The One Big Beautiful Bill Act (OBBBA), signed into law in 2025, brings meaningful changes for small and midsize businesses. For owners of S-corporations, partnerships, LLCs, and sole proprietorships, the new law creates greater long-term certainty and several opportunities to lower taxable income.
Permanent Tax Benefits for Pass-Through Entities
The OBBBA makes the Qualified Business Income (QBI) deduction under Section 199A permanent. This deduction allows eligible owners of pass-through entities to exclude up to 20% of qualified business income from taxation.
For tax years beginning after December 31, 2025, the income thresholds which are used to phase out the deduction have been expanded to $75,000 for single filers and $150,000 for joint filers. In addition, business owners who earn at least $1,000 of qualified income from an activity in which they materially participate can now claim a minimum $400 deduction.
By removing the expiration date and expanding access, the law helps business owners plan with confidence and preserve more of their earnings.
Bonus Depreciation and Expensing
Under OBBBA, 100% bonus depreciation is once again available for qualified property acquired and placed in service after January 19, 2025. This provision applies to new and certain used business assets, allowing the full cost to be deducted in the year of purchase.
The law also raises the Section 179 expensing limits. The deduction cap increases to $2.5 million, with a phase-out threshold of $4 million, and both figures will now adjust automatically for inflation.
Together, these updates make it easier for small businesses to invest in equipment, technology, and infrastructure, while managing cash flow efficiently.
New Opportunities With Qualified Small Business Stock
The OBBBA enhances the benefits of Qualified Small Business Stock (QSBS) for shares issued after July 4, 2025. The new rules introduce tiered exclusions based on how long the stock is held:
- 50% exclusion for a three-year holding period
- 75% exclusion for a four-year holding period
- 100% exclusion for a five-year holding period
The maximum exclusion per issuer rises from $10 million to $15 million, and the gross asset limit for eligible issuers increases from $50 million to $75 million, both indexed for inflation.
These changes encourage long-term investment in growing businesses and reward owners and investors who stay committed over time.
Restored Business Interest Rules
The OBBBA also revises how businesses calculate deductible interest under Section 163(j). The law restores the EBITDA-based limit, meaning companies can now calculate adjusted taxable income before accounting for depreciation and amortization.
This restoration generally allows more interest expense to be deducted, which can be helpful for businesses financing new equipment or expansion projects. The main provisions take effect for tax years beginning after December 31, 2024, with coordination adjustments applying after December 31, 2025.
Why Strategic Planning Matters
These changes may look straightforward, but how they apply depends on the structure and financial activity of each business. An LLC that reinvests profits may benefit differently from an S-corporation that distributes income to shareholders.
Strategic tax planning can help you:
- Choose the most effective entity structure for your future goals
- Time purchases to maximize deductions
- Evaluate whether bonus depreciation or Section 179 expensing offers greater benefits
- Integrate investment and income planning with your overall tax strategy
Working with a CPA helps ensure that every available deduction and exclusion aligns with your specific situation.
FAQs
When do these OBBBA changes take effect?
Most provisions for pass-through entities apply to tax years beginning after December 31, 2025. The QSBS rules apply to stock issued after July 4, 2025, and the interest-deduction updates take effect for tax years beginning after December 31, 2024.
Will my business automatically qualify for these deductions?
Not necessarily. Eligibility depends on your income, business structure, and level of participation.
Can a CPA help me adjust my strategy to take advantage of the new rules?
Yes. A CPA can help you determine which provisions apply, prepare accurate documentation, and build a long-term plan that fits your goals.
Why You Should Talk to a CPA Before You Make Your Next Move
The OBBBA creates significant opportunities for business owners, but every advantage depends on proper timing and reporting. A proactive plan can help you maximize deductions, reduce taxable income, and make smarter financial decisions.
At Myrick CPA, we work with clients across the country to make sense of complex tax laws. Our secure online portal and virtual consultations make it easy to collaborate and plan from anywhere.
If you operate a small business or manage a pass-through entity, now is the time to review your strategy. Schedule a consultation today to ensure your business is positioned to take full advantage of the new federal tax laws.
