(And What You Should Do About It Before Year-End)

Congress has just enacted what’s informally known as the One Big Beautiful Bill, a sweeping tax and economic reform package with significant implications for small and mid-sized business owners.

At Pantana CPA, we’ve identified what actually matters for our clients. Here’s your tailored guide to the key provisions, along with proactive tax planning opportunities to consider right now.

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1. 20% Qualified Business Income (QBI) Deduction Now Permanent

QBI deduction 2025, pass-through tax savings

What’s changed:
The 20% deduction for qualified business income (QBI) from pass-through entities, sole proprietors, partnerships, and S corporations is now permanent. Previously, it was set to expire in 2026.

Why it matters:
This remains one of the most powerful tax planning tools for small business owners.

Key actions to take:

• Reviewing your business structure: The right structure ensures you’re positioned to maximize the QBI deduction.
• Optimize your owner compensation strategy: Adjust salary vs. distributions to meet IRS safe harbors since it can significantly affect eligibility.
• Monitor income thresholds: Eligibility phases out above certain limits based on industry and filing status.

Even if you’ve previously claimed this deduction, it’s essential to re-evaluate your approach annually to keep up with IRS guidance and ensure optimal benefit.

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2. 100% Bonus Depreciation Restored and Made Permanent

Bonus depreciation 2025, small business tax planning

What’s changed:
Businesses can now permanently deduct (write off) the full cost of qualified property in the year it’s placed in service, known as 100% bonus depreciation. It has been restored and made permanent.

Why it matters:
This provision can significantly reduce taxable income and enhance short-term cash flow, particularly for businesses planning to invest in equipment, vehicles, or property improvements.

Tax planning strategies:

• Accelerate capital investments like vehicles, machinery, or tech upgrades.
• Coordinate with Section 179 to strategically layer deductions.
• Align large purchases with long-term financial goals to avoid cash shortfalls.

This is especially impactful for industries with recurring equipment needs or planned expansions. However, it’s important to align purchases with your operational needs and long-term financial plan.

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3. SALT Deduction Cap Increased (Temporarily)

SALT deduction 2025, itemized deductions for high earners

What’s changed:
The State and Local Tax (SALT) deduction cap increases from $10,000 to $40,000 (for married filers under $500,000 income), effective 2025 and phasing out after 2029.

Why it matters:
Higher earners in high-tax states can benefit from increased itemized deductions for the first time in years.

What to consider:

• Track AGI limits to ensure qualification.
• Re-evaluate whether to itemize instead of taking the standard deduction.
• Time deductible payments strategically to maximize benefits during the temporary window.

This window may only last five years, build it into your multi-year tax strategy.

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4. R&D Expenses Can Be Fully Deducted (Retroactive to 2022)

R&D tax credits, retroactive deduction for small businesses

What’s changed:
Businesses can now fully deduct qualified research and development (R&D) expenses in the year incurred. This applies retroactively to 2022. This reverses the prior rule requiring amortization over five years.

Why it matters:
If your business innovates, develops new processes, or invests in technical experimentation, this can dramatically reduce your taxable income.

We Recommend:

• Review 2022 and 2023 returns, amend them if missed deductions apply.
• Enhance documentation to meet IRS substantiation standards.
• Consult with your CPA about your eligibility and how to leverage this for current and future tax years.

You may qualify for more than you think, many software, engineering, and manufacturing activities count.

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5. New Payroll Tax Relief for Overtime and Tipped Wages

Payroll tax exemption 2025, small business wage planning

What’s changed:
Certain employee wages, including overtime and tips, are now exempt from federal income tax through 2028.

Why it matters:
This change may affect your payroll tax obligations and employee take-home pay.

Action items:

• Update your payroll software to reflect exempt categories.
• Adjust compensation structures in industries with tipped or overtime-heavy workforces (e.g., hospitality, food service).
• Stay alert for IRS guidance on implementation mechanics and compliance.

This could drive retention and recruitment benefits if properly integrated into your wage strategy.

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6. Clean Energy and Vehicle Credit Changes

Clean energy tax credits, EV tax planning for businesses

What’s changed:
Certain clean energy credits from the Inflation Reduction Act have been revised or reduced. However, new benefits are now available for U.S.-manufactured vehicles, with interest on auto loans potentially deductible. 

Why it matters:
Businesses planning facility upgrades or fleet investments must reassess their approach.

Consider the following:

• Evaluate vehicle credit eligibility based on country of manufacture and loan structure.
• Coordinate energy efficiency improvements with remaining tax credit opportunities.
• Use IRS and Department of Energy guidelines for industry-specific criteria.

Clean tech investments are still valuable, but require tighter planning.

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Make This Law Work for You

Tax strategy for small businesses, mid-year tax review

This legislation offers major opportunities, but also requires a proactive, tailored approach. The businesses that benefit most are the ones that start planning now, not at year-end.

Mid-Year Financial Check-In

Use this moment to:

• Reassess your QBI eligibility and owner comp model
• Inventory capital needs and depreciation strategy
• Evaluate your state tax exposure and SALT benefit
• Identify overlooked R&D expenses
• Update payroll structures and plan for clean energy investments

Don’t wait for year-end, many changes require positioning ahead of time.

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Need Help Navigating These Changes?

At Pantana CPA, we specialize in helping small and mid-sized businesses turn tax law changes into tax savings. Whether it’s optimizing your QBI, rethinking payroll, or amending prior returns, we’re here to support you with strategic insight, smart tools, and ongoing guidance.

📞 Let’s talk about how the One Big Beautiful Bill applies to your business. Schedule a mid-year check-in today. https://pantanacpa.com/contact/