On May 22, 2025, the U.S. House of Representatives passed H.R.1, better known as the One Big Beautiful Bill Act. While this massive bill touches on many areas, some of the most impactful changes affect the Internal Revenue Code. These tax changes are especially relevant to small-business owners.
It’s not law yet—the Senate still needs to pass it—but you should be prepared in case it goes into effect. Below is a breakdown of what’s most likely to impact Pros like you, both in your business and in your personal finances.
Business tax changes
Qualified business income deduction made permanent
The Tax Cuts and Jobs Act of 2017 (TCJA) created the Qualified Business Income Deduction (QBID) to reduce the tax burden for small-business owners. It was meant to ensure that pass-through businesses (like sole proprietors, partnerships, and S-corps) weren’t taxed more heavily than corporations, which pay a flat 21%.
This deduction, originally 20% of your qualified business income, was scheduled to expire at the end of 2025. However, this bill makes the deduction permanent and increases it to 23%. It also continues to apply to dividends from real estate investment trusts (REITs), which is helpful if you invest in commercial property.
Here’s an example: Imagine your business earns $100,000 in profit. Before, you got a 20% deduction, which meant you’d remove $20,000 from your taxable income and be taxed on $80,000 instead of $100,000. With the jump to 23%, you’d now remove $23,000 of taxable income and be taxed on just $77,000.
Bonus depreciation extended
To encourage business investment, the TCJA allowed “bonus depreciation,” meaning you could immediately deduct 100% of the cost of new equipment, from trucks to shop tools, instead of spreading the deduction over years.
That 100% bonus rate has been phasing out, dropping to just 40% in 2025. But under the One Big Beautiful Bill Act, 100% bonus depreciation would be restored for qualified property placed in service after January 19, 2025, through the end of 2029 (and in some cases, 2030).
This helps you lower your tax bill upfront when making major investments in your business. You still have the option to depreciate over time if you’d prefer to spread the deduction.
Section 179 expensing limit increased
Section 179 is another way to deduct the full cost of equipment in the year you buy it, but it has caps. This bill raises the limit from $1 million to $2.5 million, with a phase-out beginning at $4 million in total purchases. This is a big win if you’re investing heavily in vehicles or machinery and want to deduct it all now.
Bonus depreciation vs. Section 179
Bonus depreciation and Section 179 both let you deduct the full cost of equipment in the year you buy it, but they work a little differently.
Section 179 has limits. It caps how much you can deduct ($2.5 million under the new rules), and you must have enough business income to use it. In contrast, bonus depreciation doesn’t have an income cap or limit. You can use it even if it creates a loss.
Another difference is that Section 179 can be used on used equipment, while bonus depreciation can only be used for new property. Many businesses use both together to get the biggest upfront deduction.
Excess business loss limitation made permanent
Business losses can sometimes offset other types of income, like your spouse’s W-2 wages. But the TCJA limited how much you could write off in one year, with the rest carried forward. The One Big Beautiful Bill Act would make this limitation permanent, so it’s important to plan ahead if you’re expecting a big loss. You might not be able to deduct all of it immediately.
Here’s an example: You had a rough year and lost $150,000. Your spouse earned $120,000 from a W-2 job. Under current law (as of June 2025), you could use that loss to offset their income and pay little or no tax. But with the new bill, you may only be able to deduct part of the loss this year. The rest of the loss deduction carries forward to next year.
If this example applies to you, let us know and we can help you plan ahead.
Clean energy credits rolled back
The One Big Beautiful Bill Act accelerates the phaseout of clean energy tax incentives created by the Inflation Reduction Act. Credits for solar, wind, battery storage, and energy-efficient systems are now scheduled to end by 2028, with projects needing to begin construction within 60 days of the bill’s passage. If your business installs these systems, you may see a short-term boost in demand before these incentives disappear.
Personal tax changes
Tax brackets stay the same
The top tax rate of 37% is made permanent—no scheduled hike after 2025.
Higher standard deduction continues
For 2025 through 2028, the standard deduction rises to:
- $26,000 for joint filers
- $19,500 for heads of household
- $13,000 for single filers
Seniors (65+) also get a $4,000 boost to their deduction during these years, whether they itemize or not. This phases out starting at $75,000 of income ($150,000 for joint filers).
Child tax credit expanded
The child tax credit is made permanent and increased to $2,500 per child from 2025 to 2028. It reverts to $2,000 in later years. A Social Security number is required for each child claimed.
No tax on tips and overtime
From 2025 to 2028, tips (for those in traditionally tipped jobs) and overtime pay are deductible—even for those who don’t itemize. This lowers taxable income and puts more money in workers’ pockets.
Car loan interest deduction
You can deduct up to $10,000 in interest paid on car loans between 2025 and 2028. This phases out at $100,000 of income ($200,000 for joint filers). Keep in mind, this is for personal vehicles, since businesses already deduct interest for their vehicles.
Here’s an example of what that might look like: You bought a personal-use truck and are paying $8,000 in interest. If your income is under $100,000, that interest is now deductible—even if you take the standard deduction.
Other deductions and credits expanded
- Paid family leave: Credit expanded to cover either wages paid or insurance premiums for leave benefits.
- Childcare credit: Employers can now claim up to 50% credit on up to $600,000 of expenses.
- Adoption: Up to $5,000 of the adoption tax credit is refundable, helping lower-income families.
- Scholarships: Tax credits allowed for donations to scholarship-granting nonprofits, capped at the greater of $5,000 or 10% of adjusted gross income (AGI).
Education and 529 plan changes
529 accounts can now be used for:
- K–12 private school expenses
- Homeschooling costs
- Post-secondary certificate and credentialing programs
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Tax-free student loan forgiveness
Loan discharges (forgiveness) due to death or disability are permanently excluded from taxable income.
Itemized deduction rules change (again)
Itemized deductions are once again allowed and made permanent. However:
- A complex formula reduces them based on SALT (state and local tax) deductions and income.
- The SALT cap increases to $40,000 but phases down to $10,000 for higher earners.
- Certain professionals (e.g., lawyers, consultants, financial advisors) can’t deduct state-level pass-through taxes.
Estate tax exemption increased and made permanent
Starting in 2026, the estate and gift tax exemption rises to $15 million (indexed for inflation for future years) and remains permanent.
So, let’s say you leave your children your business. If it’s valued up to $15 million, there will be no estate tax on it, letting them keep all the value.
Disaster loss deductions extended
If you were affected by a federally declared disaster since December 2019, you can deduct related losses without needing to exceed the 10% AGI floor.
New MAGA accounts for kids
These new tax-free savings accounts can be used for education or a first home. Children born between 2025 and 2028 will get a one-time $1,000 federal contribution into their account.
What this means for you
The One Big Beautiful Bill Act isn’t law yet, but it’s packed with changes that could reshape how you plan and pay your taxes. From bigger deductions to new limits and rollbacks, it’s a lot to take in—but knowing what’s happening helps you stay one step ahead.
If this bill passes, you’ll want to be ready to take advantage of the opportunities and avoid surprises. Solid bookkeeping is your first line of defense against surprises, and HCP Accounting is built to keep your finances organized and audit-ready. Pair that with expert support from HCP Tax, and you’ll be set to make the most of new opportunities and steer clear of pitfalls. [Learn more here.]
