When major tax legislation passes, the headlines tend to focus on the biggest numbers -the total cost of the bill, the impact on federal revenue, the political back-and-forth. What gets less attention is the practical, ground-level question that small business owners actually need answered: what does this mean for me, specifically, and what should I do about it?
The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, is the most significant overhaul of the U.S. tax code since the Tax Cuts and Jobs Act of 2017. Most of its provisions took effect January 1, 2026. That means right now in the second half of 2026, business owners are either actively benefiting from what changed, or unknowingly leaving money on the table because nobody walked them through it.
This post does exactly that. Here is what the OBBBA actually changed, why it matters for small business owners specifically, and what to do with that information before the year ends.
To understand why the OBBBA matters, it helps to understand what was about to happen without it.
The Tax Cuts and Jobs Act of 2017 introduced a sweeping set of tax reductions for individuals and businesses, but many of its provisions were written as temporary, with expiration dates built in. The most significant of these were scheduled to sunset at the end of 2025, creating what tax professionals had been calling the “TCJA cliff.”
For small business owners, this cliff would have meant: the loss of the 20% Qualified Business Income deduction, the continuation of a declining bonus depreciation schedule heading toward zero, and a return to higher individual income tax rates.
The OBBBA eliminated that cliff and in several areas, improved on what the 2017 law originally established. Here is what changed and what stayed.
The Qualified Business Income (QBI) deduction is arguably the most valuable tax provision for small business owners in the modern tax code, and it was scheduled to disappear entirely after 2025.
The OBBBA makes it permanent.
The QBI deduction allows owners of pass-through entities – sole proprietorships, single-member LLCs, partnerships, and S-corporations, to deduct up to 20% of their qualified business income from their taxable income. This deduction is taken at the individual level, not the business level, and reduces the effective tax rate on business income significantly.
A concrete example: a business owner with $250,000 in qualified business income can deduct up to $50,000 reducing the income subject to federal tax from $250,000 to $200,000. At a 24% marginal rate, that is a $12,000 reduction in federal tax liability from a single deduction.
The deduction comes with income thresholds and phase-outs that vary by business type. For 2026, the deduction begins phasing out for single filers with taxable income above $197,300 and for married couples filing jointly above $394,600. Specified service trades or businesses which include fields like consulting, law, financial services, and health face additional limitations above these thresholds.
For business owners who had been planning around the loss of this deduction, the OBBBA brings significant relief. For those who haven’t been fully utilizing it, the permanence makes this the right moment to ensure the deduction is being correctly calculated and applied in full.
Bonus depreciation, the ability to immediately deduct a large percentage of the cost of qualifying assets in the year they are placed in service was set at 100% under the TCJA through 2022. After that, it began phasing down: 80% in 2023, 60% in 2024, 40% in 2025. Without the OBBBA, it would have continued declining to zero.
The OBBBA permanently restores bonus depreciation to 100% for qualifying assets placed in service in 2026 and beyond.
For small businesses that purchase equipment, technology, machinery, vehicles, or other qualifying property, this means the full cost of a qualifying asset can be deducted in the year it is placed in service, rather than depreciated gradually over five, seven, or fifteen years.
Combined with the Section 179 deduction, which allows up to $1,220,000 in immediate expensing for 2026, this gives businesses two powerful and complementary tools for accelerating deductions in years when capital investment makes strategic sense.
The practical implication: a piece of equipment purchased and placed in service before December 31, 2026, generates a full deduction in 2026. The same purchase made in January 2027 generates a 2027 deduction. For businesses projecting strong profitability in 2026, this timing distinction is worth paying attention to before year-end.
The state and local tax (SALT) deduction cap has been one of the most discussed and most frustrating – provisions of the TCJA for taxpayers in higher-tax states. Since 2018, the deduction for state income taxes, property taxes, and local taxes had been capped at $10,000 for all taxpayers, regardless of what they actually paid.
The OBBBA raises that cap to $40,000 for tax years 2025 through 2029, with a 1% annual inflation adjustment.
The increased cap begins phasing down for taxpayers with modified adjusted gross income above $500,000 (married filing jointly) or $250,000 (single filers), with the deduction floor remaining at $10,000 for high earners above the phase-out range.
For small business owners, particularly those who own commercial or investment property, or who operate in states with significant income or property taxes, this change meaningfully increases the amount of state and local taxes that can be deducted against federal taxable income. In high-tax environments, the difference between a $10,000 cap and a $40,000 cap is material.
The OBBBA introduces two new above-the-line deductions that have no precedent in prior tax law.
The tip income deduction – Allows eligible workers in tip-based industries to deduct qualifying tip income from federal taxable income. For business owners in food service, hospitality, beauty, and other service industries, this has downstream implications — both for how employee compensation is structured and how payroll records are maintained to support the deduction.
The overtime pay deduction – Provides a temporary deduction for qualifying overtime compensation. The interaction between this deduction and standard payroll reporting requires careful attention to documentation, particularly for businesses with hourly workforces.
Both deductions are newer and more nuanced than they appear at first read. They carry eligibility requirements, income phase-outs, and documentation standards that make proper implementation essential. Applying them incorrectly or missing them entirely has real consequences in both directions.
For businesses in relevant industries, a conversation with a CPA about how these deductions apply to their specific payroll structure is a worthwhile investment before year-end.
For self-employed individuals and sole proprietors, the personal tax side of the OBBBA carries equal weight.
The seven individual income tax brackets established by the TCJA – 10%, 12%, 22%, 24%, 32%, 35%, and 37% are now permanently set, with annual inflation adjustments. Without the OBBBA, these rates were scheduled to revert to the pre-2018 structure, which would have meant higher effective rates across most income levels.
The enhanced standard deduction is also now permanent. For 2026, the standard deduction is $16,150 for single filers and $32,300 for married couples filing jointly, nearly double the pre-TCJA amounts.
Additionally, the OBBBA introduces a temporary additional deduction of $6,000 for taxpayers aged 65 and older, effective for tax years 2025 through 2028. For business owners at or approaching retirement age, this creates a meaningful planning opportunity that intersects with retirement contribution strategy and income timing decisions.
Understanding what the OBBBA changed is step one. Acting on it is what produces results and the second half of 2026 is the window.
Confirm QBI eligibility and calculation
The permanence of the deduction makes it more important than ever to ensure it is being correctly applied. Business type, income level, and W-2 wages paid all affect the calculation. A review with a CPA confirms the deduction is being fully captured.
Evaluate capital purchases before December 31
With 100% bonus depreciation permanently restored, any planned equipment or technology purchase made before year-end generates a full 2026 deduction. If a purchase was already planned for early 2027, the tax case for pulling it into 2026 is worth modeling.
Revisit estimated tax payments
The OBBBA changes effective tax liability for many business owners. If Q1 and Q2 estimated payments were set based on pre-OBBBA projections or based on last year’s liability without accounting for new deductions, an adjustment before the September 15 Q3 deadline may be appropriate.
Review payroll documentation for tip and overtime deductions
Businesses in relevant industries should work with their CPA to confirm the documentation standards required to support these new deductions and ensure records are being maintained accordingly.
Start year-end planning now
The OBBBA doesn’t benefit businesses automatically. It benefits businesses whose owners understand what changed, plan around it, and execute correctly before December 31.
For a broader look at how to approach the second half of 2026 strategically, DWG’s post on Mid-Year Tax Planning for Small Business Owners covers the full framework.
The One Big Beautiful Bill Act is genuinely favorable legislation for most small business owners – permanent lower rates, a permanent QBI deduction, restored bonus depreciation, and a significantly higher SALT cap represent real, tangible financial benefits.
But tax law changes don’t benefit businesses passively. They benefit the businesses whose owners understand what changed and take deliberate action before the year ends.
At DWG CPA, the team has been incorporating OBBBA planning into every client strategy conversation since the law took effect in January 2026. For businesses that haven’t yet had this conversation, there is still time, but not unlimited time.
For further background on the legislation, DWG’s introductory post Understanding the OBBB Act: What It Means for Your Taxes provides a useful starting point.
If you’re building something important and need a trusted financial partner to grow with you – we’d love to hear from you.
DWG CPA PLLC is a Texas-based accounting firm serving businesses and nonprofits since 2005. We specialize in virtual accounting, tax strategies, and personalized financial guidance across industries like healthcare, construction, real estate, and nonprofits.
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