How does the One Big Beautiful Bill Act change taxes for self-employed business owners?

QBI deduction, now permanent at 20%: the 20% deduction on qualified business income under Section 199A was scheduled to expire at the end of 2025. OBBBA made it permanent at 20%. An earlier House version proposed 23%; that did not become law. Starting in 2026 there is also a new minimum deduction of $400 for anyone with at least $1,000 of QBI from a business they actively run, and the income range over which the deduction phases out for service businesses widened. For a consultant or clinician this is the single most valuable deduction in the code.

100% bonus depreciation, back permanently: equipment, computers, furniture, and qualifying vehicles acquired and placed in service after January 19, 2025 can be fully expensed in year one rather than depreciated over several years. The Section 179 expensing limit also rose to $2.5 million. For a service business this mostly matters in years you buy a vehicle or re-equip an office.

1099-NEC threshold raised to $2,000: if you pay subcontractors or vendors, you previously had to issue a 1099-NEC at $600. For payments made in 2026 and later the threshold is $2,000, indexed for inflation after that. This is a payer-side reporting change. It does not change your obligation to report income you receive, with or without a form.

SALT cap raised to $40,000, PTET preserved: the cap on deducting state and local taxes rose from $10,000 to $40,000 for 2025 through 2029, phasing down for income above $500,000 and reverting to $10,000 in 2030. Critically, the pass-through entity tax (PTET) workaround was left intact, so an S-corp or partnership in a PTET state can still deduct state income tax at the entity level and bypass the individual cap.

What to actually do about it: for most clients the action items are to confirm you are capturing the full QBI deduction, time any large equipment purchase to the year it helps most, and, if you operate an S-corp or partnership in a high-tax PTET state, make sure the PTET election is being filed. These are coordination items, which is exactly where having books, tax, and planning under one advisor pays off.