What the One Big Beautiful Bill Act means for small businesses in 2025
With the implementation of the One Big Beautiful Bill Act (OBBBA) underway, the IRS has announced that for the 2025 tax year, there will be no changes to existing information reporting forms such as 1099s or W-2s.
However, business owners should not interpret this as a reason to delay planning. While the IRS has made this announcement for the 2025 reporting, new requirements could begin as early as 2026, particularly related to tip income and overtime compensation.
Employees and self-employed individuals are permitted to deduct up to $25,000 of tip income on their individual income tax returns; this deduction applies per return rather than per taxpayer. Additionally, up to $12,500 (or $25,000 for joint filers) in overtime pay may be excluded from taxable income. These deductions gradually phase out at higher income levels, thereby increasing the complexity of planning for both employees and business owners.
Another change that may benefit many small businesses is the increased reporting threshold for Form 1099-K. Beginning in 2025, businesses will only receive a 1099-K from third-party payment processors if they’ve processed over $20,000 in payments and had more than 200 transactions — a significant jump from the previously proposed $600 threshold. This provides relief to small operators who use platforms like PayPal, Square, or Venmo for occasional business transactions.
Additionally, the OBBBA introduces a new above-the-line charitable deduction for non-itemizing taxpayers. Individuals can now deduct up to $1,000 ($2,000 for joint filers) in qualifying charitable contributions, potentially lowering their tax bills while supporting community nonprofits.
Businesses should stay ahead of these changes and maintain solid records in 2025 to ensure smooth compliance later.
This guidance is especially crucial for small businesses without in-house tax or accounting expertise. That’s where Boyer & Ritter comes in as a trusted advisor, offering strategic guidance and proactive planning.
To help you navigate these provisions, below are six of the OBBBA's most impactful changes for small businesses and their owners, along with practical advice for maximizing tax savings and compliance in the 2025 tax year.
1. Permanent 100% bonus depreciation for business property
What Changed:
The OBBBA makes 100% bonus depreciation permanent for most tangible business assets (with a recovery period of 20 years or less) placed in service after January 19, 2025.
Impact:
- Immediate deduction of qualifying asset costs
- Improved cash flow for businesses investing in equipment or technology
Action:
If you are planning significant capital expenditures, consider accelerating purchases to take advantage of immediate expensing.
2. Section 179 expensing limits increased
What Changed: Expensing limits under Section 179 are increased to $2.5 million, with a $4 million phase-out threshold for property in service this year; both limits are indexed for inflation.
Impact:
- Expanded access to upfront deductions for small and midsize businesses
- Can be used alongside bonus depreciation for even greater benefits
Action:
If you are planning significant capital expenditures, consider accelerating purchases to take advantage of the increased section 179 deduction. Review your 2025 capital investments and consult your advisor to determine the most effective use of both provisions.
3. Increased State and Local Tax (SALT) deduction limit
What Changed:
The SALT deduction cap is increased to $40,000 ($20,000 for married filing separately) through 2028, with a phase-down for incomes over $500,000. The bill preserves the pass-through entity tax (PTET) workaround.
Impact:
- Offers significant relief for pass-through owners in high-tax states
- PTET elections remain a valuable tool for managing state tax burdens
Action:
Review your 2025 tax planning strategies to maximize the increased SALT deduction, consider the timing of tax payments, and evaluate the impact of PTET elections in light of federal and state conformity rules, which may continue to evolve in response to these federal changes.
4. Enhanced, permanent Qualified Business Income (QBI) deduction
What Changed:
OBBBA makes the 20% QBI deduction permanent, with expanded phase-in thresholds ($75,000 for single filers, $150,000 for joint) and a guaranteed minimum deduction of $400 (starting in 2026) for materially participating owners with at least $1,000 in QBI.
Impact:
- More small business owners qualify for the full 20% deduction
- Assurance of a base-level benefit even for those taxpayers with minimal QBI or those phased out under prior rules.
Action:
To take full advantage of the now-permanent QBI deduction, review your entity structure to ensure maximum QBI deduction. Ensure your business activities qualify as “active” and that you materially participate to take advantage of the new minimum deduction or consult with your advisor to help maximize your QBI deduction based on your business structure and involvement.
5. Immediate expensing of domestic R&D expenditures
What Changed:
Businesses can now fully expense domestic research and experimental (R&E) costs in the year incurred. Foreign R&E must still be amortized over 15 years.
Impact:
- Substantial tax relief for innovation and development efforts
- Qualifying businesses can retroactively apply this provision to 2022–2024
Action:
Work with your advisor to assess if amending past returns or expensing R&D in 2025 is best for you.
6. OBBA provisions starting in 2026
- Form 1099-MISC/NEC Thresholds: The threshold increases from $600 to $2,000 for payments made after December 31, 2025 (indexed for inflation).
- Gambling Loss Deduction Limits: In 2026, the deduction is limited to 90% of losses and only up to the amount of winnings.
Bottom line
The One Big Beautiful Bill Act offers significant tax-saving opportunities for small business owners. With new deductions, permanent benefits, and evolving compliance rules, planning ahead has never been more important.
Boyer & Ritter’s small business advisory team is here to help. From understanding depreciation rules to optimizing your QBI or SALT strategy, we’re committed to providing tailored guidance that works for you and your business.
