What the Big, Beautiful Bill means for small businesses

President Donald Trump’s megabill, the One Big Beautiful Bill Act, introduced a swath of tax cuts, deductions and adjustments for both consumers and businesses. While proponents of the bill have claimed the new deductions and extensions to the 2017 Jobs and Tax Cuts Act will help small businesses, it would prove to be an economically mixed bag in the long run. (Read more: Trump signs megabill into law — here’s what it means for your money.)

“By heading off a tax increase at the end of this year, a potential headwind has been eliminated. And this should provide some added momentum to growth and consumer spending,” says Mark Hamrick, senior economic analyst for Bankrate. “At the same time, the impacts regarding the federal debt and deficits are also consequential, lending upward pressure on interest rates for the foreseeable future.”

With the new and extended deductions becoming effective for the 2026 tax year, small business owners should start working with their tax preparer in order to take advantage as soon as possible.

“Small business owners should consult with a tax professional before year-end to understand how the new provisions in the bill affect them,” says Kem Washington, CPA and former revenue agent and criminal investigator for the IRS. “They should be aware of key changes that may impact both business and personal taxes.”

Here’s what you need to know about how the massice new law will impact your business, and what you should do to adapt.

Summary of the Big, Beautiful Bill’s business impact

In a hurry? Here’s the Big Beautiful Bill’s business impact in a nutshell.

No tax on tips and overtime

The bill introduces two big tax breaks for workers: a $25,000 deduction on qualified tip income, and a $12,500 deduction on overtime (or $25,000 if married filing jointly), effective 2025 through 2028. 

Tips are classified as income received directly from customers in addition to regular income. While tips can be earned by any worker, some workers work for tipped wages, with the expectation that the majority of their income will come from tips. The IRS says it will publish a list of occupations that qualify for the new tax deduction by Oct. 2.

As for overtime, the Fair Labor Standards Act of 1938 requires that hourly workers who are in excess of 40 hours per week be paid time and a half per hour. Both overtime and tips are taxed as income and are required to be reported as income to the IRS, and are taxed as such.

Keep in mind that the value of both of these tax deductions starts to phase out for workers with modified adjusted gross income of $150,000 or more ($300,000 or more if married filing jointly).

What it means for small business

Tipped and overtime wage tax deductions can be seen as a win for workers with this type of income. For business owners, it may make recruiting tipped or overtime workers easier, as you can advertise that they’ll be able to take home more pay.

However, it does come as a mixed bag. Sentiments about tipping have shifted into the negative, with 41 percent of Americans saying that businesses should pay their employees better instead of relying on tips, according to Bankrate’s 2025 survey on tipping.

Moreover, some labor advocates worry that businesses will take advantage of this rule to push workers to work for tips or overtime, instead of offering a living wage or keeping a balanced work schedule.

What you should do now:

• Keep tracking tipped wages. Your employees will be the ones taking the deduction when they file, so be sure to be compliant with payroll tax and reporting laws.
• Don’t rely on deductions for a fair wage. With changing sentiments around tipping, it might be a better idea to attract workers with a competitive salary instead of pushing for more tips.
• Focus on a healthy working environment. Make sure that employees taking on more overtime aren’t overextending themselves.

Pass-through deduction extended

The pass-through deduction, or Sec. 199A, allows for business owners who directly pass through their business profits to their individual income tax returns to deduct up to 20 percent of their qualified business income. This applies to LLCs, partnerships, S-corporations and sole proprietors who pass through their income in this way. 

Originally established in 2018, the deduction was set to expire this year. However, the “big, beautiful bill” has now made it permanent. It has also changed certain provisions around the deduction’s limitations, including:

• An increased deduction threshold from $50,000 to $75,000 for single filers, and from $100,000 to $150,000 for married couples filing jointly.
• The minimum deduction amount has been adjusted to $400 for at least $1,000 in qualified business income, to be adjusted for inflation starting in 2026.

These new rules will apply to tax seasons after Dec. 31, 2025. 

What it means for small business

With many small business owners receiving their income as pass-through, the now-permanent deduction means that the lower amount of income taxes they’ve been paying since 2017 will continue permanently.

What you should do now:

• Talk to your tax preparer. They can help you determine how to claim the deduction and that you’re classifying your qualified business correctly. 
• Make sure you’re a pass-through business. Only sole proprietorships, partnerships, LLCs and S-corporations are eligible for pass-through income.
• Ensure that you’re deducting qualified business income. The IRS exempts certain types of income, such as wage income, and certain investment gains from being counted as qualified business income.

De minimis repealed

One tariff-related rule the new law has codified is getting rid of the de minimis rule, which allowed imported packages under $800 to be exempted from U.S. tariffs. This new rule impacts drop-shipped items in particular, as importers that send packages directly to the consumer instead of bulk-shipping now have to pay a tariff. 

What it means for small business

If you rely on imports for your inventory and materials, you’ll likely start paying more if you aren’t already. This can be particularly impactful on smaller custom orders from tariffed countries, as tariffs will apply to packages you may not have paid out before alongside price increases from tariffs across the board.

What you should do now:

• See where your shipments are coming from. Knowing your supply chain can help you make informed decisions about where tariffs are hitting you the hardest.
• Consider switching or dropping products. Changing shipments to come from a lower-tariffed country or a domestic supplier can help keep costs low.
• See if you can buy in bulk. Larger orders are often cheaper per unit, offsetting the cost of tariffs. Teaming up with other businesses to split shipment costs can also be helpful.

100% bonus depreciation

The OBBB Act has extended bonus depreciation rules, which allow businesses to deduct the full amount of an asset’s depreciation within the first year of purchase, instead of spreading it out over its depreciable life. 

Asset depreciation — or how much the value of an asset decreases over time — is a deductible expense for business owners. For example, if a business purchases a semi-truck for $200,000, and it depreciates by $5,000 each year, business owners can only deduct $5,000 each tax year of the truck’s useful life — five years — as classified by the IRS. This new rule applies to assets placed in service from Jan. 19, 2025 to Jan. 1, 2029.

However, with the new bonus depreciation, business owners can now deduct the full depreciation of the truck — $25,000 — up front in the year of purchase.

Manufacturers and farmers can also now deduct the full cost of their production property in the year it’s constructed. This can cover the cost of purchase or the cost of construction (not including the cost of land). It applies to property that begins construction between Jan 19, 2025 and Jan. 1, 2029, with the condition that the property must be put into production before Jan. 1, 2031.

The production property deductions apply only to qualified production property, which is:

• Used by the taxpayer as an integral part of a qualified production activity
• Placed in service in the United States
• Original use commences with the taxpayer (AKA, the person taking the deduction has to be the one using the property for the first time.

The production property deduction also only applies to manufacturing, refining and production businesses.

What it means for small business

The depreciation bonus can help you offset property purchase and construction costs, so long as you file the deduction correctly and understand what counts as qualified property. While you can choose to deduct in the standard way — with smaller deductions taken out over the useful life of the property — it might make more financial sense to take out the 100 percent deduction from the start, especially if you can put the money back into the purchase cost.

What you should do now:

• Talk to your tax preparer. They can help you make the right decision about which deduction to take, and how much you can deduct based on the asset’s useful life.
• Make sure your property is qualified. Production property has specific provisions for its deduction. This is outlined in more detail in the One Big Beautiful Bill Act.
• Put your deducted cash to good use. Besides putting the money back into your business or property, you can also bulk up your cash reserves.

More flexible research and development tax writeoffs

If you conduct research and development (R&D) for product creation, market testing, software creation or otherwise, you may qualify for an R&D expenditure tax credit.

Under the One Big Beautiful Bill Act, small businesses can retroactively expense and deduct domestic R&D costs going back to Jan. 1, 2022, and do so over one or two years instead of 15 years under previous law.

This new provision only applies to domestic R&D. Any foreign R&D will have to be amortized over 15 years as before.

What it means for small businesses

Even if your company isn’t in the research industry, it’s still possible to take advantage of the new rule. Research and development is defined fairly broadly, and can include:

• Researching product feasibility
• Product development or improvement
• Software development, improvement, and testing
• Product design and modeling
• Research documentation
• Creating product models or demos
• Research equipment maintenance
• R&D meetings

In terms of what can be expenses, wages, supplies, software subscriptions and contract expenses related to any of the above activities are considered expensable.

What you should do now

• See what you can count as R&D. With the definition being pretty broad, you might qualify even when you think you don’t.
• Talk to a CPA or tax preparer. They can help you find expenses that you can
• See if you qualify for the retroactive deduction. Any R&D expenses incurred from Jan 1, 2022 onward can qualify.

The bottom line

The One Big Beautiful Bill Act introduced a wide range of tax cuts and adjustments that small business owners should be aware of. New deductions can allow employers and employees to take home more pay, while the repeal of the de minimis rule may mean you’ll pay more in tariffs. Be sure to analyze your finances and talk to your tax preparer so your business is in good shape to take advantage of and adjust to the changes introduced by the new megabill.