The One Big Beautiful Bill Act introduces several expanded tax benefits for business owners, designed to reduce taxable income, enhance investment incentives, and support long-term growth. If you’re a small business owner, founder, or pass-through entity, these changes may create meaningful planning opportunities for your business structure, investment strategy, and tax filings.
Qualified Business Income (QBI) Section 199A Deduction Made Permanent
- Up to 20% deduction for Qualified Business Income (QBI) for small business owners remains in place.
- Provides ongoing tax relief to taxpayers with eligible qualifying business income from sole proprietorships, LLCs, S corporations, and partnerships.
Beginning in 2026, an increased phase-in threshold for the deduction subject to inflation adjustments allows taxpayers to utilize the available deduction more fully.
Many variables influence the extent to which the deduction is available. Income levels and strategies to take full advantage of the deduction should be assessed in light of the new law.
Preservation of SALT Cap Workarounds
- Continued use of a pass-through entity to pay taxes (available to entities such as a partnership or S corporation) enables businesses in most states to circumvent the individual SALT deduction cap by paying state taxes at the entity level—thereby preserving the deduction for individuals.
- Under the new law, the temporary increase in SALT limits available through 2029 may influence how those taxes are expensed/deducted over the period where the SALT cap is at higher levels.
Taxpayers should investigate the availability of using a pass-through entity for payment of tax in their state.
Qualified Small Business Stock (QSBS) Exclusion of Gain on Sale Expanded
- The maximum gain exclusion limit on sale for stock issued after the date of enactment (July 4, 2025) increased to $15 million from $10 million (or 10x now 15x the adjusted basis of the stock sold, if it exceeds the dollar gain threshold). The maximum gain amount is indexed for inflation beginning in 2026.
- The QSBS upper asset limit necessary to qualify a company to issue QSBS was raised from $50 million to $75 million and is indexed for inflation going forward.
- New three- and four-year holding periods allow for partial gain exclusion at 50% and 75% respectively, but apply a higher (28%) capital gains rate.
These changes present attractive opportunities for founders and early investors to invest in larger, growing companies and influence how they position their eventual sale.
Bonus Depreciation and Expensing
- Bonus depreciation has been raised permanently to 100%, allowing businesses to fully deduct the cost of qualifying property in the year it's placed in service, effective for property acquired after January 19, 2025.
- Section 179 expensing limit increased to $2.5 million, subject to a phase-down once the dollar value of property placed in service exceeds $4 million. Both are adjusted annually for inflation.
These provisions encourage capital investment and equipment purchases.
Qualified Opportunity Zone (QOZ) Investing
- QOZ investing allows investors to allocate appreciated property to certain low-income areas while either deferring and/or minimizing future capital gains taxes.
- Beginning in 2027, investors have an opportunity to defer capital gains for 5 years by reinvesting proceeds in qualified opportunity zone businesses in low-income geographic areas, and now in a qualified rural opportunity fund (QROF) established for investment in rural areas.
- Investments made prior to 2027 will continue to qualify for gain deferral /exclusion as provided by current law. Existing investments will still be eligible for exclusion of post-investment appreciation after a 10-year holding period, and that program will sunset for investments made before December 31, 2026.
- The deferral period for the QOZ investment after 2027 lasts up to the earlier of when the property is sold or exchanged, or five years after the original investment. Investors who hold for at least five years will receive a 10% basis step-up (30% step-up if 90% of the assets are in QROF property).
Investors can also fully exclude their post-acquisition investment gain when the QOZ property is held for longer than 10 years for up to 30 years when the basis is stepped up, and further gains are not subject to exclusion.
What Should You Do Now?
Many of OBBBA’s most generous deductions and exclusions are time-limited. Proactive planning in 2025 can help you capture tax savings before they phase out. Here are a few steps to consider:
- Update your tax projection to reflect new income and deduction rules.
- Explore business structure optimizations to leverage permanent QBI and depreciation changes fully.
- Work with a Financial Advisor to incorporate these updates into a financial plan for your business.
Contact your Financial Advisor today to schedule a tax impact review.
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Contact us today to discuss how we can put a plan in place designed to help you reach your financial goals.
Janney Montgomery Scott LLC, its affiliates, and its employees are not in the business of providing tax, regulatory, accounting, or legal advice. These materials and any tax-related statements are not intended or written to be used, and cannot be used or relied upon, by any taxpayer for the purpose of avoiding tax penalties. Any such taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor.
