The One Big Beautiful Bill Act was signed into law on July 4, 2025 — the largest tax package enacted since the Tax Cuts and Jobs Act of 2017. For small business owners and self-employed filers, four provisions are immediately relevant to how you structure equipment purchases, manage pass-through income, and plan your 2025 and 2026 taxes.
Bonus depreciation: 100% is back, permanently
Under the TCJA phase-down schedule, bonus depreciation was declining by 20 percentage points each year: 80% (2023), 60% (2024), 40% (2025), 20% (2026), and 0% (2027). The One Big Beautiful Bill reversed that entire phase-down.
Effective for assets acquired after January 19, 2025, bonus depreciation under Section 168(k) is permanently restored to 100%. This means:
- Equipment, machinery, vehicles, and most depreciable personal property placed in service on or after January 20, 2025 qualifies for a 100% first-year write-off.
- The deduction is uncapped — it is not limited to taxable income, unlike Section 179.
- Businesses that already filed 2025 returns using the old 40% rate may be able to amend and capture the additional deduction. Confirm eligibility with a CPA before amending.
- An election is available to apply 40% (or 60% for certain longer-production-period property and aircraft) instead of 100% for the first tax year ending after January 19, 2025, if that produces a better outcome for your situation.
For most equipment buyers, this is the single most impactful change in the Act. If your tax projections for 2025 or 2026 were built on TCJA phase-down assumptions, run the numbers again.
The QBI deduction: permanent, no expiration
The Section 199A qualified business income (QBI) deduction — which allows eligible pass-through business owners to deduct up to 20% of their qualified business income — was scheduled to expire after the 2025 tax year. OBBB made it permanent with no sunset date.
What the permanency means in practice:
- The 20% rate is unchanged. Sole proprietors, S-Corp shareholders, partners, and single-member LLC owners continue to deduct up to 20% of their qualified business income. C-Corp income does not qualify.
- No further legislative renewal required. The QBI deduction is now a standing feature of the tax code, not a temporary provision that required extension every few years.
- New $400 minimum. Taxpayers with at least $1,000 of QBI from businesses in which they materially participate can claim a minimum $400 deduction even when W-2-wage and qualified-property limitations would otherwise reduce it below that floor.
- Expanded phase-in range. OBBB widened the income threshold at which the W-2 wages and capital limitation begins to apply, partially expanding access to the full deduction for qualifying businesses at higher income levels.
If you operate as an S-Corp, the QBI deduction interacts directly with your reasonable compensation election — higher W-2 wages raise the W-2 wage limitation ceiling for QBI purposes but also increase self-employment and payroll taxes. For a detailed breakdown of how to calibrate that trade-off, see S-Corp Formation and Funding Implications. For a broader overview of pass-through tax mechanics, see Small Business Tax Basics for First-Time Filers.
Section 179: permanent and inflation-indexed
Section 179 already allowed immediate expensing of qualifying business property, but its caps were set by statute and not automatically adjusted for inflation. OBBB changed both the cap and the indexing:
- 2026 cap: $2,560,000 (inflation-adjusted from the $2.5M statutory base)
- Phase-out threshold: $4,090,000 of qualifying property placed in service (above this amount, the deduction reduces dollar-for-dollar)
- The limits are now permanently inflation-indexed — no future legislative action is needed to preserve their purchasing power
Section 179 differs from bonus depreciation in one critical way: it cannot create a net operating loss. Bonus depreciation has no taxable income ceiling and can extend or create an NOL that carries forward. Most businesses use Section 179 first on qualifying property, then apply bonus depreciation to any remaining cost basis. For owners with annual equipment purchases well below the $2.56M cap, the practical difference between the two tools is minimal — both deliver the same first-year write-off.
Business interest deduction: the EBITDA add-back is restored
This provision is less widely discussed but matters for capital-intensive operations — equipment-heavy businesses, manufacturers, and companies carrying significant SBA or equipment-term debt — that also run high depreciation deductions.
Under the TCJA as applied from 2022 through OBBB's passage, the 30% limit on deductible business interest was calculated using EBIT. Depreciation and amortization were excluded from adjusted taxable income (ATI), making the ceiling more restrictive for any business with large depreciation. The practical effect: businesses with substantial equipment debt and high depreciation could lose deductibility on a portion of their interest expense each year.
OBBB restored the EBITDA-based calculation for tax years beginning in 2025 and later. Depreciation and amortization are added back to ATI before the 30% cap is applied. For businesses that were previously hitting the interest deduction ceiling due to the EBIT-only calculation, this change meaningfully increases deductible interest — reducing taxable income without any change to actual debt or spending.
Employer childcare credit: expanded for businesses with employees
For businesses that provide childcare benefits — through a company-operated or contracted childcare facility, direct payments to a childcare provider, or employee childcare resource-and-referral services — the employer childcare tax credit under Section 45F expanded significantly:
- Maximum annual credit increased from $150,000 to $500,000 (or $600,000 for eligible small businesses)
- Credit percentage increased from 25% to 30% of qualified childcare expenditures
- Recapture rules remain: the credit is clawed back on a declining schedule if the qualifying childcare facility ceases to qualify within 10 years
This change is most relevant to businesses with 10–50 employees where childcare benefits are part of a retention strategy. The prior $150,000 ceiling was a meaningful cap for midsized operators; the $500,000 threshold substantially increases the available credit.
What this means for equipment and financing decisions
100% bonus depreciation changes the after-tax economics of every equipment purchase. At a 21% effective federal rate, a $100,000 equipment acquisition produces a $21,000 first-year tax deduction — versus $2,000 under the old 20% TCJA rate. The effective after-tax cost of the asset drops from approximately $98,000 to $79,000 in Year 1.
For businesses considering equipment acquisitions in 2026, this strengthens the case for buying over leasing — particularly for assets that retain value over time. If you need financing to structure an equipment purchase, our funding platform connects you with lender partners across equipment financing, term loans, and SBA 7(a). You can start an equipment financing application. All financing is subject to lender partner approval.
The QBI deduction's permanency also resolves a planning uncertainty that had kept many S-Corp elections deferred. The W-2/distribution optimization no longer depends on annual legislative renewal — owners who delayed entity structure review because of QBI sunset risk now have a stable baseline for that analysis.
For the retirement-planning dimension of self-employment tax strategy — including how SEP-IRA, SIMPLE IRA, and Solo 401(k) contributions interact with QBI and overall taxable income — see Choosing the Right Retirement Plan for Self-Employed Owners in 2026.
This content is for educational purposes only and does not constitute tax or legal advice. Consult a qualified CPA before amending prior returns, changing entity structure, or making depreciation elections under OBBB.