Small Businesses Are Prospering from Tax Cuts
As Tax Day approaches, small businesses are benefitting from several provisions of H.R. 1, the Working Families Tax Cuts (WFTC) package, signed into law by President Donald Trump on July 4, 2025.
The bill made permanent and increased from 20 percent to 23 percent the Qualified Business Income (QBI) deduction, which was supposed to expire in 2025. Subject to income limits, it allows most self-employed taxpayers and small businesses, including S corporations, limited liability companies, and partnerships to deduct expenses related to business operations. According to Treasury Secretary Scott Bessent, the increased QBI deduction is saving an average of $4,600 for eight million taxpayers.
The WFTC also restored the immediate expensing of domestic research and development costs. From 2022-2024, these expenses had to be amortized over five years. The faster expensing will stimulate innovation and investment, especially for start-ups.
The WFTC had several provisions that reduce complex and unnecessary paperwork. The law increased the threshold for reporting non-employee compensation on Forms 1099-MISC and 1099-NEC from $600 to $2,000 annually, adjusted for inflation. The WFTC also overturned the American Rescue Plan Act’s provision that reduced the reporting of income on Form 1099-K to $600 and a single transaction by restoring and making permanent the prior $20,000 and 200 transactions. This provision is critical for freelancers, gig economy workers, independent contractors, and individuals who sell their products online.
Every American knows someone who owns or works for a small business. These operations are often called the lifeblood of the U.S. economy and play a critical role in job creation and local economies. The WFTC ensures that small businesses will continue to drive economic growth by stimulating investment, reducing paperwork, and allowing owners and employees to keep more of their own hard-earned money which would otherwise have gone to the federal government.
