One big, beautiful bill: 5 tax changes that will impact entrepreneurs and small businesses

The House Ways and Means Committee has released a comprehensive set of proposed tax changes as part of the FY 2025 budget reconciliation effort. These proposals primarily focus on extending or modifying certain provisions from the 2017 Tax Cuts and Jobs Act (TCJA), some of which are set to expire after 2025.

Based on the proposed 2025 House Tax Bill - "One Big Beautiful Bill" - here are five key changes that may significantly impact entrepreneurs and small business owners:

1. Bonus Depreciation Extended Through 2029 - Entrepreneurs will benefit from a five-year extension of 100% bonus depreciation for qualifying property placed in service from January 2025 through the end of 2029. This allows businesses to immediately deduct the full cost of eligible equipment and property, improving cash flow and incentivizing capital investment.
2. Section 199A Pass-Through Deduction Increased to 23% - The Qualified Business Income (QBI) deduction under Section 199A will rise from 20% to 23%. Importantly, the bill expands eligibility to include certain service-based businesses—such as law, accounting, and consulting—across all income levels. This change directly benefits many small business owners who operate as sole proprietors, partnerships, or S corporations.
3.  Immediate Expensing of R&D Costs (Section 174) - From 2025 to 2029, businesses can immediately expense domestic research and experimental (R&E) expenditures instead of amortizing them over five years. This is especially beneficial for startups and tech-driven small businesses investing in innovation, as it reduces the upfront tax burdens and encourages R&D investment.
4. New Tax Credit for Paid Family and Medical Leave - A new tax credit will be introduced for businesses that offer paid family and medical leave. This provides a financial incentive for small businesses to support employee well-being and retention, helping them stay competitive with larger firms that already offer such benefits
5.  Temporary Elimination of Taxes on Tips, Overtime, and Car Loan Interest - Through 2028, the bill proposes eliminating federal income taxes on tips, overtime pay, and car loan interest. This could ease payroll complexities for small businesses in service industries and improve employee take-home pay—potentially aiding in recruitment and retention

Next Steps and Challenges:

The legislative process is dynamic, with ongoing negotiations on spending cuts, debt ceiling concerns, and intra-party divisions. While many of these proposals are expected to be included in the final bill, adjustments or temporary extensions may still occur.