Straight to the Point
Business Investment Gets Permanent Certainty: 100% bonus depreciation is now permanent, Section 179 limits nearly doubled, and the QBI deduction won’t expire, giving business owners long-term planning certainty for equipment purchases, entity structures, and growth strategies.
Wealth Transfer Windows Expand Significantly: The estate tax exemption permanently increases to $15 million per person starting in 2026, while enhanced QSBS exclusions create powerful exit planning opportunities for business owners and investors.
Cash Flow Optimization Through Immediate Deductions: R&D expensing is restored with retroactive benefits, and new reporting requirements for tip and overtime deductions create both opportunities and compliance obligations for restaurant and hospitality operators.
On July 4, 2025, President Trump signed the “One Big Beautiful Bill Act” into law, delivering the most significant business tax legislation since the 2017 Tax Cuts and Jobs Act. It’s a comprehensive tax overhaul that fundamentally reshapes the landscape for business investment, wealth transfer planning, and strategic exit strategies.
For business owners and high-net-worth individuals, the law combines immediate cash flow benefits through restored R&D expensing and permanent bonus depreciation with long-term planning opportunities through enhanced estate tax exemptions and qualified small business stock benefits.
Adapting to the new tax legislation isn’t just about compliance: it’s about competitive positioning. The businesses that adapt quickly will gain lasting advantages, while those that delay may find themselves at a structural disadvantage.
That’s why we’ve summarized all of the key changes that business owners and HNW individuals need to be aware of. For each change, we’ll summarize what’s changed, why it matters, the key implications for our clients in Illinois and beyond, and the key takeaway to bear in mind.
100% Bonus Depreciation Made Permanent
What Changed: The scheduled phase-out of bonus depreciation is eliminated. Qualifying property placed in service after January 19, 2025, receives 100% first-year expensing permanently.
What Is Bonus Depreciation?
Bonus depreciation allows businesses to immediately deduct the full cost of eligible assets like machinery, computers, or vehicles, rather than depreciating them over several years. This accelerates tax savings and improves short-term cash flow.
For example, if a company purchases $500,000 of equipment in 2026, it can deduct the entire amount on that year’s tax return using bonus depreciation. Under regular depreciation, that deduction might be spread over five or seven years instead.
Why It Matters: The permanence of this provision gives businesses long-term certainty. Unlike Section 179, bonus depreciation isn’t limited by annual income and can create or increase a net operating loss (NOL): a powerful tool for offsetting gains in other years. That makes it especially valuable for businesses with large, one-time income events.
The permanent nature of this change allows businesses to make decisions based on operational needs rather than tax deadlines. Unlike Section 179, bonus depreciation can create or enlarge net operating losses, valuable for sheltering one-time gains.
Key Takeaway: This change shifts bonus depreciation from a “use it before you lose it” benefit into a permanent planning tool. Businesses can align tax benefits with operational priorities, preserve cash flow, and make smarter decisions without tax-driven pressure.
Section 179 Expensing Limits Nearly Doubled
What Changed: The Section 179 expensing limit increases to $2.5 million, with the phase-out beginning at $4 million in total qualifying purchases. These higher thresholds apply to tax years beginning after January 19, 2025.
What Is Section 179?
Section 179 allows businesses to immediately deduct the full cost of certain assets—like equipment, software, and leasehold improvements—rather than depreciating them over several years. It’s especially useful for smaller businesses that want to write off new purchases in the year they’re made.
How It Works: If a business buys $100,000 worth of qualifying kitchen equipment in 2026, it can deduct the entire $100,000 right away, rather than taking small deductions over five or more years. The deduction is limited to the business’s taxable income and begins to phase out once total asset purchases exceed $4 million annually.
Key Differences from Bonus Depreciation:
- Section 179 is elective by asset, giving business owners flexibility in how deductions are applied.
- It applies to both new and used property, while bonus depreciation applies only to new and certain used assets.
- Section 179 cannot create or increase a net operating loss (NOL)—it’s limited to taxable income, making it ideal for profitable businesses.
Why It Matters: These expanded limits make Section 179 even more valuable for restaurant owners and franchisees investing in high-cost items like ovens, walk-in freezers, POS systems, or leasehold improvements. It gives business owners the ability to front-load deductions when cash flow is tight or growth is accelerating.
Key Takeaway:
The nearly doubled Section 179 limits offer a powerful tool for managing taxable income, especially when combined with permanent 100% bonus depreciation. Businesses can match tax savings with operational investments, improving flexibility and financial control.
QBI Deduction Made Permanent with Expanded Access
What Changed: The 20% Qualified Business Income (QBI) deduction for pass-through entities is now permanent. For certain high-income professional businesses (law, accounting, consulting, etc.), the deduction begins to shrink once taxable income passes roughly $390,000 for joint filers or $195,000 for single filers (2025 amounts, indexed annually).
The new rules let more business owners keep part of the deduction even after crossing those limits, instead of losing it entirely as before. If your income is below those levels, you can still take the full 20% deduction.
Why It Matters: This change offers two key benefits:
- Expanded eligibility: More high-income owners of SSTBs will now qualify for at least a partial QBI deduction.
- Long-term planning certainty: Business owners can structure entities and plan income distributions knowing this deduction will remain in place.
Non-SSTB businesses, including those in manufacturing, retail, and food service, continue to benefit from the full 20% deduction without being subject to the SSTB income limitations, though wage and property-based limits may still apply at higher income levels.
Key Takeaway: The permanent QBI deduction gives pass-through business owners a valuable tool to reduce taxable income. With expanded access for SSTBs and no sunset date, the deduction becomes a cornerstone of long-term tax and entity planning strategy.
SALT Deduction Cap Increased, But Planning Still Matters
What Changed: The federal cap on the state and local tax (SALT) deduction has increased to $40,000 for joint filers and $20,000 for single filers, starting in 2025. This replaces the longstanding $10,000 cap enacted under the 2017 Tax Cuts and Jobs Act.
Why It Matters: The increased cap restores partial deductibility of high state income and property taxes, but many high-income taxpayers will still exceed the new threshold. For pass-through business owners, the entity-level SALT workaround remains essential.
By electing into Illinois’s Pass-Through Entity (PTE) tax, owners can deduct 100% of state income taxes paid at the entity level, sidestepping the individual SALT cap entirely. This remains a critical strategy for owners with high income, especially in high-tax states.
Planning Implications:
- Don’t assume the higher cap eliminates the need for PTE elections. The $40,000 cap is still limiting for many business owners.
- Coordinate between PTE elections and individual deductions. It may make sense to shift certain deductions to the entity level to maximize tax efficiency.
- Multi-state filers should pay close attention to where income is sourced and how states treat entity-level tax payments.
Key Takeaway: While the higher SALT cap offers relief, it doesn’t replace the strategic value of entity-level tax planning. Pass-through business owners should continue to evaluate PTE elections annually to capture full deductions and minimize federal tax exposure.
R&D Expensing Restored with Retroactive Benefits
What Changed: Domestic research and development expenses regain immediate deductibility starting in 2025, with simplified procedures available for businesses with average gross receipts ≤ $31 million to recapture 2022-2024 costs.
Why It Matters: This change is transformative for growth-stage companies and businesses investing in process improvements or technology development. Restaurant and hospitality businesses investing in mobile applications, online ordering platforms, or operational process improvements may qualify for R&D treatment.
The restoration provides immediate cash flow relief and pairs with R&D credits for enhanced benefits. Companies should act quickly to file amended returns for retroactive benefits.
State Coordination: Illinois generally conforms to federal R&D treatment, while some neighboring states maintain separate capitalization requirements. Multi-state businesses should model the total benefit before filing catch-up amendments.
Key Takeaway: Restored R&D expensing provides immediate cash flow improvements and creates planning opportunities that require prompt action to maximize refund potential.
Enhanced Estate Planning Through Permanent Exemption Increases
What Changed: Beginning in 2026, the federal estate, gift, and GST tax exemption increases to $15 million per individual ($30 million for couples), indexed for inflation.
Why It Matters: This provides high-net-worth families with expanded, permanent capacity for wealth transfer planning without uncertainty about future exemption reductions.
Key Takeaway: Business owners can now implement succession plans with greater certainty, transferring business interests to family members while retaining operational control and minimizing estate tax exposure.
QSBS Enhancements Create Powerful Exit Strategies
What Changed: The rules for Qualified Small Business Stock (QSBS) have been expanded. Under the new framework, eligible stockholders can exclude gains on the sale of QSBS using a graduated schedule:
- 50% exclusion after 3 years
- 75% after 4 years
- 100% after 5 years
Additionally, the limits increase to a $15 million gain exclusion per taxpayer and a $75 million gross asset cap at the time of stock issuance.
What Is QSBS?
QSBS refers to stock issued by certain C corporations that meet specific criteria under Section 1202 of the Internal Revenue Code. If the stock is held for a minimum period and certain conditions are met, the gain from its sale may be partially or fully excluded from federal income tax.
Historically, the full 100% exclusion required a 5-year holding period, but the new graduated structure offers tax benefits even on shorter timelines, providing greater flexibility for founders, early employees, and investors.
Why It Matters: These enhancements make QSBS a more powerful tool for exit planning, especially for founders, early-stage investors, and executives who may sell equity before the traditional 5-year threshold. The expanded asset and gain limits also increase the number of companies and individuals who can qualify.
Planning Requirements: To qualify for QSBS treatment, the issuing company must be a domestic C corporation, meet the active business requirement, and have less than $75 million in gross assets at the time of stock issuance. Early planning is essential: QSBS benefits cannot be retroactively applied to stock issued before meeting the requirements.
It’s worth noting that some types of businesses, including hotels and restaurants, do not qualify for QSBS.
Key Takeaway: QSBS offers one of the most generous tax breaks in the code and is now available on more flexible terms. To unlock its full potential, businesses and shareholders must plan early, structure entities properly, and align exit timelines with the new exclusion thresholds.
Compliance Considerations for Restaurant and Hospitality Operators
What Changed: New deductions for employee tips (up to $25,000) and overtime premiums (up to $12,500) require enhanced payroll tracking, with retroactive application to January 2025.
Why It Matters: Restaurant operators face immediate compliance obligations while employees gain valuable tax benefits. This creates operational challenges but also competitive advantages in tight labor markets.
Implementation Requirements: Payroll systems must separately track “qualified” vs. “non-qualified” tips and overtime premiums. The IRS will publish qualifying occupations by October 2, 2025, but transition relief applies for 2025.
Key Takeaway: Restaurant operators must immediately address new tracking requirements while positioning these changes as employee benefits and competitive advantages.
Taking Action in a Transformed Tax Environment
The 2025 One Big Beautiful Bill Act represents a reset of the tax code that rewards business investment and supports wealth accumulation. The combination of permanent business incentives, enhanced wealth transfer opportunities, and immediate cash flow benefits creates a favorable environment for growth-oriented businesses.
The window for optimal positioning is open now, but businesses that move quickly will capture compounding advantages. Whether accelerating equipment purchases, restructuring entities for QBI benefits, or implementing wealth transfer strategies, these aren’t just tax changes—they’re opportunities.
How Ahlbeck & Cook Can Help
At Ahlbeck & Cook, we’re already analyzing how these changes affect our clients’ specific situations. Our expertise in tax strategy and planning, combined with our sophisticated business and wealth planning capabilities, positions us uniquely to help you capture the full benefits of this legislation.
Contact Ahlbeck & Cook today to ensure your business and wealth strategies are optimized for success in this new tax environment. Your competitive edge starts with expert guidance, and the opportunities available today won’t wait for tomorrow’s decisions.
