How can recent tax law changes affect small businesses?

 

Recent U.S. tax law changes under the One Big Beautiful Bill Act (OBBBA), signed in 2025, bring several benefits to small businesses by making key deductions permanent and expanding expensing options. These reforms aim to provide tax certainty, boost investment, and improve cash flow. However, state-level variations and compliance adjustments could add administrative burdens.​

 

Key Deductions Extended

 

The 20% Qualified Business Income (QBI) deduction is now permanent, with eased phase-outs and a new $400 minimum for eligible owners, helping pass-through entities like sole proprietorships and partnerships retain more earnings.

Section 179 expensing limit doubled to $2.5 million (phase-out at $4 million, inflation-adjusted), allowing immediate write-offs for equipment and property.

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100% bonus depreciation is restored permanently for new and used assets.​​

 

Expensing and Credits Boosted

 

Immediate R&D expensing is back for domestic costs after December 2024, with retroactive relief for small firms (under $31M receipts) back to 2022.

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Business interest deductions rise to 30% of adjusted taxable income (using EBITDA), easing limits for leveraged operations.

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Childcare credit maxes at $500K (40% rate) generally, or $600K (50% rate) for small businesses, plus pooling with third parties.​

 

International and Personal Impacts

 

GILTI deduction drops to 49.2% and FDII to 36.5%, favoring domestic over foreign operations.

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Higher personal standard deductions ($16,100 single/$32,200 joint) and retirement catch-ups (up to $11,250 for ages 60-63) benefit owner-employees.

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QSBS gain exclusion expands (per-issuer cap $15M, assets to $75M), aiding startups in raising capital.​

 

Potential Challenges

 

Small businesses must track inflation adjustments and state decoupling from federal rules, which could raise effective taxes in non-conforming states.

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Owners earning over $150K face Roth-only catch-ups, shifting tax strategy.

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Consult a tax pro for personalized planning, as itemizing may still outperform standard deductions.