Now Permanent: The Small Business Tax Deduction

On July 4, 2025, President Trump signed the One Big Beautiful Bill Act (OBBBA) into law—a sweeping, nearly 900‑page act with far-reaching fiscal implications. Among its many reforms, one of the most consequential for small businesses is the permanent extension and expansion of the Small Business Tax Deduction, also known as the Section 199A Qualified Business Income (QBI) deduction.

Originally enacted under the 2017 Tax Cuts and Jobs Act, the QBI deduction was set to expire at the end of 2025. The OBBBA not only makes this deduction permanent, but also increases the deduction rate from 20 percent to 23 percent of qualified business income. This is a major win for the more than 33 million small businesses in the U.S., many of which are structured as pass-through entities like sole proprietorships, partnerships, and S-corporations.

Expanded Access and Greater Fairness

The new law also expands access by raising the income thresholds where the deduction phases out. Under OBBBA, the phase-in starts at $75,000 for individuals and $175,000 for joint filers, meaning more small business owners will qualify for the full deduction. And most importantly, the legislation introduces a $400 minimum deduction that is indexed to inflation, ensuring that even low-earning businesses benefit from this policy.

This expansion addresses a longstanding criticism that the QBI deduction disproportionately benefited higher earners while leaving out many true Main Street small businesses.

Long-Term Tax Certainty

Perhaps the most important change is the permanence of the deduction. Previously, small business owners faced tax uncertainty with the 199A deduction set to sunset in 2025. Now, with this provision made permanent, entrepreneurs can make long-term investment decisions without fear of sudden tax increases.

The National Federation of Independent Business (NFIB), which strongly advocated for the deduction, called the bill “a landmark victory” for small businesses. According to NFIB President Brad Close, the law will “free small business owners to create jobs, grow their businesses, and invest back into their communities.”

Additional Tax Benefits for Small Businesses

But the OBBBA goes beyond just Section 199A. Several additional tax provisions offer even more relief to small firms, including:

• Section 179 Expensing: The cap on deductible equipment purchases is now $2.5 million, up from $1.25 million. This allows businesses to immediately deduct the cost of machinery, software, and vehicles used in operations.
• R&D Expensing: The law restores full expensing of domestic research and development costs, retroactive to 2022, a big boost for tech startups and manufacturers.
• Marginal Tax Rate Locks: The 2017 TCJA’s marginal rate cuts are now permanent, ensuring that small business profits are not taxed at higher rates in future years.
• Estate Tax Relief: The small business estate tax exemption is increased to $15 million for individuals and $30 million for married couples, helping family-owned businesses transition ownership more smoothly.

These provisions work together to create a more stable, growth-friendly environment for America’s entrepreneurs.

While the One Big Beautiful Bill Act gives small business owners powerful new tools, knowing how to leverage these tax advantages is key—and that’s where ARF Financial comes in. We specialize in flexible business financing solutions and advisory services tailored to your small business needs. So by combining this more favorable tax landscape with smart financing from ARF Financial, your business can scale faster, operate leaner, and plan with confidence. Visit us today to learn more.