A sweeping piece of legislation—The One, Big, Beautiful Bill—is making its way through Congress and could reshape how businesses manage their taxes. From bonus depreciation to the qualified business income (QBI) deduction, these proposals aim to boost cash flow, reduce compliance burdens, and stimulate investment. While not yet law, understanding what’s on the table is crucial for forward-looking tax planning.
Here are five key provisions business owners should keep an eye on:
1. Bonus Depreciation: A Return to 100%?
Current Rule: For 2025, businesses can deduct 40% of the cost of qualifying assets in the year they’re placed in service. This rate is set to decline to 20% in 2026, with the deduction phasing out entirely by 2027.
Proposed Change: The bill would restore 100% bonus depreciation for property placed in service after January 19, 2025, extending through 2029.
Why It Matters: Full first-year depreciation boosts cash flow by allowing immediate expensing of eligible purchases—especially impactful for capital-intensive businesses.
2. Section 179 Expensing: Doubling the Limits
Current Rule: For tax year 2025, businesses can expense up to $1.25 million of qualified equipment, with a phaseout starting at $3.13 million.
Proposed Change: The deduction limit would jump to $2.5 million, and the phaseout threshold would rise to $4 million. Both would be adjusted annually for inflation.
Why It Matters: Small and midsize businesses would gain more flexibility to deduct larger investments without navigating depreciation schedules.
3. Qualified Business Income (QBI) Deduction: Increased and Made Permanent
Current Rule: The QBI deduction, created by the 2017 Tax Cuts and Jobs Act, allows pass-through entities (LLCs, partnerships, sole proprietors, etc.) to deduct up to 20% of qualified business income. It’s currently set to expire after 2025.
Proposed Change: The bill would make the deduction permanent and increase it to 23% starting in tax year 2026.
Why It Matters: Locking in the QBI deduction offers long-term planning certainty. The increase could result in meaningful federal income tax savings for self-employed individuals and small businesses.
4. Research & Experimental (R&E) Expense Deduction: A Comeback
Current Rule: Businesses must currently capitalize and amortize domestic R&E costs over five years, per the Tax Cuts and Jobs Act.
Proposed Change: The new bill would reintroduce immediate expensing for R&E expenses incurred after 2024 and before 2030. Businesses could elect to deduct or amortize these expenses.
Why It Matters: Startups and technology firms that rely on heavy research spending would benefit from increased flexibility and lower short-term tax burdens.
5. 1099 Reporting Thresholds: Relief for Small Engagements
Current Rule: Businesses must file a Form 1099-NEC for any nonemployee compensation totaling $600 or more per contractor annually.
Proposed Change: The reporting threshold would increase to $2,000, adjusted for inflation. Additional updates to Form 1099-K reporting rules are also included.
Why It Matters: This update would reduce paperwork and compliance costs for businesses. While contractors would still need to report all income, fewer formal filings would be required by payers.
What Else Is in the Bill?
In addition to the five major tax provisions above, the bill proposes several other changes that could impact businesses, including:
- Elimination of federal income tax on tips and overtime
- Modifications to the business interest expense deduction
- Changes to employee benefit rules
The bill has passed the U.S. House of Representatives and is currently under review in the Senate. Any amendments would require reapproval by the House before moving to the President’s desk for final signature.
Stay Proactive, But Cautious
While the proposed tax breaks offer real potential, their complexity—and the likelihood of retroactive application—makes premature action risky. Smart business owners should stay informed, but avoid making major tax decisions until the legislation is finalized.
At Thomas Howell Ferguson, our CPAs are closely tracking the evolution of this bill. We can help you prepare for what’s ahead and adjust your tax strategy once the changes become law.
👉 Need tax planning guidance for 2025 and beyond? Contact us today.
