How the One Big Beautiful Bill Impacts Small Businesses (and How to Stay Ahead)

The One Big Beautiful Bill (OBBB), signed into law on July 4, 2025, brings some of the biggest updates to small business regulations in recent years. The bill introduces changes in tax rules, reporting requirements, and deductions that could affect how owners manage their finances.

Whether you run a service-based business, work with contractors, or invest in equipment, these updates could mean opportunities for savings or new compliance responsibilities. Here’s a breakdown of what’s inside, and what it might mean for you.

New Deductions for Tips and Overtime (2025–2028)

The OBBB introduces two temporary deductions designed to give relief to workers in industries where tips and overtime are common. These deductions apply for tax years 2025 through 2028:

• Tips: Individuals working in occupations that the IRS designates as “customarily receiving tips” (such as restaurants, salons, and hospitality) may deduct up to $25,000 in qualified tips each year. The IRS will publish the official list of eligible occupations by October 2025.

  
  

• Overtime: Employees who earn overtime pay may deduct up to $12,500 of their overtime “premium” pay (the extra half in “time-and-a-half”).

  
  

For married couples filing jointly, both caps double. However, these deductions begin to phase out once income exceeds $150,000 for individuals or $300,000 for joint filers.

It’s important to note:

• These are deductions, not exemptions, meaning tips and overtime are still reported as income, but you can deduct part of them later on your tax return.

  
  

• Payroll taxes still apply (Social Security and Medicare).

  
  

• Employers will have new reporting responsibilities to separately track and report tips and overtime so workers can claim the deduction.

  
  

1099 Filing Thresholds Are Changing

The OBBB raises certain 1099 reporting thresholds starting with 2026 filings, aiming to reduce paperwork for small businesses and freelancers.

• Payment platforms (PayPal, Venmo, Stripe): A Form 1099-K will only be issued if transactions exceed $20,000 AND 200 transactions per year.

  
  

• Contractor payments (1099-NEC/MISC): Starting in 2026, payments only need to be reported if they exceed $2,000 (up from $600).

  
  

This change lightens the reporting burden, but business owners still need to keep accurate, organized records of all payments to avoid compliance issues.

Bigger Deductions for Business Purchases

The OBBB expands options for businesses to write off purchases more quickly:

• Section 179: Small businesses can immediately deduct up to $2.5 million in qualifying purchases, such as equipment, vehicles, or office improvements, in the year they’re placed in service. The deduction begins to phase out once total purchases exceed $4 million. That means for every dollar over $4 million, your maximum deduction is reduced by a dollar. Very large businesses won’t qualify for the full amount

  
  

• Bonus Depreciation: Businesses can claim a full 100% first-year write-off for eligible assets acquired and placed in service after January 19, 2025.

  
  

For owners investing in tools, vehicles, or infrastructure, these provisions could translate into thousands of dollars in tax savings. To qualify, it’s essential to keep detailed records of purchase amounts, dates, and how the assets are used in the business.

Why Accurate Bookkeeping Is Essential

With these changes, bookkeeping isn’t just about staying organized, it’s the difference between capturing new opportunities and missing them. Accurate books will help track deductions, document transactions, and avoid compliance headaches. Simple tools like consistent monthly reconciliations or a bookkeeping service can make the difference between capturing deductions and leaving money on the table.

Final Thoughts

The OBBB offers relief, but also new responsibilities. Small businesses that stay ahead will save time, stress, and potentially thousands in taxes. If you’re unsure how these rules apply, consulting a bookkeeping professional can help you adapt smoothly.

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