When H.R. 1, known as the “One Big Beautiful Bill Act,” was signed into law, headlines quickly framed it as a sweeping tax win for businesses. Yet, in reality, the impact is far more nuanced. While this federal law preserves important deductions and restores certain incentives, it does not automatically translate into lower taxes for every business owner. Knowing where the real opportunities exist, and where expectations should be tempered, is the difference between effective planning and costly assumptions.
To help bring clarity to a complex and widely discussed piece of legislation, we spoke with Todd Lawrence, CPA and partner, at Wilson Ivanova CPAs. Lawrence works closely with manufacturing, construction, logistics, and distribution companies, helping owners translate tax law into practical planning decisions.
“One of the biggest challenges with legislation like this is that it all sounds great when it’s announced,” Lawrence said. “Then you get into the details, and the benefits are often more limited than people expect.”
Why H.R. 1 Feels Bigger Than It Is
Much of the public conversation around H.R. 1 focused on sweeping tax cuts, but Lawrence noted that many of the most meaningful benefits are aimed at middle- and lower-income individuals rather than high-earning business owners. That disconnect has led to confusion, particularly for owners of pass-through entities trying to determine what actually applies to them.
“A lot of what you hear makes it sound like everyone is getting massive tax savings,” Lawrence explained. “When you break it down, there are real benefits, but they’re not always where people think they are.”
For business owners, one of the most important outcomes of H.R. 1 is what it prevents rather than what it introduces. The law makes the 20% Qualified Business Income deduction permanent, avoiding what would have been a significant tax increase in 2026 for S corporations, partnerships, and LLCs.
“If that deduction had gone away, owners of flow-through entities would have seen about a 20% tax increase overnight,” Lawrence said. “Keeping it in place is a big deal, even if it doesn’t feel flashy.”
Capital Investment and Bonus Depreciation
H.R. 1 restores 100% bonus depreciation, allowing businesses to fully expense qualifying equipment purchases immediately rather than depreciating them over several years. While this has been widely celebrated, Lawrence cautions that it is often misunderstood.
“Bonus depreciation back to 100% sounds like free money,” he said. “But all it really does is let you take the deduction today instead of over the next five or ten years. It improves cash flow now, but it’s not an additional deduction overall. You’re just shifting timing.”
That distinction matters when owners make capital decisions. In many cases, taking the deduction immediately makes sense, especially for profitable companies. In others, spreading deductions over time may be the smarter move.
“If a business isn’t profitable, taking a huge write-off just creates a loss you have to carry forward,” Lawrence explained. “Sometimes it’s better to save that deduction for a year when it actually offsets income.”
Section 179 expensing was also expanded under H.R. 1, increasing the amount businesses can deduct for equipment, software, and certain improvements. Lawrence noted that Section 179 and bonus depreciation now overlap more than ever, making planning especially important.
“We look at where the company is financially,” he said. “If they’re profitable, we usually say take the deduction today because you don’t know what the future holds. But you also have to be careful not to create financial statements that raise questions with lenders.”
Research and Experimental Costs Return
Another important change under H.R. 1 is the restoration of current-year expensing for domestic research and experimental costs beginning in 2025. This reverses a change that caught many businesses off guard in recent years.
“That provision technically expired years ago, but it didn’t hit until later,” Lawrence said. “When it did, a lot of companies suddenly owed more tax than they expected. That’s why timing matters so much.”
Lawrence added that Research and Development credits and deductions are receiving increased scrutiny from the IRS, making proper documentation critical.
“The IRS is paying a lot more attention to R&D claims,” he said. “If you’re going to take it, you need to do it right and have the records to back it up.”
State and Local Tax (SALT) Deductions and Pass-Through Planning
H.R. 1 raises the federal SALT deduction cap from $10,000 to $40,000, but Lawrence cautions that many business owners will not see the full benefit due to income phaseouts.
“It sounds great on paper,” he said. “But once you get above certain income levels, that $40,000 starts getting reduced right back down to $10,000.”
For many pass-through entities, the bigger opportunity continues to be the pass-through entity tax election available in states like California. This allows businesses to deduct state taxes at the entity level rather than being limited by the SALT cap on the individual return.
“The key thing owners miss is timing,” Lawrence said. “If you want the deduction for the current year, you have to pay the tax by December 31. That means planning for a potentially large cash payment at year-end.”
While the upfront cost can be significant, Lawrence emphasized that federal tax savings are permanent.
“If you’re paying the state tax anyway, and paying it early saves you real money federally, it often makes sense,” he said. “Once clients understand that, they’re usually on board.”
Estate, Gift, and Transition Planning
H.R. 1 raises the estate and gift tax exemption to $15 million per individual, creating planning opportunities for owners thinking about succession or eventual sale. For many closely held businesses, the increased exemption may eliminate estate tax exposure entirely under current law.
“That level covers a lot of small and mid-sized businesses,” Lawrence said. “It gives owners more flexibility when thinking about transferring the business to the next generation.”
However, Lawrence stressed that the biggest mistake owners make is waiting too long.
“We see it all the time,” he said. “Someone comes in and says they’re ready to sell, and they haven’t done any estate or transition planning. At that point, it’s too late to take advantage of a lot of strategies.”
Certain planning tools require years to be effective, making early conversations essential.
“You can’t set something up today and expect it to work perfectly tomorrow,” Lawrence explained. “You need time, and you need a clear end goal.”
‘No Tax on Tips’ and ‘No Tax on Overtime’ Explained
Some of the most talked-about provisions in H.R. 1 involve tips and overtime, but these are frequently misunderstood. Tips and overtime remain fully taxable for payroll purposes. The law simply allows eligible individuals to claim temporary deductions on their personal tax returns.
“It sounds like a bigger change than it really is,” Lawrence said. “It’s helpful for middle- and lower-income workers, but it doesn’t apply to higher earners, and it doesn’t change employer withholding.”
Employers must continue normal payroll reporting and withholding. Beginning in 2026, new W-2 reporting requirements will require employers to separately track and report tips and overtime.
“The best advice is to talk to your payroll provider now,” Lawrence said. “Make sure your system can track this information early, because recreating it later is a headache.”
Why Recordkeeping Matters More Than Ever
Across nearly every provision of H.R. 1, one theme stands out: documentation.
“The IRS assumes you’re wrong unless you prove you’re right,” Lawrence said. “If you don’t have the receipt, the invoice, or the backup, they’ll just disallow the deduction.”
Credit card statements alone are not sufficient. Businesses need itemized receipts, invoices, and clear records tying expenses to business use.
“People don’t realize how quickly deductions get thrown out in an audit,” Lawrence said. “Good recordkeeping isn’t optional. It’s protection.”
A Practical Next Step
For owners feeling overwhelmed, Lawrence offered simple advice.
“Don’t overreact to what you’re hearing,” he said. “There are benefits here, but it’s not chaos. Sit down with your advisor, look at how this actually affects you, and make a plan.”
Tax laws will continue to evolve, but strong businesses that plan thoughtfully are best positioned to adapt.
At AmPac Business Capital, we support entrepreneurs at every stage of growth. Just as we help businesses secure financing to strengthen their operations, we encourage owners to work with trusted advisors to strengthen their tax and planning strategies. With the right guidance, H.R. 1 does not have to be overwhelming. It can be another tool to help your business move forward with confidence.