One Big Beautiful Bill Act( OBBBA)
2025 Issue 3 | GearedUp
62
The One Big Beautiful Bill Act( OBBBA) signed into law July 4 marks one of the most sweeping overhauls of U. S. tax policy in recent history. Andrew Chaves, principal from Baker Tilly, breaks down some of OBBBA’ s most impactful provisions for Planet Fitness ® franchises.
Key Business Provisions
• Full Expensing of Qualified Property: The OBBBA permanently revives and extends immediate 100 % expensing of the cost of qualified property acquired on or after Jan. 20, 2025. Qualified property is tangible personal property with a recovery period of 20 years or less, which includes qualified improvement property( QIP) for real estate purposes. OBBBA could significantly improve the benefits of cost segregation studies for real estate. For purposes of determining the acquisition date, property is not considered to be acquired after the date on which a written binding contract has been entered into to acquire the property. Assets placed in service before Jan. 20, 2025, are only eligible for 40 % bonus depreciation.
• Increase in Section 179 Expensing: The OBBBA increases the maximum amount a taxpayer may expense under section 179 to $ 2.5 million and increases the phase-out threshold amount to $ 4 million. The $ 2.5 million limitation is reduced( but not below zero) by the amount by which the cost of qualifying property placed in service during the taxable year exceeds $ 4 million. This provision applies to property placed in service in taxable years beginning after Dec. 31, 2024. Many states may opt out of this provision for state tax purposes.
• Limitation on Business Interest Deductions: The OBBBA restores a more generous interest deduction limit under section 163( j) that was originally in place for the first few years of the provision from 2018 through 2021. Initially, the interest deduction limitation was based on earnings before interest, taxes, depreciation and amortization( EBITDA). Beginning in 2022, depreciation and amortization are no longer added back, resulting in greater limitations for many businesses. The OBBBA permanently bases the limitation on EBITDA for deductions beginning in 2025. The OBBBA also includes a new provision that treats any capitalized interest( other than interest capitalized under sections 263( g) and 263A( f)) as interest subject to the limitation for taxable years after Dec. 31, 2025. Many taxpayers subject to substantial section 163( j) limitations have considered capitalizing interest under either sections 263( a) or 266 to obtain a timelier deduction.
• Section 199a Qualified Business Income( QBI) Deduction: QBI deduction made permanent: Under the OBBBA, the 20 % QBI deduction becomes permanent. Minimum deduction for active QBI: With respect to taxpayers whose aggregate QBI from qualified businesses in which the taxpayer materially participates is at least $ 1,000, the taxpayer is allowed a minimum QBI deduction of $ 400( subject to inflation adjustment). Change in limitation phase-in for taxpayers whose taxable income exceeds the threshold amount:
Under the TCJA, the QBI deduction is limited to 50 % W-2 of wages with respect to the qualified trade or business, or 25 % of W-2 wages plus 2.5 % of unadjusted basis in qualified property immediately after acquisition( UBIA). These limitations phase in once taxable income exceeds the threshold amount and are fully in effect when taxable income is $ 50,000($ 100,000 for joint filers) greater than the threshold amount( specified income amount). Under the OBBBA, these limitations will phase in as taxable income is $ 75,000($ 150,000 for joint filers) greater than the threshold amount. The OBBBA’ s changes to the QBI deduction apply to taxable years beginning on or after Dec. 31, 2025.
Key Individual and Trust & Estate Tax Provisions
• Tax Rates and Bracket Extensions: Current law tax rates and brackets under the TCJA( inflation adjusted) are made permanent under the OBBBA.
• Estate and Gift Tax: The OBBBA permanently increases the gift and estate tax exemptions to $ 15 million beginning in 2026, with inflation increases annually thereafter.
• Itemized Deduction Limitation: The TCJA’ s repeal of the Pease limitation is made permanent, but a new overall limit on itemized deductions effectively caps the benefit from itemized deductions at 35 % for taxpayers in the highest tax bracket.
• SALT Cap: TCJA limitations on state and local tax( SALT) deductions remain, but the OBBBA increases the deduction to $ 20,000( married filing separately [ MFS ]) and $ 40,000( all other filers). The deduction phases down for taxpayers with modified adjusted gross incomes( MAGIs) exceeding $ 250,000( MFS) and $ 500,000( all other filers) but not below $ 5,000( MFS) or $ 10,000( all other filers). Starting in 2026, the deduction cap and phase-down threshold increases 1 % annually through 2029, before reverting to $ 10,000 for the 2030 tax year.
• Deductible Car Loan Interest: For tax years 2025 through 2028, the OBBBA allows a deduction for up to $ 10,000 of new car loan interest on U. S. assembled vehicles. Only new car loans taken out or refinanced( if it doesn’ t add to the balance of the original loan) in 2025-2028 are eligible. The deduction phases out for MAGI exceeding $ 200,000( MFJ) and $ 100,000( other filers)( fully eliminated at $ 250,000 [ MFJ ] and $ 150,000 [ other filers ]). Deduction is available for non-itemizers. G
This article was authored by Baker Tilly, a leading advisory, tax and assurance firm that facilitates growth for Planet Fitness franchise operators throughout the United States. For any questions, please contact Andrew Chaves, partner at Baker Tilly, at andrew. chaves @ bakertilly. com.