What the One Big Beautiful Bill Act Means for Your Law Firm’s Tax Strategy
For the last two years, tax advisors have been telling business owners the same thing: several major deductions from the 2017 tax law were set to expire after 2025, and 2026 would arrive with a materially higher tax bill attached. Then, on July 4, 2025, the One Big Beautiful Bill Act (OBBBA) became law – and rewrote that expectation for most pass-through businesses, law firms included.
The headline isn’t that taxes went up. It’s that several provisions firm owners had been told to prepare for losing were made permanent instead – alongside a few that changed in ways that genuinely deserve a second look. This isn’t a repeat of the year-round habits covered in our post on strategic tax planning. This is what specifically changed in the law, and what it means for how your firm plans the rest of this year and into the next.
Key Takeaways
- The Section 199A (QBI) deduction is now permanent, and the income phase-out range for law firms – classified as a specified service trade or business – widened meaningfully.
- 100% bonus depreciation is back, and it’s permanent, along with a higher Section 179 expensing limit for equipment and technology.
- The SALT deduction cap rose to $40,000, but only temporarily and only below certain income levels – the pass-through entity tax workaround many firms already use is untouched.
- None of this is “set it and forget it.” Phase-outs, thresholds, and sunset dates mean this needs an annual look, not a one-time read.
- The firms that benefit most are the ones that revisit entity structure, compensation, and purchase timing in light of the new rules – not the ones that assume nothing changed.
The QBI Deduction Is Permanent – and the Phase-Out Window Just Got Wider
The Section 199A deduction – which allows owners of pass-through businesses to deduct up to 20% of qualified business income – was scheduled to disappear after 2025. Under OBBBA, it doesn’t expire. It’s now a permanent part of the tax code.
The part that matters most for law firms specifically: because legal practices are classified as a specified service trade or business (SSTB), the deduction has always phased out above certain income levels. OBBBA widened that window. The phase-out threshold expanded from $50,000 to $75,000 for individual filers, and from $100,000 to $150,000 for joint filers – giving more firm owners room to claim some or all of the deduction even as income grows.
The law also adds an inflation-adjusted minimum QBI deduction of $400, starting in 2025, for owners with at least $1,000 of qualified business income from a business where they materially participate. It’s a modest figure on its own, but it signals the direction of the provision: permanence, not retreat.
The practical implication: firms that assumed this deduction was going away – and planned income, compensation, or entity structure around that assumption – now have a reason to revisit that plan. Clean, current books make it possible to actually calculate where your firm sits relative to these thresholds, rather than guess. That’s the kind of detail that belongs in a bookkeeping process built for accuracy, not reconstructed once a year at filing time.
Bonus Depreciation and Section 179 Are Back to Full Strength
Before OBBBA, 100% bonus depreciation was on a scheduled decline – down to 40% for assets placed in service in 2025, and headed to zero by 2027. That schedule is gone. 100% first-year bonus depreciation is now permanent for qualifying new and used assets placed in service after January 19, 2025.
Alongside it, Section 179 expensing limits increased to $2.5 million, with a $4 million phase-out threshold, both indexed for inflation going forward.
For a law firm weighing new case management software, office technology, or a build-out, this changes the math on timing. Our year-end planning checklist already covers the discipline of coordinating major purchases with cash flow rather than buying reactively for a deduction – this provision simply makes that calculation more favorable, and more durable, than it’s been in years.
The SALT Cap Went Up – But Only Temporarily, and Only for Some
The $10,000 cap on state and local tax deductions has been a persistent frustration for owners in higher-tax states. OBBBA raises it – to $40,000 for joint filers (and $20,000 for those filing separately) – but with real limits attached.
The deduction phases out for higher earners: it reduces by 30% of adjusted gross income above $500,000 for joint filers, though a minimum $10,000 deduction is guaranteed regardless. The thresholds rise by 1% annually, and the entire expansion is temporary – it runs through 2029, then reverts to the original $10,000 cap.
Here’s the detail worth knowing if your firm operates as a partnership or S-corporation: the pass-through entity tax (PTET) workaround most states offer was left untouched by this law. Firms already electing PTET to work around the SALT cap at the entity level can continue to do so, and that election remains, for many firms, the more reliable planning tool — one that doesn’t depend on an individual income threshold or a 2029 expiration date.
What This Means for Your Firm’s Structure and Compensation
None of these changes operate in isolation. A wider QBI phase-out window may change whether a firm’s current entity structure – partnership, S-corp, or another arrangement – is still the most tax-efficient one. Permanent bonus depreciation changes the return on equipment and technology investments the firm may have been deferring. An expanded SALT cap, paired with an existing PTET election, changes how owner compensation and distributions might best be structured going forward.
This is precisely the kind of interconnected decision that benefits from a CFO-level view rather than a single-provision read of the new law – understanding how a change in one area shifts the right answer in another is what CFO advisory work is built to do.
Why This Isn’t a “Set It and Forget It” Law
It’s tempting to read “permanent” and file this away as settled. The permanence applies to the provisions existing at all – not to how they apply to your firm, which still depends on income, entity structure, and timing that change every year. Phase-out thresholds adjust for inflation. The SALT cap expansion has a hard expiration already written into the law. A firm’s eligibility for the full QBI deduction shifts as income grows.
Treat this law the way the better-run firms treat every other piece of tax strategy: reviewed annually, not read once and assumed to still apply three years from now.
Frequent Asked Questions (FAQs)
Does the One Big Beautiful Bill Act raise taxes on law firms?
Not as a general rule. For most pass-through law firms, it preserves or expands deductions that were scheduled to shrink or disappear – the QBI deduction, bonus depreciation, and (temporarily) the SALT cap. Whether a specific firm sees a net benefit still depends on its income level and structure.
Is the Section 199A deduction permanent now?
Yes. OBBBA removed the scheduled expiration and made the deduction a permanent part of the tax code, while also widening the income phase-out range for specified service businesses like law firms.
Does the higher SALT cap help every firm owner?
No. It phases out for joint filers with adjusted gross income above $500,000, and the entire expansion is temporary, running only through 2029. Firms using a pass-through entity tax election to work around the SALT cap at the entity level are unaffected by this change either way.
Should our firm change its business structure because of this law?
Possibly – but that’s a firm-specific question, not a universal one. Wider QBI phase-out thresholds and permanent bonus depreciation can shift the math on entity structure for some firms and leave it unchanged for others. It’s worth a deliberate review rather than either ignoring the law or assuming it requires action.
How often should we revisit this?
At least annually. Several of these provisions include inflation adjustments, phase-out thresholds tied to income, or expiration dates already written into the law – none of which stay static year to year.
How Silver Peaks CPA Can Help
Legislative changes like this one are only useful to a firm that can translate them into an actual decision – about structure, timing, and compensation. That translation is where our strategic tax planning and CFO advisory work for law firms does its job: turning a new law into a specific plan for your firm, not a general summary of what changed.
Any other questions, feel free to schedule an informed opinion on where your firm stands.
