The One Big Beautiful Bill Act of 2025 (OBBBA) expands several tax benefits for businesses while easing certain compliance obligations. Here’s a summary of the key provisions affecting small businesses.

Form 1099 compliance

The reporting threshold for Form 1099-NEC and 1099-MISC moves from $600 to $2,000 after December 31, 2025. This threshold is to be indexed for inflation starting in 2027. Prepare to update your accounting software to track vendor payments against the $2,000 threshold. This avoids unnecessary 1099 preparation and aligns with the new requirement. Although the reporting threshold is now higher, it’s still a good practice to collect W-9 forms from all vendors and contractors before issuing payments. This ensures you’re ready if payments exceed the threshold.

For Form 1099-K, the $600 reporting threshold, scheduled to take effect in 2026, is rolled back to the old threshold of $20,000, along with the dual requirement of 200 or more transactions. So, don’t rely solely on receiving a 1099-K to report income. Many businesses won’t meet the new reporting threshold but are still legally required to report every dollar earned. If your transaction count is high, however, be aware of how quickly you might approach the 200 transaction mark. Also, consider labeling business and personal accounts separately on platforms like Venmo and PayPal. Mixing funds could cause reporting errors, especially as platforms enhance their 1099-K tracking capabilities.

Deductions for small businesses

The Qualified Business Income (QBI) deduction of 20% is now permanent. There’s also a minimum deduction of $400 for taxpayers who have at least $1,000 of qualified business income. Most independent contractors and gig workers who receive Form 1099 are eligible for the QBI deduction. However, suppose your business is classified as a Specified Service Trade or Business (businesses in health, law, accounting, financial services, and others). In that case, this tax break begins to phase out when your income exceeds $197,300 (single) or $394,600 (married) in 2025.

In addition, businesses can use the Section 179 deduction to write off up to $2.5 million of qualifying property in 2025, up from $1.25 million under the previous law. If you’d rather use bonus depreciation, the ability to write off 100% of qualified property is reinstated as of January 19, 2025, through the end of 2029. Businesses can often use both Section 179 and bonus deductions in the same year. Section 179 is generally applied first, followed by bonus depreciation for any remaining balance. However, remember that this deduction only pertains to the timing of the deduction, not the total amount of the deduction.

These are some of the new tax bill’s provisions that will affect most businesses across the U.S. Please contact our RRBB advisors to discuss compliance and other provisions from the new tax bill affecting small businesses.