Small business owners: Here’s what you need to know about OBBBA
OBBBA brings big changes for small business owners. Learn what it means for your finances today—and how to prepare for tomorrow.
The One Big Beautiful Bill Act (OBBBA) of 2025, signed into law on July 4, 2025, as Public Law No: 119-21, is a sweeping tax reform aimed at simplifying the tax code and stimulating business growth. It introduces new deductions and reporting changes that can benefit small business owners, if you understand how to apply them.
Many of the bill’s provisions are designed to help small businesses invest in growth, reduce administrative burdens, and support their workforce. Whether you’re upgrading equipment, managing seasonal labor, or offering childcare benefits, these changes can improve your bottom line.
Here’s what OBBBA means for your business. Plus, learn how Sage 50, a powerful desktop accounting software with secure cloud hosting, helps you manage these changes with confidence.
Section 179 deduction for equipment
Small businesses can now deduct up to $2,500,000 in qualifying equipment purchases (including, but not limited to, computers, tools, and machinery) immediately, rather than depreciating them over several years. The deduction begins to phase out when total equipment purchases exceed $4,000,000. This means businesses purchasing more than this amount will see a reduced deduction.
Advice: Consider timing your equipment purchases strategically, as buying before year-end can maximize your deduction for the current tax year.
Sage 50 Tip: Use Sage 50’s budgeting tools to forecast how equipment investments will impact your cash flow and tax liability.
Bonus depreciation
Businesses can write off 100% of the cost of eligible property—such as vehicles, software, or office upgrades—in the year it’s purchased and placed into service. See IRS Publication 946 for the full phase-down schedule.
Advice: Bonus depreciation is especially useful for upgrading tech or vehicles. Pair this with Section 179 for maximum impact.
Sage 50 Tip: Create and flag bonus depreciation journal entries, ensuring accurate records and smoother collaboration with your accountant.
Overtime pay deduction
Employees may deduct up to $12,500 in qualified overtime wages on their personal federal tax returns. This applies to the portion of overtime pay that exceeds the regular rate (the “half” in “time-and-a-half”).
Advice: Educate your employees about this deduction, as it could improve morale and retention.
Sage 50 Tip: Generate custom pay codes to track overtime wages, simplifying reporting and helping employees claim their full deduction.
Cash Tip Deduction
Employees in tip-based occupations may deduct up to $25,000 in qualified tips, provided they are reported on a W-2, 1099, or Form 4137. This especially benefits service industries like restaurants, salons, and hospitality.
Advice: Encourage accurate tip reporting by offering digital tip tracking or payroll integration.
Sage 50 Tip: Use Sage 50 to track cash tips separately from regular wages to stay compliant with IRS reporting requirements and support employees in maximizing their deduction.
Contractor Reporting Threshold
The threshold for issuing 1099s to contractors remains at $600 in 2025, as confirmed by the IRS Instructions for Forms 1099-NEC . In 2026, the bill will raise the reporting threshold to $2,000 and will be indexed for inflation every year afterwards. The IRS continues to review reporting requirements for future years, so small businesses should monitor legislative updates and be prepared to adjust their contractor tracking processes if the threshold increases in coming years.
Advice: Even though the threshold hasn’t changed for 2025, review your contractor list on a quarterly basis to avoid last-minute 1099 surprises.
Sage 50 Tip: Generate accurate contractor reports at the $600 threshold and be ready to adjust if future legislation changes the rules.
Employer Childcare Credit
Employers may claim up to $500,000 in tax credits for providing or subsidizing childcare. Beginning January 1, 2026, the credit covers 40% of facility costs and 10% of resource and referral services.
Advice: Consider partnering with local childcare providers to offer benefits without building a facility.
Sage 50 Tip: Use Sage 50 to create a dedicated GL account for childcare-related expenses and track them automatically, making it simple to calculate credits at tax time.
What to Ask Your Accountant
Understanding how OBBBA applies to your business isn’t just about knowing what’s changed: it’s about knowing how to act on it. Every small business is different, and the impact of these new deductions and credits will depend on your structure, industry, and financial strategy.
Before making decisions, use this list to guide a conversation with your accountant or tax advisor. These questions can help you uncover opportunities, avoid compliance pitfalls, and make the most of the reforms:
- How can I combine Section 179 and bonus depreciation to maximize my deductions?
- What documentation do I need to support childcare-related tax credits?
- How do the new overtime pay deductions apply to my employees?
- What’s the best way to track and report qualifying equipment purchases under OBBBA?
- If I provide seasonal or part-time labor, how do these changes affect my reporting obligations?
- Will the increase in the 1099 threshold impact how I report contractor payments?
- How do I ensure I’m compliant with the new reporting requirements under OBBBA?
- Are there any industry-specific provisions in OBBBA that apply to my business?
- What changes should I make to my payroll or bookkeeping processes to align with OBBBA?
- Can I retroactively apply any of these deductions or credits for purchases made earlier this year?
- How will these changes affect my estimated tax payments or quarterly filings?
Reporting and Compliance Made Easy
Once you’ve discussed OBBBA’s implications with your accountant, the next step is to put systems in place to manage compliance confidently. That’s where Sage 50 comes in. With built-in tools designed for small business workflows, Sage 50 helps you stay organized, audit-ready, and proactive about tax season.
Sage 50’s built-in reporting tools make compliance simpler in several ways:
- They allow you to monitor deductible expenses throughout the year, ensuring nothing gets overlooked at tax time.
- They help you prepare for tax season with organized records and clear, easy-to-generate reports.
- They enable you to maintain audit-ready records with a full audit trail that documents every transaction.
With these tools in place, you can stay ahead of compliance requirements and make informed financial decisions.
Make the most of OBBBA with Sage 50
Tax reforms like OBBBA can create real opportunities for small businesses, but only if you have the right systems in place. Sage 50 helps you maximize deductions, automate reporting, and stay compliant, so you can focus on running and growing your business.
Discover how Sage 50 can turn tax reform into business opportunities by taking a test drive.
Disclaimer: This article is intended for informational purposes only and does not constitute legal, financial, or tax advice. The One Big Beautiful Bill Act (OBBBA) of 2025 introduces complex changes to federal tax law that may affect businesses differently depending on their structure, industry, and financial situation. Always consult with a qualified accountant or tax professional to understand how these provisions apply to your specific circumstances. Sage does not guarantee the accuracy or applicability of third-party information linked in this article.
This article was written in September 2025 and may not reflect future updates or amendments to OBBBA or related tax guidance.
