How the One Big Beautiful Bill Act Impacts Small Business Owners: Tax Savings and Opportunities

The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, introduces significant tax changes that affect small business owners across the United States. This legislation builds on the 2017 Tax Cuts and Jobs Act (TCJA) and includes provisions that impact small businesses, particularly those structured as pass-through entities like sole proprietorships, partnerships, LLCs, and S corporations. At Cedarmill Financial, our AI-powered personal finance platform for entrepreneurs, we’re here to explain the key elements of the OBBBA relevant to small business owners and highlight potential tax savings opportunities. Below, we summarize the main provisions of the OBBBA that apply to typical small business owners, focusing on how they may influence your tax obligations and financial planning.

Key Provisions of the One Big Beautiful Bill for Small Business Owners

The OBBBA includes several tax-related changes that may affect small businesses. Here are the most relevant provisions, along with their potential implications.

1. Permanent Extension of the Qualified Business Income (QBI) Deduction

• What It Is: The QBI deduction, originally introduced under the TCJA, allows owners of pass-through businesses to deduct up to 20% of their qualified business income. The OBBBA makes this deduction permanent and, in some versions, proposes increasing it to 23% starting in 2026.

• Who It Affects: Approximately 26 million small business owners, including sole proprietors, freelancers, and owners of partnerships, LLCs, and S corporations.

• Potential Tax Impact: The deduction can reduce taxable income. For example, a business with $100,000 in qualified income could deduct up to $23,000 (if increased to 23%), potentially saving $5,060 in taxes at a 22% tax rate. The permanence of the deduction offers predictability for long-term financial planning.

• Cedarmill Tip: Work with a tax professional to confirm eligibility for the QBI deduction, especially if your business is service-based, as income phaseouts may apply. Use Cedarmill Financial’s tax planning tools to estimate potential savings.

2. Restoration of 100% Bonus Depreciation

• What It Is: The OBBBA reinstates 100% bonus depreciation for qualified property (e.g., equipment, machinery, and certain software) acquired and placed in service after January 19, 2025. This provision is made permanent and extends to certain manufacturing facilities through 2030.

• Who It Affects: Small businesses investing in new equipment, vehicles, or other qualifying property, particularly in industries like manufacturing or construction.

• Potential Tax Impact: Businesses can deduct the full cost of qualifying purchases in the year they are placed in service. For example, a $50,000 equipment purchase could result in a $11,000 tax savings at a 22% tax rate, improving cash flow.

• Cedarmill Tip: Plan 2025 capital purchases to align with this provision. Track investments using Cedarmill’s budgeting tools to assess cash flow impacts.

3. Increased Section 179 Expensing Limits

• What It Is: The OBBBA raises the Section 179 expensing limit from $1.25 million to $2.5 million, with the phaseout threshold increased from $3.13 million to $4 million (both indexed for inflation after 2025). This allows businesses to deduct the full cost of qualifying equipment and software in the year of purchase.

• Who It Affects: Small businesses with annual gross receipts of $31 million or less, particularly those purchasing equipment, vehicles, or technology.

• Potential Tax Impact: A $100,000 equipment purchase could be fully deducted, potentially saving $22,000 in taxes at a 22% tax rate. The higher limits expand eligibility for more businesses.

• Cedarmill Tip: Combine Section 179 with bonus depreciation where applicable. Use Cedarmill’s expense tracking tools to monitor qualifying purchases.

4. Enhanced Qualified Small Business Stock (QSBS) Rules

• What It Is: The OBBBA expands the QSBS program, increasing the gross asset value limit for qualifying C corporations from $50 million to $75 million and raising the capital gains exclusion from $10 million to $15 million for stock acquired after July 4, 2025. It also shortens the holding period for certain exemptions.

• Who It Affects: Entrepreneurs operating or investing in C corporations, particularly in sectors like technology or manufacturing.

• Potential Tax Impact: Selling QSBS after the required holding period could allow exclusion of up to $15 million in capital gains, reducing tax liability significantly.

• Cedarmill Tip: Consult a tax advisor to determine if restructuring as a C corporation aligns with QSBS benefits. Track stock holdings with Cedarmill’s investment tools.

5. State and Local Tax (SALT) Deduction Adjustments

• What It Is: The OBBBA increases the SALT deduction cap from $10,000 to $40,000 (adjusted for inflation) for taxpayers earning less than $500,000 from 2025 to 2029, reverting to $10,000 in 2030. It also preserves state-level pass-through entity tax (PTET) workarounds, allowing businesses to deduct state taxes at the entity level.

• Who It Affects: Small business owners in high-tax states (e.g., California, New York) operating pass-through entities.

• Potential Tax Impact: Using PTET workarounds, businesses could deduct state taxes beyond the $40,000 cap. For example, a business paying $50,000 in state taxes could deduct the full amount, saving $11,000 in federal taxes at a 22% tax rate.

• Cedarmill Tip: Check if your state offers PTET options and work with an accountant to implement them. Use Cedarmill’s tax tools to estimate savings.

6. Immediate Expensing for Research and Development (R&D)

• What It Is: The OBBBA allows immediate expensing of domestic R&D costs, reversing the TCJA’s requirement to amortize them over five years. Businesses with average annual gross receipts of $31 million or less can apply this retroactively to 2022.

• Who It Affects: Small businesses engaged in R&D, such as tech startups or manufacturers developing new products.

• Potential Tax Impact: A $100,000 R&D expense could be fully deducted in 2025, saving $22,000 in taxes at a 22% rate, rather than spreading deductions over five years.

• Cedarmill Tip: Document R&D activities carefully to qualify. Use Cedarmill’s expense categorization features to track eligible costs.

7. Additional Provisions

• No Tax on Tips or Overtime: Employees earning tips or overtime can deduct up to $25,000 in tip income and $12,500 in overtime income (subject to phaseouts) through 2028, which may help service-based businesses with employee retention.

• Increased Estate Tax Exemption: The estate tax exemption rises to $15 million for individuals and $30 million for joint filers, potentially simplifying asset transfers for family-owned businesses.

• Child Care Credits: Enhanced credits for employer-provided child care may allow small businesses to offer these benefits and claim deductions.

Potential Tax Savings for Small Business OwnersThe OBBBA provides several opportunities to reduce tax liabilities:

• QBI Deduction: Deduct up to 23% of qualified business income, potentially saving thousands annually.

• Bonus Depreciation and Section 179: Deduct the full cost of qualifying purchases, improving cash flow.

• SALT Workarounds: Deduct state taxes via PTET, particularly in high-tax states.

• R&D Expensing: Immediately deduct R&D costs, beneficial for innovative businesses.

• QSBS Rules: Exclude up to $15 million in capital gains for qualifying C corporation stock sales.

• Estate Tax Exemption: Higher exemptions may reduce tax burdens for family business transfers.

Planning for 2025To navigate the OBBBA’s changes, consider these steps:

1. Work with a Tax Professional: Ensure your business structure and tax strategies align with the new provisions.

2. Plan Capital Investments: Schedule equipment purchases for after January 19, 2025, to leverage bonus depreciation.

3. Evaluate Entity Structure: Assess whether a C corporation or pass-through entity best suits your needs.

4. Document R&D Expenses: Maintain records to claim immediate expensing, including retroactively.

5. Leverage Cedarmill Financial: Use our AI-driven platform at CedarmillFinancial.com to track expenses, model cash flow, and estimate tax impacts.

Looking AheadThe One Big Beautiful Bill Act introduces a range of tax provisions that could affect small business owners’ financial strategies. By understanding these changes and planning accordingly, you can position your business to benefit from potential tax savings and enhanced deductions. Cedarmill Financial’s tools are designed to help entrepreneurs manage these complexities with ease. Stay informed and consult with professionals to tailor these opportunities to your business.Questions about the OBBBA? Visit CedarmillFinancial.com for resources or contact us to learn more!

Disclaimer: Cedarmill Financial does not provide legal or tax advice. This information is general and educational. Consult a tax professional for personalized advice. Tax laws are subject to change and may impact your results.Sources:

• Tax Foundation

• Fidelity

• CNN Business

• TaxAct

• Stinson LLP

• Plunkett Cooney

• White House

• Buchanan Ingersoll & Rooney

• Holland & Knight

• KBKG

• U.S. Chamber of Commerce

• Landmark CPAs

• CNBC

• Loeb & Loeb

• NFIB

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