President Trump signed the One Big Beautiful Bill Act (OBBBA) into law on July 4, with many tax and spending provisions offering advantages for the fashion industry. The following provides an overview of the most significant provisions affecting fashion companies and their owners.

Fashion Companies Key Provisions

Bonus Depreciation

OBBBA permanently extends the first-year bonus depreciation rules under section 168(k), increasing the allowance to 100% for property acquired and placed in service after Jan. 19, 2025. This change allows fashion companies to continue enjoying a favorable expense deduction timing for property types that qualify under section 168.

Bottom Line:

Investments in qualifying property—such as new equipment for garment production, technology upgrades for inventory management, or improvements to distribution centers and retail stores—can be fully expensed in the year they are placed in service after Jan.19, 2025. This accelerated deduction can improve cash flow and make it more attractive for fashion businesses to modernize facilities, expand capacity, or implement new technology, helping them stay competitive in a rapidly evolving industry.

Research & Experimentation

OBBBA permanently restores immediate deductions for domestic research and experimentation (R&E) activities. Previously, domestic R&E expenses were required to be capitalized and amortized over a period of five years. Foreign R&E expenses remain subject to capitalization and amortization over 15 years.

Bottom Line:

OBBBA now allows fashion brands and retailers to immediately deduct domestic research and experimentation (R&E) expenses, rather than spreading them over five years. This boosts cash flow and encourages greater investment in U.S.-based innovation, making it easier for fashion companies to develop new materials, technologies, and designs. Upfront deductions especially benefit brands pursuing sustainability, wearable tech, or cutting-edge design by lowering the financial barriers to experimentation and development.

Qualified Production Property

Fashion designers can fully deduct the cost of new “qualified production property,” including most non-residential real property used in manufacturing, production, or refining activities, except properties used for offices or other unrelated functions. The change applies to qualified property placed in service after the date of enactment and before Jan. 1, 2031.

Bottom Line:

Fashion designers, apparel manufacturers, and brands can now fully deduct the cost of new “qualified production property” such as factories, warehouses, and distribution centers used for manufacturing or refining—rather than depreciating them over time. This immediate deduction applies to qualifying investments made between enactment and Jan. 1, 2031, boosting tax savings and cash flow, and encouraging modernization and expansion of physical operations. Note that properties used for offices or unrelated activities are excluded.

Businesses with International Operations

Global Intangible Low-taxed Income (GILTI) & Foreign-derived Intangible Income (FDII)

Key Points on Recent International Tax Changes:

• Higher U.S. Tax on Foreign Profits: If your business owns foreign companies or earns profits overseas, new rules will increase the U.S. tax rate on those earnings to about 14%. Some previous deductions and credits are being reduced or eliminated, so you may end up owing more U.S. tax on foreign profits starting in 2026.
• Slightly Higher Tax on Export Income: If your company earns income from selling products or licensing intellectual property to customers outside the U.S., the special deduction for this type of income is being reduced. This will also raise your tax rate on export-related profits to about 14%.

 

Bottom Line:

If your business has international operations or sells globally, you could see higher U.S. taxes on those earnings in future years. Fashion companies with significant international operations, supply chains, or brand licensing must reevaluate their tax strategies to address higher effective rates on both foreign subsidiary earnings and export-related intangible income. Working closely with tax advisors will be critical to optimizing the business structure and maintaining global competitiveness under the new rules.

Fashion Company Owners (Key Individual Provisions)

Section 1202 Small Business Stock

OBBBA provides a permanent tiered gain exclusion for qualified small business stock (QSBS) of 50% for QSBS held for at least three years, 75% for QSBS held for at least four years, and 100% for QSBS held for at least five years. The change only applies to stock originally issued after the date of enactment. The gain excluded under the three- and four-year rules would not be treated as a preference item for purposes of the AMT if the stock were acquired after Sept. 27, 2010.

Bottom Line:

The OBBBA’s permanent tiered gain exclusion for qualified small business stock (QSBS) provides major tax benefits for investors, founders, and employees in growing fashion companies. Investors in eligible fashion startups can exclude 50% of gains from federal taxes after three years, 75% after four years, and 100% after five years for stock newly issued post-enactment—with gains from three- and four-year holdings also exempt from the AMT if acquired after Sept. 27, 2010. This encourages long-term investment in innovative and growing fashion brands, making it easier to attract capital, fuel expansion, and create more opportunities for development and job growth in the industry.

SALT Cap

Previously, the TCJA limited itemized deductions for state, local, and foreign income, property, or sales and use taxes up to $10,000 per year. Many states responded by allowing owners of pass-through entities to bypass this cap using an entity-level tax. Under OBBBA, the SALT deduction cap temporarily rises to $40,000, with phaseouts starting at $500,000 in income. Beginning in 2026, the threshold increases annually by 1%, reaching $40,400 for incomes under $505,000, and continues to grow by 1% each year through 2029. After that, the cap permanently reverts to $10,000.

Pass-Through Entity Tax (PTET) Deduction

The legislation essentially preserves the existing framework for PTET deductions.

Bottom Line:

Preserving the current PTET deduction framework allows fashion company owners —especially those operating as partnerships, LLCs, or S corporations — to continue deducting state and local taxes at the entity level. This helps bypass the federal $10,000 SALT deduction cap for individuals, reducing the owner’s overall taxable income and potentially lowering their federal tax bill. As a result, owners can retain more after-tax earnings, providing greater flexibility to invest in their business, grow operations, or fund new fashion initiatives.

Qualified Business Income Deduction

The 20% QBI deduction, previously set to expire after 2025, is made permanent.

Bottom Line:

By making the 20% Qualified Business Income (QBI) deduction permanent, fashion company owners operating as partnerships, LLCs, or S corporations can continue to deduct up to 20% of their qualified business income from federal taxes. This results in substantial tax savings, lowers their effective tax rate, and increases after-tax cash flow.

Trusts, Estates and Gifts

Tax Rates

OBBBA permanently extends the income tax rates and brackets for estates and trusts as established by the TCJA.

Exemption

The unified estate and gift tax exemption and generation-skipping transfer tax exemption are made permanent to an inflation-indexed $15 million per individual for taxable years beginning after Dec. 31, 2025.

Looking Ahead

From enhancing incentives for innovation to establishing a more predictable and favorable tax framework, OBBBA introduces a variety of changes that present meaningful opportunities for fashion company owners, designers, and industry executives. Whether you’re investing in sustainable materials, new manufacturing technology, expanding your brand footprint, or scaling creative teams, these updates can support your strategic growth and financial goals.

By understanding the new law now, fashion leaders can move quickly to restructure, invest with confidence, and optimize their tax strategies as early as 2025. Staying informed and proactive puts your company in the best position to seize these new opportunities and maintain a competitive edge in the fast-moving fashion landscape.

 

Michael Sacco, CPA, is the National Consumer & Industrial Products Industry Leader at CBIZ, where, along with his teams throughout the country, he helps companies achieve financial excellence through tailored consulting, advisory, and outsourced services.

To connect with an expert from CBIZ for a free consultation about your brand/business, please reach out to Eric Seaman: eseaman@cbiz.com