What the One Big Beautiful Bill Act Means for Small & Mid‑Size Businesses
If you own a small or mid‑size business, the One Big Beautiful Bill Act (OBBBA) changes several tax rules you use every year: how you deduct equipment purchases, calculate taxable income, plan payroll and even think about long‑term succession.
Signed into law on July 4, 2025, OBBBA updates and extends provisions from the 2017 Tax Cuts and Jobs Act, adds new deductions for certain types of income and raises key thresholds. Here’s a breakdown of the changes most likely to matter to you.
Bigger Section 179 Deduction
The maximum Section 179 deduction is now $2.5 million, with a phase‑out starting at $4 million. Both figures will adjust for inflation each year.
Why it matters: This lets you deduct the full cost of qualifying equipment, vehicles or technology purchases, up to the new higher limit, in the year you put them in service.
100% Bonus Depreciation Restored
Full bonus depreciation is permanently reinstated for qualifying assets acquired and placed in service after January 19, 2025.
Why it matters: You can write off the total cost of new (and certain used) business property right away, without waiting years for it to depreciate.
QBI Deduction Rises to 23%
The Qualified Business Income deduction for pass‑through entities (sole proprietors, partnerships, S‑corps) increases from 20% to 23%, with existing rules on income limits and specified service businesses still applying.
Why it matters: If your business qualifies, you can deduct a larger percentage of your profits from taxable income.
Higher SALT Deduction Cap
The cap on State and Local Tax deductions rises from $10,000 to $40,000 for taxpayers with modified adjusted gross income (MAGI) under $500,000. The higher cap phases down above that income level and expires after 2029.
Why it matters: If you live in a high‑tax state, you may be able to deduct more of your property, state income and local taxes.
New Exclusions for Tips and Overtime Pay
Starting after December 31, 2024:
Up to $25,000 in tips (joint filers) or $12,500 (single) can be excluded from federal taxable income.
The same amounts apply to overtime pay.
Income limits: $300,000 MAGI for joint filers; $150,000 for single.
Why it matters: Employees keep more of what they earn in tips or overtime, and you may have payroll reporting adjustments to make.
Loan Interest Rules Unchanged
OBBBA doesn’t change business loan interest deductibility, but existing documentation requirements still apply, especially for assets with any personal use.
Why it matters: You can still deduct eligible interest, but accurate records are essential.
Higher Estate & Gift Tax Exemption
The federal estate and gift tax exemption is now $15 million per individual, indexed for inflation, and made permanent under current law.
Why it matters: If you plan to pass your business or assets to heirs, you can transfer more without triggering federal estate tax.
Key Takeaways for Owners
Plan purchases strategically: The higher Section 179 limit and permanent 100% bonus depreciation mean timing equipment or vehicle buys could have a big tax impact.
Check entity status: Make sure you’re set up to take full advantage of the 23% QBI deduction.
Watch income thresholds: Staying under certain MAGI limits can maximize SALT deductions and tip/overtime exclusions.
Update payroll systems: Track tips and overtime separately to apply the new rules correctly.
Review succession plans: The higher estate exemption may allow for more flexible long‑term planning.