OBBA 2025 Tax Law: What the One Big Beautiful Bill Means for 1099 Consultants and Business Owners
- Lei Deng
- Aug 20
- 5 min read
If you’re a business owner or 1099 consultant, the OBBA 2025 tax changes could directly impact your deductions, entity choice, and cash flow planning. Signed into law on July 4, 2025, the One Big Beautiful Bill Act (OBBA) updated tax thresholds and introduced new provisions that affect nearly every taxpayer. But here’s the key question: What does it actually mean for your taxes?
In this post, we break it all down: what’s changing, when it takes effect, who benefits, and what steps you can take to get ahead for 1099 consultants and business owners. Many of these provisions include income phaseouts or sunset dates, so your personal situation will ultimately determine how much you benefit.
🔗 OBBA Blog Series Overview
This is Part 2 of a three-part series covering the One Big Beautiful Bill Act:
Part 1 : A general overview of OBBA’s key changes for individuals and families
Part 2 (This blog): What OBBA means for business owners and 1099 consultants
Part 3: OBBA’s impact on retirees and seniors
Part One Review
Before we dive into the content today, let's review what we discussed in Part One. Here’s a quick recap of the highlights:
🔹 Tax Brackets – Mostly inflation tweaks; capital gains unchanged
🔹 Standard Deduction – Slightly higher; extra boost for 65+ until 2028
🔹 SALT Cap – Raised to $40K (through 2029), but phased out for high earners
🔹 Charitable Giving – New $1K/$2K deduction for non-itemizers (2026+), but tighter rules for itemizers
🔹 Other Deductions – Mortgage insurance, auto loan interest, and more flexibility coming back
🔹 Child Tax Credit – Bigger, inflation-adjusted, and refundable up to $1,700
🔹 Tips & Overtime – Up to $25K excluded from federal income tax (2025–2028)
🔹 Estate Tax – Exemption rises to $15M/person in 2026
🔹 "Trump Accounts" – New IRA-like savings for kids, but with strict rules and uncertainties
👉 If you’d like to dive deeper into these general provisions, you can read the full post here: 2025 Tax Law Changes Explained: What the One Big Beautiful Bill Act (OBBA) Means for You.
Back to our main course. In this post, we’ll focus specifically on what OBBA means for 1099 consultants and business owners.
📋 What We’ll Cover Today
Qualified Business Income (QBI) Deduction
Bonus Depreciation & Section 179
SALT Cap Increase
QSBS (Qualified Small Business Stock)
Other Considerations: Excess Business Losses, 1099 Reporting, Meals & Entertainment, Opportunity Zones, etc
Qualified Business Income (QBI) Deduction under OBBA 2025 Tax Law for Business Owner and 1099 Consultants: Made Permanent
Effective: 2025
Status: Permanent
The 20% QBI deduction (Sec. 199A) is now permanent. For 2025, the taxable income thresholds are approximately $197,300 (single) and $394,600 (MFJ). QBI above these numbers will be subject to phase out of a widened phase‑out range of $75,000 (others) / $150,000 (MFJ) (up from $50K/$100K).
In addition, OBBA introduces a small $400 minimum QBI deduction for active qualified business income, starting in 2026. In this provision, it only requires a minimum of $1,000 of active QBI. Great for people with small side hustles. At this point, there's no claritfy as of whether this applies to SSTB or not, however.
🔎 Takeaway:
One of the most valuable tax breaks for small business owners is now here to stay. Before OBBA, a lot of small business/1099 consultant planning opportunities were hung in balance, with uncertainty on whether the QBI deduction would sunset after 2025. Now we have more certainly on how to make best use of the QBI deduction for planning purposes going forward.
Staying below income thresholds remains key to maximizing the deduction, which means income management strategies (retirement contributions, HSAs, entity structuring) remain powerful.
💡 Tip:
Retirement plan selection and funding, entity selection (notably, whether or not to elect S-Corp status), and QBI deduction planning should all go hand in hand. These are not decisions that should be made individually.
For example, reasonable salary for S-Corps are generally where tax payers hope to go lower, in order to save on self-employement tax. However, for a non-SSTB business owner with S-Corp could mean: 1. missing out on QBI deduction completely if they're above of phase out range 2. Limiting on their retirement contribution, depending on what type of retirement plans they choose.
This is an area that deserves a lot of attention and careful for business owners and 1099 consultants to look into and have your teams of tax professional and financial advisors work together on.
Check out this article on S-corp election for more on how these figures impact each other.
Bonus Depreciation & Section 179 under OBBA 2025 Tax Law for Business Owner and 1099 Consultants: 100% Returns
Effective: Property acquired and placed in service after Jan/19/2025
Status: Permanent
OBBA permanently restores 100% bonus depreciation for eligible assets—meaning full-cost write-offs are immediately available again. At the same time, the Section 179 expensing limit is raised to $2.5 million with a $4 million threshold, indexed for inflation.
💡 Tip:
Full expensing can create planning windows—e.g., accelerate deductions to open space for Roth conversions, or to manage student‑aid or surtax thresholds. Specifics should be discussed with your financial advisor or tax professional.
SALT Cap Increase under OBBA 2025 Tax Law for Business Owner and 1099 Consultants: Pass-Through Entity Implications
Effective: 2025–2029
Status: Temporary
OBBA temporarily raises the SALT cap to $40,000 (up from $10,000) through 2029. For business owners whose income flows through to their individual returns, this larger deduction may reduce the need for a pass-through entity (PTE) tax election.
Where It Applies
More than 35 states already offer PTE elections, including California, New York, New Jersey, Massachusetts, Illinois, and Georgia. Connecticut requires it mandatorily, while no-income-tax states (e.g., Florida, Texas, Washington) don’t typically need a workaround.
The New Tradeoff
If your total SALT bill is under $40K, you may not need the PTE election anymore.
If your SALT bill is well above $40K (more common in high-tax states), the PTE election may still deliver bigger savings.
🔎 Takeaway:
The higher cap makes the PTE workaround less universally appealing — but still highly valuable for high earners in high-tax states. Whether you use the workaround will now be more of a case-by-case decision.
QSBS (Qualified Small Business Stock) under OBBA 2025 Tax Law for Business Owner and 1099 Consultants: Clarified and Capped
Effective: Stock issued after July 4, 2025
Status: Permanent
OBBA updated the (QSBS) rules:
The 100% exclusion on gain is capped at $15 million per shareholder per company or 10x basis, whichever is greater.
Applies only to original issue C-corp shares meeting QSBS criteria.
Holding period (5 years) for full capital gain exclusion remains unchanged.
🔎 Takeaway:
Still one of the best tax breaks for founders and early investors for C-Corps. Notably, SSTBs do not qualify for QSBS, so make sure you don't convert your business entity to C-Corp for QSBS savings if your firms are in law, healthcare, financial advisory, or any other SSTB businesses.
Other Considerations
Excess Business Loss (EBL) Limitation - Made permanent under OBBA, effective from 2025. Non-corporate taxpayers can offset ~$313K (single) / ~$626K (MFJ) of other income with business losses; excess converts to NOL carryforwards.
1099-K & 1099-NEC Reporting Thresholds -
1099-K: OBBA reverts 1099-K reporting to the pre-2021 threshold of $20K/200 transactions.
1099-MISC & 1099-NEC: Reporting threshold rises to $2,000, effective for payments in 2026(inflation‑indexed starting 2027). However, keep in mind that all business income is taxable, even if you don’t receive a form.
Meals & Entertainment- Meals remain 50% deductible; entertainment is nondeductible. 100% meal deduction is gone.
Opportunity Zones - OBBA made the QOZ program permanent, with stricter reporting requirements.
Final Thoughts
The OBBA brings both opportunities and new limits for business owners and 1099 consultants. Some changes are highly favorable (bonus depreciation, QSBS clarity, expanded child tax credit), while others close loopholes (EBL cap, tighter QBI rules).
The real key: proactive planning. Your outcomes depend on timing, income level, and entity structure. Start tracking deductions now, plan capital gains events carefully, and consider entity choice with QSBS and QBI in mind.