The One Big Beautiful Bill Act Extends Tax Breaks for Small Businesses
The National Federation of Independent Business called the One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, a historic victory for small business owners.1 Here are three important changes to pay close attention to.
Qualified business income deduction
Owners of sole proprietorships, partnerships, S corporations, and certain LLCs may be eligible for a qualified business income (QBI) deduction — also called the Section 199A deduction. The deduction, equal to 20% of qualified business income, was scheduled to expire in 2025, but the new legislation makes it permanent and expands eligibility.
The deduction may be limited or eliminated if taxable income exceeds certain thresholds. For example, a married couple filing jointly in 2026 would generally be able to claim the full QBI deduction if their taxable income was less than $403,500; if the couple’s taxable income was between $403,500 and $553,500, the deduction would be phased out. (The 2026 phaseout range for all other filing statuses is $201,750 to $276,775.)
Also starting in 2026, the legislation establishes a new minimum $400 QBI deduction for those with at least $1,000 of qualified business income from businesses in which they materially participate. These QBI amounts and thresholds will be indexed for inflation after 2026.
Enhanced Section 179 expensing
Section 179 of the Internal Revenue Code (IRC) allows businesses to elect to deduct the full cost of depreciable tangible personal property, computer software, and specific improvements to nonresidential buildings (including roofs, HVAC systems, and security systems) in the year of purchase. Effective for property placed in service in 2025, the legislation doubled the maximum deduction for expensing under IRC Section 179 to $2.5 million (adjusted to $2.56 million for 2026). The allowable Section 179 maximum deduction amount is reduced when the cost of Section 179 property placed in service during the year exceeds an established phaseout threshold ($4.09 million in 2026).
Number of tax returns claiming the Section 199A deduction (in millions), by adjusted gross income (2023)
Source: Internal Revenue Service, 2026 (figures are rounded)
100% bonus depreciation
The legislation permanently re-establishes the additional first-year depreciation deduction at 100% for qualifying property acquired after January 19, 2025. This allows businesses to immediately deduct the full cost of new or used equipment, machinery, and other qualifying property rather than depreciate the cost over several years.
In addition to the provisions discussed here, the One Big Beautiful Bill Act provides certainty and stability by making permanent a host of tax provisions that would otherwise have expired at the end of 2025. If you have any questions, you should discuss your individual circumstances with a tax professional.
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