On July 4, 2025, President Trump signed the “One Big Beautiful Bill” into law after the Senate revised bill was approved by the House with a vote of 218-214. The bill includes a variety of tax items that will impact auto dealer business taxes, personal income taxes, and estate and gift taxation. This article will highlight the pertinent areas of the One Big Beautiful Bill that will impact auto dealership businesses and owners. BUSINESS TAX PROVISIONS Section 168(k) “Bonus” Depreciation The bill permanently extends 100% bonus depreciation for qualified property acquired after January 19, 2025. For the first taxable year, dealerships can elect to apply the 40% bonus depreciation (for taxable year ending on December 31, 2025) or 100% bonus depreciation. This is a welcome change for dealerships as it would allow the entity flexibility in weighing the pros and cons of electing full 100% bonus depreciation or only electing to take 40%. It is important to recall that the depreciation laws vary by state. Many states, such as Massachusetts, Rhode Island, New Jersey, New York, California, and New Hampshire, do not conform to Section 168(k) bonus depreciation. Section 179 Deduction The bill increases the maximum allowable Section 179 deduction to $2.5 million. The deduction will be reduced by the amount by which the cost of the qualifying property exceeds $4 million. As dealerships are expanding their operations, opening new stores, and renovating existing stores, the increased 179 deduction allows dealers to immediately expense 100% of the cost basis of the asset placed in service. Updates to Section 163(j) and Adjusted Taxable Income (ATI) For tax years beginning after December 31, 2024, the calculation of ATI will return to EBITDA, allowing the addition of depreciation and amortization expense. This is a highly anticipated provision in the bill for auto dealers. The addition of depreciation and amortization will allow dealers to take advantage of bonus depreciation and preclude them from having to use the floor plan financing exception. This change will help dealers minimize their interest limitations. The bill also modifies the definition of “motor vehicle” to include towable trailers and campers. This allows the floor plan interest for these trailers and campers to be deductible. Before enactment, interest on trailers and campers was not included as floor plan financing interest. Dealerships should still evaluate the Section 163(j) interest limitations to determine if bonus depreciation is allowed for the year. Termination of Various Clean Energy Credits While prior proposals terminated various energy credits immediately, the final bill gives some extension to the allowable energy credits introduced under the Inflation Reduction Act. Dealers selling a large number of electric vehicles and participating in the IRS credit transfer program will be significantly impacted by the termination of these credits. Dealers should contact their customers to notify them of the changes to the clean vehicle credits and encourage them to complete their EV purchase before the credits expire. The following clean vehicle credits terminate for vehicles acquired after September 30, 2025: • Section 25(e) previously owned clean vehicle credit • Section 30(d) new clean vehicle credit • Section 45(w) qualified commercial clean vehicle credit. The credit for vehicles owned and placed in service by the dealership terminates for vehicles acquired and placed in service after September 30. What Auto Dealers Need to Know About the “One Big Beautiful Bill” BY KRISTIN REESE-SCALABRINO, CPA, TAX MANAGER, WITHUM The Section 30(c) alternative fuel vehicle refueling property credit (charging stations) terminates after June 30, 2026. However, to be allowed, the property installed in qualifying areas must be acquired before that date. Some dealerships may be utilizing certain energy-efficient properties in their store renovations or new construction. The credits associated with this energy-efficient property have changed: • Section 179D energy-efficient building deduction terminates for property in which the construction begins after June 30, 2026 • Section 45(y) clean electricity production credit and Section 48(e) clean electricity investment credit terminate for wind and solar facilities placed in service after December 31, 2027 Dealers who install solar or other energy-efficient properties should work with their contractors to ensure the property will be installed and placed in service prior to December 31, 2027. Pass-Through Entity Tax Even though prior proposals recommended limitations in pass-through entity tax deductions, the final bill does not limit the use of state-level pass-through entity tax as a SALT cap workaround. Dealerships can still participate in these state tax workarounds as they have previously. Reporting Requirements for 1099s and W2s The bill increased the 1099 information reporting threshold for certain payments to people engaged in a trade or business and 18 NEW JERSEY auto retailer
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