What the One Big Beautiful Bill Act may mean for your small business

1. Qualified business income deduction is now permanent

What changed? The qualified business income (QBI) deduction allows small business owners and self-employed individuals to deduct up to 20% of qualified business income from certain pass-through businesses and sole proprietorships, subject to eligibility rules and limitations. Originally set to expire at the end of 2025, this deduction is now permanent and has been expanded so that more taxpayers qualify.

The details:

• There's now a $400 minimum deduction for those with at least $1,000 in QBI from businesses in which they “materially participate” in business operations. This means that if a taxpayer earns $1,000 in QBI from a business they materially participate in, they will still receive a minimum deduction of $400, even though 20% of their QBI is less than that.
• The thresholds at which the deduction begins to phase out have also increased, from $50,000 to $75,000 for single filers and from $100,000 to $150,000 for joint filers. These amounts will adjust for inflation beginning in 2026.

What this may mean for you: If you’re eligible, work with your accountant to process this deduction and factor it into your broader tax strategy.

2. Qualified small business stock gain exclusion is expanded

What changed? Tax rules for the sale of qualified small business stock (QSBS) have changed, giving founders and early investors the flexibility to sell their shares within the first five years while still keeping valuable tax advantages.

The details: In the past, you had to hold your shares for more than five years to potentially exclude some or all eligible gain from federal income tax, subject to detailed QSBS requirements and statutory limits. Now, for QSBS acquired after July 4, 2025, the tax benefits phase in over time. The longer you hold the QSBS, the more profits you can generally keep tax-free:

• 50% exclusion after three years
• 75% exclusion after four years
• 100% exclusion after five years

Additionally, the amount you can exclude from taxes on profits from one company has gone up from $10 million to $15 million (or if greater, 10x the adjusted basis of the stock). This limit will automatically adjust for inflation. The government also expanded the size limits for eligible companies, which means more businesses now qualify for these tax benefits.

What this may mean for you: If you need access to capital, you now have the flexibility to sell your business shares earlier while still potentially excluding a portion of capital gains.

3. Increased limits for expensing depreciable business assets

What’s changed? Qualifying business owners can now deduct a greater portion of qualifying property, such as equipment, vehicles or other machinery, in the year it was purchased and placed in service. You no longer have to spread that deduction over the course of the asset’s lifespan.

The details:

• Generally, the 100% bonus depreciation has been permanently restored for qualified property acquired after Jan. 19, 2025 and subject to applicable placed in service and eligibility rules. For businesses that qualify for Section 179 expensing, the dollar limit for the expensing election was increased from $1 million to $2.5 million, and the phase-out amount increased from $2.5 million to $4 million, with an annual adjustment for inflation.
• Taxpayers can claim the Section 179 deduction up to the new limit, with any remaining qualifying property eligible for 100% bonus depreciation. However, large first-year depreciation deductions may not always be ideal, as they could reduce future tax benefits or impact other deductions, like the QBI deduction.

What this may mean for you: Businesses should carefully consider the timing of asset purchases and deductions. Large upfront deductions can lower taxes today but may reduce flexibility or potential benefits in future years.

4. New deduction floor for charitable contributions made by corporations

What’s changed? Corporations can now only claim a deduction for charitable contributions if the total of these contributions exceeds 1% of the corporation’s taxable income.

The details:

• This 1% floor may pose a challenge for small corporate businesses, as many donate less than 1% of their taxable income. For example, smaller contributions to local organizations or sponsorships for a high school team may no longer be deductible because they do not reach the 1% floor.
• Charitable contribution deductions are limited to 10% of taxable income. Contributions above the applicable corporate charitable deduction limit may be eligible for carry-forward, subject to detailed rules.

What this may mean for you: You may need to group your corporate giving into a single tax year to surpass the 1% threshold, which helps ensure your charitable acts remain tax-deductible.