The One Big Beautiful Bill Act changed several federal tax rules that affect small-business owners, self-employed professionals, and their employees. Some provisions began in 2025, while others took effect in 2026.
The short answer: the law may create valuable deductions and planning opportunities, but it also changes reporting responsibilities and makes good recordkeeping more important. Business owners should review equipment purchases, research expenses, payroll records, estimated taxes, and entity-level planning before year-end—not only when a return is due.
What is the One Big Beautiful Bill Act?
The One Big Beautiful Bill Act, commonly called the OBBBA, became Public Law 119-21 on July 4, 2025. It made some provisions from the Tax Cuts and Jobs Act permanent and introduced additional deductions and credits for individuals and businesses.
Not every change applies to every taxpayer. Eligibility may depend on income, business structure, industry, when an expense was incurred, and whether the business maintains the documentation required to support a deduction.
Key changes for small businesses
1. The qualified business income deduction is permanent
The qualified business income deduction, often called the QBI or Section 199A deduction, was made permanent. Eligible owners of pass-through businesses—including many sole proprietorships, partnerships, S corporations, and LLCs—may generally deduct a portion of qualified business income.
The calculation can still be limited by taxable income, wages, qualified property, business type, and other factors. Making the deduction permanent gives owners more certainty, but it does not make every business or every dollar of profit eligible.
2. One-hundred-percent bonus depreciation returned
Eligible businesses may claim 100% additional first-year depreciation for certain qualified property acquired after January 19, 2025. This may allow a business to deduct the cost of qualifying equipment sooner instead of recovering it over several years.
According to the IRS Tax Guide for Small Business, the timing of acquisition and placement in service matters. A larger immediate deduction is not automatically the best cash-flow decision, so purchases should be evaluated within the business’s wider tax plan.
3. Domestic research expenses may be deducted currently
Businesses can generally deduct qualifying domestic research and experimental expenses currently beginning in 2025, or elect to capitalize and amortize them. This may be important for companies investing in software, product development, engineering, manufacturing processes, or other qualifying innovation.
The definition of qualified research is technical. Businesses should keep project records, payroll details, contractor invoices, and documentation connecting each cost to the underlying research activity.
4. Some information-reporting thresholds changed
For certain reportable business payments made after 2025, the reporting threshold increases to $2,000 and will be adjusted for inflation in later years. This can affect when businesses issue information returns such as Forms 1099.
The change does not eliminate the need to track vendor payments. Businesses should continue collecting completed Forms W-9, classifying workers correctly, and maintaining complete payment records throughout the year.
5. The excess business-loss limitation is permanent
The law permanently extended the limitation on excess business losses for noncorporate taxpayers. A loss that is limited in the current year may become a net operating loss carryforward rather than disappearing, but the timing of the deduction changes.
Owners expecting a major loss should model the result before filing. The IRS instructions for Form 461 explain the federal limitation and filing requirements.
6. The employer-provided childcare credit expanded
Beginning in 2026, the maximum employer-provided childcare credit generally increases to $500,000, or $600,000 for an eligible small business. This may create an opportunity for employers evaluating childcare facilities, qualified partnerships, or childcare resource and referral services.
The credit has detailed eligibility and expense rules, so employers should confirm that a proposed arrangement qualifies before committing funds.
What employers should know about tips and overtime
The law created temporary individual deductions for qualified tips and qualified overtime compensation for tax years 2025 through 2028. These deductions belong to eligible workers, but employers play an important role because employees need accurate payroll and information-reporting records.
The deduction for qualified overtime generally applies only to the premium portion of overtime required by the Fair Labor Standards Act—not the employee’s entire overtime payment. The maximum deduction is generally $12,500, or $25,000 for joint filers, subject to income phaseouts.
The qualified-tips deduction can be as much as $25,000, subject to occupation, reporting, income, and filing requirements. The IRS explains both deductions in its guidance for tips and overtime.
Employers should make sure payroll systems separately identify relevant compensation when required and should avoid promising employees that all tips or overtime are automatically tax-free. These are federal income-tax deductions, not a blanket exemption from every tax.
What should business owners do now?
Use this checklist to prepare for a planning conversation:
- Review equipment purchased or placed in service after January 19, 2025.
- Identify domestic research and development expenses by project.
- Confirm that vendor records and Forms W-9 are complete.
- Review payroll treatment for tips and overtime compensation.
- Recalculate estimated taxes using the new rules.
- Model the effect of QBI, depreciation, and business-loss limitations together.
- Evaluate whether planned hiring or employee benefits could qualify for expanded credits.
- Keep supporting documents with the accounting records instead of reconstructing them at filing time.
Tax provisions interact. Accelerating one deduction may reduce the value of another, affect a business loss, or change an owner’s individual return. A projection is usually more useful than evaluating each provision separately.
Frequently asked questions
Does the One Big Beautiful Bill apply to LLCs?
Yes, potentially. An LLC’s federal tax treatment depends on whether it is taxed as a sole proprietorship, partnership, S corporation, or C corporation. The provisions that apply will depend on that classification and the owner’s circumstances.
Is all overtime now tax-free?
No. The law provides a limited federal income-tax deduction for qualifying overtime compensation. It generally applies to the overtime premium required under federal law, has annual limits and income phaseouts, and does not remove every payroll or state tax.
Can my business immediately deduct new equipment?
Possibly. One-hundred-percent bonus depreciation may apply to qualifying property acquired after January 19, 2025, but acquisition dates, placed-in-service dates, property type, and elections matter.
Do I still need to track contractors if payments are below the new threshold?
Yes. The reporting threshold does not replace accurate bookkeeping, worker classification, W-9 collection, or documentation of deductible expenses.
Should I amend an earlier return because of the new law?
Not automatically. Some provisions include elections or special rules affecting earlier expenses. An amended return should be considered only after comparing it with available alternatives and confirming eligibility.
Plan before filing season
The One Big Beautiful Bill offers meaningful opportunities, but the best results usually come from planning while business decisions can still be changed. GJ Consulting Group can help review your books, payroll, projected income, and planned investments to identify the provisions relevant to your business.
Schedule a free consultation to discuss how these changes may affect your tax strategy.
This article provides general educational information and is not individualized tax, legal, or investment advice. Tax rules and IRS guidance may change, and state treatment may differ from federal law.
