The One Big Beautiful Bill Breakdown: Business Tax Credits
The One Big Beautiful Bill (OBBB) has brought significant changes to the U.S. tax code, particularly in the area of business tax credits.
Read about changes to energy tax credits here.
Low Income Housing Tax Credit Program
Over the years, legislative efforts have worked to increase funding and improve the effectiveness of the Low-Income Housing Tax Credit program.
The OBBB made several revisions to the program, including permanently enhancing the state housing ceiling from 12.5% to 12% and lowering the threshold for projects financed by tax-exempt bonds from 50% to 25% for buildings put in service between 2026 and 2029. These modifications will make the LIHTC more accessible for developers.
The New Markets Tax Credit
The New Markets Tax Credit was originally scheduled to sunset December 31, 2025, but the OBBB permanently extended the program and allows for a five-year carryover of the unused limitation starting after 2025.
The Paid Family and Medical Leave Tax Credit
This credit ranges from 12.5% to 25% of wages paid to qualifying employees for qualifying wages, and it was set to expire for years beginning after 2025. Previously, a wage deduction was not permitted for wages used in the credit calculation. The OBBB makes the credit permanent and allows the employer to take the credit on premiums paid or incurred or wages paid starting in 2026.
The Employer-Provided Child Care Tax Credit
This tax credit is calculated using employer-provided childcare costs and is limited to $150,000 per tax year. OBBB enhances the credit by increasing the credit percentage from 25% to 40% and to 50% for qualifying small businesses.
The maximum credit amount increases to $500,000 and to $600,000 for qualifying small businesses. An inflation adjuster is also included and is effective for payments made after December 31, 2025.
What It Means for You
These changes bring significant opportunities for taxpayers, particularly small businesses, from the enhanced and extended tax credits. The permanent nature of these credits provides long-term planning opportunities and potential benefits for qualifying businesses.
To learn more about how the One Big Beautiful Bill and these specific provisions may impact you, contact your Warren Averett advisor.
