As tax season planning ramps up, business owners may want to keep a close eye on Capitol Hill. A new legislative proposal — dubbed The One, Big, Beautiful Bill — is currently under debate and could introduce sweeping changes to federal tax law. The bill aims to expand several key tax breaks for businesses, with some provisions applying retroactively.
Although still making its way through Congress, the bill has already captured the attention of small and mid-sized business owners, accountants, and tax advisors across the country. If passed, it could dramatically reshape how businesses manage capital investments, deductions, and compliance.
Here’s a breakdown of five major tax changes under consideration — and how they might impact your business strategy.
1. Bonus Depreciation May Return to 100%
Current Law:
Businesses can currently deduct 40% of the cost of eligible property — such as new or used machinery — in the year it is placed in service. That percentage is expected to drop to 20% in 2026 and phase out entirely by 2027.
Proposed Update:
The bill seeks to retroactively reinstate 100% bonus depreciation for assets acquired after January 19, 2025, and maintain it through 2029.
Why It Matters:
This would allow businesses to deduct the entire cost of qualifying equipment in the first year, significantly improving cash flow. Capital-heavy industries stand to gain the most, especially those investing in growth or upgrades.
2. Section 179 Expensing Limits Could Double
Current Law:
In 2025, businesses can expense up to $1.25 million of qualified purchases, with the deduction starting to phase out at $3.13 million.
Proposed Update:
The bill would raise the Section 179 cap to $2.5 million, with the phaseout starting at $4 million — and both figures indexed for inflation starting in 2026.
Why It Matters:
Doubling the limits gives small businesses greater flexibility to fully expense major purchases. This provision would reduce the need for complex depreciation tracking and incentivize reinvestment in growth.
3. Qualified Business Income Deduction (QBI) Expansion
Current Law:
Eligible owners of pass-through entities — including LLCs, S-corps, sole proprietors, and partnerships — can claim a 20% deduction on qualified business income through 2025, subject to limitations.
Proposed Update:
The bill would make the QBI deduction permanent and increase it to 23% starting in tax year 2026.
Why It Matters:
Making this deduction permanent offers long-term tax planning certainty for small and mid-sized business owners. The increased percentage adds additional tax savings year after year.
4. Research & Experimental (R&E) Expense Deduction Reinstated
Current Law:
Since the Tax Cuts and Jobs Act, domestic R&E expenses must be capitalized and amortized over five years (15 years for foreign research).
Proposed Update:
Businesses would again have the option to fully deduct R&E expenses for costs incurred from 2025 through 2029. The requirement to amortize would be suspended during this time.
Why It Matters:
Startups, tech firms, and R&D-driven businesses could benefit enormously. Expensing these costs upfront boosts liquidity and incentivizes innovation without the burden of delayed deductions.
5. 1099-NEC Filing Threshold Could Increase
Current Law:
Businesses must file Form 1099-NEC for independent contractors paid $600 or more annually.
Proposed Update:
The threshold would rise to $2,000, indexed for inflation beginning in 2025.
Why It Matters:
This change would reduce the number of forms businesses must file, saving time and administrative effort. It’s a welcome relief for businesses working with part-time or short-term freelancers.
What Else Is on the Table?
The bill also includes proposals to:
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Eliminate federal income tax on eligible tips and overtime
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Expand employee benefit options
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Modify rules related to business interest deductions
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Change Form 1099-K thresholds and requirements
While the legislation narrowly passed in the House, it still awaits Senate approval — and potential revisions. If amended, it would return to the House before heading to the President’s desk.
Next Steps for Business Owners
Though these proposed tax changes appear favorable, business owners should not act prematurely. With the possibility of retroactive rules and evolving details, guidance from a trusted tax advisor is critical.
At Botwinick & Co., our CPAs are closely monitoring developments in Washington. If passed, this bill could represent one of the most impactful business tax packages in years.
📞 Let’s talk strategy before the law changes.
Contact us today to schedule a consultation and make sure your business is prepared for what’s ahead.
