Top Tax Planning Moves for Small Businesses Under the One Big Beautiful Bill Act

The One Big Beautiful Bill Act (OBBBA), enacted as Public Law 119-21 on July 4, 2025, provides significant tax relief and incentives designed for small businesses. By making key provisions from the 2017 Tax Cuts and Jobs Act (TCJA) permanent, restoring accelerated depreciation, boosting deductions, and introducing new benefits, the law helps owners optimize cash flow, invest in growth, and lower liabilities. With the 2026 tax year underway, proactive planning is crucial. Here are the top strategic moves small business owners should consider.

1. Maximize 100% Bonus Depreciation and Section 179 Expensing

The OBBBA permanently reinstates 100% bonus depreciation for qualifying property placed in service after January 19, 2025. This enables immediate full expensing of eligible assets such as machinery, equipment, vehicles, and certain improvements—ideal for capital-heavy operations.

Complement this with expanded Section 179 expensing, now capped at $2.5 million, with a phase-out starting at $4 million, adjusted annually for inflation. Small businesses can deduct the entire cost of qualifying purchases upfront.

Planning tip: Accelerate purchases of depreciable assets in 2026 to claim immediate deductions, boosting cash flow and reducing taxable income. Coordinate with suppliers for year-end deliveries and seek advice on qualifying property to maximize the benefits of both provisions.

2. Fully Deduct Research and Experimental (R&E) Expenses Immediately

The law overturns amortization rules, allowing immediate deduction of domestic R&E costs starting in 2025. Small businesses (average gross receipts ≤ $31 million) can also claim retroactive relief for certain previous years.

This benefits tech companies, manufacturers, software developers, and innovators trying out new processes or products.

Planning tip: Document R&E activities carefully—track salaries, supplies, and contractor expenses. Push qualifying projects into 2026 to maximize current-year deductions and potentially amend previous returns for refunds.

3. Leverage and Optimize the Permanent Qualified Business Income (QBI) Deduction

The 20% QBI deduction under Section 199A is now permanent, with expanded phase-in ranges for specified service trades or businesses (SSTBs) and a new minimum $400 deduction (inflation-adjusted) for those with at least $1,000 in QBI from active participation.

Pass-through entities—sole proprietorships, partnerships, S corporations—gain long-term certainty.

Planning tip: Structure compensation and distributions to optimize QBI-eligible income. For SSTBs nearing phase-out thresholds, consider entity restructuring or wage and investment strategies to maintain the full 20%. Keep an eye on MAGI to stay within limits.

4. Enhance QSBS Benefits for Founders and Investors

Qualified Small Business Stock (QSBS) rules are expanded: tiered exclusions (50% after 3 years, 75% after 4, 100% after 5), increased gain limits, and broader applicability to more businesses. This promotes investment and exit planning.

Planning tip: If structured as a C corporation that meets asset and activity tests, issue QSBS-eligible stock. Founders and key employees can plan sales to achieve tax-free gains (up to the greater of $10 million or 10 times their basis). Review eligibility early, especially for startups or growth-stage firms.

5. Navigate Tips and Overtime Deductions for Service-Based Businesses

New above-the-line deductions permit employees to exclude up to $25,000 in qualified tips and $12,500 ($25,000 for joint filers) in qualified overtime premium pay (2025–2028, with phase-outs). Employers must report these separately on W-2s and 1099s, but payroll taxes remain the same.

Planning tip: In hospitality, retail, or service industries, update payroll systems to ensure accurate tracking. This can support recruitment and retention by effectively increasing take-home pay without raising wages. Review reclassification risks and compliance to prevent audits.

6. Consider Entity Structure and Other Opportunities

Evaluate pass-through vs. C-corp status amid permanent lower corporate rates, enhanced interest deductions, and potential production property incentives.

Higher SALT cap ($40,000 temporary) may benefit owners in high-tax states.

Planning tip: Conduct a thorough entity review with a tax advisor. Accelerate investments, defer income where possible, and keep detailed records for audits. The OBBBA provides small businesses with exceptional tools for growth, but benefits depend on timely action. Collaborate with professionals to customize strategies, ensure compliance, and position your business for long-term success in this changing tax environment.