The recently passed One Big Beautiful Bill Act of 2025 (OBBBA) brings a number of updates designed to benefit small businesses by expanding tax incentives and simplifying some reporting requirements. Below is an overview of the most notable provisions.
Form 1099 reporting changes
Beginning after December 31, 2025, the reporting threshold for both Form 1099-NEC and Form 1099-MISC will increase from $600 to $2,000. Starting in 2027, this threshold will also be adjusted for inflation.
Planning insight: Update your accounting systems now so vendor payments can be tracked against the $2,000 requirement. While fewer 1099s may need to be filed, it’s still smart to request W-9s from all vendors upfront to avoid issues if payments exceed the new threshold.
Form 1099-K rules restored
The $600 reporting threshold that was set to take effect in 2026 has been repealed. Instead, the prior standard of $20,000 in payments and 200 transactions remains in place.
Planning insight: Even if you don’t receive a 1099-K, you are still required to report all income. If your business has a high number of small transactions, monitor activity closely to see how quickly you might hit the 200-transaction limit. Also, keep personal and business activity separate on platforms such as PayPal or Venmo to avoid reporting errors.
Qualified Business Income (QBI) deduction made permanent
The 20% QBI deduction has been permanently extended, with a minimum deduction of $400 for taxpayers who report at least $1,000 of qualified business income.
Planning insight: Many independent contractors and gig workers receiving 1099 income qualify for this deduction. However, those in specified service trades (such as health care, law, accounting, and financial services) may see the deduction begin to phase out if taxable income exceeds $197,300 (single) or $394,600 (married) for 2025.
Increased Section 179 limits and bonus depreciation
The Section 179 deduction limit doubles to $2.5 million in 2025, allowing businesses to immediately expense more qualifying property. In addition, 100% bonus depreciation has been reinstated starting January 19, 2025, and will remain available through 2029.
Planning insight: Businesses can often use Section 179 first and then apply bonus depreciation to any remaining amounts. Remember, these rules impact the timing of deductions, not the total deduction amount.
What this means for your business
These provisions are expected to ease administrative burdens while expanding opportunities to reduce taxable income. Every business is different, so it’s important to evaluate how these updates apply to your unique situation.
If you’d like to discuss how the new law may impact your business planning, please reach out to our office. We’re here to help you make the most of these changes.