Congress has officially passed H.R. 1, the One Big Beautiful Bill Act, advancing one of the most significant tax overhauls in years. The legislation, now headed to the President’s desk, includes a range of business-focused provisions poised to boost U.S. manufacturing investment, innovation, and competitiveness.
Thank you to all the One Voice members who flew to Washington over the past year, met with their lawmakers, sent Action Alerts, and made their voices heard! Your tireless advocacy helped secure one of the most significant legislative victories in years: permanent pro-growth tax policies and long-overdue certainty for businesses of all sizes.
Most notably, the bill makes immediate R&D expensing permanent and applies it retroactively, a crucial fix that will strengthen innovation, protect jobs, and drive investment back into local shops and communities. This provision alone will help level the playing field for small and medium manufacturers who rely on R&D to stay competitive.
Below is a summary of the most relevant tax changes for manufacturers.
• R&D Expensing: Immediate expensing of domestic research and experimental expenditures is restored beginning January 1, 2025. Domestic R&D amortization is repealed retroactive to January 1, 2025, while foreign R&D is still subject to amortization over 15 years. For small businesses (those with average gross receipts of $31 million or less), the change can be applied retroactively to January 1, 2022. Businesses of all sizes may elect to accelerate previously amortized domestic R&D deductions.
• Bonus Depreciation: The bill permanently extends 100% bonus depreciation for qualified property, such as machinery and equipment, acquired and placed in service on or after January 1, 2025.
• Section 179 Expensing: The maximum amount a business may expense under Sec. 179 is increased to $2.5 million, with a phaseout threshold of $4 million starting Jan. 1, 2025.
• Qualified Production Property Depreciation: A new 100% special depreciation allowance is introduced for nonresidential real property used in manufacturing—providing full first-year expensing for “qualified production property” such as factories or plants, of which the “construction, reconstruction or erection” begins after January 19, 2025, and before January 1, 2029 and is placed in service before January 1, 2031.
• Section 163(j) Interest Limitation: The EBITDA standard is reinstated starting January 1, 2025, easing limitations on interest deductibility for capital-intensive manufacturers. The new rules also ensure interest limits are applied prior to interest capitalization.
• Pass-Through Income (Section 199A): The 20% deduction for qualified business income (QBI) is made permanent. The deduction phase-in threshold for specified service trades or businesses (SSTBs) is expanded, and a new $400 minimum deduction (indexed for inflation) is introduced for eligible taxpayers with material participation in active trades or businesses.
• TCJA Corporate Rate: Preserves 21% C-Corporation rate made permanent in 2017.
• TCJA Individual Rates: Makes permanent individual tax brackets: 10%, 12%, 22%, 24%, 32%, 35%, and 37%.
• Excess Business Losses: H.R. 1 makes permanent the limitation on excess business losses for noncorporate taxpayers, which caps deductible business losses at $250,000 ($500,000 for joint filers), adjusted for inflation. Starting January 1, 2025, the treatment of disallowed losses is also revised—they will no longer convert into net operating losses but instead carry forward as cumulative business losses.
• Estate Tax Exemption Increases: Beginning January 1, 2026, the estate and gift tax exemption amount will be permanently increased to $15 million for individuals and $30 million for married couples, with inflation adjustments thereafter.
• Paid Family Leave Credit: The employer credit under Section 45S for paid family and medical leave is made permanent.
• 529 Plans: Tax-exempt distributions from 529 plans are expanded to include elementary/secondary education and postsecondary credentialing costs—useful for workforce training and education benefits.
• Section 127: Makes permanent the exclusion from employee income of up to $5,250 annually in employer payments of students loans, indexed for inflation.
• Pell Grants: Expands Pell Grants for short-term 150-600 clock hours over 8-15 weeks
• Qualified Overtime Deduction: Up to $12,500 ($25,00 joint filers) deduction equal to qualified overtime compensation received in the calendar year (expires Dec. 31, 2028).
• Temporary SALT Cap Increase: The bill temporarily raises the state and local tax (SALT) deduction cap to $40,000 for 2025 (adjusted for inflation through 2029). The cap will revert to $10,000 in 2030. The deduction phases down for taxpayers with MAGI over $500,000, but will not fall below $10,000.