The One Big Beautiful Bill Act (OBBBA), enacted in 2025, brings sweeping changes to federal tax law, impacting individuals, businesses, investors, and the clean energy sector. Below is a summary of the major updates, with each section highlighting the core changes.
The Return of Bonus Depreciation and Other Big Deductions
The OBBBA permanently reinstates 100% bonus depreciation for qualified property placed in service after January 19, 2025, and increases the Section 179 expensing limit to $2.5 million. New options allow for 40% or 60% bonus depreciation in certain cases, and special rules apply for qualified production property. These incentives are designed to encourage business investment in equipment, machinery, and other properties.
One Big Beautiful Bill Act Increases Deduction for State and Local Tax but Fails to Address Nexus Concerns
Individual taxpayers benefit from a temporary increase in the SALT deduction cap, rising from $10,000 to $40,000, with a gradual phase-out for high-income earners. The cap increases by 1% annually until 2030, after which it reverts to $10,000. However, the Act does not address business state tax nexus concerns, leaving Public Law 86-272 unchanged.
Employee Retention Credit (ERC) Changes under the One Big Beautiful Bill Act: Some Disallowances, Six-Year Statute of Limitations and Expanded Penalties
The OBBBA disallows pending ERC claims submitted after January 31, 2024, for the third and fourth quarters of 2021, but leaves earlier claims intact. The statute of limitations for IRS audits on ERC claims is extended to six years, and new penalties apply for improper claims and due diligence failures by ERC promoters.
Qualified Small Business (1202) Stock: Easier to Qualify and Exit; Bigger Tax Savings
For new stock issuances, the QSBS exclusion under Section 1202 is expanded: the asset limit rises to $75 million, the exclusion phases in over three years (50% at year 3, 75% at year 4, 100% at year 5), and the gain exclusion cap increases to $15 million or 10x basis. These changes make QSBS more attractive for investors and business owners.
One Big Beautiful Bill Act Preserves Federal Tax Exemption for Municipal Bonds
The OBBBA preserves the federal tax exemption for municipal bonds and introduces several modifications, including a reduced threshold for 4% low-income housing tax credits, a new exempt facility bond category for spaceports, and changes to qualified small issue bonds.
The One Big Beautiful Bill’s New Qualified Opportunity Zones
The QOZ program is made permanent, with rolling 10-year designations and stricter requirements for low-income community qualifications. New rules introduce a rolling five-year deferral for capital gains, enhanced benefits for rural opportunity zones, and a 30-year cap on tax-free exit benefits. Reporting requirements are also heightened.
Clean Energy Tax Credit Changes under the One Big Beautiful Bill Act
The Act limits future eligibility for wind and solar tax credits, requiring projects to be placed in service by December 31, 2027, and introduces stricter domestic content and anti-foreign influence requirements. Carbon sequestration credits are expanded, and credits for clean transportation fuels and other technologies are modified or phased out.
