Signed into law on July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) reshapes the tax landscape for many transactions. The OBBBA is one of the most significant overhauls to the U.S. tax code since the Tax Cuts and Jobs Act of 2017 (“TCJA”). Buried in the headlines are several provisions with real, immediate consequences on how deals are structured, businesses are owned, and companies should be thinking about their business plans and exits. Here’s what you should know:

1. The Qualified Business Income Deduction is Now Permanent

The qualified business income (“QBI”) deduction established under Section 199A of the 2017 Tax Cuts and Jobs Act was set to expire at the end of 2025. However, the OBBBA now makes the QBI deduction permanent, meaning self-employed individuals and businesses structured as an LLC, S-corporation, or partnership may deduct up to 20% of QBI. Up to 20% of qualified real estate investment trust dividends and publicly traded partnership income may also be deducted. Maintaining the QBI deduction means business owners in the top 37% tax bracket can continue paying at a federal rate of approximately 29.6% on qualifying pass-through income. As such, the QBI provision of the OBBBA alleviates a major source of uncertainty regarding entity structuring decisions. However, notably, there are many limitations and exceptions to consider as not all income falls under QBI and the deduction can only be claimed on income directly earned from a business versus just an individual’s taxable income.

2. Bonus Depreciation

Since 2023, bonus depreciation available under Section 168(k) had been phasing down, dropping to just 40% in 2025 before passage of the OBBBA. With the passage of the OBBBA, 100% bonus depreciation has been reinstated for qualified property acquired and placed in service after January 19, 2025. Such bonus depreciation allows businesses to write off a large percentage of an eligible asset’s cost in the first year acquired. As an example, for M&A transactions structured as asset purchases, this allows buyers to allocate the purchase price to where eligible fixed assets are immediately expensed, thereby accelerating deductions and improving after-tax cashflows. In many M&A transactions, this has had a significant impact on negotiations related to structuring (asset versus stock purchase) and the purchase price.

In addition, the OBBBA restored certain favorable business interest expense rules which allow companies to back depreciation and amortization in calculation the limitation, therefore increasing deductibility of interest expenses. The OBBBA also significantly expanded Section 179 expensing, increasing the maximum first year deduction from $1 million to $2.5 million, with the phaseout threshold raised from $2.5 million to $4 million, which is particularly valuable for small to mid-sized businesses.

Professional business meeting graphic about the One Big Beautiful Bill tax changes impacting dealmakers, investors, and business owners.

3. Opportunity Zones

Pursuant to the passage of the OBBBA, the existing temporary qualified opportunity zone (“QOZ”) program established under the TCJA is extended permanently through December 31, 2026 to further encourage investment in economically distressed communities. At its core, the QOZ program allows investors to defer and reduce capital gains taxes by reinvesting such gains into a qualified opportunity fund that invests in designated opportunity zones. The new OBBBA creates a new permanent QOZ regime for investments beginning in 2027. The rules governing the new QOZ program differ significantly from the original TCJA program and planning decisions may now affect eligibility and benefits. Many opportunity zone investors are now weighing whether they should close deals before the end of the year to take advantage of the current program, or whether they should wait until the new program goes into effect in 2027.

Under the original structure, investors may defer gains until the end of 2026, receive a step up in basis for longer holding periods, and exclude appreciation permanently after 10 years. Now, under the new program established pursuant to the OBBBA, there is a rolling five year deferral for new investments, new zone designations, and an overlap period with old zone designations until December 31, 2028. Additionally, the step up in basis is now 10% for regular opportunity zones, 30% for rural opportunity zones, and a 30-year limit for gain exclusion. Enhanced compliance and reporting requirements were also established for the new permanent plan. Below is a chart comparing key elements of the two programs:

	OZ 1.0 – TCJA	OZ 2.0 – OBBBA
Sunset/Permanence	Temporary — expires Dec 31, 2026	Permanent, 10-year cycles starting Jan 1, 2027
Census Tract Designations: Number of tracts	8,764 (one-time)	~6,500 estimated; re-designated every 10 years
Low-income definition	Poverty rate ≥ 20% OR median family income ≤ 80% of area median	Tightened: MFI ≤ 70% of area MFI OR poverty ≥ 20% with MFI ≤ 125% of median
Contiguous tracts	Up to 5% allowed (AMI ≤ 125%)	Explicitly prohibited
Tax Benefits: Gain deferral	Fixed — deferred until Dec 31, 2026	Rolling 5-year deferral from investment date
Tax Benefits: Basis step-up	10% at 5 years / 15% at 7 years (only if invested by 12/31/21)	10% at 5 years; 30% for Qualified Rural Opportunity Fund (QROF) investments
Tax Benefits: Gain exclusion	Permanent after 10 years (basis stepped to FMV)	Same — permanent after 10 years
Substantial improvement threshold	Must double original basis (100% of acquisition basis, excluding land)	Same 100%, except rural QROFs qualify at 50%
Rural definition	N/A	Any area outside a city/town > 50,000 people and its contiguous urbanized area
Rural perks	N/A (3,309 OZ 1.0 tracts retroactively identified as rural as of Sept 2025)	50% improvement threshold + 30% basis step-up for QROFs
Required forms	IRS Forms 8996 / 8997 annually for qualified opportunity funds; Form 8949 for investors	Same forms, plus mandatory annual public disclosures
Treasury reporting	Not applicable	Annual reports; additional reviews at year 6 and year 11

4. Larger QSBS Exclusions for Startup Founders and Early Investors

Qualified Small Business Stock (“QSBS”) under Section 1202 is more valuable with the passage of the OBBBA which has three main changes. For QSBS issued after passage of the OBBBA, the per-issuer gain exclusion cap increased from $10 million to $15 million, the gross asset threshold for issuing companies increased from $50 million to $75 million, and partial exclusions are now available for stock held less than five years. This means that a well structured C-corporation can now shelter more gain and the shorter partial exclusion holding periods provide flexibility for earlier liquidity events. Additionally, these changes highlight the importance of evaluating QSBS eligibility early in company formation and operational planning for both investors and emerging founders.

The Bigger Picture

Many provisions of the OBBBA provide predictability for long term tax planning for many businesses. However, the OBBBA is complex, and several provisions interact in ways that require careful analysis and planning. As with any major tax legislation, there lies real opportunity but also significant pitfalls for those who do not plan carefully.