9 Key Tax Changes for SMBs | vcfo

The One Big Beautiful Bill (OBBBA): 9 Key Tax Changes and What They Mean for Small- to Medium-Sized Businesses

The OBBBA presents opportunities for small- to medium-sized businesses (SMBs) to capture long-term savings and reinvest in growth. Still, the sizable breadth and depth of the bill make it challenging for CEOs and owners of SMBs to fully grasp all the tax changes and opportunities it offers, how to apply them, and which could be advantageous for their business. It also isn’t apparent to most SMB leaders that many of these tax changes can be paired with one another in ways that can significantly multiply the benefits available to their company. In this post, we summarize nine of the key tax changes within the OBBBA and share an example of how these changes can work together to boost your benefits.

Breaking Down the OBBBA’s 9 Key Tax Changes

Specifically, the OBBBA extends and expands provisions from the 2017 Tax Cuts and Jobs Act to prevent tax hikes, introduce new deductions and credits, offer permanent tax breaks for growth and investment, simplify compliance, and improve cash flow for businesses. Having a sense of the benefits, qualifiers, and applicability to your company for each of the following changes is essential:

#1 – Permanent QBI Deduction

The OBBBA permanently extends the 20% Qualified Business Income (QBI) deduction for pass-through businesses, including sole proprietors, LLCs, S corps, and partnerships. A new minimum $400 deduction (inflation-adjusted) applies for companies with at least $1,000 in QBI starting in 2026. Expanded phase-in ranges take effect on January 1, 2026. For Specified Service Trade or Business taxpayers (e.g., lawyers, consultants, healthcare professionals), the deduction phases out as taxable income increases, between $197,300 and $272,300 for single filers and $394,600 and $544,600 for joint filers. Non-SSTB taxpayers face limits based on the wages paid through W-2s and capital investment. This permanent extension provides SMBs with certainty for long-term planning and may encourage restructuring to optimize tax outcomes.

#2 – Permanent 100% Bonus Depreciation

The Act makes 100% bonus depreciation permanent for equipment, vehicles, and qualified production property, marking a significant shift from the 40% rate in 2025. It applies to assets placed in service after January 19, 2025. This change allows businesses to immediately expense large capital investments, improving liquidity and reducing taxable income.

#3 – 100% Depreciation Election for Qualified Production Property

Businesses can now elect a 100% depreciation deduction for qualified production property (QPP) placed in service in the U.S. as part of a qualified production activity (QPA), including manufacturing, agriculture, and refining. To qualify, construction must begin between January 20, 2025, and December 31, 2029, and the property must be placed in service before January 1, 2031. The 10-year recapture rule applies if property use changes. This incentive encourages domestic production and reinvestment in U.S. manufacturing infrastructure.

#4 – Section 179 Expensing

The Section 179 deduction cap increases from $1.25 million to $2.5 million, with the phase-out threshold rising from $3.13 million to $4 million, both indexed for inflation after 2025. Effective for assets placed in service after December 31, 2024, this change gives SMBs more flexibility in expensing new equipment and technology. Combined with bonus depreciation, this can serve as a powerful tax planning tool for businesses in managing income and cash flow.

#5 – R&D Deduction

Domestic R&D expenses are now eligible for an immediate 100% deduction (previously a 5-year amortization), retroactive to 2022 for businesses with $31M or less in average annual gross receipts. Businesses can also claim the R&D tax credit on the same expenses. The change incentivizes innovation by allowing SMBs developing products or processes to recover costs faster.

#6 – Gain Exclusion on Qualified Business Sale

The Qualified Small Business Stock (QSBS) gain exclusion (§1202 stock) now features a tiered structure: 50% exclusion after 3 years, 75% after 4 years, and 100% after 5 years. The exclusion cap rises from $10M to $15M, and the gross asset threshold increases from $50M to $75M. This change applies to QSBS issued after July 4, 2025, encouraging long-term investment and planning for owners preparing for eventual exits.

#7 – Opportunity Zone Permanence

The OBBBA makes the Qualified Opportunity Zone (QOZ) program a permanent feature of the tax code. Investors can defer recognized gains until the 5th anniversary of investment or sale/exchange and receive a 10% basis step-up after 5 years. Investments held for at least 10 years remain permanently tax-free. This permanence allows SMBs and investors to engage in long-term community reinvestment strategies.

#8 – Termination of Certain Tax Credits

The Act sunsets several energy and clean vehicle-related tax credits, including those for energy-efficient homes, clean vehicles, and alternative fuel property, between late 2025 and mid-2026. This signals a shift in policy from broad clean energy incentives to targeted sustainability programs. Businesses relying on these credits should evaluate the timing of energy-related investments to maximize remaining benefits.

#9 – Increased Information Reporting Thresholds

Reporting thresholds for Form 1099-K increase to $20,000 in gross payments and more than 200 transactions per year, effective for payments after December 31, 2024. For Forms 1099-MISC and 1099-NEC, the threshold increases from $600 to $2,000 after December 31, 2025. This reduces administrative burdens for small businesses and minimizes audit exposure from low-dollar payments.

Amplifying the Impact: Pairing Tax Strategies for Bigger Benefits

While each of the above-outlined changes offers valuable opportunities on its own, the real power comes from understanding how these provisions can work together. Strategically pairing incentives can multiply your tax advantages and accelerate cash flow. For example, companies can further amplify the benefits from the Bonus Depreciation and Section 179 Expensing changes by combining them with a cost segregation study—a detailed engineering and accounting analysis that breaks down a building or major asset purchase into separate components with different useful lives.

Here’s how it works: many tax preparers treat a $10 million building as a single depreciable asset, spreading deductions evenly across 39 years. A cost segregation study, however, identifies portions of that same building (e.g., roofing, doors, computer systems) that qualify for shorter depreciation schedules, often 5, 7, or 15 years. This reclassification accelerates deductions, and when combined with Section 179 or bonus depreciation, can yield significant results. Companies that have purchased property in the past few years may even be eligible to amend prior tax returns, claim refunds, and carry forward enhanced depreciation into future years. The result is lower current-year taxes, improved liquidity, and reinvestment capacity for growth. This example is just one of many ways that businesses can take advantage of these changes.

Turning Tax Changes into Strategic Advantage

The Big Beautiful Bill is aptly named because there is a lot to take in. Knowing the changes it entails is one thing, but knowing how to strategically apply and blend them is quite another. These combinations of the different rules and changes are complex, and their applicability depends on your company’s structure, assets, and financial goals. That’s where a fractional CFO can be invaluable, helping you identify which provisions are most relevant to your business, model their impact under different scenarios, and ensure compliance while maximizing your returns. They can also coordinate with tax advisors and engineers on cost segregation studies, helping to align your investment timing and financing strategies to take full advantage of these changes.

In short, the OBBBA doesn’t just introduce new tax opportunities; it opens the door to integrated strategies that can meaningfully strengthen your business’s financial position and resilience.

---

Want to learn how to take advantage of these strategies? Invite us for a conversation to learn how vcfo can help. We’ve partnered with leaders from over 6,000 businesses in our 29-year history and are ready to put our experience to work for you.