Key OBBBA Tax Provisions for Individuals, Partnerships, Businesses, and Corporations

On July 4, 2025, President Donald Trump signed into law “An Act to provide for reconciliation pursuant to title II of H. Con. Res. 14,” formerly known as the One Big Beautiful Bill Act (the Act). The Act makes permanent many provisions of the 2017 Tax Cuts and Jobs Act (the TCJA) and includes other amendments to the Internal Revenue Code (the Code). Key sections of the Act relating to taxes and affecting individuals, partnerships, and businesses are discussed below.

Sections Affecting Individuals and Partnerships

• Individual Income Tax Rates: The Act permanently extends the TCJA tax rate reductions, preserving the 37% top marginal rate.
• State and Local Tax (SALT) Deduction: The Act raises the annual SALT deduction cap to $40,000 beginning in 2025, increases the cap by 1% annually through 2029, and lowers the cap back to $10,000 in 2030. However, it phases out the cap (though not below $10,000) for high-income taxpayers (which are, generally, those earning over $500,000).
• Estate and Gift Tax Exemption: The Act increases the estate and gift tax exemption to $15 million starting in 2026 (indexed for inflation).
• Miscellaneous Itemized Deductions: The Act permanently eliminates miscellaneous itemized deductions.
• Charitable Deductions: The Act permits itemizing individuals to deduct charitable contributions only to the extent that those contributions exceed 0.5% of their contribution base (which is, generally, their adjusted gross income). Additionally, it allows non-itemizing taxpayers to deduct charitable contributions of up to $1,000 per year if filing individually, or up to $2,000 per year if filing jointly. Both changes take effect beginning in 2026.
• Qualified Business Income (QBI) Deduction: The Act permanently extends the Section 199A¹ passthrough deduction, which allows non-corporate taxpayers a 20% deduction for QBI, generally items of ordinary income arising from a qualified trade or business conducted through a passthrough entity or sole proprietorship.
• Qualified Small Business Stock (QSBS): QSBS generally is stock issued by a domestic C corporation that meets specific criteria designed to encourage investment in small U.S. businesses. If certain conditions are met at both the company and shareholder level, a non-corporate shareholder of QSBS generally can exclude from U.S. federal taxable income all or a portion of the gain from the sale of such stock. The Act provides for a 50%, 75%, and 100% gain exclusion for QSBS held for three, four, and five years, respectively, subject to a per-issuer cap on the amount of gain that may be excluded. It also increases the gross asset value limitation for a company to qualify as a “qualified small business” to $75 million (from $50 million) and the per-issuer cap on QSBS gain exclusion to $15 million (from $10 million) (both amounts indexed for inflation). These changes apply to QSBS issued or acquired after July 4, 2025.

Sections Affecting Businesses and Corporations

• 100 Percent Bonus Depreciation Deduction for Qualified Property: Section 168(k) generally permits taxpayers to claim a bonus depreciation deduction for “qualified property” in the taxable year in which the taxpayer places in service such “qualified property.” “Qualified property” generally includes tangible personal property that has a recovery period of 20 years or less, as well as certain computer software, certain water utility property, certain plants, and qualified film, television, live theater, and live sound recording productions. The Act permanently restores the 100% bonus depreciation deduction for “qualified property” placed in service after January 19, 2025.
• Increased Dollar Limitations on Section 179 Expensing: Section 179 generally permits certain taxpayers to elect to deduct the cost of any “section 179 property” in the taxable year in which the taxpayer places in service such “section 179 property.” “Section 179 property” generally includes tangible property (or certain computer software) that (1) either is (a) “section 1245 property” (which very generally includes most depreciable personal property and specifically excludes buildings and their structural components) or (b) certain qualified real property (if the taxpayer so elects), and (2) is acquired by purchase for use in the active conduct of a trade or business. The Act increases a taxpayer’s maximum Section 179 deduction for a taxable year to $2.5 million (the “property cost limitation”), which is reduced dollar-for-dollar by the amount by which the cost of “section 179 property” placed in service during such taxable year exceeds a “phase-out threshold.” The Act increases the phase-out threshold to $4 million. Each of the “property cost limitation” and the “phase-out threshold” continue to be subject to adjustments for inflation. The increases to the “property cost limitation” and the “phase-out threshold” are effective for property placed in service in taxable years beginning after December 31, 2024.
• 100 Percent Depreciation Deduction for Qualified Production Property: The Act adds new Section 168(n), which permits taxpayers to elect to deduct 100% of the cost of certain real estate purchased for manufacturing, production, or refining purposes. The deduction applies to the cost of “qualified production property” in the taxable year in which the taxpayer places in service such “qualified production property.” “Qualified production property” generally means nonresidential real property (1) that is used by the taxpayer as an integral part of a “qualified production activity,” (2) that is placed in service in the United States or any possession of the United States, (3) the original use of which commences with the taxpayer, (4) the construction of which begins after January 19, 2025, and before January 1, 2029, (5) that the taxpayer elects to designate as “qualified production property,” (6) that is placed in service before January 1, 2031, and (7) that is not used for offices, administrative services, lodging, parking, sales activities, research activities, software development or engineering activities, or other functions unrelated to the manufacturing, production, or refining of tangible personal property. The term “qualified production activity” generally means the manufacturing, production, or refining of tangible personal property if such property is not a food or beverage prepared in the same building as a retail establishment in which such property is sold. The Section 168(n) deduction is subject to recapture if the taxpayer ceases to use the applicable property in a “qualified production activity” and instead uses such property in an activity that is not a “qualified production activity” within 10 years of placing in service such property. Section 168(n) is effective for property placed in service after July 4, 2025.
• Expensing of Domestic Research and Experimental Expenditures: The Act adds new Section 174A, which generally permits taxpayers to immediately deduct domestic research and experimental expenditures that are paid or incurred in taxable years beginning after December 31, 2024. Certain small businesses may elect to retroactively apply new Section 174A to domestic research and experimental expenditures that were paid or incurred in taxable years beginning after December 31, 2021. Otherwise, taxpayers that capitalized and amortized domestic research and experimental expenditures that were paid or incurred in taxable years beginning after December 31, 2021 and before January 1, 2025 may elect to deduct the remaining unamortized amount with respect to such expenditures over a one- or two-year period. Foreign research and experimental expenditures are not eligible for immediate expensing under new Section 174A and must continue to be capitalized and amortized over 15 years under Section 174.
• One Percent Floor for Deductions of Corporate Charitable Contributions: Corporations generally can deduct charitable contributions, provided that the aggregate of such contributions does not exceed 10% of the corporation’s taxable income for the taxable year. In addition to the 10% limitation, the Act adds a 1% floor for charitable contributions such that otherwise allowable charitable contributions are permitted only to the extent that such charitable contributions exceed 1% of the corporation’s taxable income for the taxable year. Charitable contributions that are disallowed by the 10% limitation generally may be carried forward for five taxable years, and charitable contributions that are disallowed by the 1% floor generally may be carried forward from years in which the 10% limitation is exceeded. The addition of the 1% floor applies for taxable years beginning after December 31, 2025.
• Definition of Adjusted Taxable Income (ATI) for Business Interest Limitation: Subject to certain exceptions, Section 163(j) generally limits the amount of business interest that a taxpayer can deduct to 30% of the taxpayer’s ATI for the taxable year. For taxable years beginning after December 31, 2024, ATI is calculated without regard to any deduction allowable for depreciation, amortization, or depletion. For taxable years beginning after December 31, 2025, ATI is calculated without regard to the amounts included in gross income under Sections 951(a), 951A(a), and 78 (and the portion of the deductions allowed under Sections 245A(a) (by reason of Section 964(e)(4)) and 250(a)(1)(B) by reason of such inclusions).
• Limitation on Excess Business Losses: Section 461(l) generally disallows a deduction by non-corporate taxpayers for “excess business losses,” generally the amount that aggregate business deductions exceed aggregate business income plus a threshold amount. Excess business losses are carried forward and treated as net operating loss carryovers in succeeding years. The Act makes permanent the Section 461(l) limitation on excess business losses for non-corporate taxpayers.
• Increased Information Reporting Threshold for Certain Payees: Under Section 6041(a), every person engaged in a trade or business generally is required to report on an information return (typically an IRS Form 1099-MISC) payments that it makes in the course of its trade or business to another person of fixed or determinable income (e.g., rent, premiums, annuities, etc.) if the aggregate of such payments to such other person equals or exceeds a certain dollar threshold for the year. Similarly, under Section 6041A(a), any service-recipient engaged in a trade or business that pays in the course of such trade or business remuneration to any person for services generally is required to report such payments on an information return (an IRS Form 1099-NEC) if the aggregate of such payments to such other person equals or exceeds a certain dollar threshold for the year. For payments made after December 31, 2025, the Act increases the dollar threshold for each of Section 6041(a) and Section 6041A(1) from $600 to $2,000. The new $2,000 threshold is adjusted for inflation beginning in the 2027 calendar year. The Act makes corresponding changes to the backup withholding requirements under Section 3406.
• IRS Form 1099-K De Minimis Exception: Section 6050W generally requires “third-party network transactions” to be reported on IRS Form 1099-K. “Third-party network transactions” generally are transactions that are settled through a “third-party payment network,” which is any agreement or arrangement that: (1) involves the establishment of accounts with a central organization by a substantial number of providers of goods or services who are unrelated to the organization and who have agreed to settle transactions for the provision of the goods or services to purchasers according to the terms of the agreement or arrangement, (2) provides standards and mechanisms for settling the transactions, and (3) guarantees payment to the persons providing goods or services in settlement of transactions with purchasers pursuant to the agreement or arrangement. In general, “third-party network transactions” potentially are subject to backup withholding under Section 3406. As originally enacted, Section 6050W included a de minimis exception from reporting if, for a given year, either (1) the total amount of the payments in “third-party network transactions” with respect to a particular payee does not exceed $20,000 or (2) the aggregate number of “third-party network transactions” with respect to a particular payee does not exceed 200. The American Rescue Plan Act (the ARPA) reduced the dollar threshold to $600 and eliminated the transaction threshold entirely, although the IRS provided for various transition rules before this $600 threshold was fully implemented. The Act reinstates the pre-ARPA $20,000 threshold and 200 transaction threshold such that IRS Form 1099-K reporting of “third-party network transactions” is required only if payments to a particular payee in a year exceed both the $20,000 threshold and the 200 transaction threshold. The reversion of the dollar threshold and transaction threshold is effective as if it had been included in the ARPA. The Act also clarifies that, for calendar years beginning after December 31, 2024, the $20,000 threshold and the 200 transaction threshold apply for backup withholding purposes.

© Arnold & Porter Kaye Scholer LLP 2025 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.