Bonus Depreciation, QSBS, and More: What Trump’s One Big Beautiful Bill Could Change for Small Businesses

  • Last Modified : July 25, 2025
Small business owners review tax changes under Trump’s One Big Beautiful Bill

On July 4, 2025, President Donald Trump signed into law the One Big Beautiful Bill Act (OBBBA), a wide reaching tax reform package that delivers permanent tax relief and simplifies rules for small businesses. While it builds on the 2017 Tax Cuts and Jobs Act (TCJA), this new law introduces significant updates, especially for those running pass through businesses or launching early stage startups.

Key Takeaways

  • The One Big Beautiful Bill is now law and brings back 100% bonus depreciation while expanding Section 179 expensing for small businesses.
  • Changes to QSBS offer more clarity to startup founders and investors, including permanent 100% capital gains exclusion for eligible stock.
  • The $10,000 SALT cap is rolled back though the full impact will depend on where business owners live and how they file.
  • A range of tax credits, including paid leave, childcare and student loan benefits are now more generous and easier for small businesses to use.

Table of Contents

A Sweeping Bill to Simplify Small Business Taxes

In early summer 2025, President Trump outlined what he called the “One Big Beautiful Bill.” It cleared Congress in late June and was signed into law on July 4. The aim was simple on paper: make key provisions of the 2017 tax reforms permanent and roll out more targeted relief to small firms.

One major change is the permanent extension of the 20% pass-through deduction. Business owners who operate as sole proprietors, partnerships, or S-corporations can now continue deducting a portion of their qualified business income (QBI) without worrying about expiration dates. The deduction was previously set to expire at the end of 2025. For businesses with tighter margins, the certainty of this rule staying in place helps with staffing decisions, equipment planning and long term goals.

Another central piece is the return of full bonus depreciation. Companies can now fully deduct the cost of new or used equipment and business property in the year it’s purchased and placed in service after January 19, 2025. This measure had started phasing out under the TCJA and was down to 60% in 2025. The new law restores it to 100%, starting with assets placed in service after January 19, 2025.

The law also trims down overlapping credits and makes the tax filing process easier. These changes don’t grab headlines, but for business owners juggling compliance, they can make a real difference.

To pay for these updates, the law rolls back some clean energy tax breaks from the Inflation Reduction Act. That trade-off has already drawn criticism, especially from businesses involved in green tech. But the bill’s message to small businesses is clear: expect lower tax bills, less red tape, and more flexibility on when and how to invest.

Changes to QSBS Could Reshape Startup Investment

One of the more technical yet impactful changes in the tax code involves the Qualified Small Business Stock (QSBS) provisions. These provisions provide tax benefits on gains from investing in early-stage companies, but the tax code has long muddied the waters for founders, investors and even their accountants.

The One Big Beautiful Bill has simplified the QSBS exemption and aligned it across states and asset types. For stock issued after July 4, 2025, the gain exclusion cap increases from $10 million to $15 million, and the corporate asset threshold rises from $50 million to $75 million, both indexed for inflation starting in 2027.

The full 100% capital gains exclusion is now made permanent for eligible stock. Previously, that exemption had applied only under a patchwork of requirements and phase-outs. The law also introduces tiered exclusions: 50% after three years, 75% after four years, and 100% after five years.

This update clears up the gray area for angel investors and startup founders who frequently rely on equity offers to raise capital or keep top-tier talent.

It also widens the window in which stock must be held to qualify. The minimum holding period was maintained at five years for the full exclusion, but there’s new guidance on how other corporate events such as mergers, spinoffs and capital restructuring, just to name a few, affect that clock. These small but specific clarifications make it easier to evaluate risk and exit strategies.

For venture-backed firms or solo founders, this could lower the cost of capital and encourage more long-term plays. It’s not a game changer for all businesses because QSBS still applies only to C corporations, but those already using it may now see more predictable benefits.

Restoring Full Bonus Depreciation Has Broad Impact

Full bonus depreciation is back and this time, it’s permanent.

The new law signed on July 4 restores 100% bonus depreciation for qualifying business assets, starting from January 19 2025. That means business owners who invest in equipment, vehicles or software in 2025 can write off the entire cost in the first year, rather than spreading it out over time.

This change is expected to be especially useful for companies in construction, logistics, retail, or manufacturing. For a business planning to expand, the ability to deduct that $200,000 equipment purchase upfront instead of over seven years could be the difference between moving now or waiting another year.

Under the 2017 tax law, bonus depreciation was already a popular tax planning tool. But beginning in 2023, the write-off started to phase out dropping to 60% in 2025. With the One Big Beautiful Bill, that trend has been reversed and the full 100% deduction is locked in going forward.

The update also expands eligibility. Used equipment still qualifies, but now the law also includes a broader category of qualified improvement property, which covers many interior upgrades in office and retail spaces. That may not sound exciting, but for small businesses redoing their floor plan or outfitting new locations, it can be a meaningful cost-saver.

One catch is that the rule only applies to items placed in service on or after January 19, 2025. That detail matters, especially for businesses that placed orders early this year but didn’t install or start using the assets until later. Getting the timing wrong could mean missing the full deduction.

New and Expanded Tax Credits Support Working Families

Alongside the headline tax cuts, the law introduces a few permanent credits aimed at helping small employers support their teams. These updates are designed to lower out-of-pocket costs for businesses that offer benefits like paid leave, student loan help, or childcare assistance.

One of the most talked-about changes is the paid leave tax credit, which is now a permanent feature. What’s different this time is that businesses in states with their own mandatory paid leave programs can still claim the federal credit. In addition, the credit can now be applied toward employer-paid insurance premiums tied to the leave period.

There’s also good news for employers offering child care support. The law raises the child care expense credit from 40% to 50% of qualifying costs. That covers on-site care or nearby centers used by employees. Even better, small businesses in the same area can now band together to set up shared care programs and still access the credit.

Another benefit that made it through is the student loan repayment assistance program. This program helps employers to contribute up to $5,250 toward each employee’s student loans tax-free. That benefit was about to expire, but it’s now made permanent.

These are not just employee perks, they are important tools for attracting and retaining talent. In a tight labor market, having these federal supports locked in can give smaller employers an edge they didn’t have before.

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Rolling Back the $10,000 SALT Cap Could Ease the Pressure for Some

The new law also includes a major change that has been debated for years, the lifting of the $10,000 cap on state and local tax (SALT) deductions.

Under the previous tax rules, individuals could only deduct up to $10,000 in total for property taxes, state income taxes and other local levies. This cap introduced in 2017, hit hardest in states with higher tax rates such as California, New York, New Jersey and Illinois. For many business owners who file through their personal returns, it may lead to losing out deductions that used to help them offset larger incomes.

With the cap now removed, eligible filers can fully deduct the amount they pay in state and local taxes, as long as they itemize. For a business owner in a high-tax area earning above $250,000, the change could translate into thousands of dollars in annual savings.

However, the actual benefit will vary based on income, filing status, and where the business is located. Tax professionals are already noting that for some pass-through entities, this could renew interest in changing business structure or revisiting tax strategy ahead of year-end planning.

This move will not affect all small businesses equally, but in higher-tax states where the SALT cap was limiting deductions for many, it could bring noticeable relief.

No Change to 199A Deduction But Uncertainty Remains

One part of the tax code that was watched closely during the legislative process was Section 199A, the qualified business income deduction. This provision allows eligible pass-through businesses like sole proprietors, partnerships and S-corporations to deduct up to 20% of their qualified business income on their personal tax return.

The provision is modified and made permanent with respect to the treatment of qualified business income, qualified Real Estate Investment Trust (REIT) dividends and qualified publicly traded partnership income. This is done by repealing §199A (i) Under prior law the determination of whether the deduction would apply had an expiration date for taxable years beginning after December 31, 2025 (See IRC §§ 13213(b)(8)]; 7801(b)]. 199A(i) prior law].

And, this permanence allows for a predictable environment for tax planning. That will allow business owners to reinvest profits with confidence, or to change entity structures without fear of higher taxes in 2026.

That has created some unease among tax advisors and small-business owners. For now, they still have the benefit in place but the clock is ticking. If Congress does not act before the end of 2025, many small-business owners could see a significant increase in their tax liability starting in 2026.

Some professionals believe this temporary status makes long-term planning harder. Businesses that are considering whether to reinvest profits or change entity structure may be unsure how to factor in a deduction that could vanish in 18 months.

While nothing has changed yet, this is an area that many will continue watching as Washington moves toward the 2026 tax sunset period.

Capital Investment Expensing Extended for Small Businesses

Another win for small business owners comes from the update to Section 179. This is the tax rule that lets businesses immediately write off the cost of equipment, software, and certain vehicles instead of spreading the deductions over several years.

That write-off limit has now been increased from $1.22 million to $2.5 million. And the phase-out threshold , the point where the deduction starts getting reduced will begin at $4 million in purchases. Both amounts are now tied to inflation, which means they will grow automatically in the years ahead.

Unlike bonus depreciation, which is also part of this law, Section 179 is often used by smaller businesses making more regular, mid-size purchases. It covers a wide range of items, from computers and office furniture to machinery and software. And because it applies to both new and used property, it’s more flexible for firms buying secondhand.

The idea here is not new, but the new enhanced limits make it easier to plan purchases with more confidence. When small businesses know upfront what they can deduct and how much they tend to make those decisions faster. That is especially useful during tax season when timing matters.

Now, with the deduction amount locked in and indexed, businesses may not have to second-guess when to reinvest or whether to wait until the rules are finalized. It removes some of the usual tax planning fog that builds up late in the year.

Bonus Depreciation vs. Section 179 Expensing

Feature

Bonus Depreciation (100%)

Section 179 Expensing

Eligibility

New and used assets

New and used assets, including off-the-shelf software

Deduction Limit

No dollar limit

Increased to $2.5 million (indexed for inflation)

Phase-Out Threshold

None

Begins at $4 million in total equipment purchases (indexed for inflation)

Applies to

Most capital equipment, some improvements

Equipment, software, certain vehicles

Expiration or Sunset

Permanent

Made permanent with inflation adjustment

Applies in First Year?

Yes

Yes

Used by

Often larger or fast-growing businesses

Frequently used by small businesses and startups

Interaction With Other Deductions

May reduce business income quickly, depending on usage

Can be combined with bonus depreciation

 

What to Expect Next

With the new law now signed and the provisions taking effect from January 2025, there is going to be a rush among accountants and tax planners to help clients adjust strategies. The IRS will also need to issue guidance on several items, particularly around the details of QSBS treatment and the coordination of new credits with state programs.

In the meantime, small business owners should begin reviewing their equipment investments, employee benefit offerings, and capital structure choices. There is still time to prepare for the 2025 tax year, but understanding which changes apply and how to use them properly will require a closer look.

For many, this law offers relief that has been missing for the past few years. But for others, particularly those outside the high-income or investor class, the immediate impact may be less obvious. That is why it helps to revisit each area- credit, deduction, capital gain and weigh whether the change can support their goals.

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