The One Big Beautiful Bill Act (OBBBA) is the most comprehensive tax legislation since the Tax Cuts and Jobs Act of 2017. Signed into law in 2025, it introduces permanent changes to business taxation, individual income tax, retirement savings, and energy policy. For startup founders, small business owners, and the investors who back them, this legislation reshapes the tax planning landscape.
This article provides a structured overview of the provisions that matter most. For specific tax planning strategies, see our companion piece on tax planning under the OBBBA.
Business Tax Provisions
Pass-Through Deduction Made Permanent
The OBBBA makes the Section 199A qualified business income (QBI) deduction permanent at 20%. This applies to income from pass-through entities: sole proprietorships, partnerships, S corporations, and qualifying LLCs. An earlier House draft would have raised the rate to 23%, but the enacted law kept 20% and removed the scheduled expiration instead.
For startup founders who structure their businesses as pass-through entities, permanence removes the sunset that had clouded long-term planning. The law also widens the phase-in ranges for the income-based limitations, so more owners near the thresholds keep some or all of the deduction, and starting in 2026 it adds a $400 minimum deduction (indexed for inflation) for active owners with at least $1,000 of QBI. Limitations for specified service trades or businesses still apply.
Who benefits most: Founders with profitable pass-through entities, particularly in non-service sectors. Software companies, e-commerce businesses, and manufacturing startups see the greatest impact.
Full Expensing Made Permanent
One of the most significant business provisions is the permanent restoration of 100% bonus depreciation for qualifying property acquired and placed in service after January 19, 2025. Under the prior law, bonus depreciation was phasing down by 20 percentage points per year starting in 2023.
This means businesses can immediately deduct the full cost of qualifying equipment, machinery, computers, and certain improvements in the year of purchase rather than depreciating them over their useful life.
Who benefits most: Capital-intensive startups, companies building physical infrastructure, and any business making significant equipment purchases.
R&D Expense Deductions Restored
The OBBBA reverses one of the most controversial provisions from the 2017 tax law by restoring the ability to immediately deduct domestic research and development expenditures. Since 2022, Section 174 had required companies to amortize R&D costs over five years (fifteen years for foreign research), creating significant cash flow challenges for R&D-intensive startups.
Under the new law, domestic R&D expenses are once again fully deductible in the year incurred. Foreign R&D expenses continue to require 15-year amortization.
Who benefits most: Technology startups, biotech companies, and any business with significant engineering or product development spending. The Section 174 immediate-deduction change stacks with the existing Section 41 R&D tax credit. Founders who want a quick read on both can estimate their credit with our R&D tax credit calculator and their Delaware franchise exposure with our Delaware franchise tax calculator.
Section 179 Expanded to $2.5 Million
The Section 179 expensing election, which allows businesses to deduct the cost of qualifying assets immediately rather than depreciating them, increases to $2.5 million. The phase-out threshold (above which the deduction begins to decrease dollar-for-dollar) also increases proportionally.
This provision is particularly valuable for small and mid-size businesses that may not qualify for bonus depreciation on certain property types.
Who benefits most: Small businesses making targeted capital investments, particularly in vehicles, furniture, and specialized equipment.
1099 Reporting Simplification
The OBBBA restores the Form 1099-K reporting threshold for third-party settlement organizations to more than $20,000 in payments and more than 200 transactions, undoing the $600 threshold. Separately, it raises the Form 1099-NEC and 1099-MISC threshold from $600 to $2,000 for payments made after December 31, 2025, with inflation indexing after 2026. Together these changes reduce the volume of information returns that both platforms and their users must process and reconcile.
For startups operating as marketplaces or platforms that facilitate payments, this simplifies compliance and reduces the administrative burden of issuing 1099-K forms. Businesses that pay contractors will also issue fewer 1099-NEC forms under the higher threshold.
Who benefits most: Platform businesses, marketplaces, and gig economy companies. Also beneficial for freelancers and contractors who use payment platforms.
Opportunity Zone Extensions and Expansions
The OBBBA extends and expands the Opportunity Zone program, which provides capital gains tax benefits for investments in designated economically distressed areas. The program, originally set to wind down, receives new designations and extended timelines for qualifying investments.
Who benefits most: Startups located in or considering relocating to Opportunity Zones, and investors with capital gains seeking deferral and reduction strategies.
Individual Tax Provisions
Lower Marginal Tax Rates
The OBBBA makes permanent the individual tax rate reductions that were originally set to expire. The seven-bracket structure is retained with rates of 10%, 12%, 22%, 24%, 32%, 35%, and 37%. Without the OBBBA, rates would have reverted to pre-2018 levels, with the top rate returning to 39.6%.
For high-income founders, the permanence of the 37% top rate represents ongoing savings compared to the alternative.
Higher Standard Deductions
The standard deduction increases to $31,500 for married filing jointly and $15,750 for single filers in 2025, rising to $32,200 and $16,100 respectively in 2026, with annual inflation adjustments. The near-doubling of the standard deduction (originally enacted in 2017) is now permanent.
This simplifies tax filing for many individuals and reduces the number of taxpayers who benefit from itemizing deductions.
Senior Standard Deduction Bonus
Taxpayers aged 65 and older receive an additional $6,000 standard deduction on top of the regular amount. This provision acknowledges the fixed-income reality of many retirees and reduces their tax burden.
Child Tax Credit Increase
The child tax credit increases to $2,200 per qualifying child, up from $2,000. The refundable portion also increases, providing greater benefit to lower-income families. Phase-out thresholds remain at $200,000 for single filers and $400,000 for joint filers.
For founders with young families, this provides a modest but meaningful reduction in tax liability.
SALT Cap Modifications
The state and local tax (SALT) deduction cap, originally set at $10,000, increases to $40,000 for all filers except married filing separately, who get $20,000. The cap rises to $40,400 in 2026 and increases about 1% per year through 2029. It phases down by 30% of modified adjusted gross income above $500,000, but never below a $10,000 floor, and it reverts to $10,000 in 2030.
This is among the most impactful individual provisions for founders in high-tax states. The original $10,000 cap disproportionately affected taxpayers in states like California, New York, New Jersey, and Massachusetts, where combined state income and property taxes routinely exceed $10,000.
Tip and Overtime Income Deductions
The OBBBA introduces new above-the-line deductions for tip income and overtime compensation. While these provisions primarily benefit service-industry workers, they may affect startups in the hospitality, food service, and retail sectors that employ tipped or hourly workers.
Retirement and Education Savings
Expanded Retirement Contribution Limits
The OBBBA increases contribution limits for employer-sponsored retirement plans and IRAs, with enhanced catch-up provisions for taxpayers aged 60 to 63. This creates additional opportunities for founders to shelter income through retirement savings vehicles.
Key changes include:
- Higher annual contribution limits for 401(k), 403(b), and similar plans
- Enhanced catch-up contributions for the 60-63 age cohort
- Expanded eligibility for Roth contributions within employer plans
- New provisions allowing student loan repayments to qualify for employer matching contributions
Education Savings Enhancements
The OBBBA expands 529 plan flexibility, allowing limited rollovers to Roth IRAs for beneficiaries who have maintained accounts for at least 15 years. This addresses a long-standing concern about over-funding education savings accounts and provides a pathway to convert unused education funds into retirement savings.
What Founders Should Do Now
The OBBBA creates a new baseline for tax planning. Here are the immediate steps founders should take:
1. Review your entity structure. The now-permanent pass-through deduction changes the math for entity selection. If you are currently operating as a C corporation, model the after-tax impact of pass-through treatment under the permanent 20% deduction.
2. Audit your R&D spending. With immediate deductibility restored, ensure you are capturing all qualifying R&D expenditures. Many startups undercount by excluding activities that legally qualify. Use our R&D tax credit calculator to estimate your potential savings.
3. Reassess your SALT strategy. If you have been using a pass-through entity tax election to mitigate the SALT cap, the new $40,000 cap may change the optimal approach.
4. Plan capital expenditures. With full expensing now permanent, there is no sunset to beat when timing purchases, and the certainty of the provision allows for better long-term planning.
5. Update your financial model. Tax rate changes affect cash flow projections, runway calculations, and investor returns. Ensure your financial model reflects the new tax landscape.
6. Coordinate personal and business planning. The OBBBA affects both business and individual tax positions. Founders should work with advisors who understand both sides and can optimize across them.
Looking Ahead
The OBBBA provides a period of relative tax policy stability. Most core provisions, including bonus depreciation and the QBI deduction, are now permanent, giving businesses a clear planning horizon.
At StartupCFO, we help founders navigate the intersection of business finance and tax strategy. Through our fractional CFO services and the ClariFi, we build comprehensive financial strategies that account for the full scope of the OBBBA, from business deductions to personal tax planning to retirement optimization. Learn more about our startup tax compliance services.
The legislation is complex, but the opportunities are real. The founders who act decisively will capture the most value.
