The One Big Beautiful Bill Act: New Tax Changes for Small Business Owners

Are you a small business owner wondering how the new tax law will affect your taxes?

The One Big Beautiful Bill Act makes changes to some of the rules for small business owners.

QUALIFIED BUSINESS INCOME DEDUCTION

The Section 199A deduction, known as the qualified business income deduction, allows eligible owners of sole proprietorships, partnerships, and S corporations to take a deduction of up to 20% of their qualified business income.

This deduction was set to expire after 2025, but the new tax law makes it permanent.

The deduction can be limited depending on the business owner’s taxable income and by the type of business, amount of W-2 wages paid to employees, and the unadjusted value of qualified property held by the business.

The new tax law expands the phase-in ranges for the deduction limit by increasing the single filer phase-in range from $50,000 to $75,000 and increasing the joint filer phase-in range from $100,000 to $150,000.

The law also introduces a new minimum deduction of $400 for taxpayers who have at least $1,000 of qualified business income from one or more trades or businesses in which they materially participate. That minimum deduction, as well as the $1,000 minimum of qualified business income, will be increased annually for inflation.

The new rules for the increased phase-in ranges and the $400 minimum deduction go into effect starting in 2026. These changes will likely increase the qualified business income deduction for many small business owners.

Not sure if your business qualifies? Reach out to schedule a consultation.