A new bill in Congress, nicknamed The One, Big, Beautiful Bill, could bring major changes to federal business tax breaks. While it hasn’t passed yet, many business owners are watching closely. Here’s what you should know about five key tax provisions that could impact your bottom line if the bill becomes law.
1. Bonus Depreciation
Current Law: Businesses can currently deduct 40% of eligible equipment costs in the first year. This drops to 20% in 2026 and phases out by 2027.
Proposed Change: Restore 100% bonus depreciation for purchases made after January 19, 2025, through 2029.
Why It Matters: Full first-year deductions improve cash flow, especially for capital-intensive industries buying equipment or software.
2. Section 179 Expensing
Current Law: Businesses can expense up to $1.25 million in equipment purchases in 2025, with a phaseout starting at $3.13 million.
Proposed Change: Raise the expense limit to $2.5 million and increase the phaseout threshold to $4 million. Both amounts would adjust annually for inflation.
Why It Matters: Larger limits mean small and midsize businesses can deduct more upfront, reducing taxable income and simplifying capital investment decisions.
3. Qualified Business Income (QBI) Deduction
Current Law: A 20% deduction for pass-through income is available through 2025 for entities like LLCs, S corps, and sole proprietors.
Proposed Change: Make the deduction permanent and increase it to 23% for tax years starting after 2025.
Why It Matters: A higher and permanent deduction would provide long-term tax savings and allow for better financial planning.
4. R&E (Research and Experimental) Expensing
Current Law: Domestic R&E costs must be amortized over five years.
Proposed Change: Allow immediate deduction of R&E expenses from 2025 through 2029, giving businesses the option to deduct or amortize.
Why It Matters: Encourages innovation, especially in tech and startup sectors, by lowering the upfront tax burden of research spending.
5. Form 1099 Reporting Threshold
Current Law: You must issue a Form 1099-NEC for payments over $600 to independent contractors.
Proposed Change: Raise the threshold to $2,000 and adjust for inflation.
Why It Matters: Reduces paperwork and compliance costs for businesses with occasional or low-volume contractor payments.
What’s Next?
The bill passed in the House and is now in the Senate, where changes are expected. Until it becomes law, it’s wise to hold off on making any big tax moves. If passed, these updates could bring significant tax relief.
Need guidance on tax planning or what this could mean for your business? Contact us today.