The Ledger: The Reconciliation Act of 2025
Rick Oelerich, LPA, EA
Senior Tax Manager
The Reconciliation Act of 2025 (aka OBBBA), that was signed into law on July 4, 2025, included several key tax benefits for small businesses, primarily by making permanent or enhancing provisions from prior law.
Many of the provisions are very complicated which the taxpayer should consult their business tax professional regarding. Some of the more general provisions include:
- Permanent 100% Bonus Depreciation: Allows businesses to fully expense the cost of eligible equipment and machinery. Prior law was reducing the allowed amount each year.
- The expansion to 100% is limited to property placed in service after 01/19/2025.
- An election is available to use the percentage provided by the prior law for 2025 only.
- Expanded Section 179 Expensing: Increases the maximum deduction limit and phaseout threshold for Section 179 expensing for property placed in service after December 31, 2024. The amounts are inflation adjusted each year as in prior law.
- Starting in 2025 up to $2.5 million of eligible property is eligible for Section 179 expensing, an increase from $1.25 million.
- When the total of all eligible property is placed in service exceeds $4.0 million then the eligible amount is subject to a reduced allowance.
- Meals Deduction: For tax years after 12/31/2025 all business meals were slated to be non-deductible. The business meal deduction was restored for 2026 and beyond as provided in prior law with limited exceptions for employer provided employee meals with no direct business purpose (Example: Employee Office Lunches) which will be non-deductible starting in 2026.
- Permanent Qualified Business Income (QBI) Deduction: The 20% pass-through deduction for eligible owners of pass-through entities has been made permanent, with expanded income phaseouts and a minimum deduction starting in 2026.
- Phaseouts have been increased by 50%.
- A minimum $400 QBI Deduction has been added.
- Increased the Information Return Reporting Threshold: Starting for 2026 payments and beyond no 1099-NEC or 1099-MISC will be required to be provided unless the payee amount is $2,000 or more. This amount will be subject to inflation adjustments for reporting years after 2026.