Financial Advantages in OB3's Plan: Business Tax Reductions Commencing in 2025
The One Big Beautiful Bill Act (OB3), enacted on July 4, 2025, brings significant changes to the tax landscape, particularly for businesses. These changes, effective from 2025 onwards, are designed to stimulate innovation and growth.
One of the key changes is the introduction of immediate write-offs for some Research and Development (R&D) costs, applicable only to U.S. work. This benefit is typically extended to businesses with a research and development or international focus, including small and medium-sized enterprises driving innovation and fostering future technologies such as artificial intelligence.
To qualify as an eligible small business under OB3, a company must have had average yearly revenue of $31 million or less over the last three years. Additionally, the corporation issuing the stock can have up to $75 million in total assets.
Under OB3, businesses that qualify as eligible small businesses can go back and deduct U.S. R&D expenses from 2022 and later years, as long as they file an election within one year after July 4, 2025. This is a departure from the Tax Cuts and Jobs Act of 2017 (TCJA), where R&D costs were amortized over several years (5 years for U.S. work, 15 years for work done outside the U.S.).
The TCJA also introduced a faster tax deduction option called bonus depreciation. However, the OB3 makes this rule permanent for qualified property bought after January 19, 2025. Notably, the TCJA reduced the bonus depreciation deduction starting in 2023, but businesses can choose not to use bonus depreciation if it doesn't benefit them.
Companies that are not small businesses can still choose to deduct any leftover R&D expenses from past years. These deductions can be taken all at once in 2025 or split between 2025 and 2026. The IRS has issued new guidance (Revenue Procedure 2025-28) explaining how to make these elections.
Moreover, OB3 changes the rules for Qualified Small Business Stock (QSBS). Holding QSBS for 3 years allows a 50% exclusion, 4 years allows a 75% exclusion, and 5 years allows a 100% exclusion under OB3.
It's important to note that many of the tax rules in OB3 apply to the 2025 tax year. Companies are advised to consult their tax advisors before the end of the 2025 tax year to ensure they are taking advantage of these changes.
This article was published on September 18, 2025, providing businesses with valuable insights into the new tax landscape under OB3.
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