The One Big Beautiful Bill Act (H.R. 1) has been making waves since it became law on July 4, 2025. Designed to reform tax policies and address economic challenges, this legislation has both exciting opportunities and pressing challenges for small business owners. Here’s what you need to know about the key changes, how they affect you, and steps you can take to position your business for success.
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The Good News for Small Businesses
While navigating the complexity of any new legislation can feel daunting, the One Big Beautiful Bill (OBBB) introduces some highly beneficial provisions for small businesses. These updates can mean significant savings and opportunities to reinvest into your business. Here’s a breakdown:
1. Permanent 20% Qualified Business Income (QBI) Deduction
This is a big win for sole proprietors, LLCs, partnerships, and S corporations. Previously set to expire at the end of 2025, the QBI deduction is now permanent. This ensures eligible businesses can continue to deduct up to 20% of their qualified income, offering a substantial tax break.
What this means for you:
- You’ll avoid a hefty tax increase that many feared would accompany the expiration of this deduction.
- Planning your finances for the long term becomes simpler, as the tax burden remains predictable.
2. Immediate Deductions for R&D Expenses
Under the OBBB, small businesses can now deduct 100% of U.S.-based research and development (R&D) expenses immediately. Previously, businesses had to spread these deductions over five years, negatively impacting cash flow.
Why this matters:
- Improved cash flow empowers you to invest quickly in innovation and technology.
- Eligible small business owners can even amend prior years’ tax returns to claim R&D deductions retroactively.
3. Expanded Write-Offs for Property and Equipment
Small businesses can now write off the full cost of qualifying property and equipment (think new machinery, vehicles, or software) in the year they purchase it. Known as “bonus depreciation,” this provision used to phase out over time, but the OBBB makes it permanent. Additionally, the cap for Section 179 deductions has increased from $1.25 million to $2.5 million.
How this helps:
- Big purchases for your business, like a delivery van or specialized software, can provide immediate tax relief.
- You can confidently invest in tools knowing that you’ll save on taxes in the same year.
4. Enhanced Tax Credits for Employee Benefits
To support employers, new and expanded tax credits are now available:
- Paid Leave Tax Credit: Helps offset the costs of providing paid leave, even for businesses in states where leave is required.
- Childcare Expense Credit: Businesses can now claim up to 50% of childcare costs, encouraging the setup of on-site or shared childcare services.
- Student Loan Repayment Credit: Employers can contribute up to $5,250 toward employees’ student loans tax-free.
These incentives not only improve employee satisfaction but also enhance your ability to attract and retain top talent in today’s tight labor market.
5. Simplified IRS Reporting for Payment Apps
For those who use apps like PayPal, Venmo, or CashApp for business payments, the OBBB significantly raises the IRS reporting threshold. Now, these third-party apps must only report income if a user has over $20,000 in payments and 200+ transactions annually.
Challenges Small Business Owners Need to Watch For
While the OBBB introduces some fantastic opportunities, there are also hurdles to anticipate. Understanding these challenges can help you plan ahead:
1. Rising Borrowing Costs
The bill is projected to increase the national deficit by $3.4 trillion over the next decade. This could lead to higher interest rates, making loans and credit lines more expensive for small businesses.
What you can do:
- Secure loans or lines of credit with fixed interest rates now to lock in current rates.
- Regularly review your financing options and cash flow to ensure you can weather potential increases.
2. Cuts to Healthcare Programs
The act reduces funding for Medicaid and allows subsidies under the Affordable Care Act (ACA) to expire at the year’s end. This could significantly increase healthcare costs for small businesses and their employees, and limit access altogether for some.
Actionable steps:
- Explore group healthcare plans or health reimbursement arrangements (HRAs) as alternatives to individual coverage.
- Join or organize a healthcare purchasing pool with other local businesses to negotiate better rates.
3. Tariffs Are Back in Full Force
Tariffs on imported goods, including raw materials and equipment, are set to rise substantially. Small businesses importing goods from countries like Brazil, Mexico, or China could face additional costs of up to 50% on some items, such as steel, aluminum, and electronics.
Preparation tips:
- Diversify your supply chain to mitigate the impact of targeted tariffs.
- Optimize pricing strategies or sourcing options to adapt to cost increases.
4. Reduced Consumer Protection Agency Funding
With significant cuts to the Consumer Financial Protection Bureau (CFPB), protections against predatory lending may become weaker. This puts small businesses at greater risk of scams or unfair lending practices.
To safeguard your business:
- Choose lenders carefully and read loan terms thoroughly.
- Consider consulting a financial advisor before taking on significant debt.
Steps Small Business Owners Should Take Now
Navigating these changes may feel overwhelming, but taking proactive steps can help you adapt. Here are some practical tips:
Consult with a tax professional.
Tax strategies are essential to benefitting from the new legislation. An accountant can help you identify which deductions and credits apply to you and how to amend prior returns if needed.
Plan major investments wisely.
Evaluate your capital expenditures, from new equipment to R&D investments. With expanded deductions in place, timing these purchases strategically can boost your bottom line.
Assess your employee benefits.
Review your HR policies to incorporate tax-advantaged benefits, like paid leave and childcare support. These perks can make your business more competitive and appealing to job seekers.
Secure financing early.
If you think you’ll need funding in the next few years, act now to secure low-interest loans or establish a line of credit to protect yourself against rising rates.
Stay ahead of tariffs.
Regularly review your supply chain and factor new tariffs into your pricing models. Explore alternatives or renegotiate with current suppliers to offset increased costs.
Final Thoughts
The One Big Beautiful Bill Act offers small business owners valuable opportunities to save on taxes and invest in growth, but it also introduces challenges like higher borrowing costs and healthcare cuts. By educating yourself and working with professionals, you can make thoughtful decisions to maximize the benefits while mitigating risks.
