March 30, 2026
A broad range of federal tax changes will take effect for both individuals and businesses in 2026. Many of these changes arise under the 2025 Budget Reconciliation Act (H.R. 1), also known as the One Big Beautiful Bill Act (“OBBBA”), while others reflect routine adjustments or the scheduled expiration and modification of Internal Revenue Code (“IRC”) provisions originally enacted by the Tax Cuts and Jobs Act of 2017 (“TCJA”). This alert highlights key changes under the OBBBA and notes TCJA provisions that will remain in effect.
Business Tax Updates
Bonus Depreciation.
One of the most significant provisions of the TCJA was the allowance of a 100 percent bonus depreciation for qualified property acquired and placed into service after September 27, 2017. Under the TCJA, the bonus depreciation percentage was phased down by 20 percent each year starting in the calendar year 2023, and was scheduled to completely phase out by calendar year 2026. Under the OBBBA, the bonus depreciation phase-out is repealed, and the full 100 percent depreciation allowance for qualified property is made permanent.
Research and Experimental Expensing.
The TCJA significantly changed the treatment of research and experimental expenditures by requiring taxpayers, beginning in 2022, to capitalize and amortize such costs over a specified number of years (five years for domestic research and 15 years for foreign research), eliminating the ability to claim an immediate deduction. The OBBBA reverses the TCJA requirements and permanently restores the ability to claim an immediate deduction for qualified domestic research and experimental expenditures. Under the OBBBA, taxpayers may elect to deduct the full amount of their domestic research and experimental expenditures in the year paid or incurred for tax years beginning after December 31, 2024. The OBBBA also introduces new IRC Section 174A, which permits the amortization of domestic research and experimental expenditures over a 5-year period. The OBBBA retains the 15-year period for foreign research.
Expansion of Qualified Small Business Stock Gain Exclusion.
The OBBBA significantly expands the federal income tax exclusion for gain on the sale or exchange of qualified small business stock. The OBBBA increases the maximum amount of gain eligible for exclusion from $10 million to $15 million per taxpayer (or 10 times the aggregate adjusted basis of the stock sold during the year, whichever is greater) and raises the gross asset threshold to be considered a qualifying “small business” from $50 million to $75 million. The OBBBA also introduced a tiered system for the gain exclusion, which allows taxpayers to exclude a percentage of gain on the sale of qualified small business stock based on the holding period.
Qualified Opportunity Zones.
The TCJA established the qualified opportunity zone program, where taxpayers could elect to defer recognition of capital gain realized from the sale or exchange of property by reinvesting the amount of the gain in a qualified opportunity fund within 180 days of realizing the capital gain. Under the TCJA, the deferral lasted until the earlier of the date the qualified opportunity zone investment was sold or exchanged, or December 31, 2026, at which point any deferred gain would become taxable. The OBBBA makes the qualified opportunity zone provisions permanent and revises the deferral and basis adjustment rules to extend their availability to eligible investments in a qualified opportunity fund after December 31, 2025.
The article in its original form can be found here.
Jared C. Slipman (LAW ‘19) is the Chair of Obermayer’s Tax Department. He focuses his practice on tax structuring and analysis attendant to business transactions, representing clients before the Internal Revenue Service, and advising clients on key tax considerations.