One Big Beautiful Bill Rewrites Small Business Taxes: What To Do First

October 22, 2025

By William J. Healey, III, CPA, JD, PFS

On July 4, as parades rolled and fireworks filled the sky, a different kind of spark came from Washington. The One Big Beautiful Bill became law, and for small business owners, it reads like a new operating manual. The law restores powerful write-offs, locks in owner-friendly rules, reshapes incentives for investment and hiring, and tightens compliance in certain areas. Knowing exactly what changes and when they change can increase after-tax cash flow and inform every major decision you make.

The money you invest now works harder

If you have delayed an equipment upgrade or a shop floor expansion, the numbers have just improved. One hundred percent bonus depreciation is available for most machinery, equipment, vehicles, and qualified improvement property acquired on or after January 20, 2025. Under the prior law, the bonus rate was sliding down, which made new projects harder to justify. Now, many assets can be written off in the first year again, which shortens payback periods and lifts project return on investment.

There is also a new category that matters to manufacturers and processors. Qualified production property is nonresidential real estate used in manufacturing, production, or refining. If construction begins after December 31, 2024, and the property is placed in service before January 1, 2034, the full cost can be deducted. For plant buildouts and retrofits, that is a rare opportunity.

Practical move: dust off your capital plan, price out cost segregation studies, and stage purchases so that placed-in-service dates line up with these rules.

Your choice of entity deserves a second look

Owners of sole proprietorships, partnerships, and S-corporations keep the twenty percent Qualified

Business Income deduction. It is now permanent. The phase in mechanics are also more forgiving for higher- income owners. That permanence removes a major unknown that made long-range planning difficult.

Practical move: rerun your entity choice analysis. With a lasting QBI deduction on one side and corporate rate stability on the other, a model that compares long-term salaries, dividends, losses, exit plans, and state taxes is worth the time.

William J. Healey, III, CPA, JD, PFS – Founder
Healey & Associates, CPAs and Consultants

Financing growth just became easier to deduct

The business interest limitation under Section 163j again uses a more favorable measure of adjusted taxable income. Depreciation, amortization, and depletion are added back in the calculation. That boosts the amount of interest expense that many businesses can deduct starting in 2025. Capital intensive companies and private equity-backed rollups will feel this right away.

Practical move: update your pro formas and lending covenants for 2025 and later years. Deals that were marginal under last year’s formula may now clear your hurdle rate.

Innovators get cash flow relief on research costs

Domestic research and development costs return to immediate expensing beginning in 2025. Small businesses with average gross receipts of 31 million dollars or less can generally apply the favorable rule back to 2022. All firms that capitalized research costs in 2022 through 2024 can elect to accelerate the remaining deductions over one or two years beginning in 2025.

Practical move: inventory your software builds, product design, and process engineering costs from 2022 forward. Decide whether to amend returns, accelerate in 2025, or spread across 2025 and 2026.

Section 179 gets a larger ceiling

Section 179 expensing rises to $2,500,000 with a phaseout beginning at $4,000,000. Paired with bonus depreciation, this creates multiple paths to a full write-off in the first year. This is handy when an asset misses bonus rules or when you want control over which class lives you accelerate.

Practical move: map Section 179 and bonus in a single schedule so you can place assets where each rule is the most beneficial.

Founder exits and early investment gain new advantages

Qualified Small Business Stock becomes more attractive. For stock issued after enactment, gain exclusions now arrive sooner. A fifty percent exclusion applies after three years, a seventy-five percent exclusion after four years, and the familiar one hundred percent exclusion remains after five years. The per issuer cap rises from ten million to fifteen million dollars, and the gross asset test for qualifying corporations increases to seventy-five million dollars.

Practical move: if you expect to raise outside capital or sell within a few years, align your structure and holding periods to capture these exclusions. Confirm that the corporation and its activities meet the QSBS tests before issuing shares.

Place-based incentives continue

The Opportunity Zone program remains in force with a plan to revisit designations every ten years. Deferral and basis increases remain for five-year holding periods, and full gain exclusion remains after ten years. There is a new outer boundary. To obtain the full exclusion, you must exit within thirty years of your original investment.

Practical move: if you are relocating or expanding, compare locations inside and outside zones with a full tax and workforce model. For investors, synchronize the fund timeline with the thirty-year limit.

Energy and clean vehicle incentives shift on a faster timeline

Several clean energy credits are now phasing out sooner than expected. Wind and solar projects must be placed in service by December 31, 2027, to claim the new technology neutral investment or production credits, subject to a limited transition rule. Some credits, such as the clean vehicle credit, end after the third quarter of 2025. There are also new restrictions for specified foreign or foreign-influenced entities, as well as new supply chain tests that can disqualify a project that begins after 2025.

Practical move: Re-check eligibility and supply chain sources before signing contracts. Build sunset dates into construction schedules and vendor terms.

Payroll reporting and a closed door on ERC

New above-the-line deductions for employee tips and for overtime affect workers, but employers must continue to report these amounts on Form W-2. Expect payroll system updates for 2026.

For the Employee Retention Credit, the filing window for the last two quarters of 2021 is closed. The IRS also has a longer period to challenge claims. Maintain strong documentation if you filed. If you did not file, do not engage promoters who suggest late claims.

What matters most by situation:

Planning a build-out or large equipment purchase
Utilize the return of a 100% bonus and the increased Section 179 limit to reduce cash taxes. Add a cost segregation study to convert more basis into shorter-lived property. Capture the qualified production property rules if your facility qualifies and you can meet the construction and service dates.

Running a profitable pass-through
With a permanent QBI deduction, revisit compensation levels, reasonable salary for S corporations, and retirement plan design. Weigh these against any case for a C corporation, especially if you plan to use QSBS for a future exit.

Financing growth
The revived interest deduction formula allows for more interest to be deducted, effective beginning in 2025. Rebalance debt and equity and update models that drive your loan covenants.

Building software or products
Flip research costs back to expensing. Decide whether to amend prior years or accelerate remaining amortization into 2025 or 2026.

Pursuing Opportunity Zone deals
Date investments and construction carefully, and plan for an exit within thirty years to preserve full gain exclusion.

Relying on energy credits
Confirm eligibility and supplier status early. Sunset dates arrive sooner and foreign influence rules can disqualify projects.

A simple action plan for the next four months

Run a three-year model that layers in one hundred percent bonus depreciation, the larger Section 179 limit, the revived interest deduction formula, and the permanent QBI deduction.
Inventory research costs from 2022 through 2024 and choose an approach for deductions in 2025 and 2026.
Map your facility and equipment plan. Align acquisition and placed in service dates with the new rules.
Revisit your capital structure and projections for 2025 and later years so that lender terms reflect the new interest deduction math.
Prepare payroll systems for new reporting of tips and overtime, and train managers before year-end.
If you filed for the Employee Retention Credit, maintain a complete file. If you did not, regard the filing window as closed.

Bottom line

This law is about alignment. Time projects to the new depreciation rules. Structure ownership to lock in the QBI deduction and to qualify for QSBS where it fits. Finance growth under a friendlier interest limitation. Thread energy incentives before they sunset. Owners who understand these moving parts will keep more cash, preserve flexibility, and make better decisions.

If you’re looking for a tailored plan for the next two to three years that integrates capital spending, hiring, financing, and potential exit strategies, our team can develop it with you. Then you can stop reacting to tax changes and start using them to your advantage.

Need help decoding what H.R. 1 means for you?
Schedule a tax strategy session with Bill Healey today. Phone: (760) 320-2107, email: bh@healeycpas.com

Disclaimer: The information provided in this blog post is for informational purposes only and should not be construed as legal, tax, or accounting advice. Tax situations are often complex and highly specific to the individual or business. You should contact a qualified tax expert directly to discuss your particular circumstances. Nothing herein is intended to, nor does it, create an attorney-client or advisor-client relationship. For individual guidance, please contact us directly.