The One Big Beautiful Bill Act (OBBBA), enacted into law on July 4, 2025, introduces sweeping changes that will significantly affect the wholesale and distribution industry. The legislation brings a mix of new opportunities and potential hurdles, and it is crucial for companies in the industry to stay informed about these developments to help with effective planning and financial stability. Read more to see OBBBA’s top impacts for wholesalers and distributors.
1. 100% Bonus Depreciation Returns
One of the most high-impact provisions is the modification of Section 168(k) of the Internal Revenue Code (IRC). This section allows for 100% bonus depreciation on qualifying property that is placed in service after January 19, 2025. This will enable wholesale and distribution companies to fully deduct the cost of qualifying assets—such as warehouse equipment, fleet vehicles, and logistics technology—in the year they are placed in service. This provision serves as a powerful tool for tax planning because the immediate write-off can dramatically help improve cash flow and reduce the financial burden associated with large capital expenditures. For industries that are capital intensive, this can help lower taxable income in the short term and boost after-tax cash flow.
2. Expanded Section 179 Deduction
In addition to the modification of §168(k), OBBBA increases the §179 deduction. The maximum deduction has been increased from $1 million to $2.5 million, and the phase-out threshold has been raised to $4 million. These changes provide greater flexibility for midsize wholesalers investing in automation, facility upgrades, and other infrastructure improvements critical to efficiently scaling operations.
3. More Flexibility in Interest Expense Deductions
Another notable change under OBBBA is the revision of the interest expense deduction rules under IRC §163(j). Businesses can now calculate their deduction based on 30% of earnings before interest, taxes, depreciation, and amortization (EBITDA), instead of earnings before interest and taxes (EBIT). This adjustment is especially advantageous for capital-intensive wholesale and distribution companies—such as those with debt-financed inventory and infrastructure, because it increases the amount of interest that can be deducted.
4. Immediate Expensing for Domestic R&D Activities
OBBBA offers a significant advantage for businesses involved in domestic research and development (R&D). Under the new law, domestic R&D expenses no longer require capitalization and amortization over time. Instead, expenses can now be fully deducted in the year they are incurred. This shift is especially advantageous for wholesalers and distributors investing in innovation, as it can lead to substantial tax savings and improved cash flow. The legislation encourages continued investment in domestic R&D efforts by permitting immediate deduction of those R&D expenses.
5. Permanent Extension of the QBI Deduction for Pass-Through Entities
Wholesale and distribution companies structured as pass-through entities (PTEs) are expected to benefit from the permanent extension of the qualified business income (QBI) deduction, which will take effect for tax years starting after December 31, 2025. OBBBA has maintained a 20% deduction rate for these entities. This change not only enhances long-term tax planning but also aligns with the specific business structures in the industry. Thus, wholesale and distribution companies structured as flow-through entities will be better equipped to manage their taxable income more effectively over time.
6. No Tax on Overtime
Employees may also find a significant advantage from OBBBA through a deduction for qualified overtime work. Starting in 2025 and continuing through 2028, taxpayers who receive qualified overtime pay will be able to deduct the “time-and-a-half” portion reported on their individual W-2 forms. This deduction is capped at $12,500 for Single Filers and $25,000 for those who are Married Filing Jointly.
Businesses may require time to update payroll systems accordingly despite these changes being effective immediately. Leaders should proactively communicate with employees about the timing and implementation of these adjustments, clarifying which portions of overtime pay will be affected.
7. SALT Deduction
In addition, the bill provides a substantial benefit for business owners operating in various jurisdictions. If you are a flow-through owner or investor, the new state and local tax (SALT) cap may be advantageous for you. The PTE tax remains deductible at the entity level. Even though the deduction for state and local taxes has risen from $10,000 to $40,000 for 2025 on individual tax returns, this increase is phased out once modified adjusted gross income exceeds $500,000 for those Married Filing Jointly and $250,000 for those Married Filing Single. This increase is temporary and will revert back to $10,000 after 2029.
8. Qualified Opportunity Zone Credit
OBBBA also establishes a permanent opportunity zone (OZ) policy directed at providing benefits to taxpayers looking to defer capital gains. Taxpayers can defer their capital gains by investing in Qualified Opportunity Funds. The act would establish a rolling 10-year OZ designation and bolster eligibility requirements. A taxpayer would support low-income communities by investing in opportunity zones and potentially have a lower cost of capital for additional buildings.
9. Lifetime Exemption
Previously set to sunset at the end of 2025, OBBBA increases the estate tax exemption to $15 million, indexed for inflation, and removes the previous sunset provision. Family businesses should consult tax advisors to align gifting strategies with the new limit and consider long-term estate planning under these updated rules. While the lack of an immediate sunset may seem like a relief, there are other estate strategies and advantages to consider in today’s economic landscape.
Next Steps for Wholesalers & Distributors
Wholesale and distribution businesses should take a strategic look at their capital investment plans to fully leverage the reinstated bonus depreciation and expanded §179 limits. Evaluating financing arrangements and entity structures is also key to utilizing interest deductions under the new EBITDA-based calculation.
From a financial perspective, these changes are expected to deliver stronger deductions starting in 2025, which will, in turn, help improve short-term cash flow. The permanent nature of the QBI and bonus depreciation provisions also simplifies long-term tax planning, giving companies greater clarity and confidence in future investment decisions.
How Forvis Mazars Can Help
Our team brings a wealth of experience in working with wholesale and distribution companies, merging industry-specific knowledge with advanced tax experience. We recognize the traditional obstacles of running a company, along with understanding the unique financial and operational challenges you face—from inventory management and supply chain coordination to facility investments, and R&D initiatives. We can provide customized guidance to help you identify deduction and credit opportunities, help you identify structure strategies for your entity that could lead to greater tax efficiency, and help you plan for sustainable growth. As you adapt to the changes brought about by OBBBA, we’re here to help you turn complex legislation into actionable opportunities.