OB3 Is Here: A Guide for What Business Owners Must Do Now (and Next Year)

OB3 hard-codes several federal benefits that directly affect how owners pay themselves, reinvest, and recruit talent—with effective dates in 2025 and 2026 (OB3 was signed July 4, 2025). Business owners should take immediate steps to capitalize on these three changes: the pass-through (QBI) deduction is now permanent, 100% bonus depreciation is restored and made permanent with expanded expensing options, and employer childcare incentives are significantly richer starting in 2026.

Why OB3 Matters for Business Owners

The One Big Beautiful Bill Act of 2025 (“OB3”) reshapes business taxes. If you own, manage, or are involved in business operations, now is the time to plan entity structure, time capital purchases, and design benefits to capture these advantages. Owners should revisit compensation and distributions to maximize QBI, coordinate placed‑in‑service dates and cost‑segregation to accelerate deductions, and prepare 2026 open‑enrollment updates for DC‑FSAs/childcare credits; proactive modeling around thresholds, phase‑outs, and documentation helps secure these benefits in 2025–2026.

How the OB3 has Changed Business Income: Make the Permanent QBI Deduction Work Harder

Qualified Business Income (QBI) is a federal deduction, typically up to 20%, applied to net income from pass-through businesses like S corporations, partnerships, and sole proprietorships. It is subject to wage and UBIA limits, SSTB restrictions, and income thresholds. The OB3 Act makes this deduction permanent, offering long-term certainty for business owners.

The permanence of the deduction eliminates the planning “cliff” that previously challenged business owners. This change makes it easier to plan multi-year strategies for compensation, capital allocation, and succession. QBI continues to cover domestic qualified income, subject to limits tied to W-2 wages and the unadjusted basis immediately after acquisition (UBIA) of qualified property. High-income owners remain restricted by the SSTB rules.

Why it Matters

• Many successful closely held businesses operate as pass‑throughs; permanence lets you plan multi‑year compensation, distributions, and succession with fewer “sunset” risks.
• Owners can now optimize wage and property levers with a longer horizon—helpful where W‑2 wages or UBIA drive the limitation formula.
• Multi‑entity groups gain flexibility: aggregation (when appropriate) may improve the wage/UBIA profile across related activities.
• Rental real estate that rises to the level of a trade or business can generate QBI; formalized operations and documentation strengthen the position.

Steps to Take Now

• Re‑evaluate entity choice (S corp vs. partnership) and owner‑employee comp mix to balance QBI eligibility with payroll, benefits, and reasonable‑compensation rules.
• Tune the wage/UBIA mix: test scenarios where slightly higher W‑2 wages (or added qualified property) increase the allowable QBID when you are in the wage/UBIA phase‑in range.
• Stress‑test income levels for QBID limitations (e.g., SSTB rules and threshold mechanics) and consider trusts or family ownership structures where appropriate.
• Model exit/succession with QBI in mind (installment sales, redemptions, or family transitions) and refresh operating/comp agreements to reflect policy.
• Coordinate benefits and retirement plans (e.g., employer contributions) with QBI—model the tradeoffs between lowering taxable income and shifting wage/QBI ratios.
• Run midyear projections and align quarterly estimates; build a checklist for evidence..

Quick Reference: QBI Levers & Typical Effects

How the OB3 Impacts Capital Investment: Use 100% Bonus Depreciation (and Friends) to Front-Load Deductions

OB3 permanently restores 100% bonus depreciation under §168(k) for most qualified property and broadens immediate expensing by raising §179 limits and introducing an elective qualified production property write‑off. It clarifies that both new and used property may qualify when it is the taxpayer’s first use, and that certain qualified improvement property (QIP) for nonresidential interiors can be expensed when placed in service.

At the same time, passenger automobiles remain subject to §280F luxury‑auto caps, while heavier vehicles and non‑passenger equipment are treated differently. Taxpayers may also elect out of bonus depreciation on a class‑by‑class basis to smooth income where full expensing would be inefficient or interact poorly with other limitations. Finally, Section 179 remains a complementary tool, now covering more real‑property categories (e.g., roofs, HVAC, fire protection, security systems) and allowing targeted expensing subject to business‑income limits and phaseouts.

Why it matters

• Capital-intensive sectors such as construction, energy services, manufacturing, and logistics can immediately expense equipment, machinery, and certain improvements, improving cash flow and ROI.
• Front‑loading deductions can reduce taxable income in peak years, support growth investments, and enhance loan covenant metrics tied to after‑tax earnings.
• Bonus/§179 decisions affect other provisions (e.g., interest deductibility under §163(j) by lowering ATI), so coordinated modeling can prevent unintended limits.

Steps to Take Now

• Time purchases: place assets in service in 2025–2026 to capture full expensing; coordinate with project timelines and financing.
• Bundle assets where it improves basis allocation and utilization of bonus vs. §179 (watch taxable income limits for §179, unlike bonus).
• Model M&A and build-outs with cost-segregation to pull more into 5–15-year classes eligible for bonus.
• Consider electing out of the bonus for specific classes if it helps spread deductions across years or preserve ATI for interest deductions.
• Leverage QIP and refresh cost‑seg studies for interior renovations of nonresidential real property to convert longer‑life assets into shorter‑life, bonus‑eligible classes.
• Tighten documentation: capture placed‑in‑service dates, vendor invoices, component IDs/serials, and project close‑out memos; coordinate capitalization vs. repair decisions under the tangible property regs (e.g., de minimis and routine maintenance safe harbors).

Quick Reference: Expensing Options Under OB3

Talent & Benefits: Supercharge Childcare Benefits (Starting 2026)

What changed

OB3 enhances employer-supported childcare beginning after 2025. The Employer‑Provided Childcare Credit (§45F) increases to 40% of qualified childcare expenditures (50% for eligible small businesses), and the annual cap rises to $500,000 (or $600,000 for eligible small businesses). Starting in 2026, the Dependent‑Care FSA (DC‑FSA) household pre‑tax limit increases from $5,000 to $7,500 ($3,750 MFS).

Qualified expenditures can include costs to acquire, build, rehabilitate, or expand an on‑site childcare facility; operating expenses for such a facility; and contracted slots or services with licensed third‑party providers. Certain resource‑and‑referral services may also qualify when program requirements are met. Coordination rules prevent double‑counting across benefits, and reimbursements to employees or costs subsidized by other credits generally reduce the eligible base.

Why it Matters

• Tight labor markets reward employers who solve childcare pain points. OB3 lets owners lower taxes while improving recruitment/retention—especially for frontline, healthcare, education, and service workforces.
• Access to reliable childcare increases workforce participation and productivity, lowers absenteeism, and reduces turnover costs.
• Enhanced benefits help differentiate compensation packages without permanently raising wage rates, creating a scalable talent strategy.

Steps to Take Now

• Pick a delivery model: on‑site center, reserved slots with a licensed provider, or a vetted network (aligns with §45F “qualified expenditures”). Assess demand via short employee surveys before committing capital.
• Stand up a DC‑FSA for 2026 open enrollment; update plan docs, payroll, and employee communications early. Ensure Section 125 cafeteria plan documents are amended and that nondiscrimination testing is scheduled to avoid HCE testing failures.
• Coordinate credits + FSAs: design benefits so §45F credit and employees’ DC‑FSA elections work together without double‑counting the same dollars (work with your plan administrator and CPA). Educate employees on eligibility, receipts, and substantiation rules to maintain tax‑favored treatment.
• Vet providers: confirm licensing, capacity, hours, and backup‑care options; negotiate service‑level terms (attendance guarantees, wait‑list priority, cost escalation caps).
• Budget and forecast: model expected utilization, employer cash outlays, and the net after‑credit cost; consider tiered subsidies that target high‑impact shifts or locations.
• Document and substantiate: retain contracts, invoices, and provider credentials; set up internal controls for FSA claims adjudication and employer payments.

Quick comparison: Employer childcare tools

Implementation Timeline (What to Do Now vs. Next Year)

This table highlights what to finalize before year‑end and what to stage for early 2026, linking the strategies above to concrete next steps. Share it with your finance and HR leads to coordinate entity/compensation reviews, asset placed‑in‑service dates, and childcare benefit setup against the new effective dates.

As a business owner, use this timeline to decide what to do this quarter and what to tee up for 2026. Prioritize cash‑flow wins, align tax moves with your growth plan, and note where documentation is required so deductions hold up under review. Start here—then book time with your CPA to model the impact.

Talk with Hall Accounting Company

OB3 opened the door — now it’s a strategy that can turn it into savings. If you run a business, let’s map a plan for QBI optimization, capital expenditures timing, and childcare benefits that fit your cash flow and goals.

With Hall Accounting Company, you get guidance from dedicated, experienced professionals who learn your business and stay with you year after year. We don’t deliver generic, templated plans; we build a tailored tax roadmap aligned to your entity structure, industry dynamics, growth targets, and exit horizon, then pressure‑test it with scenario modeling and proactive check‑ins.

OB3 FAQs for Business Owners

1. Did OB3 really make the QBI deduction permanent?
   Yes. The 20% pass-through deduction is now permanent, providing durable planning certainty for S corporations, partnerships, and sole proprietors.
2. Is 100% bonus depreciation back—and for how long?
   Yes. OB3 permanently restores 100% bonus depreciation for most qualified property and expands expensing pathways, alongside higher §179 limits.
3. What’s the difference between bonus depreciation and §179?
   Bonus has no general taxable-income cap and can create/expand losses; §179 is limited by business income and is better for targeting specific assets. Many owners blend both.
4. How does the employer childcare credit change in 2026?
   The §45F credit increases to 40% of qualified costs (50% for eligible small businesses) with a higher annual cap ($500k/$600k).
5. What’s new about dependent-care FSAs?
   The annual household cap rises to $7,500 ($3,750 MFS) for plan years beginning in 2026. Update plan documents and payroll ahead of open enrollment.
6. I’m planning an acquisition/build-out. How should OB3 influence it?
   Use cost-segregation and the permanent 100% bonus to front-load deductions; coordinate placed-in-service dates and financing terms to maximize NPV.
7. Are there other OB3 changes I should watch?
   Yes—SALT cap relief, estate/gift changes, and sector-specific rules (energy/manufacturing) may affect strategy.