A Guide to the One Big Beautiful Bill Act (OBBA)
Understanding the One Big Beautiful Bill Act (OBBA)
On July 4, 2025, the One Big Beautiful Bill Act (OBBA) was signed into law, introducing a wide range of tax provisions that will have a substantial impact on individuals and businesses across the United States.
According to analysis from the AICPA and the Journal of Accountancy, this legislation makes many provisions from the 2017 Tax Cuts and Jobs Act (TCJA) permanent while also introducing significant new changes.
For business owners, understanding these updates is critical for effective tax planning and financial strategy.
This guide provides a comprehensive analysis of the OBBA, breaking down its key components to help you understand how these changes may affect your organization.
We will explore provisions relevant to our core client industries—construction, manufacturing, distribution, and nonprofits—and outline actionable steps for navigating this new tax environment.
Key Individual Tax Provisions in the OBBA
While many provisions target businesses, several changes affecting individual taxpayers will influence financial planning for business owners and their employees.
Permanent Lower Tax Rates: The OBBA makes the lower individual income tax rates and brackets from the TCJA permanent.
Increased Standard Deduction: The higher standard deduction is now permanent. For 2025, the amounts are $15,750 for single filers and $31,500 for those married filing jointly.
State and Local Tax (SALT) Deduction: The cap on the SALT deduction has been increased to $40,000 per household for 2025, a significant change for taxpayers in high-tax states. This cap phases out for taxpayers with modified adjusted gross income (MAGI) over $500,000.
Charitable contribution deductions:
Taxpayers who take the standard deduction are eligible for a new charitable contribution deduction in 2026.
2026 tax changes reduce the value of charitable deductions for taxpayers who itemize their deductions, including the new 0.5 percent floor and lower itemized deduction value for high earners, making 2025 a more favorable year for donors to give
Child Tax Credit: The Child Tax Credit increases to $2,200 per child starting in 2025 and is indexed for inflation.
No Tax on Tips and Overtime: For 2025 through 2028, the act creates new above-the-line deductions for qualified tips and overtime pay, though income and occupation limitations apply. This provision applies only to federal income tax, not FICA or state taxes.
Primary OBBA Focus Areas for Businesses
The OBBA introduces several business tax provisions that create both opportunities and compliance challenges. The following sections highlight the most relevant changes for the construction, manufacturing, distribution, and nonprofit sectors.
For Construction Businesses
Primary OBBA Focus Areas to Highlight:
The OBBA provides significant incentives for capital investment, a cornerstone of the construction industry.Bonus Depreciation & Section 179: The act restores 100% bonus depreciation for qualified property, including machinery and equipment, placed in service after January 19, 2025. Alternatively, the Section 179 expensing limit is increased to $2.5 million, allowing businesses to immediately deduct a larger portion of their capital expenditures.
Qualified Production Property (QPP): A major development is the 100% expensing for newly constructed manufacturing or production facilities. This can provide a substantial tax benefit for construction firms and their clients who are expanding their physical footprint.
R&D Expensing: The option to immediately deduct domestic research and development (R&D) costs has been restored for expenses incurred.
For construction firms, an immediate reassessment of capital expenditure plans is warranted.
The following three questions merit consideration:
How can you use these new expensing rules to finance new equipment or vehicles?
Does your new warehouse or production facility project qualify for immediate expensing?
Can your design, engineering, or process improvement costs now be deducted immediately to improve cash flow?
For Manufacturing Businesses
Primary OBBA Focus Areas to Highlight:
Manufacturers benefit from provisions aimed at stimulating domestic production and innovation.
R&D Expensing: Like the construction sector, the restoration of immediate deductions for domestic R&D costs is a critical update. This encourages investment in product development and process improvement.
Bonus Depreciation & QPP: The ability to claim 100% bonus depreciation for new equipment and production facilities allows manufacturers to accelerate cost recovery on major capital investments.
Section 163(j) Interest Deduction: This update is significant for larger businesses, as the method for calculating the business interest deduction limitation has been revised. It now uses earnings before interest, taxes, depreciation, and amortization (EBITDA), which generally allows for a larger interest deduction compared to the previous EBIT-based calculation.
Manufacturing leaders should evaluate how these changes impact their annual tax strategy.
What is the optimal timing for purchasing new machinery to maximize tax benefits?
How does the change to the Section 163(j) calculation affect the deductibility of interest on existing or future business loans?
For Distribution Businesses
Primary OBBA Focus Areas to Highlight:
Distribution companies, with their heavy reliance on logistics and fleet management, will find value in several OBBA provisions.
Bonus Depreciation & Section 179: Full expensing is now available for vehicles, warehouse equipment, and racking systems. This allows companies to immediately write off the cost of upgrading their fleets and facilities.
Qualified Business Income (QBI) Deduction: The 20% QBI deduction (Section 199A) for pass-through entities has been made permanent. This provides long-term certainty for owners of S-corporations, partnerships, and sole proprietorships.
The primary question for distribution businesses is how to structure fleet replacement or warehouse automation projects to achieve maximum tax savings.
Furthermore, what does the now-permanent QBI deduction mean for your personal wealth strategy as a business owner?
For Trade Associations and Nonprofits
Primary OBBA Focus Areas to Highlight:
The OBBA includes specific updates that directly affect the operational and compliance landscape for tax-exempt organizations.
Expanded Compensation Limits: The act modifies the Section 4960 excise tax on excess remuneration paid to top executives, requiring organizations to review their compensation structures.
Employer-Provided Childcare Credit: The credit limit for employer-provided childcare facilities and services has been increased to $500,000 (or $600,000 for small businesses), offering a powerful incentive to enhance employee benefits.
Tax on Overtime/Tips: While the deductions for overtime and tips are for employees, employers face new reporting requirements. Payroll systems must be updated to ensure compliance with the new W-2 reporting rules.
Nonprofit leaders must ask how their executive compensation policies need to change to ensure compliance with the updated Section 4960 rules.
Can your organization leverage the enhanced childcare credit to attract and retain talent?
What immediate changes are needed for your payroll systems to handle the new reporting requirements?
Charting Your Path Forward
The One Big Beautiful Bill Act introduces a complex but manageable set of changes to the federal tax code. A proactive approach is essential for leveraging its benefits and ensuring compliance. By understanding how these provisions apply to your specific industry, you can make informed strategic decisions that support your organization’s financial health and long-term goals.
The information presented here is based on initial analysis from reputable sources such as the AICPA and the Journal of Accountancy, as well as a review of Public Law 119-21, 139 Stat. 72, known as the "One, Big, Beautiful Bill Act" (OBBBA), a comprehensive U.S. federal statute signed into law on July 4, 2025.
As the IRS releases further regulatory guidance, additional details and clarifications will emerge. Partnering with a knowledgeable CPA firm, like Kellogg and Kellogg is the most effective way to navigate this evolving landscape.
Take Control of Your Financial Future
The tax professionals at Kellogg and Kellogg, PC are here to provide the expert guidance you need to understand how the OBBA impacts your unique financial situation. We are committed to helping you develop a customized plan that aligns with your objectives.
All content shared here is for reference and general information only. It is NOT tax, legal, or financial advice. Decisions about tax and financial matters require personalized professional attention. Readers should contact Kellogg and Kellogg or their current tax advisor for specific guidance.