Trump’s “One Big Beautiful Bill”: Which Provisions May Impact Business Owners

On July 4^th, President Trump signed the “One Big Beautiful Bill Act,” which includes a broad range of tax reform provisions. The provisions listed in the bill may help offer small businesses much-needed tax relief. According to the Whitehouse.gov, it is estimated that workers could see increased wages up to $7,200, with up to 1 million new jobs created annually by small businesses.[i]

Potential Benefits of the Bill for Small Businesses:

The bill is designed not only to benefit individuals, but includes key provisions that may benefit small businesses.

·       Permanent Small Business Deduction (Section 199A): A permanent 20% deduction for qualified business income (QBI) for pass-through entities (a pass-through entity is a business structure where the income, losses, deductions, and credits of the businesses are passed directly to the owner(s), or shareholder(s) for tax purposes, such as an LLC, sole proprietorship, partnerships, and S corporations).[ii] The deduction helps to lower the tax rate for these businesses. Pass-through entities make up the majority of businesses in the United States.[iii] An example of a business that isn’t a pass-through entity is a C corporation.[iv]

·       Modification of the Business Interest Deduction: The adjusted taxable income used in calculating the business interest deduction has been revised, making it more favorable for small businesses.[v]

·       Bonus Depreciation: One hundred percent bonus depreciation has been permanently reinstated, allowing businesses to deduct the full cost of eligible qualified property in the first year.[vi]

·       Section 179 Expensing Cap Increase: The limit that allows businesses to immediately deduct the cost of equipment has been increased from $1.25 million to $2.5 million. Small businesses can now write off more of their investments in the first year.[vii]

·       Tax Credit for Organizations that Offer Scholarships: A new tax credit option for donations to organizations that grant scholarships.[viii]

·       Retroactive Deductibility of Domestic Research and Development (R&D) Expenses: Small businesses with average annual gross receipts of $31 million or less can retroactively deduct domestic R&D expenses incurred after Dec. 31, 2021. Businesses are also permitted to amend previous tax returns and potentially get refunds.[ix]

·       Eligible family farms can be safeguarded from punitive double taxation: Family farmers and ranchers may benefit from a permanent small business deduction increase to 23 percent as well as one hundred percent immediate expensing (meaning they can deduct the full cost of qualifying business investments such as machinery and equipment in the year of purchase rather than depreciating it over time). They can now immediately expense new production facilities. Lastly, they are also given more flexibility to secure farming loans at lower costs.[x] Farmers and ranchers can reach out to a financial professional to determine if there are any other provisions they may benefit from.

Potential disadvantages of the bill for Small Businesses:

The bill also may have disadvantages that small business owners may want to consider. These include,

·       Increased Healthcare Costs: There may be significant cuts to Medicaid that could mean a loss of healthcare coverage for many small business owners, their families, and employees.[xi]

·       Enhanced Deficits and Debt: This is subjective, however, a possibility. Projected deficit and national debt increases could lead to higher interest rates, which could slow economic growth, thereby impacting small businesses.[xii]

·       Tax credit implications: A repeal or curtailing of clean energy and foreign entity tax credits could impact small businesses in those sectors.

·       Complexity of the tax code: The addition of new tax regulations could potentially increase the complexity of the tax code, creating an administrative cost burden for small businesses.[xiii]

Schedule a meeting with your financial professional

With all the changes reportedly taking form after the signing of Trump’s “One Big Beautiful Bill,” you may consider scheduling a meeting with your financial professional to learn about how these modifications could impact you and your financial strategy and goals. There may be advantages where you could benefit or disadvantages that you can prepare for as 2025 comes to an end, when most take effect.

Important Disclosures:

Content in this material is for educational and general information only and not intended to provide specific advice or recommendations for any individual.

This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.

All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

This article was prepared by LPL Marketing Solutions

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