A high-level summary of key individual and business tax changes under the One Big Beautiful Bill Act
Last updated: [January 2, 2026]
Recent federal legislation, commonly referred to as the OBBBA, introduces several notable tax changes that may affect both individuals and businesses. Below is a high-level summary of the provisions we expect to be most impactful. This overview is not exhaustive, but it is designed to highlight planning considerations and areas where you may want to take action.
Key Changes for Individuals
1. Expanded and Permanent Individual Tax Benefits
The OBBBA makes several taxpayer-favorable provisions permanent, providing long-term certainty for individual tax planning.
Key highlights include:
- Permanent increase to the standard deduction, reducing taxable income for many filers
- Permanent increase to the Child Tax Credit, expanding benefits for families
- Permanent Qualified Business Income (QBI) deduction under Section 199A for eligible pass-through income
What to consider:
- Long-term income and deduction planning
- Impact on pass-through business owners
- Re-evaluating estimated taxes and withholding
2. New and Expanded Individual Deductions
The OBBBA introduces or expands several above-the-line or itemized deductions that may benefit a broad range of taxpayers.
Key highlights include:
- Charitable contribution deduction for non-itemizers beginning in 2026
- Temporary increase to the SALT deduction limit from $10,000 to $40,000 for tax years 2025–2029
- New senior deduction of $6,000 per qualifying taxpayer
- Deduction for tip income up to $25,000
- Deduction for overtime income up to $12,500 per taxpayer
- Auto loan interest deduction up to $10,000 on new vehicles with final assembly in the US
What to consider:
- Whether itemizing deductions is now more beneficial
- Timing of charitable contributions
- Coordination of new deductions with retirement and wage income
3. Reporting and Account-Related Changes
Additional provisions affect reporting thresholds and new savings-related vehicles.
Key highlights include:
- Increase to the Form 1099 reporting threshold from $600 to $2,000 effective for the reporting year 2026 (filed in 2027)
- Introduction of a new “Trump Account,” designed as a new savings or investment vehicle (details and guidance forthcoming)
What to consider:
- Changes to income reporting compliance
- Monitoring future IRS guidance on new account rules
Key Changes for Businesses
1. Enhanced Expensing and Depreciation Provisions
The OBBBA makes several significant and favorable changes to business expensing rules, aimed at encouraging domestic investment, innovation, and capital spending. These provisions directly impact taxable income, cash flow, and planning decisions for businesses of all sizes.
100% Bonus Depreciation (Permanently Restored)
The OBBBA permanently restores 100% bonus depreciation for most qualified property acquired and placed in service after January 19, 2025.
Research & Development (R&D) Expensing Restored
The OBBBA significantly changes the treatment of research and development costs by restoring the immediate expensing of domestic R&D expenditures. This reverses the prior requirement to capitalize and amortize these costs over five years.
Key R&D changes include:
- For tax years beginning after December 31, 2024, businesses may fully deduct U.S.-based R&D costs in the year incurred
- The requirement to capitalize and amortize foreign R&D costs over 15 years remains unchanged
- Immediate expensing of R&D expenses is again allowed, but businesses may still elect to amortize them over at least 60 months.
Transition rules for prior R&D costs (2022–2024):
- All businesses may elect to deduct any remaining unamortized domestic R&D balance from 2022–2024 either in full in the first tax year beginning after December 31, 2024, or ratably over a two-year period
- Eligible small businesses may retroactively apply the new expensing rules to tax years 2021 – 2024, by filing amended returns.
Increased Section 179 Expensing Limit
The OBBBA increases the Section 179 expensing limit to $2.5 million, allowing qualifying businesses to expense a greater portion of eligible asset purchases, subject to the applicable phase-out thresholds.
What to consider:
- Timing of capital expenditures and asset purchases
- Coordinating bonus depreciation and Section 179 elections
- Evaluating R&D cost recovery opportunities, including transition elections
- Reviewing prior-year R&D capitalization for potential catch-up deductions or amended returns
- State conformity considerations: Minnesota currently conforms to the Internal Revenue Code through May 1, 2023, which does not include OBBBA changes. As a result, these federal benefits may not apply for Minnesota income tax purposes.
2. Changes to Business Meal Deductions (Effective 2026)
Beginning January 1, 2026, the rules for deducting business meal expenses change significantly.
0% Nondeductible Meals
Starting in 2026, most meals and snacks provided to employees on the employer’s business premises for the employer’s convenience will be 100% nondeductible. This includes many common workplace perks that were previously deductible or treated as de minimis fringe benefits, such as:
- Snacks and beverages in breakrooms (e.g., coffee, soda, granola bars)
- Meals provided to employees who must remain on-site due to working late, emergencies, or short meal periods
50% Deductible Meals
Several categories of business meals remain 50% deductible, provided they are ordinary and necessary and receipts are maintained
Examples include:
- Meals with clients, customers, or prospects where business is discussed and a company employee is present
- Meals incurred while traveling away from home for business purposes
- Meals during business meetings with employees, directors, or stockholders
100% Deductible Meals
Certain meal expenses continue to be fully deductible, including:
- Employee social or recreational events (e.g., holiday parties or company picnics)
- Meals made available to the general public for advertising or promotional purposes
What to consider:
- Reviewing on-site meal and snack programs before 2026
- Updating expense tracking and account classifications
- Ensuring proper documentation to support continued 50% or 100% deductibility
How We Can Help
Tax law changes often create both challenges and opportunities. Our team is actively monitoring guidance and interpretations related to the OBBBA and can help you understand how these provisions apply to your specific situation.
If you have questions or would like to discuss planning opportunities, please contact us.
This content is intended for general informational purposes only and should not be construed as tax advice.
