The One Big Beautiful Bill Act (OBBBA) is one of the most sweeping pieces of tax legislation in recent years. Passed in 2025, it makes permanent many of the tax breaks first introduced under the Tax Cuts and Jobs Act (TCJA) of 2017, while also adding new benefits for individuals and businesses. Some provisions are retroactive to January 1, 2025, but the majority begin on January 1, 2026.
For business owners, the OBBBA is especially important because it stabilizes rules that were set to expire, provides new incentives for investment, and changes how certain deductions and credits are calculated. The Act affects everything from how companies expense equipment to how they structure charitable contributions.
In this article, we’ll outline the bill’s key provisions and explain what small business owners need to know—especially the changes that could affect hiring, employee benefits, and personal tax planning.
Individual Provisions In OBBBA That Affect Business Owners
Higher Standard Deduction
The standard deduction is a flat amount taxpayers can subtract from their income instead of itemizing individual expenses. The OBBBA makes a higher standard deduction permanent. Small business owners filing as individuals will see less need to itemize deductions.
Starting in 2025, the standard deduction is $31,500 for joint filers, $23,625 for heads of household, and $15,750 for single filers. These amounts will increase annually with inflation.
The Act permanently eliminates personal exemptions—the deductions taxpayers once claimed for themselves and dependents. Instead, the higher standard deduction and enhanced credits are intended to offset this loss.
State and Local Tax (SALT) Deduction Changes
Many small business owners file taxes as “pass-through” entities—sole proprietorships, partnerships, LLCs, and S corporations—where the business’s income flows directly onto the owner’s personal return. For them, the state and local tax (SALT) deduction reduces their overall taxable income.
The OBBBA temporarily raises the cap on the SALT deduction—the amount taxpayers can deduct for state and local income and property taxes. For the 2025 tax year, the cap increases to $40,000. Beginning in 2026, the cap grows by one percent each year until 2029. However, for taxpayers with incomes above $500,000, the benefit begins to phase out. After 2029, the cap drops back down to a flat $10,000. Importantly, the law does not restrict the various strategies and workarounds that some taxpayers have used to sidestep the SALT cap.
Here’s why it matters:
- If you own a pass-through business, your business income gets reported on your personal return. The SALT deduction can directly reduce the personal tax you pay on that income.
- For higher-income owners, the deduction is subject to phase-outs and eventual reduction, which may change how you plan distributions, payroll, or timing of expenses.
- The law explicitly notes that “workarounds” (such as state-level pass-through entity tax elections) remain available. These allow certain business owners to shift state income taxes from their personal return to the business level, where they become deductible.
For C corporations, the SALT deduction is less relevant, since corporations can already deduct state and local taxes as a business expense without being subject to the SALT cap.
OBBBA Temporary Relief for Workers
The OBBBA introduces several short-term measures that run from 2025 through 2028. If your business is in an industry where tipping or overtime is common—like restaurants, hospitality, construction, or healthcare—these provisions make those jobs more financially attractive.
These include:
- A deduction of up to $25,000 in tip income for employees in industries where tipping is customary.
- A deduction of up to $12,500 in overtime pay ($25,000 for joint filers).
- A deduction for up to $10,000 in auto loan interest, provided the vehicle is newly manufactured in the United States.
These government-provided benefits can make your compensation package more appealing without raising your payroll expenses. Business owners may face less resistance to scheduling overtime during busy seasons, since employees get to keep more of what they earn.
Business Tax Provisions: The Core of OBBBA
Expensing and Depreciation Rules
One of the most valuable changes is the permanent restoration of bonus depreciation. This allows businesses to deduct the full cost of short-lived assets, such as equipment or machinery, in the year they are placed in service. Previously, businesses had to spread the deduction over several years.
In addition, Section 179 expensing is expanded. Starting in 2025, businesses can expense up to $2.5 million of qualifying property immediately, with the deduction phasing out once property costs exceed $4 million. This is particularly beneficial for small and mid-sized businesses making large investments.
The law also provides 100% expensing for certain manufacturing structures built between 2025 and 2029, encouraging investment in domestic production.
R&D Costs
Research and development (R&D) expenses can once again be fully deducted in the year they are incurred. The OBBBA makes this rule permanent, reversing a previous change that required businesses to amortize these costs over several years. For small businesses with gross receipts under $31 million, the law allows retroactive expensing of R&D costs back to 2021.
Business Interest Deductions
The OBBBA reinstates the EBITDA standard for interest deductions. EBITDA stands for “earnings before interest, taxes, depreciation, and amortization.” By basing the deduction limit on EBITDA, rather than the stricter EBIT (which excluded depreciation and amortization), businesses have greater flexibility to deduct interest on borrowed funds.
Qualified Business Income Deduction
The Act makes permanent the Section 199A deduction, which allows owners of pass-through businesses (such as sole proprietorships, partnerships, and S corporations) to deduct up to 20% of their qualified business income. The phase-in range for limitations is increased, providing more room before the deduction begins to phase out at higher income levels.
Corporate Contributions and Benefits in OBBBA
The OBBBA reshapes how businesses can support employees and communities.
Charitable Contributions
Starting in 2026, corporations can only deduct charitable contributions if they exceed one percent of taxable income, and deductions are capped at ten percent of taxable income. Excess contributions can be carried forward for up to five years. This “floor and ceiling” approach encourages meaningful giving while limiting deductions for smaller contributions.
Education Benefits
Employer payments toward employee student loans are now permanently excluded from taxable income. In other words, businesses can help workers pay off student debt without the payments counting as income for the employee. The $5,250 annual limit will be adjusted for inflation beginning in 2026.
Child Care Support
The employer-provided child care credit is expanded. Employers can now receive a credit of up to 40 percent of qualifying child care expenses, and small businesses may claim 50 percent. The total credit is capped at $500,000 ($600,000 for small businesses). The law broadens the definition of eligible expenses, allowing companies more options for providing child care support.
Paid Family and Medical Leave
The OBBBA makes the tax credit for paid family and medical leave permanent. Employers can claim the credit for wages paid directly to employees on leave or for insurance premiums covering leave benefits. The credit ranges from 12.5% to 25%, depending on how much of an employee’s wages are replaced.
Other Notable Provisions
Beyond the core changes, the OBBBA includes additional rules business owners should know:
- Alternative Minimum Tax (AMT): The Act locks in higher exemption levels, but phases them out for higher-income taxpayers beginning in 2026.
- Estate Tax: The exemption for estates and lifetime gifts increases to $15 million for individuals and $30 million for couples, indexed for inflation. This has planning implications for family-owned businesses.
- Form 1099 Reporting: The threshold for issuing Form 1099 to contractors and other payees increases, reducing administrative burdens for businesses.
- Adoption Credit: While mainly for individuals, the Act expands the adoption tax credit, treating up to $5,000 as refundable. This may affect business owners offering family benefits.
- Child Tax Credit: Under the OBBBA, the credit is set at $2,200 per qualifying child starting in 2025, with adjustments for inflation in future years.
What This Means for Business Owners
While the OBBBA contains many rules for families and employees,
The permanent restoration of favorable rules—bonus depreciation, R&D expensing, and the pass-through deduction—provides certainty for long-term planning. For employees, expanded credits for child care, education, and family leave may strengthen recruitment and retention.
At the same time, business owners should note the new limitations, such as the one-percent floor on corporate charitable contributions and the permanent elimination of personal exemptions. Temporary provisions like tip and overtime deductions will expire after 2028 unless extended.
For business owners, the “one big beautiful bill” is both an opportunity and a responsibility: an opportunity to take advantage of generous deductions and credits, and a responsibility to stay informed as phase-outs, caps, and income thresholds come into play.
Business owners should consult with tax professionals to align their strategies with the new law. For personalized guidance, please schedule a consultation appointment with a Principal at Bernstein Financial Services to help you determine your optimal planning strategies.
The information provided in this blog post is for general informational purposes only and is not intended as legal advice. Every business and financial situation is unique, and the strategies discussed may not be applicable to your specific circumstances.