Year-End Tax Planning: Key OBBBA Changes to Consider
As 2025 winds down, businesses face a very different tax landscape following last summer’s passage of the One Big Beautiful Bill Act (OBBBA). Many of the new law’s provisions could directly affect businesses’ 2025 tax returns, even though various compliance requirements and implementation procedures are still unclear.
Although this is by no means a complete list of OBBBA changes, here are some noteworthy provisions that business owners and tax advisors should consider as part of their year-end planning.
Bonus Depreciation and Section 179 Expensing
The OBBBA restored 100% bonus depreciation for qualifying property placed in service after January 19, 2025. It also increased the maximum amounts eligible for Section 179 expensing for property placed in service in a tax year beginning after December 31, 2024.
- Who’s affected: Any business that purchased or is planning to purchase equipment, machinery, technology, or other depreciable fixed assets.
- Year-end steps: Review capital expenditure plans to determine which approach to apply to various assets. Depending on the situation, accelerating or deferring purchases could improve deductions, but pay close attention to “placed in service” requirements—merely ordering equipment is not enough to qualify.
Research and Experimental (R&E) Costs
After the OBBBA, businesses may once again choose to deduct qualifying domestic research and experimental (R&E) expenses, rather than amortize them over five years.
- Who’s affected: Any business engaged in product development, software development, process improvement or other research-related activities.
- Year-end steps: Decide if immediate expensing is desirable in view of future taxable income and profit expectations as well as its impact on other deductions and tax credits. Consider when to recognize unamortized capitalized R&E expenses from tax years 2022–2024, as well as the impact on fourth quarter 2025 estimated tax payments.
Production Property Depreciation Deduction
The OBBBA created a new Section 179A deduction for qualifying “production” property—real property used directly in manufacturing, fabrication, or production—provided those facilities are located within the US or a US possession.
- Who’s affected: Manufacturers, food and beverage producers and other businesses with production-oriented operations.
- Year-end steps: Identify any assets that could qualify, bearing in mind that, in addition to domestic location requirements, there are timing requirements regarding when construction must commence and when the facility must be put into service. Evaluate whether to modify construction plans to qualify.
Clean Energy Tax Incentives
The OBBBA tightened the rules for both the business solar investment tax credit and the Section 179D deduction for energy-efficient commercial building improvements, adding new mid-2026 “start of construction” deadlines (June 30 for Section 179D and July 4 for solar credits).
- Who’s affected: Businesses considering rooftop or ground-mounted solar installations, as well as commercial building owners planning energy-efficient upgrades to lighting, HVAC or building envelope systems.
- Year-end steps: Reassess pending projects and accelerate timelines if necessary to meet the deadlines, bearing in mind contractor availability and the law’s new, more stringent definition of “start of construction.”
New 1099 Reporting Thresholds
The OBBBA increased the Form 1099-NEC and 1099-MISC reporting thresholds from $600 to $2,000 for payments made during or after calendar year 2026.
- Who’s affected: Any business that issues 1099s to contractors, professional services firms, landlords or other entities.
- Year-end steps: Update internal payment systems and vendor records to apply the new thresholds for 2026 reporting.
Employer Reporting of Overtime and Tips
Under recently released IRS guidance (Transition penalty relief for tax year 2025), employers will not face penalties for failing to provide a separate accounting of qualified tips or overtime compensation under the OBBBA rules for 2025. This penalty relief applies to 2025 only, however, and employers are encouraged to provide employees with the tips and overtime information needed for their individual returns.
- Who’s affected: Virtually any employer with hourly employees or workers who receive tips.
- Year-end steps: Decide how to provide information to employees and coordinate with payroll providers. Confirm that payroll systems are ready for the 2026 reporting requirements.
SALT Deduction Changes
The OBBBA raised the cap on itemized deductions for state and local taxes (SALT) to $40,000 for tax years 2025–2029, with phaseouts for higher income taxpayers. The effects on various state-level pass-through entity (PTE) taxes that were implemented in response to the previous SALT cap vary significantly.
- Who’s affected: S corporations, partnerships and LLCs that have elected (or are considering electing) a state-level PTE tax.
- Year-end steps: Check state-specific conformity rules and evaluate whether the entity should elect to pay PTE taxes or have the individual owners deduct state tax payments on their personal returns.
Charitable Contribution Rules
Beginning in 2026, corporations’ charitable contributions will be deductible only to the extent they exceed 1% of taxable income. For individuals, the deduction floor will be 0.5% of adjusted gross income.
- Who’s affected: Businesses with recurring charitable programs or year-end giving campaigns, and pass-through owners who itemize.
- Year-end steps: Review planned contributions for timing opportunities. Consider whether making contributions in 2025 or 2026 yields a better tax result under the new rules.
Employee Meal Deductions
Starting January 1, 2026, the deduction for employer-provided meals will generally be disallowed, with limited exceptions. Disallowance may also apply to coffee service and office snacks.
- Who’s affected: Companies that provide meals in office settings, cafeterias or for the “convenience of the employer” to keep employees on-site during work hours. Businesses, such as restaurants, that sell meals to customers and also provide meals to employees are exempt from these provisions.
- Year-end steps: Reevaluate meal policies and consider alternatives, while preparing accounting systems to track non-deductible meals in 2026.
Year-end planning is always a challenge, but this year’s changes under OBBBA make early preparation and consultation with tax professionals even more important.
Please contact us to discuss these or any other year-end tax questions.
