The tax landscape for American businesses just got a major overhaul with the signing of the "One Big Beautiful Bill Act" (H.R. 1) in July 2025. Two key tax credits impacted by this legislation are the Research and Development (R&D) Tax Credit and the FICA Tip Credit.
Here’s a breakdown of the key changes and how they might benefit your business.
For tax years beginning after December 31, 2021, the Tax Cuts and Jobs Act (TCJA) required businesses to capitalize and amortize domestic R&D expenses over a five-year period. This change created a significant financial burden for many companies, and hindered innovation efforts for others.
The "One Big Beautiful Bill Act" reverses this amortization requirement. Under new Internal Revenue Code (IRC) Section 174A, companies can once again choose to deduct their entire domestic R&D expenditures in the year they are incurred, effective for tax years beginning after December 31, 2024.*
This is a major win for businesses that innovate, as it helps:
Restore cash flow by allowing for an immediate, full deduction, which can be critical for companies with high upfront R&D costs.
Simplify tax planning by removing the complex amortization requirement.
Provide a renewed incentive for companies to invest in U.S.-based research and development activities.
The legislation also provides options for businesses that capitalized their R&D expenses from 2022 through 2024.
Eligible small businesses (those with average annual gross receipts of $31 million or less) have the option to amend prior tax returns to fully deduct R&D expenses in those years.*
All other companies can elect to accelerate and deduct any remaining unamortized costs from this period in their 2025 tax year, or spread the deductions over 2025 and 2026.
Navigating these retroactive options can be complex, and the optimal strategy often depends on your business's specific financial situation. Consulting with a tax professional can help you model the potential benefits and help you determine the best course of action.
The "One Big Beautiful Bill Act" also brings a long-awaited expansion to the FICA Tip Credit, a valuable incentive that allows employers to claim a tax credit on the Social Security and Medicare taxes they pay on employee tips.*
Historically, this credit was limited to the food and beverage industry. However, the new law broadens eligibility to include the beauty and personal care industry.*
This means businesses such as barbershops, hair and nail salons, spas and esthetic services, and other establishments where tipping is a customary part of the business are now eligible to claim this credit.
This change corrects a long-standing tax inequity and offers significant financial relief to a vital part of the small business economy. The FICA Tip Credit can help offset an employer's federal income tax liability, helping free up capital that can be reinvested in the business, used for employee benefits, or used to encourage transparent tip reporting.
The new tax law offers powerful benefits, but taking full advantage of them requires expertise and careful planning. The provisions for both the R&D Tax Credit and FICA Tip Credit are detailed and require precise documentation.
At Equifax, our team specializes in helping businesses identify, calculate, and receive the tax credits and incentives they deserve. We stay on top of legislative changes like the "One Big Beautiful Bill Act" to help our clients stay more up to date and better position themselves to receive their appropriate tax benefits and credits.
From analyzing your R&D activities to helping you identify eligible FICA tip credits, we can help companies better navigate these opportunities. Contact us today to learn more about how we can help your business under the new tax law.
Source: https://www.congress.gov/bill/119th-congress/house-bill/1/text
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