New Tax Act and the Small Business Owner

Here are five specific tax provisions to pay close attention to:

Qualified business income deduction(QBI)

If you run a sole proprietorship, partnership or S corporation you may be eligible for a qualified business income (QBI) deduction. The deduction is equal to 20% of qualified business income and is now a permanent deduction.

The deduction may not apply if taxable income exceeds certain limits. For 2025, the limit is $394,600 for married filing joint taxpayers. If taxable income exceeds this amount, the deduction begins to phase out.

Also, starting in 2026, there will be a new minimum $400 QBI deduction for taxpayers with at least $1,000 of qualified business income.

100% bonus depreciation

Businesses can immediately deduct the full cost of new or used equipment, machinery, and other qualifying property purchased after January 19, 2025.

Super Section 179 expensing

The maximum deduction for expensing new equipment is $2.5 million.

Qualified small business stock

Need to raise capital without going to a bank? Issuing qualified small business stock could help you do that. Qualified small business stock is stock issued by an active corporation with assets below a certain amount and that meets other specific requirements. Some types of businesses are ineligible, including professional services, finance and investment services, banking, leasing, insurance and restaurants.

Up to 100% of gain from the sale of qualified small business stock can be excluded from taxable income if the shares are held for more than five years.

• A 50% exclusion now applies if the shares are held for at least three years, and a 75% exclusion applies if shares are held for at least four years.

State and local tax deduction

The limit for state and local tax deduction is temporarily set to $40,000 ($20,000 if married filing separately). This could mean you may be able to include a higher percentage of your property taxes when computing your home office deduction.

What's next?

If you have any questions or want to learn more about what this means for you and your business, contact MNM Vested, LLC.

All investing involves risk, including the possible loss of principal, and there is no guarantee that any investment strategy will be successful.