A sweeping piece of legislation in Congress — officially dubbed the One Big Beautiful Bill — could dramatically reshape several federal business tax breaks. While still under debate, the One Big Beautiful Bill is already generating buzz across business communities for its potential to deliver meaningful tax relief.
Here’s a breakdown of five key tax provisions under current law and how the One Big Beautiful Bill proposes to change them — and what that could mean for your business.
1. Bonus Depreciation
Current rules: Businesses can deduct 40% of the cost of eligible new and used equipment in the year it’s placed in service. This percentage drops to 20% in 2026 and phases out entirely by 2027.
Proposed change: Restore 100% bonus depreciation retroactively for property acquired after January 19, 2025, and extend it through 2029. This would be a major win for businesses looking to invest in equipment, machinery and certain software.
Why it matters: Full first-year deductions would improve cash flow and benefit capital-intensive industries.
2. Section 179 Expensing
Current rules: Businesses can expense up to $1.25 million in qualified asset purchases in 2025, with a phaseout starting at $3.13 million. Under Section 179, businesses can deduct the cost of qualifying equipment or software in the year it’s placed in service, rather than depreciating it over several years.
Proposed change: Raise the expensing limit to $2.5 million and the phaseout threshold to $4 million for property placed into service after 2024, with annual inflation adjustments.
Why it matters: This would allow small businesses to deduct more upfront without dealing with depreciation schedules. Larger thresholds mean more flexibility for expanding operations.
3. Qualified Business Income (QBI) Deduction
Current rules: The QBI deduction, created by the Tax Cuts and Jobs Act, allows pass-through entities to deduct up to 20% of qualified business income through 2025. Pass-through entities include S corporations, partnerships, limited liability companies, sole proprietors and most self-employed individuals. QBI is defined as the net amount of qualified items of income, gain, deduction and loss that are effectively connected with the conduct of a U.S. business. The deduction generally equals 20% of QBI, not to exceed 20% of taxable income minus net capital gain. But it’s subject to additional limits that can reduce or eliminate the tax benefit.
Proposed change: Make the QBI deduction permanent and increase the deduction rate to 23% starting in 2026.
Why it matters: A permanent, higher deduction would offer long-term tax savings and planning certainty for pass-through businesses.
4. Research & Experimental (R&E) Expensing
Current rules: Businesses must amortize domestic R&E costs over five years (15 years for foreign research).
Proposed change: The bill would reinstate a deduction available to businesses that conduct R&E. Specifically, the deduction would apply to R&E costs incurred after 2024 and before 2030. Providing added flexibility, the bill would allow taxpayers to elect whether to deduct or amortize the expenditures. (The requirement under current law to amortize such expenses would be suspended while the deduction is available.)
Why it matters: This change would reduce tax burdens for innovation-driven businesses, especially startups and tech firms.
5. Information Reporting Thresholds
Current rules: Businesses must issue Form 1099-NEC for payments over $600 to independent contractors.
Proposed change: Raise the threshold to $2,000 and adjust for inflation. The bill also includes updates to Form 1099-K rules.
Why it matters: This would reduce administrative overhead and simplify compliance for small businesses. Fewer 1099-NECs would need to be prepared and filed, especially for small engagements. If the provision is enacted, contractors would receive fewer 1099-NECs. Income below $2,000 annually would still have to be reported to the IRS, so contractors may have to be more diligent in tracking income.
More to Consider
Beyond these five provisions, the One Big Beautiful Bill also proposes changes to business interest deductions, employee benefits, and even the elimination of federal income tax on eligible tips and overtime.
If enacted, the One Big Beautiful Bill could provide both immediate and long-term tax relief. It has passed the House and is under Senate review. Changes are likely to be made there, at which point the new version would have to be passed again by the House before being sent to President Trump to be signed into law. The current uncertainty means business owners shouldn’t act prematurely.
While these changes may sound beneficial, their complexity — and the possibility of retroactive provisions — make professional guidance essential. Contact us to discuss how to proceed in your situation.