10 Provisions in the “One Big Beautiful Bill Act” for Small Business Owners to be Aware Of

May 22, 2025

Early this morning, the “One Beautiful Bill Act” (yes, that is the actual name of the bill) passed the House of Representatives by a narrow margin of 215-214. Note that this is just the first step in the process and the bill is not yet law. But, there are many provisions small business owners should be aware of as the legislation makes its way to the Senate.

The chief and primary purpose of the legislation is to make permanent both the individual and corporate tax rate reductions from the 2017 Tax Cuts and Jobs Act (TCJA), preventing a reversion to higher pre-TCJA rates. This will prevent a tax increase on 26 million small businesses and most taxpayers that would otherwise go into effect.

The Qualified Business Income (QBI) deduction for pass-through businesses (such as LLCs and S-corps) rises from 20% to 23% and is made permanent. This supports 26 million entrepreneurs by reducing taxable income, encouraging reinvestment and hiring.

The bill reinstates full immediate expensing for capital investments (such as equipment and buildings) for 2025–2029, reversing the TCJA’s phase-out. This incentivizes business expansion and modernization, particularly for capital-intensive industries.

Federal income taxes on tips and overtime pay are eliminated. This benefits service workers (such as Uber drivers, restaurant staff) and high-overtime industries (such as healthcare). Small businesses benefit from simpler payroll but we should assume that there will be increased IRS scrutiny to prevent income misclassification.

The state and local tax (SALT) deduction cap rises from $10,000 to $40,400 for incomes up to $500,000, with a 1% annual increase and a phase-down for higher earners. This will positively impact small business owners who itemize their tax deductions.

The Child Tax Credit (CTC) increases to $2,500 per child (from $2,000) through 2028, with a $1,700 refundable portion, and the standard deduction rises by $1,500 for 2025–2028. Childcare is expensive, and the increase and refundable feature to this credit is substantial.

The bill imposes work requirements for able-bodied Medicaid recipients (effective 2026, accelerated from 2029) and cuts $715 billion over 10 years, potentially removing 8.6 million people from coverage. This portion is a mixed bag for business. Some might benefit if more people are pushed into the workforce. But increased uncompensated care from uninsured people could ultimately increase costs to insurance premium payers.

The bill allocates $140 billion for immigration enforcement, including $50 billion for a border wall, $45 billion for detention centers, $14 billion for deportations, and $8 billion for immigration officers. Some businesses could experience disruption in their labor markets, especially in industries like agriculture and hospitality.

The bill accelerates the phase-out of energy incentives from the 2022 Inflation Reduction Act, redirecting funds to tax cuts and border security. Wind, solar, and other alternative energy providers, manufacturers, and installers could be negatively impacted.

There has been a lot of reporting on how much the bill would add to the deficit over the next decade, which is essentially referring to the rate the debt would actually grow. But it is also important to understand where the total debt is expected to stand 10 years from now, as that important context is often missing from news articles. So, let’s talk absolute debt levels. In 2015, the U.S. had just over $18 trillion in outstanding debt. Today, 10 years later, it stands at over $36 trillion. Before this bill, the U.S. was projected to reach $52 trillion in debt in the next 10 years. If this bill is signed into law, the debt level would exceed $55 trillion. That is what it means to add $3 trillion to the expected deficit (as most new articles cite). In other words, the debt trajectory in the next 10 years is about the same as the last 10 years.