2025 Tax Law Changes Explained: Key Takeaways from the One Big Beautiful Bill

Signed into law by President Trump on July 4, 2025, the “One Big Beautiful Bill Act” introduces several notable changes to the tax landscape. Along with extending a range of provisions that were set to expire at the end of the year, the bill brings forward key updates that could have a significant impact on businesses and individual taxpayers. 

It’s also important to note that not all states, including Minnesota, automatically conform to changes in federal tax law. As a result, certain provisions may be treated differently at the state level.

To help you navigate what’s new, we’ve put together answers to some of the most frequently asked questions about the law and what it may mean for you.

What are some of the most impactful tax law changes in the “One, Big, Beautiful Bill”?

Our educational sessions offer numerous benefits to both the company and its technical personnel:

The bill brings a number of meaningful updates for a wide range of taxpayers. For S Corporations and partnerships, two standout provisions are the permanent extension of the 20% IRC Section 199A deduction and the permanent extension of the top individual tax rate of 37%—both considered major wins.

Other taxpayer-friendly provisions include:

• Permanent full expensing of domestic research and development expenditures
• The return of 100% bonus depreciation
• A revised calculation for the IRC Section 163(j) interest limitation, now based on EBITDA rather than EBIT

These updates offer expanded planning opportunities and relief for many business owners moving forward. The ability to deduct research and development (R&D) expenditures was one of the most anticipated changes in the bill.

The ability to deduct research and development (R&D) expenditures was one of the most anticipated changes in the bill. How are the previously capitalized R&D expenditures treated under the new law?

The treatment depends on the size of the taxpayer. Those with average gross receipts of $31 million or less (as determined by the aggregation rules) are eligible to amend prior-year filings and request a refund for previously paid taxes.

For all other taxpayers, or for eligible taxpayers who choose not to amend prior filings, the bill allows for deduction of previously capitalized domestic R&D expenditures that have not yet been amortized, spread over either a one-year or two-year period.

The best approach will vary based on projected taxable income for 2025 and 2026, as well as how individual states choose to conform to the federal changes. 

The treatment of state and local taxes (SALT) was a major negotiation point among Republicans during the passage of the new tax law.

The treatment of state and local taxes (SALT) was a major negotiation point among Republicans during the passage of the new tax law. How is SALT treated under the new law? 

The itemized deduction cap for state and local taxes has been raised from $10,000 to $40,000 for tax years 2025 through 2029, with annual increases built in. However, the $40,000 cap is subject to a phaseout for taxpayers with modified adjusted gross income over $500,000. The cap is reduced by 30% of the excess above that amount, eventually returning to the original $10,000 cap when fully phased out. After 2029, the $40,000 cap reverts back to $10,000 for all taxpayers.

In addition to raising the itemized deduction cap, Congress chose not to change the treatment of pass-through entity taxes, a workaround many states have adopted that allows partnerships and S corporations to pay state taxes at the entity level. This structure continues to help businesses avoid being subject to the $10,000 (or $40,000 under the new law) cap at the individual level.

What businesses or industries were most negatively impacted by the new tax law?

While the bill includes a wide range of changes that affect taxpayers both positively and negatively, those involved in energy-efficient property and other green energy projects may feel the most negative impact.

A variety of specific energy-related tax credits and incentives were either repealed or phased out under the new law. Many of these incentives were increased or created under the Inflation Reduction Act passed by President Biden.

After the passage of the tax law, are there changes to my business structure that I should be considering? 

While the changes introduced under President Trump’s earlier “Tax Cuts and Jobs Act” had a greater impact on entity structure decisions, the new law still presents situations where it may be worth reevaluating whether being taxed as a C corporation, rather than an S corporation or partnership, is the best fit.

One driving factor of this evaluation is the expansion of the Qualified Small Business Stock (QSBS) rules under IRC Section 1202. The revised rules introduce a tiered holding period for the gain exclusion:

• 50 percent exclusion for QSBS held at least 3 years
• 75 percent for 4 years
• 100 percent for 5 years

These changes apply to eligible stock acquired after July 4, 2025. The per-issuer exclusion amount was increased from $10 million to $15 million, and the gross asset ceiling for eligible businesses was raised to $75 million. These updates will allow more businesses to qualify as eligible small businesses under IRC 1202 and more taxpayers to benefit from the exclusion.

The international tax law changes could also make certain entity types more advantageous. The specifics of those rules are beyond the scope of this article, but as with any change, all factors should be considered when determining the ideal structure for your business.

With the passage of the tax law, what process is needed to ensure taxpayers maximize the benefit of the changes? 

A clear understanding of which provisions take effect in 2025 and how they apply to each taxpayer’s situation will be essential to fully benefit from the new law. For example, the ability to expense previously capitalized and unamortized R&D costs in 2025, the return of 100 percent bonus depreciation, and other provisions could lead to a projected tax loss for the year.

While a tax loss may be the intended outcome, it is important to consider how that loss interacts with other areas of the tax code, such as the excess business loss rules, the impact on the owner's tax brackets, and whether those lower brackets are being used as efficiently as possible over multiple years.

In addition to evaluating federal tax implications and available incentives, it will also be important to monitor how individual states choose to conform to the new law. In some cases, state-level guidance may not be available until later in the year or even beyond, depending on the jurisdiction.

How do the tax law changes impact the Construction and Real Estate industry? 

The law includes several provisions that may affect those involved in construction and real estate. One key update is the return of 100 percent bonus depreciation, which applies to qualified property placed in service after the effective date. This may offer immediate expensing opportunities for eligible assets commonly used in construction and development projects.

Additionally, residential construction contracts may now be eligible for additional deferral as they are no longer required to use the percentage of completion method of accounting.

As always, a detailed review of project types, timelines, and asset classifications will be essential to determine how the new provisions apply.

How do the tax law changes impact the Manufacturing industry?

Manufacturers may benefit from a few provisions aimed at encouraging capital investment. Notably, the return of 100 percent bonus depreciation allows eligible manufacturing equipment and other qualified property to be fully expensed in the year it is placed in service. This may reduce near-term tax liability and improve cash flow. In addition to the items historically eligible for bonus depreciation, the law was expanded allowing certain qualified manufacturing real property to be eligible for bonus depreciation.

The treatment of research and development (R&D) expenditures has also changed allowing immediate expensing of domestic R&D expenses. Furthermore, taxpayers may now deduct previously capitalized domestic R&D costs that have not yet been amortized, with updated timing rules depending on the size and structure of the company. This may be particularly relevant for manufacturers involved in product innovation or process improvement.

Additional provisions, such as updates to interest deductibility and international tax rules, may also apply depending on the taxpayer’s specific circumstances. A thorough review of operations and planned investments is recommended to assess the full impact.

These frequently asked questions cover just a portion of the changes introduced by the “One Big Beautiful Bill Act.” As the full impact of the new law continues to unfold, Redpath and Company is here to help you assess what the changes may mean for your specific situation.

If you have questions or would like to discuss how the new provisions could affect you, contact us to start the conversation.

We will continue to share insights and guidance in the months ahead as additional details become available.