Key Takeaways
- The OBBBA permanently restores 100% bonus depreciation for equipment placed in service after January 19, 2025 - no more phased reductions.
- Domestic R&D expensing is permanently restored: companies can immediately deduct R&D costs instead of amortizing over 5 years.
- The 20% Qualified Business Income (QBI) deduction for pass-through businesses (sole proprietors, S-corps, partnerships) is now permanent.
- Section 179 expensing limits are significantly increased, benefiting small businesses buying equipment outright.
- Most residential clean energy credits (solar, geothermal, home efficiency) expired December 31, 2025. The EV tax credit was repealed after September 30, 2025.
- The Energy Efficient Commercial Buildings deduction expired June 30, 2026 - only projects placed in service by that date qualify.
- Businesses can also deduct employee tip and overtime costs through new employer provisions that parallel the individual deductions.
If you run a business — whether it’s a solo consulting practice, a restaurant, or a mid-size manufacturer — the One Big Beautiful Bill Act (OBBBA) changes your tax picture significantly. Some changes are genuinely good news for investment planning. Others close doors that were previously open, especially on the clean energy side.
Here’s what matters for your 2026 and 2027 tax strategy, with honest context on both the wins and the losses.
Part of our OBBBA Tax Guide series — see all OBBBA provisions in one place.
The Good News for Businesses: Permanent Incentives
100% Bonus Depreciation — Permanently Restored
Before the OBBBA, bonus depreciation was phasing out: 80% in 2023, 60% in 2024, 40% in 2025. The OBBBA reset it to 100% for qualifying property placed in service after January 19, 2025. This is now permanent, not a temporary patch.
What this means practically: if your business buys a piece of equipment in 2026 — a CNC machine, a commercial oven, servers, vehicles used for business — you can deduct the full cost in the year you place it in service rather than depreciating it over 5–7 years.
Example — Small Manufacturer: A machine shop owner purchases a $180,000 CNC machine in September 2026. Under bonus depreciation, she deducts the full $180,000 in 2026. At a 24% corporate-equivalent rate, that’s a $43,200 tax reduction — money that stays in the business for payroll and expansion.
The permanence is the key here. Before, businesses faced uncertainty about whether depreciation would be phased down further. Now, capital expenditure planning has a stable, predictable baseline.
R&D Expensing — Permanently Restored
One of the most quietly damaging changes in recent years was the 2022 requirement to amortize domestic R&D costs over five years instead of expensing them immediately. The OBBBA restores immediate expensing of domestic R&D — permanently.
For tech companies, pharma, advanced manufacturing, and any business that invests in innovation, this is material. An R&D-heavy company spending $5 million on domestic research in 2026 can deduct the full $5 million now rather than $1 million per year over five years.
Note: foreign R&D still must be amortized over 15 years. The restoration applies to domestic activities only.
QBI Deduction — Permanent for Pass-Through Businesses
The 20% Qualified Business Income (QBI) deduction for sole proprietors, partnerships, S-corporations, and LLCs was set to expire. The OBBBA made it permanent.
If you run a pass-through business and earn $200,000 in qualified business income, you can deduct $40,000 (20%) from your personal taxable income. For most small businesses under the W-2 wage and qualified property limitations, the deduction is straightforward to claim.
Example — Independent Contractor: Alex runs a marketing consultancy as an S-corp. QBI: $150,000. QBI deduction: $30,000. In the 24% bracket, that’s $7,200 in permanent annual savings — nothing changed from prior law, but the stability of knowing it won’t expire is significant for long-term planning.
Section 179 Expensing — Increased Limits
Section 179 lets businesses immediately expense qualifying equipment up to a dollar limit (as opposed to bonus depreciation, which has no dollar cap but applies to specific property types). The OBBBA increased both the deduction limit and the phase-out threshold:
| Pre-OBBBA | Post-OBBBA | |
|---|---|---|
| Maximum Section 179 deduction | $1,160,000 (2023) | Significantly increased |
| Phase-out starts at purchases of | $2,890,000 | Increased proportionally |
The exact 2026 figures are subject to IRS inflation adjustments (see IRS.gov for current-year limits). The practical effect: more small and mid-size businesses can expense equipment purchases in full without being limited by the old caps.
Business Deductions for Tips and Overtime Pay
Businesses also get a corresponding deduction for the tips and overtime they pay to employees. This means the employer-side costs of the individual no-tax-on-tips and no-tax-on-overtime provisions are also deductible above previous limits.
For hospitality and food service businesses, this is a meaningful reduction in effective labor cost for tipped employees. Track these figures separately — they have their own reporting requirements.
→ Individual side of the overtime deduction: No Tax on Overtime — Who Qualifies and How to Calculate Your Deduction
The Bad News: Clean Energy Credits Are Largely Gone
Residential Clean Energy Credits — Expired December 31, 2025
The 30% Residential Clean Energy Credit (for solar panels, solar water heaters, geothermal heat pumps, battery storage, and wind energy) expired at the end of 2025. No extension was included in the OBBBA.
The Energy Efficient Home Improvement Credit (for windows, doors, insulation, heat pumps) also expired on December 31, 2025.
If you installed solar in 2025, you can still claim the credit on your 2025 return. If you were planning a 2026 installation hoping for a credit, that ship has sailed under current law.
Business impact: Homeowners who were also counting on these for rental property improvements need to reassess. Commercial properties have a separate timeline (see below).
Energy Efficient Commercial Buildings Deduction — Expired June 30, 2026
The Section 179D deduction for energy-efficient commercial buildings (new construction or major retrofits) expired on June 30, 2026. This affects commercial landlords, real estate developers, and businesses constructing or significantly renovating commercial facilities.
If your qualifying project was placed in service by June 30, 2026, you can still claim the deduction on the return for the year the property was placed in service. Projects placed in service after that date no longer qualify. If you’re unsure whether your project made the cutoff, consult a tax professional.
EV Credits — Repealed
The federal EV purchase credits (up to $7,500 for new EVs, $4,000 for used EVs, and credits for commercial EVs) were all repealed for vehicles placed in service after September 30, 2025. This is done.
What remains: the new auto loan interest deduction (up to $10,000) applies to personally-purchased new American-made EVs that meet the U.S.-assembly requirement. This doesn’t replicate the old EV credit — it’s significantly smaller — but it does provide some ongoing offset for qualifying EV buyers at income levels under $150,000 (single).
Small Business Planning Takeaways for 2026–2027
Accelerate equipment purchases. With permanent 100% bonus depreciation, there’s no tax incentive to delay capital expenditure. If you need new equipment, buy it and deduct it this year.
Reconsider clean energy projects. Commercial solar installations can still use accelerated MACRS depreciation (solar equipment is 5-year property), but the direct energy credits are gone. The economics of commercial solar may still work through depreciation — run the numbers with a tax advisor.
Pass-through QBI planning stays relevant. If you’re near the W-2 wage limitations for the full QBI deduction ($182,400 for single / $364,800 for joint in recent years), consider the QBI optimization strategies that have always applied — W-2 wage payments, property investment, and business structure.
Employer tip and overtime deductions. If you’re in hospitality, food service, or any sector with significant tipped or overtime-heavy employees, make sure your payroll system is tracking these separately. The deductions compound across both the employer and employee sides.
Subscribe here to stay current — I’ll update this page as IRS guidance on the commercial building deduction expiration and other details comes in.
2027 and 2028 Outlook
For most business tax provisions, 2027 will look much like 2026 — permanent changes don’t create year-to-year volatility. The big calendar items:
- June 30, 2026: Energy Efficient Commercial Buildings deduction expired. No new projects qualify until/unless Congress restores it.
- End of 2028: The individual tip, overtime, auto loan, and senior deductions expire. This may reduce labor cost planning benefits for employers (since the individual deductions affect employee take-home pay, which in turn affects hiring attractiveness and wage negotiation).
From a purely business planning standpoint, the OBBBA creates unusual stability: permanent R&D, permanent QBI, permanent bonus depreciation. The variability from prior tax-cliff years is largely gone for business tax planning. That’s worth something.
Related: 2026–2027 IRS Tax Brackets and Business Rates — see how C-corp and pass-through rates interact with these new provisions.
