The OBBB Act introduces a series of incentives aimed at strengthening small businesses, supporting workers, and simplifying compliance. These changes impact business deductions, capital investment rules, worker benefits, and reporting thresholds. Below are the most significant updates.
1. Permanent 20% Deduction for Qualified Business Income (QBI)
The legislation permanently establishes the 20% deduction for pass-through income from:
Sole proprietorships
Partnerships
S corporations
This move provides long-term clarity for millions of business owners after years of uncertainty. By making the deduction permanent, the law supports entrepreneurship and may reduce the effective tax rate for many small businesses.
2. Return of 100% Bonus Depreciation
Businesses can once again expense 100% of capital investments made after January 19, 2025.
This allows companies to immediately deduct the full cost of eligible equipment and property, improving cash flow and encouraging investment. While some limitations apply, the restored deduction may be especially valuable for businesses upgrading technology, purchasing machinery, or expanding operations.
3. Updated 1099-K Reporting Threshold
Starting in 2025, the reporting threshold for payment apps and online platforms rises to:
$20,000 in paymentsand
200 transactions
This reverses the previously scheduled $600 threshold, reducing the reporting burden for gig workers, independent contractors, casual sellers, and individuals receiving payments through platforms such as PayPal or Venmo.
4. New Deductions for Service Industry Workers
The bill introduces two new temporary deductions for workers with income from tips or overtime.
Tip Income Deduction
Available 2025–2028:
Up to $25,000 deduction for service workers
Phases out over $150,000 (single) and $300,000 (joint)
Overtime Deduction
Also available 2025–2028:
$12,500 deduction for single filers
$25,000 deduction for joint filers
Same income limits as the tip deduction
These provisions aim to support workers in industries such as hospitality, retail, and personal services, where extra hours and tipped wages make up a substantial portion of income.
Collectively, these business and work incentives create meaningful planning opportunities for entrepreneurs, contractors, and employees. They also add flexibility to how businesses manage expenses and navigate tax compliance in the years ahead.
Sources 1. Congress.gov, July 4, 2025 2. Internal Revenue Service, July 25, 2025. 3. Internal Revenue Service, July 25, 2025.