Breaking Down the OBBBA: Impacts on M&A

The One Big Beautiful Bill Act (OBBBA) became law on July 4, 2025 after months of deliberation and speculation. This sweeping legislation includes several changes that buyers and sellers should carefully evaluate.

We’ve got a full breakdown of the bill’s broader tax changes here but, for dealmakers, these are the key items to keep on your radar:

1. Bonus Depreciation and Expansion of Section 179 Expensing
2. State and Local Tax (SALT) Deduction 
3. Section 1202 Deduction for Qualified Small Business Stock
4. Research & Experimental (R&E) Costs
5. Limitation on Interest Expense Deduction

100% Bonus Depreciation is Back

What Changed:

Bonus depreciation is back to a full 100% for certain property placed in service after January 19, 2025. On top of that, the Section 179 expensing cap is doubled from $1.25 million to $2.5 million, with phase-outs starting at $4 million.

Why It Matters for M&A:

Buyers of asset-heavy businesses can now enhance post-acquisition cash flow with larger, upfront depreciation deductions. Buyers and sellers, however, usually have different motivations when allocating purchase price. Buyers want more value assigned to fixed assets to maximize deductions. Sellers on the other hand prefer to assign less value to fixed assets to minimize depreciation recapture.

SALT Deduction

What Changed:

The hotly-debated $10,000 cap on SALT deductions is increasing to $40,000 through 2029 but starts phasing out for taxpayers with income above $500,000. Importantly, passthrough entity tax (PTET) workarounds weren’t touched despite some early proposals that suggested otherwise.

Why It Matters for M&A:

This is good news for sellers structured as passthrough entities. Valuations often account for state tax burdens, and PTET regimes help reduce the pain of calculating and negotiating tax gross-ups.

Expanded Section 1202 Exclusion

What Changed:

Big updates here. The gain for qualified small business stock has been expanded:

• 50% gain exclusion after three years of holding
• 75% exclusion after four years
• Cap increased from $10 million to $15 million
• Gross assets threshold raised from $50 million to $75 million

Why It Matters for M&A:

This means serious tax savings for startup businesses and sellers that meet the eligibility requirements. Certain private equity funds should also take note. This section gives them more flexibility to tax-efficiently structure deals.

R&E Costs Now Fully Deductible

What Changed:

Businesses can once again fully deduct domestic R&E costs in the year they’re incurred – no more amortizing over five years. This change is permanent and effective for tax years starting after December 31, 2024. They can also deduct remaining unamortized R&E expenses in 2025 or spread them across 2025 and 2026. Small businesses with $31 million or less in revenue get retroactive relief.

Why It Matters for M&A: 

This boosts after-tax earnings for R&E-heavy businesses like biotech, tech and manufacturing, which may make them attractive targets in the market.

Interest Expense Limitation Now Based on EBITDA

What Changed:

Since 2023, interest expense deductions were limited to 30% of EBIT (earnings before interest and taxes). Starting in 2025, this limit is now based on EBITDA (adds back depreciation and amortization), which is more generous. This change is permanent.

Why It Matters for M&A: 

This is a major win for private equity and other financial buyers who rely on leveraged transactions as part of their investment model. An increased ability to deduct interest expense leads to enhanced cash flow projections and deal-financing flexibility.

Bottom Line: The OBBBA Has Plenty to Like for Both Buyers and Sellers

Whether you’re buying, selling or in the M&A space, the OBBBA delivers tax changes worth your attention. The Sikich Transaction Advisory Services team is here to cut through the noise and help you turn complexity into clarity – for your business, your strategy and your next move.

This article is part of our continued analysis of the OBBBA. Find all of our coverage here.

About Our Authors

Sharif Ford, CPA, MBA, specializes in the tax aspects of mergers and acquisitions and other strategic transactions. His expertise includes technical issues for Washington national tax practices, tax due diligence, tax restructuring opportunities and tax document review.

Greg Lohmeyer, JD, LLM, also specializes in mergers and acquisitions and other strategic transactions. His background includes leading tax due diligence efforts, identifying and implementing tax structuring opportunities, reviewing tax provisions in transaction documents and leading post-merger integration activities.