What does the One Big Beautiful Bill Act (OBBBA) Mean for Your Small Business?

If you haven’t heard of the One Big Beautiful Bill Act (OBBBA) yet, it’s time to get acquainted. Signed into law on July 4, 2025, this is the most significant tax reform since the Tax Cuts and Jobs Act of 2017; and for small business owners, it comes with some genuinely good news.

The 20% Pass-Through Deduction Is Now Permanent

If your business is structured as an LLC, partnership, S-corp, or sole proprietorship (a “pass-through” entity), you’ve been benefiting from a 20% deduction on qualified business income (QBI) since 2018. Under previous law, that deduction was set to expire in 2025. The OBBBA makes it permanent.  It even sweetens the deal a little.

• The income phase-out thresholds have been raised, meaning more business owners now qualify.
• There’s a new $400 minimum deduction for taxpayers with at least $1,000 in active qualified business income.

Bottom line: if you’ve been planning around the QBI deduction expiring, you can stop worrying. It’s here to stay.

💡 Action item: Review your entity structure with your accountant to make sure you’re set up to maximize this deduction.

100% Bonus Depreciation Is Back - and It’s Permanent

One of the biggest wins for business owners who invest in equipment, machinery, or technology: 100% bonus depreciation has been fully restored and made permanent for qualifying property acquired after January 19, 2025.

What does that mean in practice? Instead of depreciating a piece of equipment over several years, you can write off the entire cost in the year you buy it. That’s a major cash flow advantage, especially for businesses making capital investments.

• Section 179 expensing limits have also been increased, now up to $2.5 million for property placed in service after 2024.
• There’s also new 100% depreciation available for certain U.S. manufacturing real property if construction begins before 2029.

💡 Watch out: Property ordered before January 20, 2025 under a binding contract may not qualify. Timing matters.

R&D Costs Can Now Be Deducted Immediately

For any business that incurs research and development expenses - whether you’re in tech, product development, or another innovative field - the OBBBA brings welcome relief. Domestic R&D costs can now be deducted in full in the year they’re incurred, rather than being spread out over five years as required under the old rules.

Even better: if your business had R&D costs from 2022, 2023, or 2024 that were previously capitalized, you may have options to retroactively accelerate those deductions. Small businesses (under $31 million in average annual gross receipts) can even amend prior returns to claim this benefit.

💡 Action item: If your business has had R&D expenses in recent years, talk to your accountant about retroactive relief options. This could put real money back in your pocket.

SALT Deduction Cap Gets a Temporary Boost

The state and local tax (SALT) deduction cap, which was previously $10,000, has been temporarily increased to $40,000 for 2025 through 2029. For business owners in higher-tax states, this can make a meaningful difference in your overall tax picture, particularly if you’re paying significant Washington State B&O or property taxes.

A Few Other Perks Worth Knowing

• Tips and overtime: Up to $25,000 in tip income is now excludable from federal taxable income (through 2028), and the premium portion of overtime pay is also deductible within limits. If you have employees who earn tips or overtime, this affects your payroll planning.
• 1099 reporting thresholds: The Form 1099-NEC and 1099-MISC threshold has been raised from $600 to $2,000 for payments made after 2025, reducing reporting burden for businesses that pay contractors.
• 1099-K threshold: The OBBBA rolls back the controversial lowered 1099-K threshold, restoring it to the pre-2021 standard of $20,000 and 200 transactions.

What’s Not Changing (That You Might Have Heard About)

Despite some early speculation, the corporate income tax rate stays at 21%, no reduction there. And the carried interest rules remain unchanged. The OBBBA also rolled back several clean energy credits, including EV and solar credits, which expired for purchases after September 30, 2025.

The Bottom Line

The OBBBA offers meaningful opportunities for small business owners, particularly around equipment investment, pass-through income, and R&D. But the new rules come with complexity, timing requirements, and some important exceptions.

We’re here to help you navigate all of it. If you’d like to review how these changes affect your specific situation, reach out to our team. A little planning now can translate into significant savings.