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Understanding the One Big Beautiful Bill Act (OBBBA) and its Implications for Small Businesses

When the One Big Beautiful Bill Act (OBBBA) was officially signed into law on July 4, 2025, it introduced significant tax reforms that could impact small businesses. This landmark legislation established some of the most consequential tax shifts in recent years. Notably, several pandemic-era regulations have transitioned to permanent status, others have been expanded, and certain rules are adopting completely new trajectories.

If you are a business owner, it’s crucial to act promptly and revise your tax strategies for 2026 in light of these substantial changes. Below is an in-depth exploration of several key modifications and their implications for your business strategy in the coming year.

1. The QBI Deduction Is Here to Stay

The Qualified Business Income (QBI) deduction, codified under Section 199A and initially instituted through the Tax Cuts and Jobs Act, is officially permanent.

Why This Matters

Business owners operating pass-through entities such as sole proprietorships, partnerships, and S corporations can now base their long-term financial planning around this 20% deduction. Moreover, there may be prospects for a slightly elevated deduction rate based on pending tax legislation.

Actionable Steps

While specified service trades or businesses (SSTBs) must continue to monitor phase-out criteria, they no longer have to worry about the impending sunset of this tax benefit in 2025. Fields classified as SSTBs include healthcare, law, accounting, consulting, among others—industries where income is primarily derived from the owner’s expertise. To adapt to this change, revisit your entity structure and compensation strategies with the assumption that the QBI deduction is here to stay.

2. Bonus Depreciation and Section 179 Get a Boost

The OBBBA reinstates 100% bonus depreciation for eligible property acquired after January 19, 2025.

Why This Matters

Additionally, the Section 179 deduction limits have significantly increased, now exceeding $2.5 million, with the phase-out threshold rising to approximately $4 million—and these figures will be indexed for inflation on an annual basis. This increased clarity regarding long-term expensing makes it easier for businesses planning to purchase equipment or technology to effectively forecast cash flow and establish budgets.

Actionable Steps

If you’ve delayed capital acquisitions due to uncertainty, you can now confidently integrate these purchases into your 2025-2026 planning. It’s advisable to evaluate whether any of these acquisitions should be expedited based on your broader business goals.

3. Enhanced Qualified Small Business Stock Rules

In an exciting development for C-corporations and their stakeholders, the OBBBA has expanded the provisions related to Section 1202 Qualified Small Business Stock (QSBS).

Why This Matters

The existing exclusion for gains on the sale of QSBS remains intact, and there could be additional benefits for QSBS issued after July 4, 2025. Early strategic planning becomes essential, particularly for founders or owners anticipating future growth or a potential exit strategy.

Actionable Steps

If your business operates as a C-corp—or if converting to one is on your agenda—assess whether your stock qualifies for these benefits and ensure compliance with applicable documentation requirements. This also presents an optimal opportunity to review how these updated regulations may affect your timing regarding investments and potential exits.

4. Immediate Expensing of Research and Experimental Costs

With the new legislation, businesses can again immediately expense domestic research and experimental (R&E) costs instead of amortizing them over several years.

Why This Matters

This change is particularly crucial for companies involved in software development, product design, and other areas requiring innovation. By allowing immediate expensing, businesses can improve their after-tax cash flow while also alleviating the administrative burden of managing multi-year deductions.

Actionable Steps

Take time to assess your R&E activities, ensuring that all eligible expenses are thoroughly documented. Discuss potential retroactive planning opportunities with your financial advisor that can support immediate deduction eligibility.

5. Updates to 1099 Reporting Thresholds

The OBBBA has revised the information-reporting requirements for third-party payment networks and various vendor payments.

Why This Matters

The 1099-K threshold continues to remain at $20,000 and 200 transactions, modifying the previously anticipated drop to $600. Furthermore, the 1099-MISC/1099-NEC threshold will rise from $600 to $2,000 starting in 2026. With these augmented thresholds and new reporting guidelines, businesses will likely need to refresh their payment and vendor processes.

Actionable Steps

Now is the time to update your vendor files by collecting any outstanding W-9 forms and verifying that your payment-tracking procedures are in line before the end of the year.

New Tax Landscape, New Game Plan

The OBBBA represents more than mere tweaks to the tax code; it signifies a profound transformation for small businesses. With many provisions becoming permanent or substantially expanded, the landscape for 2026 offers a newfound stability for long-term planning that has been absent for quite some time.

However, optimizing the opportunities presented by the OBBBA requires a cohesive plan. Effective planning will be vital for everything ranging from equipment investments and entity configurations to R&D expenditures and compliance updates.

How AI legalese decoder Can Assist

Navigating these regulatory changes can be daunting for small business owners. AI legalese decoder can streamline the understanding of complex tax language and legal terms, helping you make informed decisions about how these changes impact your business. By simplifying legal jargon, the AI tool allows you to focus on strategic planning rather than deciphering the intricacies of tax law.

If you’re a business owner, now is the optimal time to consult with your tax advisor and develop a tailored plan that considers how these changes might influence your growth, cash flow, and objectives for the upcoming years.

For those seeking assistance in finding a qualified professional to address your tax planning needs, consider browsing the membership directory at ChattanoogaChamber.com. Simply search for accountants and bookkeepers to find a variety of member businesses, including Market Street Partners (a Smith + Howard company), who can provide expert guidance in this evolving landscape.

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