The Senate recently passed a significant tax reform package known as Trump’s "One Big Beautiful Bill," bringing several important changes for small business owners. Here’s a breakdown of three major business-related provisions included in the bill, plus a quick look at noteworthy individual provisions.
Qualified Business Income (QBI) Deduction – Now Permanent
The 20% Qualified Business Income deduction, which many feared would expire after 2025, has been permanently extended. Additionally, businesses now receive at least a $400 deduction if their QBI is $1,000 or more from active trades or businesses in which they materially participate.
Example:
Sarah operates an Etsy shop with a net profit of $100,000.
Without the QBI deduction, she'd owe taxes on the full $100,000.
With the QBI deduction, she reduces her taxable income by $20,000, paying taxes only on $80,000.
Assuming a 22% tax rate, Sarah saves $4,400 in taxes.
Bonus Depreciation – Restored to 100%
Previously declining each year, bonus depreciation is now permanently reinstated at 100% for qualified property placed in service on or after January 19, 2025. This means businesses can fully expense new equipment, vehicles, and other qualifying property immediately.
Increased SALT Deduction Cap
The State and Local Tax (SALT) deduction cap, previously limited to $10,000, will significantly increase to $40,000 in 2025, with incremental 1% increases each year through 2029.
Notable Individual Tax Provisions
- Tax-Free Tips: Workers in tipping professions (restaurants, salons, etc.) can deduct up to $25,000 of tip income annually from 2025–2028.
- Overtime Pay Deduction: Deduct up to $12,500 (single filers) or $25,000 (joint filers) of overtime pay annually from 2025–2028, subject to federal labor regulations.
- Car Loan Interest: Deduct up to $10,000 in interest paid on loans for U.S.-manufactured personal vehicles from 2025–2028.
