On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was signed into law — and it brings some major tax updates for solopreneurs. Some changes can boost your business profit, while others directly impact your personal tax return. Many of these helpful updates take effect this year and next, giving you new opportunities to save.
Here’s what to know so you can plan ahead:
100% bonus depreciation is back
Who this could help: S Corps and sole proprietors (business return)
What this means: After being phased out since 2022, 100% bonus depreciation is making a comeback, which brings back favorable changes that you can take advantage of this year. If you buy qualifying purchases, you can now deduct the full cost up front – as long as the item is placed in service after January 19, 2025. (Note: Some purchases may be subject to limitations, for example, business vehicles.)
Why it matters: Depreciation rules require that you deduct certain expenses over a period of time rather than deducting the cost all at once. With the new bill in effect, you can write off eligible purchases in full. This lowers your taxable business profit immediately, which ultimately lowers your personal tax bill.
SALT deduction limit increased
Who this could help: Individuals in high-tax states (individual/personal return)
What this means: The prior cap on deducting state and local taxes has increased from $10,000 to $40,000 starting in 2025.
Why it matters: This unlocks a larger deduction for people in high-tax states like California or New York. If you’ve previously taken the standard deduction because itemizing wasn’t worthwhile, this change could affect how you file your taxes in 2025 – and may substantially decrease your taxable income.
Higher 1099 reporting thresholds
Who this could help: Business owners who pay contractors
What this means: Starting in 2026, the IRS is increasing the reporting threshold for Form 1099-NEC and 1099-MISC from $600 to $2,000. This means your business will only be required to issue a 1099 to contractors, freelancers, or vendors if you paid them $2,000 or more during the year. The threshold will be adjusted annually for inflation.
Why it matters: With the higher 1099 threshold, there will be fewer forms to send out at tax time, which means less paperwork and a lower chance of penalties for missing smaller payments. Business owners may also notice they stop receiving 1099s from clients they’ve worked with in the past if the total paid is under $2,000. In any case, it’s important to keep full records, include all amounts in your books, and hold on to W-9s, since the IRS can still review payments of any size. QBI deduction extended.
QBI deduction extended
Who this could help: Business owners with pass-through entities, including S Corps, sole proprietors, and partnerships (individual/personal return)
What this means: The 20% deduction for passthrough business income is now permanent (it was up for expiration this year). Starting in 2026, there’s also a new flat $400 QBI deduction if you have at least $1,000 in qualified business income.
Why it matters: If you qualify, you can continue to deduct 20% of your business profit from your taxable income. For many business owners, this is one of the most valuable deductions they get. The new $400 minimum deduction helps out during lower-income years or those just getting started.
Other noteworthy changes
- Child Tax Credit: Rises to $2,200 per child in 2025 ($1,700 refundable) and adjusts for inflation starting in 2026.
- No tax on overtime or tips (for now): From 2025–2028, you don’t pay income tax on up to $12,500 (single) or $25,000 (joint) in qualifying overtime or tips. Income phaseouts begin at $150K single / $300K joint.
- Tax brackets and standard deduction: The current tax brackets (10–37%) and higher standard deductions ($15,750 single/$31,500 married) are now permanent, with inflation adjustments going forward.
- R&D write-offs: Domestic research and development (R&D) costs can now be deducted all at once in the year they’re incurred. For certain small businesses with average annual gross receipts of $31M or less, this can be applied retroactively to 2022, though the cost of R&D studies should be considered and outweighed against the potential benefit
The bottom line
The OBBBA brings back popular tax breaks from 2017 and introduces some new opportunities to help you save. If you’re self-employed, these updates could mean a lower tax bill and more flexibility for planning big business moves. Consult with your tax professional to make sure you’re getting every benefit available under the new law.
Marissa Achanzar is part of the sales team at Collective and doubles as a content writer based in Roseville, California. After a successful seven-year-stint in public accounting, Marissa decided to pivot and put her tax compliance and client engagement experience to use by creating practical, people-first educational content.
Marissa is also the founder of Something Good Co., a non-profit that supports foster and at-risk youth in the Sacramento region. In her spare time, she enjoys exercise, trying out new recipes, dabbling on piano or guitar and won’t say no to a good TV/movie marathon. You can find her on LinkedIn or contact her at [email protected]