The One, Big, Beautiful Bill Act (OBBBA) introduces several tax changes that materially affect manufacturers — particularly for capital-intensive companies looking to finalize tax and capital planning strategies for 2026 and beyond. This quick reference checklist highlights the top areas to review and consider.
Depreciation and amortization addbacks are restored to the adjusted taxable income (ATI) calculation, increasing the amount of interest that can be deducted.
Planning items:
- Check for significant repairs and maintenance expenses that can be claimed as depreciation to maximize your Section 163(j) deduction.
- Model the impact of depreciation on ATI for interest limitation calculations.
- Ensure 100% bonus depreciation is evaluated for the interaction with the limitation.
- Check state conformity since some states may continue applying the Tax Cuts and Jobs Act-era rules.
The Section 179 deduction limit increases to $2.5 million, with phase-out beginning at $4 million. Bonus depreciation is restored to 100% for qualifying property.
Planning items:
- Verify placed‑in‑service dates for 2025 capital projects; bonus depreciation eligibility depends on both acquisition date and service date.
- Review 2024 binding contracts, as they may prevent assets placed in service in 2025 from qualifying for 100% bonus depreciation.
- Confirm state treatment since not all jurisdictions conform to federal depreciation rules.
- Evaluate opportunities to create or increase a net operating loss (NOL) through accelerated depreciation, and assess carryforward strategies to maximize future tax benefits and offset taxable income in subsequent years.
This provision allows a 100% deduction for qualified production property (QPP), including new U.S. nonresidential real property used in a qualified production activity. Construction must begin after Jan. 19, 2025, and before Jan. 1, 2029.
Planning items:
- Flag facility projects early to determine whether construction timelines align with QPP eligibility windows.
- Consider a cost segregation study to identify and maximize qualifying QPP components.
- Explore utilization of used nonresidential real property to support QPP eligibility, where applicable.
Domestic R&D costs capitalized from 2022–2024 become fully deductible in 2025. Foreign R&D remains subject to 15-year amortization requirements.
Planning items:
Select a 2025 deduction election for unamortized 2022–2024 R&D costs:
- Deduct 100% of the remaining basis in 2025.
- Deduct 50% of the remaining basis in 2025 and 2026.
- Amend 2022–2024 tax returns (small taxpayers only).
- Capitalization could maximize benefit when also claiming foreign tax credits and foreign-derived intangible income (FDII).
- Reevaluate R&D location strategy, as domestic and foreign costs receive different tax treatment.
- Check state conformity, especially for states that continue following TCJA capitalization rules.
Several additional OBBBA provisions may affect 2026 tax planning, particularly regarding energy credits, international rules, and payroll reporting. Review the following items to determine whether compliance processes or cost assumptions need updating.
- IRA energy-related credits: The OBBBA accelerates expiration dates and tightens eligibility for several IRA credits, including EV-related incentives and certain wind and solar credits. Confirm whether current or planned projects remain eligible under the revised timelines.
- International impacts: The OBBBA modifies GILTI and FDII calculations beginning in 2026, including the removal of QBAI and changes to Section 250 deduction rates. Model the impact of these adjustments and evaluate whether tariff or supply chain changes could affect global tax profiles.
- New reporting for overtime pay and Form 1099s: Employers must separately report qualified overtime pay on Form W-2 beginning in 2025, and Form 1099 reporting thresholds increase to $2,000 starting in 2026. Update payroll systems to track qualified overtime compensation and adjust information reporting procedures.
For a complete analysis of these provisions, read our article, “The One, Big, Beautiful Bill: Key insights for manufacturers.”
These OBBBA provisions are interconnected — R&D expensing, bonus depreciation, QPP deductions, and restored depreciation addbacks to ATI all compound to reduce after-tax investment costs. It’s important to model these items together, not individually, to fully understand tax impacts. Early coordination with your tax specialist will help identify planning opportunities, avoid eligibility pitfalls, and align capital strategy with the new rules.
