How Does the One Big Beautiful Bill Act Benefit Manufacturers?
First, what is the One Big Beautiful Bill Act?
The One Big Beautiful Bill Act is a proposed tax reform package that includes expanded deductions for interest, R&D, bonus depreciation, and Section 179 expensing, offering major relief to manufacturers beginning in 2025.
Over the past few years, many midsized manufacturers, especially Wisconsin-based manufacturers, have been grappling with rising costs and tightened tax rules, including changes to interest deductions and R&D expensing. But there’s promising news on the horizon: a new federal tax package, known as the “One Big Beautiful Bill Act,” has recently cleared the U.S. House of Representatives. While it is likely to go through significant revisions before it is signed into law, the bill outlines a series of significant tax reforms that could deliver much-anticipated relief for manufacturers starting in 2025.
Which elements of the bill will likely impact Wisconsin-based manufacturers?
Expanded Interest Deduction Rules
The bill temporarily loosens limits on how much interest manufacturers can deduct on loans. From 2025 through 2029, businesses will be allowed to factor in depreciation and amortization when calculating their income limit for interest deductions. This means more borrowing costs can be deducted upfront, potentially freeing up cash for investments or operations.
Immediate R&D Expensing Returns
Under current rules, businesses must spread the cost of R&D over several years, which has been a burden for many manufacturers. Starting in 2025 and ending in 2029, the bill would allow immediate deductions for domestic research expenses, making it easier to invest in process improvements, product development, and other innovations. Foreign research will still need to be amortized over fifteen years.
100% Bonus Depreciation Is Back
The bill would bring back full (100%) bonus depreciation for qualifying equipment and machinery purchases made between January 19, 2025, and the end of 2029. That means manufacturers could immediately deduct the full cost of new machinery and equipment, improving ROI and cash flow planning.
Enhanced Section 179 Expensing Limits
In the current version of the bill, Section 179 expensing limits would double from $1.25 million to $2.5 million with a phase-out starting at $4 million. This gives manufacturers more room to write off the full cost of equipment purchases in the year they’re made, rather than depreciating them over time.
Qualified Business Income Deduction
For manufacturers structured as pass-through entities (like partnerships and S-Corps), the bill would permanently extend the Qualified Business Income (QBI) deduction under Section 199A, and would slightly increase the deduction from 20% to 23%. Specific thresholds and rules are still in flux, but this change could mean long-term tax savings for qualifying businesses.
The proposed legislation also extends Tax Cuts and Jobs Act provisions.
The following TCJA provisions are included in the proposed legislation:
- Maintains the top tax bracket at 37%
- Permanently increases baseline standard deduction
- Permanently maintains personal exemptions at zero
- Increases SALT cap to $40,000 from $10,000.
- A quick note for Wisconsin-based manufacturers: most avoid the state’s pass-through entity tax election because it disqualifies them from claiming Wisconsin’s valuable manufacturing credit. This dynamic won’t change under the new federal bill, but it’s an important reminder when weighing entity-level decisions.
What’s next?
While this bill passed the House with strong support, its future in the Senate is less certain. Negotiations and amendments are likely, and the final version may look significantly different from the current bill. Still, it’s worth watching closely, especially for manufacturers looking for relief on R&D expenses, interest deductions, and capital investment incentives. We’ll continue to monitor its progress and are here to help you understand how the final legislation may affect your business. Sign up for our Manufacturing email list to receive timely updates delivered directly to your inbox.
As always, the Wegner CPAs Manufacturing Advisors are here to help you make the most out of these anticipated changes. Reach out with any questions or for more information on how we can best help you maximize your tax savings.
