Congress just passed what they’re calling the One Big Beautiful Bill. Name aside, this thing is huge and covers a lot of ground. But if you’re a small or mid-sized business owner, there are a handful of changes that are actually worth paying attention to.
We’ve already dug through the fine print for you. Here’s what stands out, along with some ideas for how you might want to plan around the changes.
20% Qualified Business Income (QBI) Deduction Made Permanent
One of the most significant wins for business owners: the 20% deduction for qualified business income from pass-through entities (sole proprietorships, partnerships, and S corporations) is now permanent. Previously, this provision was set to expire in 2026.
This deduction remains one of the most powerful tools available to reduce taxable income, but it does require intentional planning.
Consider:
- Reviewing your business structure to see if you’re positioned to maximize the QBI deduction.
- Evaluating how you pay yourself as an owner, since the balance between salary and distributions can significantly affect eligibility.
- Monitoring your taxable income relative to QBI thresholds, which vary by industry and filing status.
Even if you’ve claimed this deduction before, it’s worth revisiting your approach to confirm you’re still making the most of it under current rules.
100% Bonus Depreciation Restored and Made Permanent
The ability to fully expense (write off) the cost of qualifying property in the year it’s placed in service, known as 100% bonus depreciation, has been restored and made permanent.
Businesses can fully expense qualifying assets
This provision can create significant tax savings and improve cash flow, particularly for businesses planning to invest in equipment, vehicles, or property improvements.
Planning opportunities include:
- Accelerating planned capital expenditures to take advantage of immediate deductions.
- Consider how bonus depreciation fits into your broader cash flow and tax strategy.
- Coordinating bonus depreciation with Section 179 expensing limits to optimize benefits.
While this is a valuable incentive, it’s important to align purchases with your operational needs and long-term financial plan.
SALT Deduction Cap Temporarily Increased
The State and Local Tax (SALT) deduction cap is raised from $10,000 to $40,000 for married filing jointly (with income below $500,000), beginning in 2025.
This higher cap is temporary and will phase out after 2029.
If you’re in a high-tax state, this change could allow you to claim significantly higher itemized deductions during this window.
We recommend:
- Taxpayers in high-tax states may benefit from increased itemized deductions during the window.
- Monitoring income thresholds carefully to avoid disqualification.
- Evaluating whether itemizing now offers greater benefits than the standard deduction.
R&D Expenses Can Be Fully Deducted
The bill allows businesses to fully deduct research and development (R&D) expenses in the year incurred, retroactive to 2022. This reverses the prior rule requiring amortization over five years.
This creates an opportunity to lower taxable income for current and prior years.
We recommend:
- Reviewing past and current activities to identify R&D expenses that qualify.
- Amending 2022 and 2023 returns, if applicable, to claim missed deductions.
- Strengthening documentation to support your R&D claims under IRS guidelines.
New Payroll and Compensation-Related Provisions
The bill exempts federal income tax on certain employee wages, including overtime pay and tips, through 2028. This change may affect your payroll tax obligations and employee take-home pay.
We recommend:
- Updating your payroll systems and withholding procedures to reflect exempt income categories.
- Reviewing compensation structures in industries with significant overtime or tipped wages.
- Watching for additional IRS guidance as implementation details are finalized.
Clean Energy and Vehicle Credit Changes
Several clean energy tax credits from the Inflation Reduction Act have been scaled back or revised. New incentives exist for U.S.-manufactured vehicles, with interest on auto loans potentially deductible.
If your business plans include energy-efficient improvements or fleet upgrades, this is an important area to reassess.
Planning ideas include:
- Reviewing eligibility for revised energy-related credits before committing to investments.
- Evaluate vehicle purchases and financing structures in light of eligibility criteria.
- Consulting industry-specific guidance if your business relies heavily on energy credits.
Make This Bill Work for You
Tax changes like these create both risks and opportunities, and every business will feel the impact a little differently. The changes in this legislation may not require immediate action, but understanding how they apply to your business can make a meaningful difference in cash flow, tax liability, and investment timing.
Start now, and give yourself options later
In our experience working with small and mid-sized businesses, the owners who benefit most are the ones who take time now to understand what applies to them and adjust their plans before year-end.
A good place to start is with a mid-year financial check-in to see where you stand and what adjustments make sense before December.
These are the conversations you should already be having with your accountant. If you’re not, we’re here to help you get started.
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