A significant piece of tax legislation, known as the “One Big Beautiful Bill Act,” has recently passed the House of Representatives and is now under consideration in the Senate. While not yet law, this bill contains provisions that could substantially affect small business owners.
If enacted, the bill would:
- Increase and make permanent the Small Business Deduction: The 20% deduction for qualified business income (Section 199A) would rise to 23%, providing ongoing tax relief for pass-through entities like S corporations, partnerships, and sole proprietorships.
- Raise the Section 179 expensing cap: The limit for immediate expensing of business equipment purchases would double from $1.25 million to $2.5 million, encouraging investment in capital assets.
- Temporarily restore 100% bonus depreciation for business equipment and other fixed asset purchases from 2025 – 2029.
- Make 2017 individual tax rate cuts permanent: This would prevent scheduled increases in individual tax rates, benefiting the many small business owners who pay taxes at individual rates.
- Increase the estate tax exemption: The exemption would rise to $15 million for individuals and $30 million for joint filers, aiding in succession planning for family-owned businesses.
- Expand the SALT deduction cap (beneficial for high-tax state residents): The cap on state and local tax deductions would increase from $10,000 to $40,000, with a phase-out beginning at $500,000 of income.
These proposed changes underscore the importance of proactive tax planning. For instance, the increased Section 179 cap and 100% bonus depreciation could influence decisions on capital expenditures, while the enhanced Small Business Deduction may affect entity structure considerations.
The expanded estate tax exemption presents opportunities for revisiting estate and succession plans.
As this bill progresses through the legislative process, modifications are possible. We are monitoring developments and will keep you informed of changes that may impact your business.
If you have questions about how this pending legislation could affect your tax situation or would like to discuss tax planning strategies, contact us at info@sbsaccountants.com or 770-745-4283.