Effective July 4, 2025, the One Big Beautiful Bill Act introduced sweeping tax reforms that offered major advantages for small businesses, particularly those in manufacturing or in high cost of goods sold (COGS) sectors. While the new legislation has received mixed reviews from Americans and political analysts, it does include important tax benefits for small business’ growth and investment capacity.
Permanent Qualified Business Income Deduction
The new law makes permanent the Section 199A deduction for pass-through businesses such as LLCs, S-corporation and partnerships. While some of the largest companies in the country are C-corporations, which do not qualify for these tax deductions, the majority of U.S. businesses are pass-throughs.
With the extension of this law, business owners, whether independent contractors or large, privately held businesses, can continue to deduct 20% of their qualified business income from taxable income. Qualified business income is the net number of income, gain, deduction and loss from any qualified trade or business. The previous deduction was set to expire at the end of 2025.
Permanent Reinstatement of the 100% Bonus Depreciation Deduction
Instead of slowly phasing out by 2026, the bonus appreciation deduction is back up to 100% — permanently. This allows businesses to immediately deduct the cost of qualifying capital investments in machinery and equipment. Instead of slowly deducting taxes over the years for new equipment used to grow their business, business owners can once again take the full deduction up front which can improve cash flow and incentivize reinvestment.
Higher Section 179 Expensing Limit
In an effort to target small to mid-size businesses, the law permanently increases Section 179 expensing limit from roughly $1.25 million to $2.5 million. These expenses can be for anything from machinery to equipment, off-the-shelf software and improvements to nonresidential properties used more than half of the time, such as roofing, HVAC or a security system.
This increased limit provides more flexibility to small businesses making lower-scale capital investments.
Full Expensing for Qualified Production Property
Certain businesses can now fully expense new, nonresidential buildings that will be used for manufacturing, agricultural or chemical production or refining tangible personal property. However, the construction for these buildings needs to be started by Jan. 19, 2025, but before Jan. 1, 2029. The buildings must also be in service before Jan. 1, 2030.
Through this expanded Section 168(k), companies with high capital expenditures and high cost of goods sold will see a benefit.
Immediate R&D Expense Deductions
With this law, businesses can once again fully write off domestic research and development expenses the same year they occur. Historically, this was the case until 2022 when the tax code changed to a gradual write off these expenses over a five-year term. This is designed to fuel innovation and growth, especially within the U.S.
Internationally, the new law keeps research and development budgets to a 15-year period.
Overall, these changes represent significant opportunities for small businesses — especially in the manufacturing, technology and equipment-intensive sectors. By reducing tax burdens, improving cash flow and incentivizing investment in people and property, these could all be a win for your business.
Jeremy Shackleford is Senior Vice President, Director of Small Business Sales for WSFS Bank. He joined WSFS in 2018 after 22 years working in banking and financial services, and was most recently Senior Vice President, Regional Manager for WSFS’ Greater Philadelphia Market, where he oversaw 15 Retail Office locations. He also served 10 years as a member of the United States Air Force.
