The One Big Beautiful Bill Act, signed into law on July 4, 2025, as part of the 2025 Reconciliation Legislation (H.R. 1), introduces sweeping reforms to the tax code. Nicknamed the Big Beautiful Bill, this legislation combines a mix of permanent and temporary changes that reshape how individuals and small businesses manage their tax obligations.
While much national attention has focused on how the law impacts individual taxpayers, small businesses, from solo entrepreneurs to multi-employee firms, face distinct changes worth understanding. This Big Beautiful Bill summary outlines what the bill means for small business owners, independent contractors, gig workers, and self-employed professionals.
What Is in the Big Beautiful Bill for Small Businesses?
At its core, the One Big Beautiful Bill Act does three things:
- Makes many provisions from the 2017 Tax Cuts and Jobs Act (TCJA) permanent.
- Introduces targeted deductions and credits that benefit service workers, gig workers, and sole proprietors.
- Adjusts thresholds and rules related to income reporting, deductions, and credits, many of which are crucial for small business tax planning.
This post breaks down the tax changes affecting small businesses, including implementation timelines and strategies for staying compliant and optimizing your tax position.
TCJA Provisions Made Permanent: What Small Businesses Need to Know
Several provisions passed initially under the TCJA are now permanent under the Big Beautiful Bill. These rules provide clarity and consistency for small businesses that have been adapting to temporary guidelines over the last several years.
Permanent Tax Brackets
The legislation permanently establishes the seven-tier individual tax bracket structure: 10%, 12%, 22%, 24%, 32%, 35%, and 37%. Many small businesses, especially sole proprietors and LLCs taxed as pass-through entities, report income on their returns, so these brackets remain highly relevant.
Increased Standard Deduction
For single-filers and married couples running small operations, the permanently expanded standard deduction can simplify tax filing:
- Single: $15,750
- Married Filing Jointly: $31,500
- Head of Household: $23,625
This change may reduce the need for many small business owners to itemize deductions, especially those without significant personal deductions outside of business expenses.
Key Tax Changes for 2025: Immediate Impact on Small Businesses
Several deductions and provisions become effective for tax year 2025, directly affecting how business income is reported and taxed.
No Tax on Tips Deduction
For service-based businesses in food, hospitality, or personal care, the tip income deduction can offer relief to employees and business owners. Workers can deduct up to $25,000 of tip income. While this is a personal deduction, it impacts how small businesses handle W-2 reporting and employee communications.
Implication for business owners:
Employers must properly report tip income on W-2s, including designated tip income categories. This may require payroll software updates or enhanced bookkeeping practices.
No Tax on Overtime Deduction
Similarly, employees can deduct up to $12,500 (single) or $25,000 (joint) in overtime pay. To qualify, overtime must be clearly labeled on the W-2, and employers must follow specific reporting guidelines.
Why it matters:
While the deduction benefits employees, business owners need to ensure compliance with reporting rules. This provision may influence payroll structuring and year-end planning for industries with seasonal demand, like construction, retail, or event services.
Form 1099-K Reporting Thresholds
Starting in 2025, the threshold for third-party payment platforms to issue Form 1099-K returns to $20,000 in gross payments and more than 200 transactions annually. This is a welcome update for small businesses that use platforms like PayPal, Stripe, Square, or Venmo for business payments.
What to watch for:
The IRS expects income to be reported even if you don’t receive a 1099-K. Businesses that previously received forms for just a few thousand dollars in transactions will now see fewer forms, but must maintain their reporting diligence.
SALT Deduction Cap Raised
The State and Local Tax (SALT) Deduction Cap increases to $40,000 for individuals under $500,000. For higher-income small business owners, especially those in high-tax states like California, New York, and New Jersey, this could impact whether itemizing deductions is more advantageous.
Vehicle and Equipment-Related Tax Changes
Car Loan Interest Deduction
Up to $10,000 of car loan interest may be deductible for qualifying vehicles purchased between 2025 and 2028 if the car was assembled in the U.S. and the VIN is properly reported.
Impact:
Small businesses that use a personal vehicle for business can allocate a portion of this deduction. Still, proper usage logs and mileage tracking will be more critical than ever.
Clean Vehicle and Energy Credits Repealed
The Big Beautiful Bill phases out several credits that had previously benefited environmentally conscious small businesses:
- Clean Vehicle Credits for new and used EVs end after September 30, 2025.
- Residential Clean Energy Credits for solar installations, energy-efficient HVAC, and similar upgrades end after 2025.
Consider this:
If you’re planning a commercial EV purchase or home-office solar upgrade, completing the transaction before the deadline could be the difference between a significant tax benefit and none at all.
Business Benefit Extensions and Expansions (Starting 2026 and Beyond)
Beyond 2025, the One Big Beautiful Bill Act introduces additional reforms relevant to small businesses and self-employed individuals.
Educator Expense Deduction Expanded
If you run or work for a business in the education, coaching, or training space, you’ll benefit from an expanded educator deduction that now includes coaches and instructional equipment. While the base $250 deduction remains, itemizers may qualify for additional write-offs.
Employer Student Loan Contributions Made Permanent
Employers, including small businesses, can now permanently offer up to $5,250 per year in tax-free student loan repayment assistance to employees as a benefit. This could become a competitive hiring tool for smaller firms that can’t offer high salaries but want to attract skilled talent.
Reporting Thresholds for 1099-NEC and 1099-MISC Raised
In 2026, the thresholds for reporting payments to contractors and freelancers increase from $600 to $2,000. This change affects small businesses that rely on gig workers or independent contractors for project-based work.
Why it matters:
You’ll issue fewer 1099s, but the IRS still expects you to track and report those payments. It's wise to update accounting systems or contractor agreements to reflect these changes.
Charitable Deductions for Non-Itemizers
Suppose your business is structured as a pass-through entity. In that case, you may benefit from charitable contributions of up to $1,000 (single) or $2,000 (joint) even if you take the standard deduction. While this is a personal tax benefit, it could support business-aligned charitable giving strategies.
Summary: Big Beautiful Bill Summary for Small Businesses
Here’s a quick big beautiful bill summary for small business owners:
| Change | Effective | Small Business Impact |
|---|---|---|
| Standard deduction increase | 2025 | Simplifies filing for solo business owners |
| Overtime/tip deductions | 2025–2028 | Affects payroll tracking and employee W-2 reporting |
| 1099-K threshold increase | 2025 | Reduces form volume; maintain internal tracking |
| Car loan interest deduction | 2025–2028 | Deduct interest for qualified business-use vehicles |
Legal DisclaimerTickmark, Inc. and its affiliates do not provide legal, tax or accounting advice. The information provided on this website does not, and is not intended to, constitute legal, tax or accounting advice or recommendations. All information prepared on this site is for informational purposes only, and should not be relied on for legal, tax or accounting advice. You should consult your own legal, tax or accounting advisors before engaging in any transaction. The content on this website is provided “as is;” no representations are made that the content is error-free.          Was this post helpful?Thank you for your feedback Oops! Something went wrong while submitting the form.         |
