Big, Beautiful, and Official: What the Final Tax Bill Means for Business Owners

The 2017 Brackets Are Now Permanent

Those “temporary” tax brackets from the 2017 Tax Cuts and Jobs Act were set to sunset in 2025. Many expected a return to older, higher rates like 25 percent or 28 percent.

Instead, the current brackets are now permanent:

• 10%, 12%, 22%, 24%, 32%, 35%, 37%

This gives small business owners more breathing room. Pass-through income stays taxed at lower individual rates, which means more flexibility in how you draw compensation and structure profits.

The Standard Deduction Just Got Even Bigger

The already generous standard deduction not only sticks around, it grows:

• $15,750 for single filers

• $23,625 for heads of household

• $31,500 for married couples filing jointly

These figures apply for 2025 and will adjust with inflation starting in 2026.

If you’re a sole proprietor who doesn’t itemize, this is real money in your pocket. It simplifies your return and lowers your taxable income. And for those on the fence about whether to donate, itemize, or simplify, this change might make that decision easier.

State and Local Tax (SALT) Deduction Cap Expanded

The SALT deduction cap increases to $40,000 for joint filers and $20,000 for single filers. This expanded cap applies to households with income below $500,000. Once that threshold is crossed, the cap begins to phase out.

For business owners in high-tax states, this change may offer modest relief, especially for those who don’t use PTET or have significant itemized deductions. It doesn’t remove the cap entirely, but it does ease the limitation for many upper-middle income households.

100% Bonus Depreciation Is Back (With a Catch)

Businesses can once again expense the full cost of eligible property in the year it’s placed in service, as long as the asset is acquired after January 20, 2025.

This includes machinery, equipment, software, and other items with a recovery period of 20 years or less.

Real estate investors should take note. Bonus depreciation does not apply to entire properties. Instead, it covers qualified improvements (like HVAC systems or interior upgrades) and certain components. It’s worth reviewing what qualifies before pulling the trigger on big purchases.

Qualified Business Income Deduction Stays the Course

The QBI deduction remains at 20% for eligible pass-through income. Starting in 2026, the phaseout threshold increases to $150,000 for single filers and $300,000 for joint filers.

The specified service business limits are still in place, but the expanded range gives a bit more room for those near the cutoff.

Estate and Gift Tax Exemption Raised, Not Reduced

This was a surprise to many. Instead of letting the estate exemption fall back to pre-2017 levels, Congress raised it:

• $15 million per person

• $30 million per couple

This exemption is permanent and will begin adjusting for inflation in 2026.

If you’ve paused estate or gifting strategies in anticipation of a rollback, now’s a good time to revisit those conversations. Families who own businesses or real estate can make longer-term plans with more confidence.

Tips, Overtime, and a Few Unexpected Benefits

The bill includes some people-focused provisions that could affect both your team and your personal return:

• Tips and Overtime Pay Deductions: Employees can now deduct up to $25,000 of combined tip and overtime income (or $12,500 for single filers) from 2025 through 2028. This only applies below a certain income threshold.

• Car Loan Interest Deduction: Up to $10,000 of interest on personal car loans is now deductible, even if you don’t itemize. The deduction phases out at $200,000 for singles and $250,000 for joint filers.

Quick Hits: More Business-Friendly Changes Worth Knowing

• Section 179 limit increased to $2.5 million, with a phaseout starting at $4 million.

• Opportunity Zones now operate on rolling 10-year designations. Holding for five years earns a 10 percent basis step-up.

• Child Tax Credit increases to $2,200 per child starting in 2026 and will rise with inflation.

• Dependent Care FSA contributions can increase to $7,500 for married couples.

• Health Savings Accounts (HSAs) are now available for Bronze and Catastrophic ACA plans.

• Charitable Giving receives a new above-the-line deduction of $2,000 for joint filers ($1,000 for single). A new 0.5 percent AGI floor also applies to itemized charitable deductions.

• Pass-Through Entity Tax (PTET) elections are preserved. If your state allows it, you can continue deducting state taxes through the business at the federal level.

• Qualified Small Business Stock (QSBS) rules are expanded. The exclusion rises to $15 million, and partial exclusions now kick in earlier (50 percent at three years, 75 percent at four years, 100 percent at five). Businesses can now qualify with up to $75 million in assets.

The Fine Print Still Matters

While the bill provides broad changes, the details can get complicated quickly. Many provisions, especially those tied to income thresholds, business type, or filing status, will affect people differently.

What works well for one business owner may not apply the same way to another. That’s why these updates are best reviewed in the context of your own situation, with your full financial picture in mind.

What This Means for Business Owners

This bill won’t solve every challenge, but it does create a more stable environment for financial planning. Taking the time to understand how it fits into your overall strategy can help you make more thoughtful choices moving forward.