The One Big Beautiful Bill Act, signed into law on July 4, 2025, locked in two tax benefits that small business owners had been waiting on for years. The 20% Qualified Business Income (QBI) deduction, which was set to expire at the end of 2025, is now permanent. And the Section 179 expensing limit for equipment purchases has jumped from $1 million to $2.5 million.
The QBI deduction, also known as the Section 199A deduction, lets owners of pass-through businesses like sole proprietorships, partnerships, S corporations, and LLCs deduct up to 20% of their qualified business income from their taxable income. Under the original 2017 Tax Cuts and Jobs Act, this benefit had a built-in expiration date. That uncertainty made long-term tax planning difficult for millions of business owners.
Now that the deduction is permanent, owners can factor it into multi-year financial plans with more confidence. The law also widened the income range where the deduction phases out, meaning more higher-earning business owners may qualify. A new minimum deduction of $400 was also added for active business owners with at least $1,000 in qualified business income.
On the equipment side, the Section 179 increase to $2.5 million (with a phaseout starting at $4 million) lets businesses write off a much larger share of qualifying equipment costs in the year they buy it, rather than spreading deductions over several years. This change applies to tax years beginning after December 31, 2024, so it already covers purchases made in 2025.
Full 100% bonus depreciation was also restored for qualifying business investments made after January 19, 2025. That had been phasing down under prior law.
Business owners filing 2025 returns this tax season should talk to a tax professional about whether their recent equipment purchases qualify under the new rules. For 2026 and beyond, the permanent QBI deduction and higher expensing limits open up more room for planning around entity structure, compensation, and capital investment.
The IRS has begun issuing guidance on these provisions and is expected to publish updated inflation-adjusted thresholds for 2026 as those numbers are finalized.
