In early 2025, the House of Representatives began advancing a reconciliation bill—colloquially dubbed the "One Big Beautiful Bill"—that would make sweeping changes to the tax code. The bill's primary objective is to extend the individual tax provisions of the Tax Cuts and Jobs Act, which are scheduled to expire after December 31, 2025, while also introducing new provisions aimed at business owners, investors, and high-income taxpayers. For business owners and their advisors, understanding the key proposals is essential for planning purposes, even as the legislative process remains fluid.

What Is a Reconciliation Bill?

Budget reconciliation is a legislative procedure that allows certain tax and spending legislation to pass the Senate with a simple majority (51 votes) rather than the 60 votes typically required to overcome a filibuster. This procedure was used to enact the original TCJA in 2017, the American Rescue Plan in 2021, and the Inflation Reduction Act in 2022. The current reconciliation effort aims to combine tax policy, border security, defense, and other priorities into a single package.^[1]

Key Tax Provisions for Business Owners

Individual Rate Extensions

The bill proposes to make the TCJA's individual rate reductions permanent. Under current law, the top individual rate reverts from 37 percent to 39.6 percent after 2025, and all lower brackets shift upward. Permanent extension would lock in the current rate structure, including the 37 percent top rate and the wider brackets that benefit taxpayers at every income level.

Section 199A Qualified Business Income Deduction

The 20 percent deduction for qualified business income under § 199A—one of the TCJA's most significant provisions for passthrough business owners—is also scheduled to expire after 2025. The reconciliation bill proposes to make it permanent and may increase the deduction percentage for certain categories of businesses. This deduction effectively reduces the top rate on passthrough business income from 37 percent to 29.6 percent, making its extension critical for S corporations, partnerships, and sole proprietorships.^[2]

Estate and Gift Tax Exemption

The TCJA doubled the estate and gift tax exemption to approximately $13.99 million per individual in 2025. Without legislative action, this exemption is scheduled to revert to approximately $7 million (adjusted for inflation) in 2026. The reconciliation bill proposes to make the higher exemption permanent, which would remove the urgency for high-net-worth families to implement advanced estate planning techniques before the sunset. However, until the bill is enacted, the sunset remains the law, and planning should proceed accordingly.^[3]

SALT Deduction Cap

The TCJA capped the state and local tax (SALT) deduction at $10,000. The reconciliation bill proposes to increase this cap, though the specific amount has been a subject of intense negotiation. Representatives from high-tax states have pushed for a significantly higher cap or complete repeal, while fiscal conservatives have resisted. The resolution of this issue will particularly affect business owners in states with high income and property taxes.

Bonus Depreciation

The TCJA provided 100 percent bonus depreciation for qualified business property, which began phasing down in 2023 (80 percent), 2024 (60 percent), and 2025 (40 percent). The reconciliation bill proposes to restore 100 percent bonus depreciation retroactively and make it permanent. For businesses that make significant capital investments, this provision has an outsized impact on cash flow and effective tax rates.^[4]

New Provisions

The bill also includes several new provisions, including an expansion of the child tax credit, elimination of taxes on tips and overtime pay for certain workers, and a new deduction for automobile loan interest. While these provisions are aimed primarily at individual taxpayers, they affect the broader economic environment in which businesses operate and may influence compensation strategies for employers.

What Business Owners Should Do Now

The reconciliation bill has not been enacted, and its final form will differ from the current proposals. Legislative negotiations will produce compromises on rates, deduction amounts, and effective dates. Business owners should not make irreversible tax planning decisions based on proposed legislation that may never become law.

However, contingency planning is appropriate. Owners should model the impact of both scenarios—TCJA extension and TCJA sunset—on their businesses and personal finances. Decisions about entity structure, retirement contributions, capital expenditures, and estate planning should be evaluated under both frameworks. As the legislative process progresses, we will provide updates on the provisions most relevant to our clients.^[5]