🇺🇸 The One Big Beautiful Bill Act (OBBBA): What It Means for Small Businesses

On July 4, 2025, President Trump signed the One Big Beautiful Bill Act (OBBBA) into law — a sweeping tax package designed to lower costs and simplify compliance for millions of small business owners. Whether you run a sole proprietorship, an LLC, or an S corporation, the Act includes several powerful changes. Here's what to expect starting in 2025 and beyond.

💼 1. 20% Small Business Income Deduction Made Permanent

The 20% Qualified Business Income (QBI) deduction under Section 199A is now permanent. If your business is a sole proprietorship, partnership, S corp, or eligible LLC, and your income is below:

• $75,000 (single filers)

• $150,000 (married filing jointly)

…you may fully deduct up to 20% of your qualified business income. These thresholds will be indexed for inflation starting in 2027. This change offers long-term predictability for tax planning.

🛠️ 2. 100% Bonus Depreciation & Domestic R&D Expensing

Effective for property acquired and placed in service on or after January 19, 2025, you can:

• Immediately deduct 100% of the cost of qualified new or used assets such as equipment, furniture, and certain vehicles.

• Fully deduct domestic research and development (R&D) costs starting in tax years after December 31, 2024.

Note: Foreign R&D expenses must still be amortized over 15 years.

🧾 3. Business Interest Expense Deduction Expanded

For tax years beginning after December 31, 2024, the interest expense limitation under §163(j) reverts to the 30% of EBITDA standard (earnings before interest, taxes, depreciation, and amortization). This change makes it easier to deduct interest payments—especially important for growing firms using loans.

🌆 4. SALT Deduction Cap Temporarily Increased

From 2025 through 2029, the state and local tax (SALT) deduction cap increases from $10,000 to $40,000, with the following details:

• Cap applies to married filing jointly; it’s $20,000 for single filers.

• Indexed for inflation beginning in 2027 (e.g., ~$40,400 in 2026).

• Begins phasing out for income above $250,000 (single) and $500,000 (joint).

The cap reverts to $10,000 in 2030 unless extended.

🚀 5. QSBS Exclusion Expanded for New Investors

If you or your investors purchase Qualified Small Business Stock (QSBS) on or after July 4, 2025, new exclusion tiers apply when held for:

• 3–4 years: 50% gain exclusion

• 4–5 years: 75% exclusion

• 5+ years: 100% exclusion

Other key changes:

• The aggregate gain exclusion limit increases from $10M to $15M per issuer, indexed from 2027.

• The gross asset limit for eligible C corps rises from $50M to $75M.

These updates make QSBS even more attractive for startup founders and angel investors.

🧾 6. 1099 Threshold Raised to $2,000

Starting in 2025, businesses only need to issue Form 1099-NEC/MISC for payments totaling $2,000 or more, up from the longstanding $600 threshold.

• This limit will be adjusted for inflation starting in 2027.

• Reduces paperwork, especially for those who work with part-time contractors or vendors.

  
  

👷 7. New Deductions for Workers: Overtime & Tips

Available from 2025 through 2028, these above-the-line deductions benefit many employees and service-based business owners:

• Tip Income: Deduct up to $25,000/year in reported tips.

• Overtime Pay: Deduct up to $12,500 (single) or $25,000 (joint) of overtime earnings.

Both deductions phase out for:

• AGI over $150,000 (single)

• AGI over $300,000 (married filing jointly)

Great for workers in food service, salons, delivery, retail, or trades.

👩‍⚕️ 8. Employee Benefit Enhancements

Several important benefit changes help both owners and employees, effective from 2026 unless otherwise noted:

• Dependent Care FSAs: Contribution limit increased to $7,500 (indexed), up from $5,000.

• Telehealth & HSAs: High-deductible health plans can permanently cover telehealth pre-deductible without jeopardizing HSA eligibility (retroactive to 1/1/2025).

• Student Loan Repayment: Employers can continue offering up to $5,250/year in tax-free student loan help. Starting in 2027, this amount will be indexed for inflation.

  
  

💰 9. Estate and Gift Tax Exemption Increased

Beginning January 1, 2026, the federal estate and gift tax exemption increases to $15 million per person, up from $13.61 million in 2024. This amount will be indexed annually for inflation.

This creates an expanded opportunity for business succession and legacy planning.

🌐 10. 1% Excise Tax on Certain Foreign Cash Transfers

Starting in 2026, a new 1% excise tax applies to outbound foreign remittance transfers, mostly affecting unbanked individuals or businesses that send undocumented cash abroad.

• Applies only when the sender cannot prove U.S. citizenship or legal residence.

• Doesn’t affect typical ACH, wire, or PayPal-like business transfers with documentation.

  
  

⚡ 11. Clean Energy Credits Phase Out by Late 2025

Several Inflation Reduction Act (IRA) energy tax credits are eliminated or sunset under OBBBA. Key changes:

Credit	Ends
Electric Vehicle (EV) Tax Credit	Sept. 30, 2025
Residential Solar & Energy Upgrades	Dec. 31, 2025
Commercial Clean Energy	Gradually reduced through 2026
Alternative Fuel Refueling	Ends Dec. 31, 2026

If you’re considering green investments for your home office or business vehicles, aim to complete them by the end of 2025.

✅ Final Takeaways for Small Business Owners

• Permanent tax relief: With QBI and bonus depreciation locked in, it’s easier to plan.

• Temporary opportunities: SALT relief, tip/overtime deductions, and energy credits expire soon.

• Simplified reporting: Fewer 1099s, more flexible interest and benefit rules.

• Strategic planning: Expanded estate and QSBS rules offer long-term wealth-building options.