The One Big Beautiful Bill Act, signed in July 2025, did something the tax code rarely does. It took a set of business tax breaks that were scheduled to expire and made them permanent. For a small business owner, three of those changes matter more than the rest: the 20% qualified business income deduction, a much larger Section 179 expensing limit, and the return of 100% bonus depreciation.
The headlines treated permanence as the good news, and it is. But permanence carries a quiet risk that almost nobody is talking about. A deadline forces a decision. Remove the deadline and the decision gets postponed, year after year, until the owner realizes they have been paying more tax than the law actually requires. The breaks are permanent. Capturing them is not automatic.
Here is what changed, how each piece actually works, and the specific moves to make in the second half of the year so these deductions land in your return instead of someone else's example.
The 20% QBI Deduction Is Permanent, but Only If Your Business Is Built to Take It
The qualified business income deduction, known as Section 199A, lets owners of pass-through businesses deduct up to 20% of their qualified business income before calculating federal tax. Pass-through means a sole proprietorship, partnership, S corporation, or most LLCs, where the profit flows onto your personal return instead of being taxed at the entity level. For a business with $200,000 of qualified income, a full 20% deduction removes $40,000 from taxable income before the rate is even applied.
This deduction was set to disappear at the end of 2025. The new law made it permanent and kept the rate at 20%. An earlier version of the bill would have raised it to 23%, but that did not survive into the final law, so plan around 20%. The law also widened the income range over which the limits phase in, which gives more owners room to claim the full amount.
The catch is that the deduction is not a flat giveaway once your income climbs above the threshold. Above $403,500 of taxable income for a married couple filing jointly in 2026, or $201,750 for single filers, the deduction starts getting tested against two things: how much W-2 wages your business pays, and whether you are in a specified service business such as consulting, law, accounting, or health. Below the threshold, the rules are simple and most owners get the full 20%. Above it, the deduction can shrink or disappear depending on how your business is structured and how you pay yourself.
That is where the planning lives. The amount of wages an S corporation pays, whether you hold property in the business, and how income is split across entities can each move the deduction up or down. None of that gets fixed in April when the return is prepared. It gets fixed during the year, while you can still change what the numbers will say. If your income is near or above the threshold, this is worth a deliberate look now, not a discovery next spring.
Section 179 and 100% Bonus Depreciation: Bigger, Back, and Worth Timing
The second and third changes work together, and both reward buying the equipment your business actually needs. Normally, when you buy a large asset such as a truck, a machine, or a server, you deduct its cost slowly over many years through depreciation. Section 179 and bonus depreciation let you deduct much or all of that cost in the first year instead.
Section 179 lets you immediately expense qualifying equipment up to a cap. The new law raised that cap dramatically. For 2026 the limit is $2,560,000, with the benefit beginning to phase out once total equipment purchases pass $4,090,000. The old cap was $1,000,000, so this more than doubled the amount a business can write off in a single year. For the overwhelming majority of small businesses, that ceiling is now high enough that it is no longer the constraint.
Bonus depreciation is the companion tool. The law permanently restored 100% bonus depreciation for qualifying property placed in service after January 19, 2025. In plain terms, qualifying assets can be fully deducted in year one. Bonus depreciation and Section 179 overlap, but they follow different rules, and a good advisor uses them in combination rather than choosing one blindly.
The word that matters in both is permanent. When 100% bonus depreciation was scheduled to step down to 80%, then 60%, then lower, owners rushed purchases to beat the drop. That pressure is gone now. The risk is that owners stop thinking about timing entirely. But timing still matters, just for a different reason. A first-year deduction is only valuable in a year when you have income to offset. Buying $200,000 of equipment in a low-profit year wastes much of the deduction. The same purchase in a high-profit year can save real money. The deadline used to be the calendar. Now the deadline is your own profit picture, and only you can see that coming.
"The hardest thing in the world to understand is the income tax."
Attributed to Albert Einstein
A Worked Example: What This Is Actually Worth
Numbers make this concrete. Take an owner of a profitable pass-through business, married filing jointly, with taxable income that puts the top of their income in the 32% federal bracket. Suppose the business has a strong year and the owner needs a new piece of equipment that costs $300,000. The business also has $250,000 of qualified business income for the year.
Here is the rough shape of the first-year benefit, looking only at the federal side.
| Item | Amount |
|---|---|
| Equipment purchase, fully expensed (Sec. 179 / bonus) | $300,000 |
| Federal tax saved on that deduction (32%) | $96,000 |
| QBI deduction on $250,000 income (20%) | $50,000 |
| Federal tax saved on the QBI deduction (32%) | $16,000 |
| Combined first-year federal tax saved | $112,000 |
That is $112,000 of federal tax avoided in a single year, before counting any state benefit. The equipment deduction is a timing benefit, meaning you are pulling deductions forward rather than creating them from nothing, but pulling $300,000 of deductions into a high-income year is exactly the point. The QBI deduction is closer to free money, a permanent 20% haircut on qualifying income that simply requires you to be structured to claim it.
Now look at what happens if the same owner does not plan. They buy the equipment in a slow year instead, where there is little income to offset, and much of the first-year deduction sits idle. Their income drifts above the QBI threshold and, because the S corporation pays low wages, the deduction gets limited. The same business, the same law, a very different tax bill. Nothing about the legislation changed. The planning did.
The Complacency Trap, and the Move to Make Now
This is the heart of it. Temporary tax breaks get used because they create pressure. Owners hear "this expires in December" and they act. Permanent tax breaks get forgotten precisely because the pressure is gone. The breaks become background scenery, assumed rather than managed, and the planning that used to happen every fall simply stops.
June and July are the right time to act, not December. At mid-year you can still see how the year is shaping up and you have months to change the inputs. You can decide whether this is the year to make a major equipment purchase based on where your profit is heading. You can review how you are paying yourself out of an S corporation so the QBI deduction is protected. You can look at whether your entity structure still fits a tax code that just changed in your favor. By December, most of those levers have already locked.
The owners who get the most out of these changes will not be the ones with the most complicated strategies. They will be the ones who treated "permanent" as a reason to plan every year rather than an excuse to stop. The law handed small businesses a genuinely better deal. Whether it shows up on your return depends on a few decisions you make while the year is still open.
If you want to go straight to the source, the IRS keeps a plain-language overview of the qualified business income deduction at irs.gov. It is worth ten minutes before you talk to anyone.
Are You Structured to Capture These?
The deductions are permanent. Whether you actually claim the full amount depends on how your business is set up and how you time a few decisions this year. If you want a clear read on whether you are leaving money on the table, that is exactly the kind of mid-year review we run with owners. Practical, specific, and built around your numbers.
Review my tax positionThis article is general information, not tax advice. Tax outcomes depend on your specific facts, your entity type, and your state. The figures here are illustrative. Confirm your situation with a qualified tax professional before acting.