How the 2025 Tax Reform Impacts Business Owners

United States Capitol Building

📘 Lee la versión en español aquí.

On July 4, 2025, President Trump signed into law the sweeping tax and financial legislation known as the “One Big Beautiful Bill Act.” While the name may raise eyebrows, the implications are substantial for small to mid-sized businesses, especially those in real estate, healthcare, and professional services. Here’s a breakdown of what changed, what stayed the same, and what it means for your business.

🔍 Why This Matters to Business Owners

From depreciation schedules to interest deductions, the bill reshapes the tax landscape for businesses. Understanding the changes can help you unlock savings and plan with more confidence.

📊 Business Tax Provisions: What Changed and Why It Matters

🛠️ Bonus Depreciation Fully Restored

Before: Began phasing out in 2023 (80%) and was set to fully expire by 2027.

Now: Restored to 100% through 2026, then phases to 80% in 2027, 60% in 2028, and 40% in 2029.

👉 Impact: Businesses can immediately write off full asset costs again, improving after-tax cash flow. Ideal for real estate, healthcare, and capital-intensive firms.

💡 Section 179 Expensing Expanded

Before: Deduction limit was $1.16M (2023), phaseout at $2.89M.

Now: Limit raised to $2.5M, phaseout starts at $4M, indexed annually.

👉 Impact: Larger firms can now expense more up front. Excellent for dental, construction, and equipment-heavy businesses.

🔽 Business Interest Expense Deduction Loosened

Before: Deduction limited using a calculation that included depreciation and amortization in Adjusted Taxable Income (ATI), reducing deductibility.

Now: Reverts to pre-2022 rules — depreciation and amortization excluded from ATI.

👉 Impact: Increases interest deductions, especially useful for leveraged real estate deals and capital-heavy businesses.

🤝 R&D Expensing Restored

Before: Since 2022, R&D expenses had to be amortized over 5 years for domestic costs.

Now: Full immediate expensing restored for U.S.-based R&D, retroactive to 2022.

👉 Impact: Huge win for medical, tech, and manufacturing firms focused on innovation. Consider amending prior returns.

📆 1099 Filing Threshold Raised

Before: Threshold was $600 per contractor.

Now: Increased to $2,000, indexed for inflation.

👉 Impact: Fewer 1099s to file, less admin burden for firms hiring freelancers or one-time vendors.

🚚 Inventory Accounting Relief

Before: Strict inventory rules applied unless under $25M.

Now: Businesses under $30M can use simpler treatment (non-incidental materials and supplies).

👉 Impact: Eases compliance for e-commerce and retail operators juggling hybrid business models.

🏥 Qualified Business Income (QBI) Deduction Made Permanent

Before: Scheduled to expire after 2025, with lower phaseout thresholds.

Now: Made permanent, with phaseouts raised to $150,000 (MFJ) and $75,000 (Single). Adds a minimum $400 deduction for low-income filers.

👉 Impact: More service businesses may now qualify, and certainty helps long-term planning. Great news for professional service firms and physicians.

📃 What To Do Now (Business Edition)

1. Review Your Entity Structure – Service businesses may now fully benefit from QBI.

   
   

2. Maximize Depreciation – Don’t wait to invest in equipment while full bonus rules are back.

   
   

3. Evaluate Accounting Methods – Cash method may now apply.

   
   

4. Update 1099 & R&D Tracking – You may be eligible to skip forms or amend returns.

   
   

📢 Final Thoughts

The One Big Beautiful Bill Act introduces significant changes that affect how businesses plan, invest, and report. From depreciation to interest deductibility and accounting method eligibility, these updates may open new planning opportunities — but they also require careful analysis.

Now is the time to revisit your tax strategy, review your accounting methods, and consider whether your current structure still aligns with your goals.

Staying in close contact with your CPA is essential — not only to stay compliant, but to ensure you're making the most of these new provisions and avoiding costly missteps.

Cam Betancourt, CPA

Founder, Betancourt Business Advisors