If you’re a small-business owner, you may benefit from some of the business-friendly provisions of the Big Beautiful Bill Act (BBBA). Some are brand new, others are permanent extensions or expansions of existing tax breaks.
The Qualified Business Income deduction (QBI) is now permanent
Many qualified small businesses will be able to continue to deduct up to 20% of their qualified business income, a tax break that was originally scheduled to expire this year.
QBI deductions are only available for pass-through entities such as S corporations, sole proprietors, partnerships and LLCs.
Higher reporting limits for businesses receiving online payments
Many individuals and small businesses that sell items on online marketplaces and receive payments from PayPal, Venmo and other online transaction vendors have been concerned about receiving Schedule K. These forms are sent from marketplaces and payment providers to the IRS and to payees whose income and transaction activity levels exceed a certain level.
For several years, the IRS had planned on requiring Schedule K reports when total online payments to a payee were higher than $600.
Instead, BBBA will only require these platforms to send Schedule Ks if total payments per user exceed $20,000 and 200 transactions every year.
This change will deliver the greatest benefit to individuals who simply want to sell some of their household items on eBay, Amazon Marketplace or other online classifieds sites.
However, even if these sellers don’t receive a Schedule K, they should still report income from these sales on their tax returns.
Higher limits for reporting contractor income
Starting in 2026, companies will now only need to file 1099-NEC and 1099-MISC reports for contractors, freelancers and other self-employed workers who receive more than $2,000 in compensation per year. Before BBBA, this reporting threshold was $600.
Bigger deductions for physical asset purchases
Firms that purchase property, equipment, tools, vehicles, computer hardware and software, and other “hard assets” can continue to deduct their full costs (this benefit was originally scheduled to phase out over time). In addition, the limit for Section 179 deductions has risen from $1.22 million to $2.5 million.
R&D expenses can be deducted immediately
Before BBBA, small businesses had to spread deductions of R&D expenses over a five-year period. Now, companies can choose to deduct these expenses for the tax year in which they occur.
Bigger tax credits for employee benefits
Small-business owners can now receive new and larger tax breaks for providing certain benefits to their employees:
- Paid leave: Businesses now get a tax break for providing paid leave, even in states that require companies to provide it.
- Childcare expenses: The employer-provided childcare tax credit will be raised from $150,000 to $500,000 to encourage workplaces to offer on-site or shared childcare services.
Shorter exclusion holding periods for qualified small business stock (QSBS) sales
For owners of C corporations who are thinking about selling some or all of their private stock shares, a new BBBA provision may influence their timing,
In the past, the holding period for the full exclusion benefit for QSBS sales was five years. Given that the exclusion amount could be as high as $10 million, many owners felt that this tax benefit was worth waiting for.
BBBA now provides greater flexibility and higher limits for owners who want to sell sooner.
First of all, starting this year, the exclusion cap will rise from $10 million to $15 million.
And now, instead of having to wait five years, those who sell stock after a three-year holding period may be eligible for a 50% exclusion rate. Those who wait four years may be eligible for a 75% exclusion rate. Those who wait five years will continue to receive the full 100% QSBS exclusion benefit.
Another BBBA provision will now allow more smaller-sized C corporations to take advantage of QSBS exclusions. Starting this year, companies may own up to $75 million in assets and still be considered a small business. Before BBBA, this limit, originally established in 1993, was $50 million. Annual increases in the cap will be linked to inflation.
Talk to a professional before acting
Keep in mind that these BBBA tax provisions only apply to federal taxes. Higher state tax taxes may still apply in some cases. That’s why small-business owners may want to consult with their accountant or tax professional to determine if and when they should take advantage of these tax breaks.
This material has been provided for general informational purposes only and does not constitute tax advice. Although we go to great lengths to make sure our information is accurate and useful, we recommend you consult with a tax professional on any tax-related issues.
This article was authored by Martin Baker and Jeffrey Briskin. Martin is a financial advisor and Director of Financial Planning with Canby Financial Advisors, a SEC-registered investment adviser. SEC registration does not constitute an endorsement by the SEC nor a statement about any skill or training. Martin can be reached at 508.598.1082 or mbaker@canbyfinancial.com. Jeffrey Briskin is Director of Marketing at Canby Financial Advisors.
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