The H.R. 1: One Big Beautiful Bill was signed into law by President Trump on July 4, 2025. This bill brings long-awaited clarity and permanence to key provisions of the Tax Cuts and Jobs Act (TCJA), while introducing new measures aimed at middle-class families and working individuals. Review our highlights of how the bill impacts small businesses. 

The Tax Cuts and Jobs Acts of 2017 introduced 100% bonus depreciation to businesses that phased down from 100% to 40% under prior law in 2025. The OBBBA made 100% bonus depreciation a permanent feature of the tax code.

To qualify for bonus depreciation, property must have a Modified Accelerated Cost Recovery System (MACRS) recovery period of 20 years or less. This includes assets such as office equipment, computers, automobiles (other limitations may apply), furniture, machinery, qualified leasehold improvements, qualified restaurant property and others.

The One Big Beautiful Bill Act of 2025 significantly increased Section 179 expensing limits and phase-out thresholds, providing substantial benefit to asset-heavy small businesses.

• • Maximum deduction limit: increased from $1 million to $2.5 million

  • Phase-out threshold: increased from $2.5 million to $4 million (for 2025)

  • Both thresholds will be indexed for inflation going forward

This change allows businesses to immediately expense more capital investments, boosting cash flow and reducing taxable income.

The OBBBA delivers meaningful tax relief for businesses incurring research and experimental (R&E) expenses.

Previously, these costs were required to be capitalized and amortized over 15 years. The new law introduces immediate expensing for domestic R&E expenditures:

• • Domestic R&E: deductible in the tax year paid or incurred

  • Foreign R&E: still must be capitalized and amortized over 15 years

  • Optional election: taxpayers may choose to capitalize and amortize all R&E expenses

Further IRS guidance is expected on transition rules and accounting method changes. This change is effective starting in 2025.

The OBBBA makes permanent the Qualified Business Income Deduction (QBID) originally introduced by the TCJA.

This deduction was designed to equalize tax treatment for pass-through entities—such as partnerships, S corporations, and LLCs—with the lower corporate tax rate also introduced under the TCJA.

By making the QBID permanent, small businesses can confidently include it in long-term planning and benefit from a reduced effective tax rate on qualified income.

The One Big Beautiful Bill Act of 2025 enhanced the tax benefits for investments in qualified small business stock. Qualifying businesses will be able exclude more gain than warranted under the previous law.

Qualifying small business stock is defined as originally issued stock from a domestic C-Corporation acquired at its original issuance. The issuing corporation must be a C-Corporation with aggregate assets ≤$50 million at the time of issuance and immediately after and must use at least 80% of its assets in the active conduct of a qualified trade or business.

Non-corporate investors who own qualified small business stock (QSBS) can qualify for tax-free gains on the sale of the stock if certain criteria is met. For QSBS acquired after September 27, 2010, up to 100% of the gain may be excluded from Federal tax if held for 5 years. The maximum gain eligible for exclusion is the greater of $10 million or 10x the taxpayer’s basis in the QSBS.

Under the OBBBA, additional gain exclusion tiers apply to QSBS acquired after the bill enactment date (July 4, 2025). The following graduated exclusion system applies:

• • 50% of gain is excluded after a 3-year holding period
  • 75% after 4 years
  • 100% after 5 years

Additionally, for QSBS acquired after the enactment date, the cap increases from $10 million to $15 million. Starting in 2027, the annual cap will be indexed for inflation. This gain exclusion enhancement is a big win for qualifying small businesses.

If you have questions about how this topic will impact you, Team LittleOwl CPA is here to help. Schedule a discovery call today!