There’s a new tax law in town, the One Big Beautiful Bill Act (OBBBA), and it’s packed with changes that could impact your business.
Don’t worry, you don’t need to wade through hundreds of pages of legal jargon. We’ve done the heavy lifting for you and distilled the key points on how the OBBBA affects Massachusetts businesses.
Let’s dive in and see how these changes could affect you.
Bonus Depreciation Is Back at 100%
In 2025, you can once again write off the full cost of qualifying business purchases in the year you make them, instead of spreading them over a few years. This applies to items such as office furniture, renovations, equipment, technology, and certain improvements to commercial buildings. If you’re planning to invest in your business, this could be a great opportunity to reduce your taxable income for the year.
Section 179 Limit Raised
The Section 179 deduction limit has been increased, allowing you to expense up to $2.5 million in qualifying purchases. The deduction starts to phase out once you hit $4 million in total purchases. This pairs well with bonus depreciation, especially if you’re buying used equipment or making multiple investments across locations. As long as the equipment is new to you and used more than 50% for business purposes, used equipment can also qualify.
R&D Expenses Can Be Fully Deducted Again
Previously, you had to spread out your domestic research and development expenses over five years. Starting in 2025, you can deduct the full cost of qualifying R&D expenses in the same year you incur them.
Don’t dismiss this deduction if you’re a restaurant owner. Even though you may not think of it as doing research, testing new menu concepts or kitchen automation can fall under this umbrella, and you might qualify for R&D deductions or credits.
QBI Deduction Made Permanent
The 20% deduction for Qualified Business Income (QBI) is here to stay. This applies to pass-through entities like sole proprietors, S corporations, and partnerships.
Your taxable income before the QBI deduction must be within the annual IRS thresholds. For 2025, the income for single filers should be below $197,300 and for married joint filers, below $394,600. Phase outs apply after those thresholds.
Certain businesses that provide services in law, healthcare, or financial services are classified as specified service trades or businesses (SSTBs). SSTBs also qualify for the deduction, as long as their taxable income remains within the upper-income threshold.
State And Local Taxes (SALT) Workarounds Still Apply
If you own pass-through entities operating in other states with income taxes, you can still use the pass-through entity tax (PTET) to pay state taxes at the business level. This bypasses the personal $10,000 SALT cap and allows you to deduct more of those payments.
For example, imagine your share of state income taxes is $25,000. Normally, on your federal return, you could only deduct $10,000. If your business elects the PTET, the business pays the $25,000 to Massachusetts, and you can claim most or all of that as a federal deduction. That means more of your money stays in your pocket rather than going to federal taxes.
Tip And Overtime Deductions For Employees
The bill also contains provisions related to overtime and tip income reporting that can affect hospitality and service businesses. Between 2025 and 2028, your tipped employees can deduct up to $25,000 of their tip income from federal taxable income, without itemizing. Overtime wages also get a new deduction during the same period, up to $12,500 for single filers or $25,000 for joint filers.
If you run a restaurant, salon, or any tipped business on Cape Cod, talk with your payroll provider about the new reporting boxes and educate staff on how tips are being tracked for tax purposes.
Individual Tax Changes That Still Matter
Even if you focus mostly on your business, many of these changes will affect your personal return too, especially if your business income flows through to you.
- Tax Brackets Stay Lower: The current lower tax brackets from the 2017 tax law will remain in place permanently. That means rates like 10, 12, 22, and 24% are not going anywhere. For married filers making under $400,000, this helps avoid bracket creep.
- Standard Deduction Stays High: The higher standard deduction is also made permanent. For 2025, that is $31,500 for married couples filing jointly. It keeps things simple and reduces taxable income without needing to itemize.
- SALT Deduction Expanded Temporarily: In 2025, the deduction cap for state and local taxes jumps from $10,000 to $40,000. This is a one-year bump and will phase back down gradually. Still, it is worth noting if you own real estate or pay high property taxes in other states.
- New Deduction for Seniors: If you are age 65 or older, there is a new $6,000 deduction available as long as your income is under $150,000 for married filers or $75,000 if single.
- Interest Deduction on Car Loans: From 2025 through 2028, you can deduct up to $10,000 in interest on a car loan, as long as the car was assembled in the United States. This could be relevant if your business uses vehicles and you are considering financing instead of paying cash.
For Massachusetts, State Conformity Is Not Automatic
Massachusetts does not automatically pick up every federal change. The state’s Department of Revenue issues guidance on which federal code changes it will conform to and when. That matters because some businesses will see different results on their federal return than on their Massachusetts return.
What Should You Do Now
We’ve covered the major changes here, the stuff that actually matters if you’re running a business in Massachusetts. But remember, state conformity is still a big factor. Massachusetts may not pick up every federal change, so before making any big moves, check in with your CPA to see how the numbers actually play out in your situation.
At Steven M. Ellard, CPA, we treat this like what it is: a planning opportunity. The kind that doesn’t come around every year.
Book a time with our team if you want to walk through it. We’ll break it down and help you focus on the parts that actually reduce your tax bill.