What Business Owners Need to Know

The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, brings some of the most significant federal tax changes affecting business owners in years. These updates—issued and explained by the Internal Revenue Service (IRS)—impact everything from depreciation and deductions to reporting requirements and tax planning strategies. IRS+1

As business tax returns become due, understanding these provisions can help you optimize deductions, stay compliant, and reduce your overall tax burden.

1. 100% Bonus Depreciation Is Back—and Permanent

One of the most substantial changes for businesses is the reinstatement and permanent availability of 100% bonus depreciation for qualifying property placed in service after January 19, 2025. This provision allows companies to deduct the entire cost of eligible business assets—including equipment, machinery, and certain real property improvements—in the first year instead of depreciating them over several years. IRS

This immediate expensing can significantly improve cash flow and reduce taxable income for businesses investing in growth.

2. Business Interest Deduction Limitation Updated

The IRS has updated guidance on changes to the business interest expense deduction under OBBBA. Business owners can now adjust how they calculate the limitation on interest deductions by adding back certain depreciation, amortization, and depletion items when determining adjusted taxable income. Bloomberg Law

This adjustment can allow greater interest expense deductions for some businesses, especially capital-intensive operations.

3. 1099 Reporting Thresholds Return to Simplicity

The OBBBA restores and clarifies key information return thresholds for businesses:

• 1099-NEC and 1099-MISC: The reporting threshold for payments to contractors reverts from $600 back up to $2,000, effective January 1, 2026. IRS
• 1099-K Threshold: The IRS has also confirmed that the third-party network transaction threshold will be restored to $20,000 and 200 transactions—a change that reduces unnecessary reporting for gig economy sellers and businesses that process many smaller transactions. IRS

These adjustments simplify reporting and reduce compliance burden for small and mid-sized businesses.

4. Pass-Through Deduction (199A) and Business Income

Under OBBBA, the 20% Qualified Business Income (QBI) deduction (Section 199A) for pass-through entities was made permanent, providing ongoing tax relief for owners of S corporations, partnerships, LLCs, and sole proprietorships. This deduction continues to be a key tax planning tool for business owners. Scale CPA

5. R&D Expensing Rules Restored

Research and experimental (R&E) costs—previously subject to mandatory amortization—can again be deducted fully in the year incurred, rather than capitalized and spread over years. This reinstatement restores a valuable tax benefit that boosts innovation investments for many businesses. JLK Rosenberger CPAs

6. Enhanced Employer Credits & Benefits

The OBBBA also expanded certain credits useful to business owners:

• Employer childcare tax credit: For tax year 2026, the credit increases dramatically, with a maximum credit of up to $500,000—or even $600,000 for eligible small businesses, offering substantial support for employee recruitment and retention. IRS

What This Means for Your Business

These OBBBA provisions offer important tax planning opportunities for business owners—especially those planning capital investments, managing contractor relationships, and optimizing deductions. However, many of these changes require accurate reporting and thoughtful strategy to ensure compliance and maximize benefits.

During peak tax season, partnering with a professional tax advisor can help you interpret these IRS updates and apply them correctly to your 2025 business tax return.