Tax Planning Under the One Big Beautiful Bill: What Business Owners Need to Know

By Gary Galstyan, Founder & CEO

Earlier this year, Congress passed the One Big Beautiful Bill Act (OBBB), a comprehensive piece of legislation that introduces changes to business tax rates, deductions, credits, and compliance rules. For many small- and mid-sized business owners, understanding these changes is essential for effective tax planning and long-term strategy.

As founder and CEO of Rockwell Capital Group, I’ve reviewed the Act to provide an overview of the key provisions and what they may mean for your business.

New Business Tax Rates

The Act adjusts tax brackets for smaller enterprises:

· Lower rates for microbusinesses: Companies earning under $1 million in annual revenue are eligible for a reduced federal tax rate.

· Adjusted thresholds for mid-sized businesses: Slightly higher marginal rates may apply, with offsetting credits in certain cases.

· Phase-in periods: Changes will be applied gradually over the next two tax years, allowing time to adapt tax strategies.

Tax Planning Tip: Forecast expected income for the next two years. Timing of major expenses or income recognition may influence overall liability.

Expanded Deduction Opportunities

OBBB broadens what qualifies as deductible business expenses:

· Technology and automation: Software subscriptions, cloud services, and AI tools may now be fully deductible in the year incurred.

· Workforce development: Training programs and employee certifications can qualify for enhanced deductions.

· Green business investments: Eco-friendly equipment and energy-efficient upgrades may have higher deduction limits.

Tax Planning Tip: Ensure eligible expenses are properly categorized in your accounting system to capture all potential deductions.

Small Business Tax Credits

The legislation introduces new credits that directly reduce tax liability:

· Hiring credit: Available for businesses that expand their workforce over the next three years, including hiring from underrepresented groups.

· Local investment credit: Applies to investments in economically distressed areas.

· R&D credit expansion: Small-scale product improvements or software development may now qualify for more generous credits.

Tax Planning Tip: Work with a CPA to identify activities that may qualify for credits, including areas not traditionally considered R&D.

Depreciation & Capital Investment Rules

OBBB modifies how businesses handle capital expenditures:

· Accelerated depreciation: Larger portions of equipment and machinery costs may be written off in the first year.

· Real estate adjustments: Depreciation timelines for office buildings and rental properties have been streamlined.

· Section 179 expansion: Higher caps allow more immediate expensing of qualifying assets.

Tax Planning Tip: Evaluate upcoming purchases of machinery, vehicles, or office improvements to determine the most tax-efficient timing.

Compliance & Documentation

The Act increases reporting and documentation requirements:

· Expanded reporting: Certain credits and deductions require additional documentation for the IRS.

· Digital record-keeping: Cloud-based records may be necessary for filing and audit purposes.

· Penalties: Noncompliance may result in higher fines than prior rules.

Tax Planning Tip: Consider adopting cloud-based accounting and document management systems to streamline compliance and reduce audit risks.

Strategic Steps for Business Owners

To align with the changes under OBBB:

1. Review entity structure: Adjusting from an LLC to an S-Corp (or vice versa) may affect tax outcomes.

2. Time income and expenses strategically: Accelerating deductions or deferring income can optimize tax liability.

3. Seek professional guidance: Customized tax planning is critical due to the complexity of the Act.

Key Takeaways for Small- and Mid-Sized Businesses

· OBBB introduces both opportunities (deductions, credits, depreciation) and new compliance responsibilities.

· Planning and documentation are essential to maximize benefits and reduce risks.

· Early consultation with a qualified accountant or financial advisor can help tailor strategies to your business.

Conclusion

The One Big Beautiful Bill Act represents a significant update to small business taxation. By understanding its provisions, taking proactive steps, and aligning business strategies with the law’s requirements, owners can better manage tax liability and compliance.

For guidance specific to your business, Rockwell Capital Group can help you assess the impact of the Act and develop a tailored tax planning strategy.

Call (888) 676-7878 to schedule a consultation.