The biggest tax law in years is now in effect. The One Big Beautiful Bill Act (OBBBA), signed in July 2025 as Public Law 119-21, didn't just extend the 2017 Tax Cuts and Jobs Act — it made much of it permanent and expanded several breaks that owner-led businesses rely on. A handful of changes reached back into 2025, but most took effect on January 1, 2026. Here's what matters if you run a business, and why the planning window is open right now.

The 20% pass-through deduction is permanent — and reaches more owners

The Qualified Business Income deduction under §199A — the up-to-20% deduction for S-corporations, partnerships, and sole proprietors — was scheduled to disappear after 2025. It's now permanent. (You may have read that the rate jumped to 23%; that was an early House proposal that was dropped. The final rate stayed at 20%.)

Two changes make it reach further in 2026. The income range over which the wage-and-property limits phase in widened to $75,000 for single filers and $150,000 for joint filers above the threshold, so fewer owners get squeezed. And a new minimum deduction of $400 is available to active owners with at least $1,000 of qualified business income. For most pass-through owners, this means §199A is no longer a "use it before it's gone" benefit — it's a permanent cornerstone to plan your salary, entity structure, and retirement contributions around.

Full expensing is back for equipment and improvements

100% bonus depreciation has been restored for qualifying property, and the Section 179 expensing limit rose to $2.5 million (with the phase-out threshold at $4 million). If you've been timing a vehicle, equipment, or build-out purchase, the calculus changed — you can again write off the full cost in the year you place the asset in service rather than depreciating it over years. That makes when you buy a real decision worth running before year-end.

Research costs can be expensed again

For businesses that develop products, software, or processes, OBBBA restored immediate expensing of domestic research and development costs (§174), reversing the five-year amortization rule that had been creating phantom taxable income since 2022. If R&D is part of what you do, this is meaningful cash-flow relief.

A friendlier interest deduction, and a win for homebuilders

The business interest limitation under §163(j) returned to an EBITDA-based calculation, which generally lets leveraged and capital-intensive businesses deduct more interest. And in a change aimed squarely at construction, the completed-contract rules under §460(e) were expanded to include condominium projects, so builders aren't taxed on buyer deposits during construction the way they previously could be.

More certainty for succession planning

The federal estate and gift tax exemption rose to $15 million per person in 2026 and was made permanent (indexed for inflation). For owners thinking about transferring a business to the next generation, that's room to plan with confidence instead of racing a sunset.

One California caveat

Don't assume federal equals California. California has historically decoupled from federal bonus depreciation, caps its own Section 179 deduction far lower, and offers no state equivalent of the §199A deduction. Your federal savings and your California result can diverge sharply, and confirming the state treatment is part of doing this right.

The through-line: OBBBA traded uncertainty for permanence, which is good news — but permanence only pays off if you build it into a plan. Capex timing, reasonable compensation, retirement funding, and entity structure should all be revisited now that the rules are settled.

If you'd like to turn these changes into a concrete plan for your business before year-end, schedule a consultation.