New Tax Law Unlocks Major Savings for Main Street Small Businesses
President Trump’s recently enacted tax legislation, dubbed the One Big Beautiful Bill, promises substantial financial relief for small businesses across Main Street. Although passed over the summer, many of the bill’s most advantageous tax benefits are just beginning to take effect and will continue to impact business filings into next year. Several provisions revive previously phased-out deductions, while others introduce expanded write-offs and credits designed to bolster local economies and small business growth, according to tax experts Jeffrey Kelson and Melanie Lauridsen.Full 100% Deduction on Business Equipment Purchases
Small businesses investing in new machinery, computers, or equipment can now deduct 100% of the purchase price, a dramatic increase from the previous 40% threshold. This benefit applies to assets acquired on or after January 20, 2025.“This is a huge jump from the old 40%,” noted Ken Webster, CEO of Rocket Legal Professional Services. He advises businesses to review their recent equipment purchases to maximize deductions. Additionally, purchases up to $2.5 million can qualify for full deductions for taxable years starting after December 31, 2024, provided the assets are new to the business, even if not brand new. Spending limits apply before deductions phase out. Consulting a tax advisor is recommended to optimize these write-offs and explore potential state tax benefits.Restored Immediate Expensing of Research & Development Costs
The bill reinstates the immediate deduction of 100% of domestic R&D expenses incurred after 2024, reversing the amortization requirement imposed by the 2017 Tax Cuts and Jobs Act.“This is a huge relief for many taxpayers, especially startups in technology sectors,” said Diana Walker, director at Baker Tilly’s tax practice. Businesses with gross receipts under $31 million averaged from 2022 to 2024 can also claim credits for prior domestic R&D expenses by amending past returns, even after filing their 2024 taxes.Enhanced Interest Deduction for Business Loans
The legislation restores the EBITDA-based limitation for interest deductions on loans, replacing the stricter EBIT-based system. This allows small businesses greater ability to deduct interest paid on debt.“Many small businesses rely on debt to fuel growth. This change enables them to deduct interest and reinvest those savings,” explained Melanie Lauridsen of the American Institute of CPAs.New Tax Deduction on Tips for Business Owners
A notable new provision allows eligible small businesses to deduct up to $25,000 annually in tips through 2028. However, self-employed individuals cannot deduct more than their net income from the tipped business, and income thresholds apply to claim this benefit. Businesses claiming this deduction should maintain meticulous tip records due to anticipated IRS scrutiny.Permanent and Expanded Qualified Business Income Deduction
The Qualified Business Income (QBI) deduction, allowing a 20% deduction on business income for eligible sole proprietors, partners, and S corporation shareholders, is now permanent with broadened income eligibility. A minimum $400 deduction is guaranteed for businesses with at least $1,000 in active income, increasing with inflation. Certain service sectors face income limits for full deduction eligibility.Expanded Employer-Provided Child Care Tax Credits
Small businesses with gross receipts under $31 million can now claim tax credits up to $600,000 and 50% of expenses related to employee child care programs for 2025. The U.S. Chamber of Commerce recommends small businesses consider expanding child care benefits or collaborating with nearby firms to maximize this credit.FinOracleAI — Market View
The new tax legislation represents a significant fiscal boost for Main Street small businesses by reinstating and expanding key deductions that directly reduce taxable income and increase cash flow.- Opportunities: Enhanced equipment and R&D deductions encourage capital investment and innovation.
- Permanent QBI deduction expansion supports higher-income small business owners.
- Improved interest deduction rules facilitate business growth through debt financing.
- Child care tax credits incentivize employee support programs, potentially improving workforce stability.
- Tip deductions offer additional, albeit regulated, income relief for select business types.
Impact: This legislation is expected to have a positive effect on small business profitability and Main Street economic vitality by lowering effective tax burdens and encouraging investment.
Contents
New Tax Law Unlocks Major Savings for Main Street Small BusinessesFull 100% Deduction on Business Equipment PurchasesRestored Immediate Expensing of Research & Development CostsEnhanced Interest Deduction for Business LoansNew Tax Deduction on Tips for Business OwnersPermanent and Expanded Qualified Business Income DeductionExpanded Employer-Provided Child Care Tax CreditsFinOracleAI — Market View
