The One Big Beautiful Bill Act, signed on July 4, 2025, runs hundreds of pages. Most of it won't touch your business. A handful of changes will, some in ways that reward planning before December 31. Here's the translation.
Equipment and property: deduct it sooner
Bonus depreciation is back at 100%, permanently, for qualifying property acquired after January 19, 2025. Instead of spreading the cost of equipment, vehicles, or software over several years, many businesses can deduct the full cost in the year the asset goes into service.
Section 179 expensing also went up, to a $2.5 million limit that begins phasing out once total purchases pass $4 million, with both amounts adjusted for inflation. For most small and midsize businesses, that covers nearly any purchase.
Deducting faster isn't always better. If this year's income is low and you expect higher income later, spreading the deduction out can be worth more. Run the numbers before you buy.
Research and development: immediate deductions again
Since 2022, businesses had to spread domestic research and development costs over five years. The new law restored immediate deductions for domestic R&D under a new Section 174A. Some businesses can also speed up the costs they were still amortizing from earlier years, and smaller businesses had options to revisit prior returns. Several of these transition elections came with deadlines, so if you haven't reviewed your R&D costs since the law changed, do it soon.
Pass-through owners: QBI is here to stay
The 20% qualified business income deduction for owners of sole proprietorships, partnerships, S corporations, and LLCs was made permanent. The income range where the deduction phases down for certain service businesses also widened. If you've been weighing a change in entity type, that decision no longer needs to account for QBI disappearing.
Everyday paperwork: higher 1099 thresholds
For payments made in 2026 and later, the threshold for issuing Forms 1099-NEC and 1099-MISC rises from $600 to $2,000, with inflation adjustments after 2026. The 1099-K threshold for payment platforms returns to $20,000 and 200 transactions. You'll still want a W-9 on file for every vendor, since some will cross the new threshold, and you'll need their details either way.
State taxes: a bigger SALT deduction, with limits
The cap on deducting state and local taxes rose from $10,000 to $40,000 for 2025 and $40,400 for 2026, then grows 1% a year through 2029 before returning to $10,000 in 2030. Higher earners see the larger cap shrink as income rises. Pass-through entity tax elections, which let a business pay state income tax and deduct it at the entity level, remain available.
Your year-end checklist
- Map out planned equipment, vehicle, and software purchases, and decide whether to buy before or after year-end.
- Review R&D spending, including software development, and confirm how it's being deducted.
- Revisit your entity structure if your income has changed significantly.
- Update your vendor list and W-9s before January 1099 season.
- If you own a pass-through business in a high-tax state, check whether a pass-through entity tax election makes sense this year.
We wouldn't buy equipment just for the deduction. A deduction returns only part of what you spend, so we'd buy what the business actually needs and simply time the purchase well.