One Big, Beautiful Bill: What Trump’s Tax Legislation Means for Small Business Owners

• The 2017 Tax Cuts and Jobs Act is made permanent, with new benefits for families and businesses
• The bill advances to the Senate, but final passage is not expected until July at the earliest
• Now is the time to review your tax strategy and ensure your business and long-term financial plans are on the best course

There was relief on Capitol Hill last Wednesday when the US House of Representatives narrowly passed President Trump’s “One Big, Beautiful Bill” (OBBB). It was a razor-thin tally, with 215 yeas, 214 nays, and one voting present. The comprehensive spending and tax-cut package now makes its way to the Senate, and there will be changes before the legislation returns to the House for final approval.

The president targets Independence Day to ink it into law, but it’s likely that the OBBB won’t be signed until August—around the time of the so-called “X-date,” when Congress must raise the debt limit.

Lots of drama, for sure, but there’s relief on the way for small business owners and their families. While there will be fine-tuning, we are pleased with the outcome—at least when it comes to financial planning opportunities.

At the national level, extending and expanding the 2017 Tax Cuts and Jobs Act (TCJA) without significant spending cuts means the US budget deficit will grow. The bond market has already voiced its worry with the tax plan—the rate on the US 30-year Treasury bond rose to its highest level since July 2007 recently, above 5.15%.

But let’s focus on what the OBBB contains and call out how you can save money from its features.

Key Provisions Impacting Small Business Owners

1. Permanent Extension of the 2017 TCJA

Regardless of what happens in the Senate, the OBBB will almost certainly make permanent today’s marginal tax rates that were part of Trump’s first-term signature TCJA.

We expected that, and it would maintain lower individual tax rates and a doubling of the estate tax exemption to an inflation-adjusted $15 million starting in 2026. This is helpful for small business owners who record business income on their personal tax returns (primarily through pass-through business entities).

• Enhanced Section 199A Deduction

We also anticipated the Qualified Business Income (QBI) deduction to live on, but it may be bigger and more beautiful on its own. The House bill expands the list of eligible business activities and increases the deduction rate from 20% to 23%, while making it permanent—a big win.

If you’re in the 37% tax bracket this means you could potentially see a 1.1% net tax-rate decrease, freeing up capital for investment opportunities.

• 100% Bonus Depreciation and R&D Incentives, Section 179 Expensing Limit Ticks up

Entrepreneurs should also be thrilled that full immediate expensing of construction, machinery, and equipment, alongside incentives for research & development, is part of the OBBB. 100% first-year depreciation applies to qualified commercial property acquired and placed in service after January 19, 2025, and before January 1, 2030. So, capital investments in growth, innovation, and infrastructure will dramatically lower your tax bill and boost your business’s value.

We’ll keep tabs on if the Senate tweaks this part of the bill, but small business owners writ large can use all the help they can get given today’s interest rates and uncertainty macro backdrop. Without this extension, the bonus depreciation rate was scheduled to phase down to 40% in 2025 and eventually phase out entirely by 2027.

Furthermore, the OBBB increases the Section 179 expensing limit from $1 million to $2.5 million, with phase-outs starting at $4 million for property placed in service beginning January 1, 2025.

Finally, the business interest deduction is expanded by removing depreciation, amortization, and depletion from the calculation of adjusted taxable income (ATI).

• Qualified Opportunity Zone (QOZ) Program Renewal

Trump’s bill creates a new QOZ program with updated eligibility and reporting rules. Effective for 2027-2033, new QOZ designations apply to certain rural and low-income areas. We’ll see how this gets fleshed out in the bill’s final version later in the summer.

As written, it offers tax deferral and basis step-up incentives for additional QOZ investments.
 

• No Tax on Tips and Overtime (Temporary)

Moving further through the new policy, if you employ folks earning tips or working on overtime, they’ll benefit from higher take-home pay, at least through 2028, as part of Trump’s campaign pledge. The hospitality and retail industries stand to benefit the most.

This group of hourly workers also has a high propensity to spend, so there could be plenty of juice in the squeeze from an economy-wide perspective, to say nothing of the upside of improved employee morale.
 

• Increased SALT Deduction Cap

Perhaps the most debated provision was the State and Local Tax (SALT) deduction limit, currently set at $10,000. It’s raised to $40,000 in the OBBB for taxpayers earning less than $500,000, with a 1% annual increase over the next 10 years.

Increasing the SALT deduction cap helps small businesses in high-tax states like New York, California, and Illinois. For us in Florida, it’s generally a non-issue.
 

• Trump Accounts for Children

Just as there are financial benefits to expanding your business, there’s a kicker if you and your spouse intend to expand your family. The legislation introduces new tax-favored savings accounts for children born between December 31, 2024, and January 1, 2029, with a $1,000 government hand-out and annual parental contributions up to $5,000. Withdrawals after age 18 for education, home purchases, or business startups are taxed at capital gains rates.

It’s not quite as good as a Roth IRA, but this gets youngsters saving and investing early.
 

• No Tax on Auto Loan Interest

For families, there’s an added incentive to purchase a made-in-the-USA vehicle—the bill temporarily eliminates taxes on interest for loans on American-made cars through 2028.

On this topic, there was significant gutting of certain solar, wind, and EV credits in the House’s bill, which may be altered by Senate Republicans and Democrats.
 

• Increased Child Tax Credit (Temporary)

The Child Tax Credit (CTC) is increased from $2,000 to $2,500 per child through 2028, with inflation adjustments thereafter.
 

• Employee Benefits

Health Savings Accounts (HSAs) are expanded, too. New rules would allow Medicare-eligible individuals and those with spouses holding Flexible Spending Accounts (FSAs) to contribute. The list of qualifying health plans is broadened while permitting FSA and Health Reimbursement Arrangements (HRAs), which can, under certain conditions, be rolled over to an HSA.

Lastly, the OBBB would double HSA contribution limits for individuals earning up to $75,000 ($150,000 for joint filers), with phase-outs.

What Does This Mean for Small Business Owners?

Small business owners stand to benefit from a higher QBI deduction rate and full expensing of capital investments. Moreover, there’s added certainty with respect to tax rates and deduction levels, which may help you invest in big projects confidently. For those nearing an exit or who sold their business years ago, the doubling of the estate tax exemption may simplify succession planning for family-owned enterprises.

The no-tax-on-tips provision could make service-oriented small businesses more attractive to workers, but this is just a temporary change through Trump’s second term.

Implications for Investors

We aren’t focusing on markets with this piece, but there’s nuance to how the OBBB will impact your portfolio. The tricky thing is that the bond market has been a bit “yippy,” as the president dubbed April’s interest rate rise, back when tariffs were causing some investors to panic.

As the bill passed, the 30-year Treasury yield jumped to fresh highs since 2007. Stocks didn’t like that. Higher borrowing costs negatively impact small and large businesses, which can sting profits and stymie growth.

At the same time, a massive tax hike would have occurred had the 2017 TCJA not been extended, which would have absolutely been a blow to the economy. Thus, there’s a balancing act between rising fiscal deficits and supporting households and businesses.

We are still confident that stocks will appropriately price in these changes, and keeping on track with your long-term investment plan is the best thing to do.

Financial Planning Strategies

• Leverage Tax Deductions: The higher 23% QBI deduction is significant, and 100% bonus depreciation is a big win. Take advantage of those by strategically timing investments, income, and deductions.
• Plan for Temporary Benefits: The no-tax-on-tips, overtime, and CTC increases are temporary (2025–2028). Budget for potential tax increases thereafter, and consider accelerating income or deductions where possible.
• Estate and Succession Planning: The expanded estate tax exemption offers business owners a window to transfer assets or restructure ownership with less tax exposure. Use this opportunity to review and update estate plans.
• Mitigate Audit Risks: Given potential IRS audit extensions, be sure to maintain detailed financial records, and we can always reach out to tax attorneys for compliance reviews.
• Watch for Changes: The OBBB faces a long path before it is inked into law; amendments could alter provisions like SALT deductions, Medicaid cuts, and renewable energy credits.
• Diversify Smartly: With higher interest rates today and federal fiscal jitters, we could see volatility due to the goings-on in the bond market. Diversifying across asset classes is prudent.

Key Points

The Bottom Line

The multitrillion-dollar One, Big, Beautiful Bill offers substantial tax relief and planning opportunities for small business owners and investors. It adds to the annual budget deficit and the national debt, which has already spooked the bond market.

Still, the permanent extension of the TCJA, enhanced QBI deduction, and bonus depreciation provisions are particularly beneficial for entrepreneurs, their workers, and their families. Stay tuned for changes, and it will be crucial to take advantage of new provisions once the bill is signed into law, likely in the third quarter.