Small Business Tax Law Changes
- Steve Julal
- Sep 25
- 2 min read
The One, Big, Beautiful Bill Act (OBBBA), signed into law on July 4, introduces several tax changes relevant to small business owners. Below is a summary of the key provisions:
Depreciation and Expensing
100% Bonus Depreciation: Permanently restores full first-year depreciation for eligible assets acquired after January 19, 2025.
Qualified Production Property: For construction projects in the United States beginning after January 19, 2025 and before 2029, a provision has been introduced allowing 100% first-year depreciation for specified nonresidential real property utilized in manufacturing.
Section 179 Expensing: For 2025, the maximum deduction increases to $2.5 million, with a phase-out starting at $4 million in assets placed in service. Amounts will be indexed for inflation beginning in 2026.
Research & Development (R&E)
As of 2025, businesses may immediately deduct qualified domestic R&E expenses rather than amortizing them over a five-year period. This provision applies retroactively to tax years commencing after 2021, with special elections available for expenses incurred during the 2022–2024 period.
Business Interest Expense
Beginning in 2025, businesses will be permitted to calculate deductible interest based on adjusted taxable income (ATI) without reducing it by depreciation, amortization, or depletion, thereby enabling greater deductions.
Qualified Small Business Stock (QSBS)
Applicable for stock issued after July 4, 2024, gains on QSBS can now be excluded on a tiered basis:
After 3 Years | After 4 Years | After 5 Years |
50% Exclusion | 75% Exclusion | 100% Exclusion |
Other Key Changes
Excess Business Losses: The disallowance rule for noncorporate taxpayers has now been made permanent.
Paid Family & Medical Leave Credit: The employer credit is made permanent, with updates to wages and insurance coverage rules.
Employer-Provided Child Care:
| Credit Percentage | Maximum Credit |
Other Business Entities | 40% of Qualified Expenses | $500,000 |
Small Businesses | 50% for Small Businesses | $600,000 |
** Indexed for inflation after 2026.
Termination of Clean-Energy Incentives
Several energy-related credits and deductions will be phased out, including those for commercial clean vehicles, refueling property, energy-efficient buildings and homes, clean hydrogen production, and sustainable aviation fuel.
Looking Ahead
The IRS is expected to release additional guidance in the coming months. If you have questions about how these changes affect your business, reach out for personalized advice.
