OBBBA Tax Overhaul SignedBusiness, SALT, Energy & Estate Changes

What the OBBBA Tax Overhaul Actually Changed

The OBBBA preserved and modified many provisions that otherwise would have changed after 2025 under the 2017 Tax Cuts and Jobs Act. For businesses, the headline is faster cost recovery and more stable planning rules. For individuals in high-tax states, the larger state and local tax deduction may provide short-term relief. For clean-energy projects, timing now matters more than ever. For wealthy families, the estate, gift, and generation-skipping transfer tax exemption is substantially larger and indexed for inflation.

The catch is that not every change lasts forever. The business provisions are largely built for permanence, while the enhanced SALT cap runs only through 2029 and several energy incentives have already expired or are nearing expiration. Tax planning under OBBBA is therefore less like setting a cruise-control speed and more like packing for a road trip with several toll booths.

Business Tax Changes: Bigger Deductions and Faster Write-Offs

100% Bonus Depreciation Is Back

One of the most valuable OBBBA business tax changes is the permanent restoration of 100% bonus depreciation for eligible property generally acquired after January 19, 2025. Instead of depreciating qualifying equipment over several years, a business may be able to deduct the full cost in the first year it is placed in service.

Think of a fabrication company buying $600,000 in machinery, a logistics business replacing a fleet of eligible equipment, or a dental practice investing in new imaging technology. The deduction can improve short-term cash flow because the business is not waiting years to recover the tax value of the investment. It does not make equipment free, sadly. The equipment supplier will still expect payment, and probably before lunch.

Special Depreciation for Qualified Production Property

The law also creates a separate 100% first-year depreciation opportunity for certain qualified production property. This generally targets eligible nonresidential real property used in manufacturing, production, or refining in the United States. Offices, parking areas, administrative space, and other nonproduction areas are generally outside the preferred treatment.

This provision is especially relevant to manufacturers building or expanding factories. However, it comes with construction-start and placed-in-service deadlines, so taxpayers should document project dates carefully. “We started thinking about it in 2025” is not usually considered a tax document.

Domestic Research and Development Can Be Expensed Again

The OBBBA created Section 174A, allowing businesses to currently deduct domestic research and experimental expenses paid or incurred in tax years beginning after December 31, 2024. Businesses may still elect capitalization and amortization in appropriate circumstances, but immediate expensing can significantly improve cash flow for companies that develop software, formulas, prototypes, manufacturing processes, or new products.

Foreign research and development remains subject to 15-year amortization. That distinction makes location tracking much more important. A company with engineering teams in multiple countries should not treat all R&D spending as one cheerful pile of receipts. Domestic and foreign costs may now create very different federal tax outcomes.

Interest Deductions Return to an EBITDA Framework

For many businesses subject to the Section 163(j) limitation, adjusted taxable income is once again calculated using an EBITDA-style approach. Depreciation, amortization, and depletion are added back when determining the limitation base. This can increase the amount of business interest expense deductible in the current year for capital-intensive or debt-financed companies.

The rule can help companies refinancing debt, expanding with borrowed funds, or carrying substantial equipment loans. Still, it is not a universal invitation to borrow like a game-show contestant with a buzzer. Interest rates, lender covenants, state conformity rules, and business risk still matter.

Pass-Through Owners Get More Certainty

The OBBBA permanently extends the Section 199A qualified business income deduction, which may allow eligible owners of sole proprietorships, partnerships, S corporations, trusts, and estates to deduct up to 20% of qualified business income. The law also expands certain income-based phase-in ranges and adds a minimum deduction for qualifying active businesses that meet the required income thresholds.

The law also raises the Section 179 expensing limit to $2.5 million, with the phaseout beginning once qualifying property costs exceed $4 million. Founders and investors should also pay attention to expanded qualified small business stock rules, including more flexible holding periods and higher limits for qualifying newly issued C corporation stock.

SALT Deduction Changes: Relief With an Expiration Date

The SALT Cap Increases Through 2029

The state and local tax deduction, better known as SALT, was previously capped at $10,000 for most itemizers. Under the OBBBA, the cap increased to $40,000 for tax year 2025, or $20,000 for married taxpayers filing separately. The cap rises by 1% annually through 2029 before returning to $10,000 in 2030.

Income Phaseouts Limit the Biggest Benefit

The enhanced SALT deduction begins phasing down once modified adjusted gross income exceeds $500,000 in 2025, or $505,000 in 2026. The deduction cannot be reduced below the $10,000 floor for most taxpayers. This means the biggest benefit often goes to upper-middle-income homeowners in high-tax states rather than households with extremely high income.

A household with $30,000 in combined property taxes and state income taxes may now deduct the full amount if it itemizes and stays below the relevant income phaseout. But someone taking the standard deduction does not receive a special SALT bonus just because property taxes were painful. The tax code remains remarkably committed to making “it depends” a complete sentence.

Pass-Through Entity Tax Planning Still Matters

Many states allow partnerships and S corporations to use pass-through entity tax elections, often called PTET elections, to pay certain state taxes at the entity level. The final OBBBA did not adopt broad proposed federal restrictions on many of these arrangements. That means owners should continue reviewing PTET opportunities with their tax advisers, especially where state law permits them.

Energy Tax Changes: Deadlines Now Matter More Than Brochures

Home Energy and EV Credits Ended Early

The OBBBA accelerated the end dates for several consumer clean-energy incentives. The energy efficient home improvement credit and residential clean energy credit generally ended for qualifying improvements or expenditures after December 31, 2025. That includes many home solar, battery, insulation, window, heat-pump, and efficiency-related tax benefits that homeowners had expected to remain available for longer.

The new, used, and commercial clean vehicle credits generally ended for vehicles acquired after September 30, 2025. A buyer who paid for an EV after the deadline cannot simply wave an old dealership brochure at the IRS and hope for a sentimental exception.

Commercial Energy Incentives Have Their Own Countdown

Several business-facing incentives remain relevant in 2026, but the deadlines are close. The alternative fuel vehicle refueling property credit generally ends for property placed in service after June 30, 2026. The new energy efficient home credit generally ends for qualifying homes acquired after June 30, 2026. The Section 179D deduction for energy-efficient commercial buildings generally does not apply to property if construction begins after June 30, 2026.

For wind and solar projects claiming the technology-neutral clean electricity credits, timing is especially critical. Projects that begin construction before early July 2026 may have more favorable treatment under the transition rules. Projects that begin later generally face a much shorter placed-in-service window ending in 2027.

Not Every Energy Credit Disappeared

The OBBBA did not erase the entire clean-energy tax system. Certain credits, including the clean fuel production credit, continue in modified form. Some technologies outside wind and solar retain longer phaseout schedules. However, the law adds more restrictions tied to prohibited foreign entities and material assistance rules, making supply-chain documentation increasingly important for large projects.

Estate and Gift Tax Changes: A Larger Planning Window

Beginning in 2026, the federal estate, gift, and generation-skipping transfer tax exemption is $15 million per person and is indexed for inflation. For a married couple with careful planning, roughly $30 million may potentially be sheltered if both exemptions are available and relevant elections are handled correctly.

This does not mean estate planning can be placed in a dusty drawer until retirement. Estate plans still need updated wills, trusts, beneficiary designations, insurance reviews, business succession documents, and liquidity planning. State estate taxes and inheritance taxes can also apply at much lower thresholds than the federal exemption.

The practical change is certainty. Families with large business interests, real estate portfolios, concentrated stock positions, or rapidly appreciating assets have more room to plan transfers without the looming risk that the exemption would fall sharply after 2025.

What Businesses, Homeowners, and Investors Should Do Next

1. Run a 2025 and 2026 tax projection rather than relying on last year’s return.
2. Review equipment purchases, factory expansions, and qualifying property dates for bonus depreciation opportunities.
3. Separate domestic and foreign R&D costs in accounting records before filing returns.
4. Compare itemized deductions with the standard deduction before assuming the larger SALT cap helps.
5. Review energy contracts, construction timelines, and placed-in-service dates immediately.
6. Update estate documents and succession plans while the larger exemption creates flexibility.
7. Check state tax conformity rules because states do not always follow federal depreciation or R&D treatment.

The broader fiscal picture is worth watching, too. The Congressional Budget Office estimated that Public Law 119-21 would increase federal deficits by about $3.4 trillion from 2025 through 2034 relative to its baseline. That estimate does not tell any one taxpayer’s story, but it is a reminder that future Congresses may revisit revenue rules again. Tax planning should be proactive, not based on the assumption that today’s law will stay frozen forever.

Experience-Based Planning: What OBBBA Looks Like in Real Life

Imagine a family-owned manufacturer that delayed replacing old machinery because bonus depreciation had been shrinking each year. Under OBBBA, the owners may finally have a stronger reason to move forward. Their experience is not simply “buy equipment and save taxes.” The useful work happens before the purchase order: confirming that the asset qualifies, checking the acquisition date, modeling taxable income, reviewing financing, and making sure the company has enough cash for payroll after the shiny new machine arrives. A tax deduction is wonderful, but employees tend to prefer being paid in actual money.

Now consider a software company with engineers in Texas, California, Canada, and India. Before OBBBA, leadership may have viewed research costs as one broad category. The new domestic R&D deduction changes that habit. The company must identify where the work is performed, which activities qualify as research, and how costs flow through payroll and project accounting. The experience becomes less about clever tax tricks and more about disciplined records. A clean chart of accounts suddenly becomes as exciting as a superhero movie, at least to the tax department.

For homeowners, the SALT change can be both helpful and frustrating. A couple in New Jersey, New York, California, or Illinois may see their deductible state income and property taxes rise well above the old $10,000 limit. But the benefit may disappear if they take the standard deduction or move into the income phaseout range. Their best experience is usually a side-by-side comparison: itemize versus standard deduction, current year versus next year, and projected income before versus after a bonus, stock sale, or business distribution.

Energy planning now feels more urgent. A homeowner who completed a solar installation by the 2025 deadline may still have been eligible for a federal credit. A neighbor who signed papers but finished installation later may not be. For commercial developers, a charging station, energy-efficient building project, or solar facility can depend on the exact date construction began and the date the property was placed in service. In this area, calendar management is no longer administrative housekeeping. It can change the economics of an entire project.

Estate planning experiences may be quieter but no less important. A business owner with a fast-growing company may have spent years worried that the federal exemption would shrink dramatically. The $15 million per-person exemption provides breathing room, but it also creates an opportunity to improve the plan rather than ignore it. Families can review trusts, ownership structures, life insurance, charitable goals, and whether children are actually ready to inherit a business without immediately turning Thanksgiving dinner into a board meeting.

The common lesson is simple: OBBBA rewards taxpayers who understand timing, documentation, and interaction between rules. A deduction can be permanent, temporary, phased down, limited by income, blocked by state law, or dependent on a construction date buried in a contract. The smartest approach is to bring tax advisers, accountants, legal counsel, and operational leaders into the conversation early. That may not sound glamorous, but neither does finding out in April that a deadline passed last September.

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