With inflation and economic uncertainty still putting pressure on small businesses, President Trump’s One Big Beautiful Bill (OBBB) is designed to give them some much-needed relief. The bill offers bigger tax breaks, new exemptions, and investment incentives to help business owners grow, hire, and plan for a more secure future. Here’s a look at what the bill could mean for small businesses and franchises.

Permanent Tax Cuts for Small Businesses

When the Tax Cuts and Jobs Act (TCJA) was passed in 2017, it lowered the corporate tax rate from 35% to 21%, giving large corporations a lasting break. To keep smaller, non-corporate businesses competitive, the law also created a 20% deduction on qualified business income (QBI) for pass-through entities such as sole proprietorships, partnerships, and S corporations.

However, that deduction was temporary. Under the new OBBB, that tax break becomes permanent—giving small business owners who use pass-through structures some long-term peace of mind. The bill also makes it easier to qualify, so more businesses can take advantage of the savings.

Starting in 2026, small businesses will also receive a new baseline $400 deduction on qualifying income, with yearly adjustments for inflation. It might seem small, but every bit helps. Combined with the other changes, this gives business owners a little more financial stability, making it easier to reinvest in their business, hire more people, and plan for the future with greater confidence.

Full Expensing for R&D and Facilities

The new bill makes it easier for small businesses to invest in innovation by allowing immediate tax deductions for research and development (R&D) costs. Instead of spreading these expenses out over several years—as current law requires—businesses can now fully deduct R&D spending in the same year the money is spent. This change puts more cash back into the business faster, helping companies reinvest quickly in product development and competitive growth.

The legislation also expands tax benefits for property improvements and new construction. Small manufacturers, franchise owners, and other business owners can now write off the full cost of building or upgrading their facilities in the same year the work is finished. Whether opening a new location, adding production space, or buying something like commercial kitchen equipment, owners can deduct those costs right away—helping lower your tax bill and free up cash to keep your business moving forward.

No Federal Tax on Tips or Overtime

Trump campaigned on a promise to implement no-tax-on-tips and no-tax-on-overtime legislation, and the OBBB delivers. Effective through 2028, employees can deduct up to $25,000 in tips from their taxable income. Businesses are required to report these tips on Forms W-2 and 1099. The OBBB also permits workers to deduct up to $12,500 in overtime pay from their taxable income. Again, businesses are required to report qualified overtime pay on Forms W-2 and 1099.

This change could be a win for everyone—employees get to keep more of what they earn, and employers could see happier teams and better staff retention.

SALT Deduction Cap Increase in 2025

Under the OBBB, the cap on the state and local tax (SALT) deduction would increase from $10,000 to $40,000 for tax years 2025 through 2029, with an annual inflation adjustment of 1%. This could be a big help to small business owners who operate as pass-through entities such as LLCs, S corporations, partnerships, or sole proprietorships, especially in states with higher tax rates. For instance, a business owner with $50,000 in combined state and local tax liabilities would be able to deduct $40,000 starting in 2025, rather than being limited to just $10,000 under the previous cap.

Expanded Bonus Depreciation and Interest Deductions

The new legislation strengthens tax incentives that help small businesses invest in equipment, vehicles, and machinery. Under the new rules, businesses can keep writing off the full cost of things like equipment or machinery in the same year they start using them—instead of spreading the deductions out over several years. That means owners can reinvest faster in the tools, technology, and equipment they need to boost productivity and grow their business.

The bill also improves the handling of interest on business loans. The updated rules loosen restrictions on deducting interest expenses, giving small business owners more flexibility when borrowing to invest, hire, or manage seasonal demand.