Horsesmouth will host a special four-day Savvy Tax Planning School that can put you on the inside track regarding tax changes ushered in by the “One Big Beautiful Bill Act.” Sessions begin October 21. Learn more and register here.
The One Big Beautiful Bill Act (OBBBA) not only reshapes household finances but also carries broad implications for businesses, federal deficits, and financial markets. Its provisions revive major corporate tax incentives while adding trillions to the deficit and reshaping the investing landscape.
For advisors, the challenge lies in helping business owners seize tax opportunities while preparing investors for the realities of higher deficits, interest rates, and market volatility.
1. Clear shifts in federal spending priorities
The OBBBA redirects federal dollars in ways that will shape industries and fiscal stability for years to come. Roughly $170 billion is allocated to border security and $150 billion to defense, reinforcing national security priorities. At the same time, the Act slashes funding for Medicaid, SNAP, and clean energy programs, shifting costs to states and leaving safety-net and future-focused sectors under pressure.
These choices carry clear sectoral consequences. Defense contractors and fossil-fuel producers stand to gain from targeted spending, while clean energy firms face a sharp reversal after years of robust federal support under the Inflation Reduction Act. The Center for Climate and Energy Solutions projects as many as 1.7 million clean energy jobs could be lost.
In the healthcare sector, the CBO is projecting a $1 trillion reduction in federal healthcare spending between 2025 and 2034. Experts warn that rural hospitals dependent on Medicaid may see service cutbacks or closures. Consumer-facing sectors could also feel strain as reduced benefits dampen household discretionary spending.
From a fiscal perspective, these spending cuts do little to offset the revenue losses from permanent corporate and individual tax breaks. Moody’s has already downgraded the U.S. credit rating, citing rising deficits, and further downgrades are possible as interest payments absorb a growing share of federal spending. With Treasury yields already elevated, the combination of higher borrowing needs and weaker credit quality could raise long-term financing costs across the economy.
Taken together, this policy package amounts to an austerity-style budget tilted toward legacy sectors and financed by deficits.
2. Depreciation and capital investment incentives
The OBBBA restores some of the most business-friendly provisions of the Tax Cuts and Jobs Act and makes them permanent. Chief among them is bonus depreciation, which is now fully revived at 100% for assets placed in service after January 19, 2025. Previously, the deduction had been phasing down—80% in 2023, 60% in 2024, and 40% in 2025—but firms can once again deduct the full cost of qualifying assets with lives of 20 years or less.
The law also introduces a new category: qualified production property (QPP). Companies that build manufacturing facilities or production plants can now expense both equipment and certain real property that would otherwise have been depreciated over nearly four decades. While this provision is temporary (construction must begin after January 19, 2025, and be in service before January 1, 2031), it creates powerful incentives for industrial expansion.
Additionally, Section 179 expensing limits doubled, with businesses able to immediately expense up to $2.5 million in assets for 2025, phasing out after $4 million. This complements bonus depreciation but has a key distinction: Section 179 deductions are capped at taxable income, whereas bonus depreciation is not. Together, these rules give firms greater flexibility in matching deductions with cash flow.
Finally, the Act permanently restores first-year expensing of domestic R&D costs. Businesses no longer need to amortize research over five years, freeing up cash and encouraging more U.S.-based innovation. Smaller firms with under $31 million in receipts can even make retroactive elections back to 2022, potentially securing refunds by accelerating deductions.
3. QBI deduction made permanent
The OBBBA also makes permanent the 20% qualified business income (QBI) deduction, which was scheduled to sunset after 2025. This deduction applies broadly to pass-through businesses, partnerships, LLCs, S corporations, sole proprietors, farmers, and even some landlords. It allows eligible owners to deduct 20% of their allocable business income directly from taxable income.
The permanence of this provision provides clarity for millions of small business owners who had been planning around its expiration. For 2025, the QBI deduction begins to phase out for single filers at $197,300 taxable income and for married filing jointly at $394,600. The deduction is fully phased out at $247,300 for single filers and $494,600 for joint filers.
These thresholds will be indexed for inflation in future years. Service businesses in fields like law, health, and finance face special restrictions, but the overall benefit remains significant.
4. Deficits and debt ceiling raised
The OBBBA comes with a hefty price tag.
The Congressional Budget Office (CBO) estimates the bill will increase deficits by $3.3 trillion over the next decade, closer to $4.0 trillion once interest costs are included.
The debt ceiling is lifted by $5 trillion, meaning the national debt could climb to 124%–130% of GDP by 2034, surpassing post-World War II levels and reducing fiscal flexibility for future crises. Even with additional tariff revenue, the deficits could exceed 6% of GDP.
This chart from J.P. Morgan Asset Management shows the federal deficit and net interest payments as a share of GDP from 1973–2034. It highlights how the OBBBA adjustments push total deficits higher and interest costs upward, with annual deficits projected to stay above 6% of GDP after 2028.
Source: CBO, BEA, Treasury Department, J.P. Morgan Asset Management.
Years shown are fiscal years. OBBB refers to the “One Big Beautiful Bill Act.”
*Adjusted by JPMAM to include estimates from the CBO June 2025 report “Estimated Budgetary Effects of an Amendment in the Nature of a Substitute to H.R. 1, the One Big Beautiful Bill Act.” Figures are also adjusted to include JPMAM estimates of tariff revenues and the estimated cost of extending expiring tax cuts beyond 2028, based on CBO estimates prepared for the version of the OBBB proposed by the House of Representatives on May 22, 2025. Data are as of July 15, 2025.
5. Economic and market implications
The OBBBA creates conflicting economic forces: Tax relief may boost consumer spending in early 2026, but higher tariffs and stricter immigration enforcement will tighten labor supply and drive inflation, likely forcing the Fed to maintain elevated rates despite fiscal stimulus.
Reduced safety net spending means households will face higher out-of-pocket costs for healthcare, food, and education, offsetting tax benefits for many middle-income families while the $4 trillion deficit increase limits monetary policy flexibility.
Financial markets face a dual narrative where corporate tax breaks and permanent bonus depreciation should support equities, but persistent inflation risks and larger deficits will likely keep Treasury yields elevated.
Advisors should consider diversifying beyond expensive U.S. large-cap growth into international and value equities, overweighting sectors benefiting from investment incentives (technology, manufacturing, defense) while underweighting healthcare and consumer staples facing headwinds from reduced federal support and tighter household budgets.
Help clients balance optimism with caution
By making corporate tax breaks permanent and reviving powerful incentives like bonus depreciation, the OBBBA could spark new business investment and expansion. At the same time, the bill’s deficit impact and inflationary pressures are likely to keep Treasury yields elevated and limit the Fed’s flexibility.
Advisors should guide clients toward strategies that take advantage of business incentives while adjusting portfolios to account for higher borrowing costs, shifting sector opportunities, and a more volatile market backdrop. Success will come from balancing optimism about growth with caution around debt-driven risks.
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