It’s official: The new tax package referred to as the “One Big Beautiful Bill” (OBBB) has been signed into law, ushering in a new era of tax policies. Fortunately for business owners, several new tax provisions could help reduce next year’s tax bill. In our last blog, we discussed two increased deductions: 100% bonus depreciation and 100% R&D expensing. Today, we’ll be looking at a new deduction for qualified production property and updates to qualified opportunity zones and qualified small business stock. 

Qualified Production Property
Introduced by the OBBB, this new deduction applies to “qualified production property” (QPP). If that sounds like an unfamiliar term, that’s because it’s brand new. QPP refers to new or used nonresidential real property that is used for manufacturing, producing, or refining tangible personal property. In other words, the facility must transform materials into a product. So you can see that the incentive here is to encourage the construction of more manufacturing facilities. This mostly applies to agricultural and chemical production. Food and beverages prepared in the same building where they are sold, as in restaurants, do not qualify.

Previously, manufacturing buildings were simply classified as “nonresidential real property,” which meant that the cost of the facility could be written off—but only very slowly. Since buildings decline in value as they age, the IRS allows businesses to take a “depreciation deduction” to subtract the cost of the property from their taxes. However, the rules state nonresidential real property must be depreciated over the course of 39 years. 

The new OBBB rules dramatically change this process by allowing manufacturers to expense 100% of the cost of a qualifying building constructed between January 20, 2025 and December 31, 2028. The property must also be placed in service—meaning used for business purposes—after July 4, 2025 but before January 1, 2031. What if you want to turn an existing building into a manufacturing facility? The OBBB includes a special exception for property that was not used for a “qualified production activity” within the last 4.5 years (specifically from January 1, 2021 to May 12, 2025). If such a property is transformed into a qualified production property, the business may still be eligible for this deduction. 

However, business owners should note that certain parts of these properties will be excluded, including offices or administrative services, lodging, parking, sales activities, research and development, and other purposes unrelated to manufacturing. Unfortunately, this means AirBnB hosts cannot qualify! Many businesses will need to divide up the value of the property between these categories, so they can be sure to claim only the parts that qualify for the deduction. 

Before launching into a construction project, keep in mind that if you change the use of the property within 10 years after placing it in service, you’ll have to pay that deduction back in full. The OBBB sets that boundary—the incentive is intended to boost manufacturing, so the property must continue operating in that role for at least the next decade. 

Qualified Opportunity Zones

Renewed by the OBBB, qualified opportunity zones (QOZ) are now permanent and being revamped. Areas considered economically distressed can receive a “QOZ” designation and receive preferential tax treatment to encourage investors to fund businesses operating in the area. Starting on January 1, 2027, a new program will be in place that favors rural investments and enforces tighter restrictions, which will mean fewer QOZ communities on the map.  To be considered a QOZ, the region must be nominated by a state and certified by the IRS. Next year, governors will have the opportunity to nominate new areas. The zones must mean certain “low-income” criteria.

How does the QOZ program benefit businesses? Businesses that operate in QOZ areas receive preferential tax treatment. The idea is that these tax incentives would encourage investors to invest in businesses that might normally be overlooked. To take advantage, investors can set up qualified opportunity funds (QOF), which are specifically designed to invest in a QOZ property. Under the original law, QOF investors were allowed to defer gains received until January 1, 2027. The same benefit will be available to new QOFs, but if investors have an existing QOF, they will have to decide whether to pay the gains this year or next—before the old program expires. 

Qualified Small Business Stock
The enhanced qualified small business stock (QSBS) provision came as a surprise to many. Also known as Section 1202 stock, this tax incentive is meant to encourage investors to invest in small businesses. A major benefit is the ability to exclude up to 100% of capital gains from the sale of QSBS. 

Of course, there are limitations on what counts as a qualified small business. The business must be a C corporation that is actively engaged in a qualified trade or business, which excludes personal service industries, financial services, hospitality businesses, and others. The new tax legislation does make a few changes to the other qualifications. After July 4, 2025:

• Businesses must have no more than $75 million in assets to qualify
• Tax-free gains are capped at $15 million or 10 times the investor’s initial purchase price minus adjustments—whichever is greater
• If stock is held for…
  • 3 years: investors can exclude 50%
  • 4 years: investors can exclude 75%
  • 5 years: investors can exclude 100%

So if you have existing QSBS, these provisions don’t apply. However, if you have a business and you are considering converting to a C corporation yet, this could be an incentive to do so.

One provision that the OBBB did not change was the Section 1045 rollover. This can benefit investors who are looking to sell their current QSBS and invest in new QSBS. If they have held the initial stock for at least six months, they can roll over the gains to new QSBS and still enjoy deferred taxes on that gain. 

Summary
The stream of tax news hitting us in 2025 has left many taxpayers’ minds spinning. With the OBBB in place, business owners can finally wrap their heads around what this means for their tax plans. As you explore the changes to tax policy, you may find that some of the new provisions can be used in your favor to lower your next tax bill. With the help of a tax professional, you can identify the tax breaks that can be applied to your business today or that you might pursue in the years to come. 

For guidance on how to make the OBBB provisions work for you, reach out to a Certified Tax Planner today.