A new tax proposal moving through Congress, often referred to as the “One Big, Beautiful Bill,” could bring meaningful tax savings for small business owners if passed. This bill includes two major changes: increasing the Qualified Business Income (QBI) deduction and restoring 100% bonus depreciation for business equipment purchases. If you’re a small business owner, this is worth paying attention to as it could affect your tax strategy starting as early as 2025.
Under the current law, many small businesses—such as sole proprietors, partnerships, and S corporations—can take a deduction of up to 20% of their qualified business income. This deduction, known as the QBI deduction, has helped reduce taxable income for millions of business owners since it was introduced in 2018. However, it is set to expire after 2025. The new bill proposes not only to make the QBI deduction permanent, but to increase it to 23%. This means that if your business earns $100,000 in profit, you would be able to deduct $23,000 instead of $20,000—resulting in lower taxable income and potentially lower taxes.
The second key part of the bill is related to bonus depreciation. Right now, businesses are only allowed to deduct a portion of the cost of new equipment over several years. In previous years, however, businesses could deduct 100% of the cost in the year the equipment was placed in service, which helped free up cash flow. This 100% deduction, known as bonus depreciation, is currently being phased out and will be gone completely by 2027. The proposed bill would bring back 100% bonus depreciation through 2030. That means you could fully write off the cost of trucks, tools, computers, and other qualifying equipment in the same year you buy them, which could be especially helpful for businesses in transportation, construction, and manufacturing.
So, what should business owners do now? First, it’s a good idea to speak with your CPA or tax advisor before the end of the year. You can model different scenarios to see how your tax situation might change under the current rules versus the proposed ones. If you’re planning to buy new equipment or vehicles, it may be worth timing those purchases to take full advantage of the bonus depreciation if it becomes available again. Also, keep in mind that the QBI deduction change would apply to tax years beginning after 2025, so any year-end tax planning should take that timing into account.
Although the bill has passed the House, it still needs approval from the Senate, and some of the details could change during negotiations. However, the fact that it’s being seriously considered means business owners should be paying attention. These changes could offer real savings, but only if you plan ahead. Being proactive with your tax strategy now can help you make the most of whatever final version of the bill becomes law.