The One Big Beautiful Bill Act: Important Tax Changes for Small Businesses and Individuals

President Trump signed H.R. 1, the One Big Beautiful Bill Act, into law on July 4, 2025. This legislation is designed to help small businesses invest in growth, reward innovation, and help to simplify compliance. We’ve been working through the details to understand how this affects your business. You can review the full text on Congress.gov: https://www.congress.gov/bill/119th-congress/house-bill/1/text

As you plan your budget and strategy for the coming years, consider these key changes:

100 Percent Bonus Depreciation

To accelerate recovery of equipment costs, businesses may expense the full price of qualifying machinery and equipment placed in service on or after January 19, 2025, by permanently extending the Sec. 168 bonus depreciation deduction. Prior to the new law, bonus depreciation was scheduled to be reduced to 40% for 2025, 20% for 2026 and 0% thereafter. For details, see IRS Publication 946: https://www.irs.gov/pub/irs-pdf/p946.pdf

Enhanced section 179 expensing limits

The Act increases the maximum section 179 depreciation deduction to $2,500,000 for property placed in service after December 31, 2024. This doubles the amount that would have been available under the old law. The $2,500,000 limit is phased down dollar for dollar after assets put in service exceed $4,000,000.

Qualified Production Property

The Act adds new Code Sec. 168(n), letting you elect to expense 100 percent of the adjusted basis of “qualified production property” (QPP) in the year it’s placed in service. To qualify, QPP construction must begin between January 20, 2025, and December 31, 2029, and the property must be placed in service within the United States (or a U.S. possession) by January 1, 2031. QPP is nonresidential real property used as an integral part of manufacturing, agricultural, or chemical production, or refining, so office space, leased assets, and Alternative Depreciation System property don’t qualify. The property generally must be original use, although an exception applies if it wasn’t previously used by the taxpayer or in production by another party and wasn’t acquired in a non‑recognition transaction. If QPP ceases production use, a ten-year recapture under Code Sec. 1245 applies. For full statutory language, see H.R. 1, Sec. 70307 (amending IRC §§ 168 and 1245) at Congress.gov: https://www.congress.gov/bill/119th-congress/house-bill/1/text#toc-HB454B9A3CAD14A92A1ABE66B082CE28F

Permanent 20 Percent Pass‑Through Deduction

With upfront deductions secured, turn next to structuring your pass-through income for maximum benefit. The Section 199A Qualified Business Income (QBI) deduction remains at 20 percent of qualified business income from eligible pass-through entities, providing stable tax relief for owners. Income and service–business tests still apply; consult IRS Topic 409 for guidance: https://www.irs.gov/taxtopics/tc409

Immediate R&D Expense Treatment

Having optimized profit retention, you may also reclaim research spending more quickly. Research and development costs paid in 2025 and beyond qualify for full expense. Taxpayers with annual gross receipts of less than $31 million will be permitted to apply the change retroactively to tax years beginning after December 31, 2021.

Universal Charitable Deduction

Beyond R&D, charitable contributions gain broader flexibility. Non‑itemizers can deduct up to $1,000 in cash gifts or $2,000 in non-cash donations. This will allow for the greater deductibility of small donations.

Tip and Overtime Pay Deductions

Employee compensation rules also receive attention. Employees reporting tips may deduct up to $25,000, and those with overtime earnings may deduct up to $12,500 ($25,000 for a jointly filed return), subject to income phase-outs. Make sure your payroll system is configured correctly to track these amounts accurately.

State and Local Tax Caps (SALT)

Meanwhile, your state tax position has shifted. The SALT deduction limit rises to $40,000 in 2025, increases 1 percent each year through 2029, and then reverts to $10,000 in 2030. Federal rules (IRS Topic 503: https://www.irs.gov/taxtopics/tc503) may differ from your state’s approach, so verify local conformity.

Estate and Gift Tax Exemptions

For those planning wealth transfers: Starting in 2026, the individual estate and gift exemption increases to $15 million per person. The annual gift exclusion remains at $19,000 for 2025, opening new windows for succession and transfer planning.

Enhanced QSBS Exclusions

Finally, consider the revamped incentives for startup investors. IRC Section 1202 now allows for a gain exclusion of up to $15 million (up from $10 million) for Qualified Small Business Stock issued after July 4, 2025. Partial exclusions start sooner: 50 percent after three years and 75 percent after four, culminating in full exclusion at five years. In addition, the gross asset threshold to be considered a Qualified Small Business was increased from $50 million to $75 million. These changes should result in the ability of more sellers of QSBS to benefit from the 1202 gain exclusion.

See the full text on Congress.gov: https://www.congress.gov/bill/119th-congress/house-bill/1/text

Putting It into Practice

These provisions demand coordinated timing and precise records. We’re here to help navigate these changes and will continue to monitor clarifications released by the IRS. Contact us to align your tax strategy with these new rules.

The information provided is for informational purposes only and should not be interpreted as investment, tax, or legal advice. Individual circumstances may vary; therefore, this information should not be used as a substitute for professional advice tailored to your specific situation.

This analysis reflects H.R. 1 as enacted on July 4, 2025. Tax laws and regulations change frequently. Information verified as of July 30, 2025