Here’s a summary of the new provisions in the One Big Beautiful Bill (OBBB) that will affect small business entities including S corporations, partnerships, and individual business owners. Most provisions apply to tax years beginning after December 31, 2025, i.e., starting with 2026 tax returns.
These provisions collectively reinforce real estate as a tax-advantaged asset class, especially for high-net-worth individuals and passthrough entities.
Depreciation & Cost Recovery
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100% Bonus Depreciation Restored Permanently:
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Applies to qualified property acquired and placed in service after Jan. 19, 2025.
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Includes tangible personal property and qualified improvement property (QIP).
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New Expensing for Production Property:
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Businesses can fully expense new factories and improvements used in qualified production activities (e.g., manufacturing, agriculture).
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Applies to construction started after Dec. 31, 2024 and placed in service before Jan. 1, 2034.
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State and Local Tax (SALT) Deduction
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Temporary SALT cap increase:
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Raised from $10,000 to $40,000 for 2026 (adjusted for inflation to $40,400).
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Applies to itemizing taxpayers, including passthrough owners.
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Phase-down for high earners:
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Begins at $500,000 MAGI (adjusted annually), reducing the deduction by 30% of the excess.
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Cannot fall below $10,000.
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PTET workaround limited: Specified service trades or businesses (SSTBs) can no longer use pass-through entity tax (PTET) payments to bypass the SALT cap.
New tax deductions for individuals
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New deduction for overtime and tips:
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Up to $12,500 of overtime and $25,000 of tips can be deducted from income (phased out above $150,000 AGI).
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Auto loan interest deduction:
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Up to $10,000 deductible for U.S.-assembled vehicles (expires after 2028).
Net Operating Loss Carrybacks:
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Two-Year Carryback Reinstated:
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The bill restores a 2-year carryback for NOLs incurred by noncorporate taxpayers, including passthrough entities like S corporations and partnerships.
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This reverses the current rule (post-TCJA) that generally disallows carrybacks for most taxpayers.
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The permanent QOZ reboot and 1031 preservation offer long-term planning certainty, while the LIHTC expansion may create new syndication opportunities.
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