Over the past four weeks, we’ve covered 401K changes and written a series of blogs exploring tax changes in 2025. That series started with a high-level overview for everyone and continued to specific audiences such as high-income professionals and retirees.
For the final blog in our series on the tax changes introduced by the One Big Beautiful Bill Act, we are focusing on the major changes affecting business owners, ranging from the roll-back of some tax deductions to the enhancement of others.
Let’s get started.
Essential Tax Changes in 2025 for Business Owners
Many unique tax provisions are specific to business owners, and understanding these provisions is key to good tax planning.
Qualified Business Income (QBI) Deduction Made Permanent
The Qualified Business Income (QBI) deduction—originally set to expire at the end of 2025, is now permanent. This change ensures continued tax relief for pass-through entities such as sole proprietorships, partnerships, and S corporations. In addition, the income phase-out thresholds for specified service trades or businesses (including legal, medical, and consulting services, among others) have been expanded, allowing more business owners to qualify.
Notably, a minimum QBI deduction of $400 will now be available to qualifying taxpayers with at least $1,000 in qualified business income. This enhancement ensures even smaller operations receive some level of benefit.
100% Bonus Depreciation Made Permanent
The ability to fully deduct the cost of qualifying capital assets in the year they are placed in service has now been made permanent. This 100% bonus depreciation provision significantly enhances cash flow planning and encourages continued investment in business infrastructure, equipment, and technology. The bonus depreciation provision had been phasing out, so the return to 100% depreciation is a significant lift from current law.
Full Expensing of R&E Costs
In a substantial shift from previous law, research and experimentation (R&E) costs are once again fully deductible in the year incurred. This change reverses recent capitalization requirements and provides a powerful incentive for innovation and product development. Additionally, there may be an opportunity to retroactively expense domestic R&E costs incurred as far back as 2022, which could yield immediate tax savings. As in the past, deductions for R&E can be complex, so it is vital to work with a tax professional to properly manage these costs.
Permanent Enhancements to Employer Tax Benefits
Several employer-related tax incentives have also been made permanent:
- Employer-provided childcare credit: Permanently increased, supporting workforce participation and retention.
- Paid family and medical leave credit: Extended indefinitely, encouraging flexible work policies.
- Student loan repayment exclusion: Employer-paid student loan assistance remains excludable from employee income, offering a valuable recruitment and retention tool.
Elimination of Meal Deductions in 2026
Looking ahead, one important deduction is being phased out. Starting in 2026, employer-provided meals (provided by a company cafeteria or for the convenience of the employer – see details here: https://fa-cpa.com/business-meal-deductions-are-changing-what-employers-need-to-know-before-2026/) will no longer be deductible. Businesses should plan accordingly for this upcoming change.
The Bottom Line for Small Business Owners
These updates present meaningful opportunities for small business tax planning. Consult with a qualified tax advisor to understand how these changes may impact your business strategy and cash flow plans for 2025 and beyond. As always, if you have any questions please reach out to us.
