179 to expense qualifying depreciable business assets has existed in various forms since 1958, with the most recent substantial revision implemented in 2017 with the TCJA. Effective beginning in the 2018 tax year, these modifications permit full expensing of qualified property up to $1,000,000 annually (indexed for inflation such that the maximum deduction for 2025 is $1,250,000). This deduction is subject to a phase-out once the total cost of eligible property placed in service exceeds $2,500,000 (indexed for inflation such that the 2025 amount is $3,130,000).

BNN Commentary: Although on the surface this provision may appear duplicative of bonus depreciation, there are important distinctions that enhance its value for taxpayers. Notably, certain assets with tax lives exceeding 20 years—such as HVAC systems, roofing, and fire protection or security systems—do not qualify for bonus depreciation and are typically depreciated over 39 years. The IRC 179 election offers an opportunity to fully expense these assets in the first year. Additionally, while bonus depreciation is often disallowed for state tax purposes, many states permit IRC 179 deductions at some level, thereby enabling lower overall tax liabilities when utilized.

BBB:

The BBB maintains the eligibility parameters for IRC 179 expensing, preserving its utility alongside the enhanced 100% bonus depreciation provisions. Moreover, the bill increases the annual deduction cap to $2.5 million and lifts the phase-out threshold to $4 million (both indexed for inflation) for property placed in service in taxable years beginning after December 31, 2024.

BNN Commentary: These enhancements to the IRC 179 limitations further incentivize investment in facilities and equipment, particularly benefiting small and mid-sized businesses by affording greater flexibility to manage taxable income across federal and state regimes. For clients operating in jurisdictions that restrict or prohibit bonus depreciation, the expanded IRC 179 cap becomes a vital planning resource, especially in sectors such as retail, banking, hospitality, and healthcare where frequent improvements to leased properties (e.g., HVAC and security systems) are common but often ineligible for bonus depreciation. The evolving interplay between IRC 179 and bonus depreciation now provides a more robust set of strategies for timing deductions, optimizing taxable income, and aligning capital expenditures with both federal and state tax objectives.

Conclusion

The BBB represents more than just a continuation of tax relief—it signals a long-term policy shift toward incentivizing domestic investment, simplifying planning and providing greater certainty for business owners. By making key provisions permanent and introducing new tools like the Qualified Production Property deduction, the bill equips taxpayers with a more stable and strategic framework for decision-making (at least for the next few years when a new administration could, in theory, change the laws again).

For clients, the implications are clear: now is the time to revisit entity structures, capital expenditure plans, and income strategies to ensure alignment with the new rules. The interplay between IRC 179 and bonus depreciation, the expanded reach of IRC 199A, and the nuanced changes to interest expense limitations all present opportunities to optimize outcomes—but only with proactive planning.

As always, we’re here to help interpret these changes and tailor strategies that reflect both the letter of the law and the unique goals of each client.

For more information, please contact your BNN tax service provider at 800.244.7444.