Major Business Tax Changes
- Viktoriya Barsukova, EA, MBA
- Jul 25
- 4 min read
The One Big Beautiful Bill Act (OBBBA) brings sweeping changes to business taxation. Here’s what you need to know about the most important provisions affecting your business.
Permanent Qualified Business Income (QBI) Deduction
Prior law: The 20% QBI deduction for pass-through businesses (sole proprietors, partnerships, S corporations, some trusts and estates) was set to expire after 2025.
New law: The 20% QBI deduction is now permanent. Starting in 2026, there is also a new minimum deduction of $400 for active business income if your total active QBI is at least $1,000. The phase-in threshold for wage and property limitations is increased to $75,000 ($150,000 for joint filers), indexed for inflation. This means more business owners can benefit from the deduction, and even small businesses with modest profits will get a minimum deduction.
Example: Sam has a workshop and earns $2,000 in QBI. Under this new law, she automatically gets a $400 deduction, even if her profits are small.
What does it mean? This change provides greater certainty and simplifies long-term tax planning. Business owners can now count on the 20% QBI deduction beyond 2025.
Permanent 100% Bonus Depreciation (Including Qualified Production Property)
Prior law: 100% bonus depreciation for qualified property was phasing out, dropping to 0% after 2026.
New law: 100% bonus depreciation is now permanent for qualified business property placed into service after Jan. 19, 2025. This includes a new provision for 100% expensing of certain nonresidential real property used in qualified production activities (manufacturing, refining, etc.), with special recapture rules. Businesses can immediately deduct the full cost of eligible property, improving cash flow and simplifying planning.
Example: Cooper Company, a manufacturer, purchased and placed in service a new machine (five-year MACRS property) on Feb. 1, 2025, for $500,000. The machine was used 100% for business. Under the new law, because the machine was acquired and placed in service after Jan. 19, 2025, the business can claim 100% bonus depreciation on the full $500,000 in 2025.
What does it mean? More businesses can take advantage of full write-offs for large investments, including manufacturing-related property.
Increased Section 179 Expensing Limits
Prior law: The §179 expensing limit was $1 million, with a phaseout starting at $2.5 million.
New law: The §179 limit increases to $2.5 million, with the phaseout starting at $4 million. Both amounts are indexed for inflation. This allows businesses to expense more of their equipment and property purchases up front, rather than depreciating them over several years.
Example 1: In 2025, Chase Corp. purchased and placed in service $2 million of qualifying equipment. Since $2 million is less than the $4 million threshold, Chase Corp. can elect to expense the full $2 million under §179 (subject to the business income limitation).
Example 2: In 2025, Chase Corp. purchased and placed in service $4.5 million of qualifying equipment. $4.5 million exceeds the $4 million phase-down threshold by $500,000.
The maximum §179 deduction is reduced dollar-for-dollar by the excess:
• $2.5 million (maximum deduction)
• Minus $500,000 (excess over $4 million)
• Allowed §179 deduction: $2 million
What does this mean? Bigger purchases can be written off faster, especially for small to mid-sized businesses.
New Rules for Qualified Small Business Stock (QSBS)
Prior law: There was a 100% exclusion for gain on QSBS held more than five years, with a $10 million per-issuer limit and $50 million gross asset test.
New law: For new stock, the exclusion is phased in at 50% at three years, 75% at four years, and 100% at five years. The per-issuer limit increases to $15 million, and the gross asset test increases to $75 million, both indexed for inflation. This makes the QSBS exclusion more accessible and valuable for growing businesses and investors.
Example: Ethan is an investor who acquires stock in a domestic C corporation on Aug. 1, 2025. The corporation is a qualified small business C corporation, and its gross assets have never exceeded $75 million. The corporation is engaged in a qualified trade or business (not a service, financial organization, or other excluded business). Ethan acquires the stock at original issuance, directly from the company, in exchange for cash.
Ethan invests $1 million and receives 100,000 shares. He holds the stock for five years and sells all his shares on Aug. 2, 2030, for $20 million. The gain is $19 million.
Exclusion:
• Greater of $15 million (new limit) or
• 10x his basis ($10 million) = $15 million excluded
• $4 million of gain still taxable
If he sold after three or four years, only 50% or 75% would be excluded.
What does this mean? Greater tax benefits and flexibility for founders, startups, and investors.
Changes to Forms 1099-K, 1099-NEC, and 1099-MISC
Prior law: All had a $600 threshold.
New law:
• 1099-K threshold reverts to $20,000 and 200 transactions (retroactive for 2025)
• 1099-NEC and 1099-MISC threshold increases to $2,000, indexed for inflation
Example: Ed, a self-employed artist, earns:
• $1,500 from PayPal/Venmo (50 sales) → No 1099-K
• $2,500 from a local business (check) → Will receive 1099-NEC
• $1,800 (Zelle) → Still gets 1099-NEC under old rules, but would not under 2026+ threshold
What does this mean? Fewer forms for small transactions; less administrative burden.
Termination of Energy and Clean Vehicle Credits
Ended Early:
• Clean vehicle credits: After Sept. 30, 2025
• Alternative fuel refueling: After June 30, 2026
• Energy efficient home improvements: After Dec. 31, 2025
• Residential clean energy: After Dec. 31, 2025
• New energy-efficient home credit: After June 30, 2026
Conclusion
The OBBBA permanently extends many business tax benefits, increases expensing and depreciation opportunities, and simplifies reporting for many small businesses. However, it also ends or limits several energy-related incentives.
San Diego Precision Tax Service
Comments