Sustainability is black and white for Wall-Stone Holsteins
How powerful is paper in NE Wisconsin?
July 28, 2025
The One Big Beautiful Bill Act was signed into law July 4.
The act includes many tax changes, including permanent and limited modification of many soon-to-expire provisions of the Tax Cuts and Jobs Act of 2017 (TCJA) – many of which will impact businesses.
Bonus depreciation
Under the act, bonus depreciation has been reinstated to 100% (old law was set for 40% for 2025) for all qualifying assets purchased after Jan.19, 2025.
All qualifying assets purchased before Jan. 20, 2025, are subject to the 40% bonus depreciation limit.
Assets must meet certain criteria – typically, assets with a MACRS recovery period of 20 years or less – to qualify for 100% bonus depreciation.
Also, a special rule is in place for assets placed in service after Jan. 19, 2025 – with a written, binding contract to purchase dated prior to Jan. 19, 2025 – are not eligible for 100% bonus depreciation.
Also note, Wisconsin (and some other states) does not follow the federal tax law for bonus depreciation.
Code Section 179 Expensing Election
The Section 179 dollar limitation is increased to $2.5 million with the investment phaseout beginning at $4 million for tax years beginning after Dec.31, 2024.
Wisconsin follows the Federal Section 179 rules.
Code Section 174 Research and Experimental Expenditures
Effective Jan. 1, 2025, domestic research and experimental expenditures are eligible for immediate expensing.
Foreign research and experimental expenditures must be capitalized and amortized over 15 years.
Qualifying research and experimental costs are those expenses paid for research or experimental products in connection with the taxpayer’s trade or business.
Taxpayers may elect to capitalize and amortize domestic research expenditures over a period of at least 60 months beginning in the month they recognize a benefit from the research or experimental expenditure.
This election must be made by the due date of the return (including extensions) and applies to all subsequent years.
Small taxpayers (average annual gross receipts under $31 million) may retroactively elect to apply these new rules to any tax year beginning after Dec. 31, 2021.
The election must be made by July 4, 2026, and is made on an amended return.
QBID under Section 199A (passthrough deduction):
The Qualified Business Income Deduction (QBID) remains at 20% under the act and is made permanent.
Modifications were made to the phase-in of the wage and investment limitation, as well as for the Specified Service Trade or Business limitation.
The act also introduces a new minimum $400 QBID for taxpayers with at least $1,000 of Qualified Business Income, which will be adjusted for inflation annually.
Employee-focused changes
The next two provisions from the act are new tax laws.
They are not directly business items but can be useful to business owners as you hire employees.
No tax on tips
Beginning with the 2025 tax year through 2028, tip income will be eligible for a deduction whether a taxpayer itemizes or takes the standard deduction.
This deduction applies to individuals in occupations that customarily receive tips.
The Department of the Treasury is expected to provide a list of occupations that customarily receive tips.
The tip income is not an exclusion from income but rather a deduction in computing taxable
income equal to the amount of tip income received, up to a maximum deduction of $25,000 per year.
For employers, this should not impact payroll tax reporting, as tip income will still be subject to Social Security and Medicare tax.
However, an employer must report qualified tips on the employee’s Form W-2.
No tax on overtime
Again, beginning with the 2025 tax year through 2028, overtime income will be eligible for a deduction whether a taxpayer itemizes or takes the standard deduction.
This deduction applies to individuals who receive qualified overtime compensation under the Fair Labor Standards Act.
Overtime income will still be subject to Social Security and Medicare tax – thus, no major changes to payroll tax reporting, but to qualify, the total amount of eligible overtime must be separately stated on the individual’s Form W-2.
Thus, some new W-2 reporting rules are expected.
Work Opportunity Tax Credit
The Work Opportunity Tax Credit (WOTC) is available to employers for wages paid to individuals who are certified as members of one of several targeted groups.
The credit is generally 40% of wages up to $6,000 with a maximum credit of $2,400.
The WOTC was set to expire on Dec. 31, 2025.
There was talk of extending this credit during the reconciliation process; however, the act did not address the WOTC, thus it will expire at the end of the year.
This means businesses that hired individuals who were eligible for the WOTC will no longer receive this benefit after 2025.
Meals Provided at the Convenience of the Employer:
Business meal rules currently in place in 2025 include:
- 50% deductible: Most meals with clients, prospects, employees, vendors, where a clear business purpose is discussed. Meals consumed during business travel.
- 100% deductible: Meals provided for the convenience of the employer. Meals for employees working late or during trainings or meetings. Company-wide parties and employee events. Meals included as taxable compensation to the employee.
Business meal rules that will be in place after Dec. 31, 2025, include:
- The 50% deductible meal rules remain the same.
- Employer-provided meal changes. Expenses for meals provided on the employer’s business premises for the employer’s convenience, or meals for employees working late, will no longer be deductible. Items such as office snacks and coffee are no longer allowed as a deduction. This follows the TCJA rules for entertainment expenses, which are no longer deductible.
- Company-wide parties, employee events, outings, social events and potentially team building activities, etc., will still qualify for 100% deduction.
As with any business deduction, all expenses must have a business purpose and be considered ordinary and necessary.
It is also important to invoice separately for entertainment costs vs. food and beverage costs – otherwise, the entire amount may be considered nondeductible.
Other Items
A few other tax provisions under the act that business owners should keep in mind include:
- The 1099-K reporting limit has been increased to $20,000 and 200 transactions, effective for years after Dec. 31, 2024.
- The 1099-NEC/MISC reporting threshold has been increased from $600 to $2,000, effective for years after Dec. 31, 2025.
- C-corporations with charitable contributions will have the deduction limited to 1% of income (new law). The overall limit of 10% of adjusted gross income is still in place.
The specific facts and circumstances of your business will determine how these tax laws impact you and your business.
We suggest that you discuss any specific questions with your accountant.
