- The Co. Letter
- Posts
- One Big Beautiful Bill Act’s Impact on Small and Medium Businesses (SMBs) and Their Owners
One Big Beautiful Bill Act’s Impact on Small and Medium Businesses (SMBs) and Their Owners
We’ve waded through the massive Act and sifted out the political rhetoric so you don’t have to.
Braden Fiveash: Publisher
July 08, 2025
Good Morning!
Feature: One Big Beautiful Bill Act’s Impact on Small and Medium Businesses (SMBs) and Their Owners (5 min read)
From the Archive: How To Assign Your LLC Ownership Interest To Your Revocable Trust. Read it here.
Tuesday check-in: remember your goals—keep moving forward!
-TCoL
Missed our last feature article? Understanding LLC Capital Accounts: A Bitcoin Bonanza Explains It All. Read it here.
Want to streamline your business operations and save time? With The Co. Letter Premium, you get instant access to a growing library of professional templates. All for just $7.95 per month—less than your usual Starbucks order. Stay in control of your cash flow and protect your business.
[Get Premium Now]
Be smart. Save money. Use TCoL templates.
Executive Snapshot—Why This Matters
H.R. 1 (“One Big Beautiful Bill Act,” July 2025) sprawls 900 pages, but only a fraction hits a main-street balance sheet. Below is a bias-free map to the provisions most likely to affect cash flow, planning, and payroll.
23 Percent Pass-Through Deduction Stays—and Grows
What changed
Section 110005 makes the Qualified Business Income (QBI) deduction permanent and raises it to 23 percent starting in 2025.
The familiar wage-and-capital guardrails remain; there is no $400 “floor.”
Phase-outs still apply once taxable income crosses the service-business thresholds.
Move for ’25
Project QBI under the new rate; then explore entity tweaks, retirement contributions, or income-smoothing to remain under the caps.
Section 179 Expensing—Higher Ceiling, Same Rules
What changed
Section 111103 lifts the §179 cap to $2.5 million and starts a phase-out at $4 million (both indexed for inflation after 2026).
Eligible property remains machinery, software, certain improvements, and heavy SUVs.
Move
If an equipment order would push you over the cap, split delivery into late-2025 and early-2026 to maximize first-year write-offs.
100 Percent Bonus Depreciation Restored Through 2029
What changed
Section 111001 extends 100 percent bonus depreciation for property acquired after Jan 19, 2025 and placed in service before Jan 1, 2030 (with a one-year extension through 2030 for certain aircraft and long-production-period property).
No step-down schedule—full expensing lasts through the 2029 tax year, then sunsets.
Move
Lock down delivery dates in writing; a forklift that shows up December 31, 2029 still qualifies, one arriving January 2, 2030 does not.
R&E Expensing—Domestic-Only and Time-Stamped
What changed
Section 111002 creates new §174A allowing full expensing of Research & Experimental (R&E) costs incurred in the United States from 2025-2029.
Foreign research stays on 15-year amortization.
Move
Tag R&E spending by location in the general ledger now; auditors will ask later.
SALT Cap—A One-Year, $40k Detour
What changed
§164(b)(7) temporarily lifts the State and Local Tax (SALT) cap to $40,000 ($20,000 for married filing separately) for 2025 only.
The cap phases down once Modified Adjusted Gross Income (MAGI) tops $500k and disappears altogether in 2026.
Move
Front-load property-tax payments and evaluate pass-through-entity (PTE)-level “work-around” taxes—the math changes with a bigger federal cap.
Tip and Overtime Deduction—Four-Year Window
What changed
Section 110101 lets employers deduct qualified tip wages and overtime pay from taxable income 2025-2028.
Qualifying tips must be reported through point-of-sale (POS) or contemporaneous logs.
Move
Refresh tip-tracking procedures now; the credit vanishes after 2028, but IRS penalties live on.
Other Credits You Can Actually Use
Provision | What It Does | Who Benefits |
|---|---|---|
Paid Family & Medical Leave Credit (permanent) | 12.5–25 % wage credit | Talent-hungry firms |
New Markets Tax Credit (NMTC) (made permanent) | 39 % over seven years | Expansion in low-income areas |
Manufacturing Credit (rate up to 35 %) | Direct credit on fab equipment | Contract & specialty makers |
Opportunity Zones (extended to 2033) | Capital-gain deferral & basis boosts | Real-estate-heavy SMBs |
Problems for some SMBs
Rule | Practical Impact | Mitigation |
|---|---|---|
Medicaid work requirement (Section 44141) saves ≈ $109 bn over ten yrs | Retail & hospitality turnover may rise | Offer low-cost Minimum Essential Coverage (MEC) plans |
Enhanced ACA† credits expire after 2025 | Marketplace premiums jump for owners & staff | Negotiate multi-year group rates now |
Permanent excess-loss cap ($250 k/$500 k) | Slows loss use for capital-intensive startups | Layer Net Operating Losss into cash-flow models |
No rural-broadband grants here | Section 3303 was dropped | Watch future infrastructure bills |
†ACA = Affordable Care Act.
Strategic Checklist
Run a 2025-2029 tax model using 23 % QBI, the new §179 limits, and 100% bonus depreciation.
Advance cap-ex you’d make anyway before 2029—why wait if Washington lets you expense it all?
Segregate domestic R&E costs to lock in deductions and prep for 2030 amortization.
Bunch SALT payments into 2025 to exploit the $40k cap.
Button up tip reporting to claim the four-year wage write-off.
Reprice health benefits ahead of the ACA credit sunset.
Stack credits—pair NMTC or Opportunity-Zone equity with traditional bank debt to drop effective borrowing costs.
Final Word
H.R. 1 hands SMB owners genuine help—just not forever, and never without strings.
Know the dates, track the details, and you’ll convert a thousand-page Act into concrete savings long before Congress rewrites the rules again.
Consult your tax professional for advice tailored to your business.
Have an interesting business question and need a free bit of advice? Send your question to [email protected]. No confidential info, please!