Multimedia | Up to Speed
Dealerships One Big Beautiful Bill update
How taxes will be impacted in 2025 and beyond
Nov. 19, 2025 · Authored by A. Michael Mader, Daniel Gillen
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Multimedia | Up to Speed
Nov. 19, 2025 · Authored by A. Michael Mader, Daniel Gillen
As part of our ongoing coverage, this big beautiful bill update breaks down how the One Big Beautiful Bill Act (OBBBA) in July 2025 marked a significant turning point for U.S. tax policy, particularly for dealerships and other closely businesses. Designed as a taxpayer and business-friendly measure, OBBBA extended several provisions from the Tax Cuts and Jobs Act (TCJA) while introducing new rules that reshape planning strategies for businesses, individuals and estates. For dealerships, the implications are particularly notable in areas such as interest expense deductions, bonus depreciation and qualified business income.
In this month’s episode of Up to Speed, Mike Mader, Principal with Baker Tilly’s dealership advisory service team, is joined by Dan Gillen, Tax Principal in Baker Tilly’s Washington D.C. office, to break down the tax law changes introduced under the One Big Beautiful Bill Act (OBBBA) and their impact on dealerships. They explore how dealers can leverage new provisions for tax planning in 2025 and beyond.
One of the most impactful changes for dealerships involves Section 163(j), the limitation on business interest expense. Under TCJA, deductions were capped at 30% of adjusted taxable income (ATI). Initially, ATI was calculated as EBITDA (earnings before interest, taxes, depreciation and amortization), but later revisions excluded depreciation and amortization, shifting the measure to EBIT.
This adjustment created challenges for dealerships, which often carry substantial interest expenses tied to floor plan financing and acquisition loans. While a floor plan exception allowed unlimited deductions, it came at the cost of forfeiting bonus depreciation. OBBBA permanently restores ATI to an EBITDA-based calculation, enabling many dealerships to deduct interest without relying on the carve-out and reclaiming access to bonus depreciation, a central takeaway in this big beautiful bill update for dealers.
Bonus depreciation has long been a cornerstone of dealership tax planning. TCJA initially allowed 100% expensing of qualified property, but this was scheduled to phase down to zero by 2027. OBBBA reverses that trajectory, reinstating 100% bonus depreciation permanently.
Eligible property includes tangible assets with a class life of less than 20 years, such as lifts, service equipment, computers, office furniture and qualified improvement property (non-structural interior improvements). However, timing matters: assets acquired and placed in service after January 20, 2025, qualify for the full 100% deduction, while those acquired earlier remain subject to the prior 40% rule.
Although overshadowed by bonus depreciation, Section 179 remains relevant. It allows immediate expensing of certain assets that bonus depreciation does not cover, such as rooftops or exterior HVAC units. This distinction provides dealerships with flexibility when planning capital improvements.
Section 199A, the qualified business income (QBI) deduction, was scheduled to sunset at the end of 2025. OBBBA makes the provision permanent, ensuring that pass-through entities such as partnerships and S corporations continue to benefit. This deduction effectively lowers the top marginal rate on business income from 37% to 29.6%, preserving parity with the reduced corporate tax rate.
OBBBA permanently sets the top marginal individual tax rate at 37%, avoiding the scheduled increase to 39.6%. Across the brackets, rates are slightly reduced compared to pre-TCJA levels, offering modest relief to taxpayers.
A new limitation caps the benefit of itemized deductions at 35%, even for taxpayers in the 37% bracket. This change reduces the value of deductions for high-income individuals and may encourage acceleration of deductible expenses into 2025.
Charitable contributions face an additional restriction beginning in 2026: a floor of 0.5% of adjusted gross income (AGI). While caps remain generous (60% of AGI for cash contributions), the floor limits the amount deductible in a single year. Donor-advised funds (DAFs) may become a popular vehicle for taxpayers seeking to maximize deductions before the new rules take effect.
The state and local tax (SALT) deduction cap, long a contentious issue, was temporarily raised from $10,000 to $40,000 for tax years 2025-2029. However, the benefit phases out for taxpayers with taxable income between $500,000 and $600,000, creating a “danger zone” where effective marginal rates can spike to 45%. Pass-through entity tax elections remain a valuable workaround, allowing businesses to deduct state taxes at the entity level and bypass the cap.
Several energy-related credits are expiring. Residential energy credits under Sections 25C and 25D, covering improvements such as solar panels and geothermal systems, sunset after December 31, 2025. Taxpayers planning such projects must ensure completion and placement in service before year-end to qualify.
OBBBA permanently increases the lifetime gift and estate tax exemption to $15 million beginning in 2026, indexed for inflation. While this alleviates immediate pressure to complete estate transfers before year-end, proactive planning remains essential. Assets appreciating faster than inflation can erode the benefit of the exemption over time, making early transfers advantageous.
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The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.
OBBBA delivers a mix of favorable provisions and new limitations, reshaping the tax landscape for dealerships and their owners. As businesses navigate the evolving rules and watch for each emerging big beautiful bill update, nuances of timing, eligibility and interaction with state laws demand careful planning. Dealerships and individuals alike should work closely with advisors to ensure they capitalize on opportunities while mitigating risks in this evolving environment.
