How the One Big Beautiful Bill Act Affects Small Businesses

If you own a small business, the so-called One Big Beautiful Bill Act is going to affect you. 

This sweeping new law makes the 2017 Tax Cuts and Jobs Act (TCJA) permanent and adds several new rules that will impact your personal and business taxes. 

Some provisions help business owners. Others take away tax breaks that many companies have come to rely on, especially those in construction, energy, or vehicle-related industries.

Below, we break down the major changes in the One Big Beautiful Bill Act that small business owners need to know. 

Whether you’re running a restaurant, dental office, or service company, these changes could affect your bottom line—and how you plan for the future.

What Is the One Big Beautiful Bill Act?

Passed in July 2025, the One Big Beautiful Bill Act (often referred to as the “OBBB”) is one of the most significant tax overhauls in years. It builds on the framework of the TCJA by making many of those temporary provisions permanent, such as lower individual tax rates and the 20% Qualified Business Income (QBI) deduction for pass-through businesses.

But OBBB isn’t just about locking in past tax breaks. It introduces a wide range of new tax credits and deductions, some aimed at helping workers and families, others designed to encourage business investment. These include tax-free treatment of certain tips and overtime wages, larger credits for employer-sponsored child care, and expanded options for educational savings.

At the same time, the law also rolls back many of the clean energy tax incentives introduced under the Inflation Reduction Act of 2022. Credits for electric vehicles, energy-efficient commercial buildings, and solar-related upgrades are being reduced or phased out entirely over the next few years.

In short, this bill is a mix of opportunities and trade-offs. For small business owners, the OBBB brings both potential tax savings and critical planning decisions. Understanding what’s changing and when is essential.

Here’s what’s most important for small businesses and their owners.

Individual Tax Changes That Affect Business Owners

While many of the OBBB’s business provisions grab headlines, the changes to individual taxes are just as important, especially for small business owners who file taxes as individuals or through pass-through entities like LLCs, S corps, and partnerships. 

Here’s a look at the key updates that could impact your personal tax situation starting in 2026 and beyond.

Lower Tax Rates Are Here to Stay

The tax brackets created by the 2017 TCJA are now permanent. These include rates ranging from 10% to 37%, which is good news for many pass-through business owners.

More Relief for Families

• The Child Tax Credit is increased to $2,200 per child and will adjust with inflation.
• A portion of the adoption credit is now refundable—up to $5,000.
• 529 education plans can now be used for K–12 tuition and other school-related costs, with the limit doubled to $20,000.
• The standard deduction was also raised to $31,500 for joint filers and $15,750 for single filers starting in 2026.

SALT and Estate Tax Changes

The SALT deduction cap (state and local tax deduction) was temporarily raised to $40,000 for 2025, but will return to $10,000 in 2030 unless extended again. For estate planning, the estate and gift tax exemption increases to $15 million starting in 2026.

Business Provisions You Need to Understand

The OBBB includes several long-awaited updates that directly affect how small businesses manage taxes, make purchases, and report payments. From permanent deductions to streamlined reporting thresholds, these changes are designed to simplify planning and reward growth, especially for pass-through entities. 

Here’s what every business owner should know.

The 20% QBI Deduction Is Now Permanent

If your business is a sole proprietorship, S corporation, or partnership, the 20% Qualified Business Income (QBI) deduction is now permanent. The income limits before the deduction phases out were raised to $150,000 (joint filers) and $75,000 (single).

This is a significant win for pass-through businesses, which include companies such as sole proprietorships, partnerships, S corporations, and certain LLCs where the business income is “passed through” to the owners’ personal tax returns rather than being taxed at the corporate level.

Bonus Depreciation and Section 179 Expensing Are Locked In

If you invest in equipment or assets, this matters:

• 100% bonus depreciation (also known as full expensing) is now permanent.
• Section 179 limits are increased to $2.5 million, with phaseouts beginning at $4 million.

These changes let you deduct large purchases in the year they’re made instead of spreading them out.

1099 Filing Thresholds Increased

A small but meaningful change:

• The reporting threshold for Form 1099-MISC and 1099-NEC has increased from $600 to $2,000 beginning in 2026.
• The 1099-K threshold goes back to the old rule: $20,000 and 200 transactions per year.

If your business pays freelancers, vendors, or uses third-party platforms like Venmo or PayPal, this reduces the number of forms you'll need to file.

Payroll-Related Credits and Deductions

The OBBB introduces new tax benefits tied directly to your workforce. These updates reward employers who support their teams with paid leave, childcare, and education assistance, and offer significant new breaks on wages, including tips and overtime. 

If you have employees, especially in industries like hospitality, health care, or skilled trades, these changes could make a meaningful difference in both retention and your tax liability. 

No Tax on Tips and Overtime (With Limits)

Effective for 2025 through 2028, workers can exclude:

• Up to $25,000 of tips
• Up to $12,500 of overtime pay

This could reduce employee tax burdens, especially in the food service and personal care industries, and help you attract and retain staff.

Expanded Family, Childcare, and Education Benefits

• The Paid Family and Medical Leave Credit is now permanent and easier to qualify for.
• The Employer-Provided Childcare Credit increases from 25% to up to 50%, with higher caps for small businesses.
• Employer-paid student loan assistance (up to $5,250/year) is now permanent and will be adjusted for inflation.

Clean Energy Incentives Are Being Phased Out

If your business has been investing in clean energy, such as installing solar panels, purchasing electric vehicles, or upgrading to energy-efficient systems, several tax incentives are being phased out.

Under the OBBB, many of the clean energy credits introduced by the Inflation Reduction Act are being rolled back or eliminated entirely:

• Credits for new and used electric vehicles, as well as commercial clean vehicles, will end after September 30, 2025.
• Energy-efficient home and commercial building credits, along with alternative fuel refueling credits, are set to expire by mid-2026.
• Accelerated depreciation for energy property will no longer apply to projects started after 2024.
• Wind energy and critical mineral production credits will begin phasing out in 2027, with full elimination by 2034.

New restrictions also make it harder to qualify for remaining credits, especially those involving components sourced outside the U.S.

If your business is in construction, logistics, or transportation, or you’ve been considering investments in energy upgrades, this phase-out means it's time to revisit your project timelines and financing assumptions. Waiting too long could mean missing out on valuable incentives.

IRS Enforcement Is Getting Stronger

As tax policy evolves, so does IRS oversight — and business owners need to be aware of what’s changing behind the scenes. The OBBB sends a clear message: the IRS is ramping up enforcement, especially when it comes to pandemic-era tax credits. The Employee Retention Credit (ERC), originally intended to support businesses that kept employees on payroll during COVID-19 disruptions, has become a major focus of IRS scrutiny.

• The IRS now has six years to audit any ERC claim, giving it far more time to review amended returns or challenge questionable filings.
• Strict penalties now apply to ERC promoters, including tax advisors and consultants, who failed to perform proper due diligence when helping businesses file. This includes a $1,000-per-violation penalty and possible further consequences.
• No new ERC claims are allowed unless they were filed before February 1, 2024. If you missed the deadline or are unsure about the legitimacy of a previous claim, talk to your accountant or a qualified advisor.

If your business claimed the ERC or is still waiting on processing, this new enforcement environment means it's time to get organized. Make sure your documentation is in order, and be cautious about third parties offering “easy money” through amended returns. The IRS is watching closely.

Turning Tax Changes Into Business Advantages

The One Big Beautiful Bill Act brings a mix of opportunities and challenges, depending on your business. Some changes make life easier for small business owners, while others eliminate credits that may have been part of your long-term strategy. Either way, doing nothing isn’t an option.

Understanding how these updates affect your business and making smart moves now can mean the difference between missed savings and meaningful financial advantage.

At TMA Accounting, we help small business owners cut through the complexity. Whether you're reviewing your payroll situation, making a major investment, or trying to stay compliant in a shifting regulatory landscape, we’re here to help you take confident, informed action.

Let’s turn tax changes into business opportunities, together. Schedule a meeting with our team today, and let’s make sure your next move is the right one.