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. R. 1, commonly known as the One Big Beautiful Bill Act( OBBB), offers transformative tax incentives for manufacturers, and the legislation has the potential to significantly enhance a company’ s cash flow while reducing costs. Although many of the law’ s incentives appear straightforward at first glance, the real value lies in how manufacturers strategically apply them.

Following are four key areas where a thoughtful approach can unlock greater long-term savings and inform broader business decisions.

Thinking through R & D expensing

One aspect of the OBBB gaining significant attention is the ability to deduct all 2025 domestic research and development( R & D) costs on the current year’ s taxes. While this may yield short-term benefits, it’ s not always the most advantageous strategy. Expensing the entire R & D outlay provides a deduction, but no interest expense benefit. Conversely, capitalizing and amortizing R & D over multiple years may allow companies to maximize their interest expense deductions since amortization is added back when determining deductions for interest.

For example, if a manufacturer opts to capitalize $ 1m of R & D expenditures, it could increase its interest expense deduction by $ 300,000 in that year without adversely impacting interest deductions in future years. This approach could be particularly beneficial for companies with a substantial domestic R & D footprint and interest expense. However, this may not be the optimal choice if the manufacturer is already deducting all its interest expense. Other factors to consider include the company’ s effective tax rate, overall profitability and where R & D expansions may occur going forward.

Reclassifying repair and maintenance

Similar to R & D decisions, manufacturers may benefit from capitalizing and depreciating repair and maintenance costs since depreciation deductions are added back when determining interest expense limitations while repair expenses are not. For every $ 100,000 capitalized, a company can claim 100 percent bonus depreciation, which could increase the interest expense deduction by $ 30,000. Depending on the company’ s tax rate, this could generate tax savings of $ 10,000 or more.

For companies that spend millions on repairs and maintenance every year, this relatively simple adjustment can translate into a sizable return. Similar considerations apply to any rotable, temporary, or emergency spare parts and the capitalization of certain SG & A expenses.

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