With the S&P 500 and Nasdaq hovering near record highs – and the One Big Beautiful Bill Act (OBBBA) signed into law on July 4, 2025 – the tax landscape for business owners and founders has shifted in meaningful ways. These changes introduce powerful new opportunities for growth, capital raising, and strategic planning.

Major QSBS Enhancements: Unlocking New Value

The benefits of Qualified Small Business Stock (QSBS) have expanded significantly, making it a more compelling tool for both founders and investors.

Shorter Holding Periods for Tax Exclusion

  • 3 years: 50% gain exclusion
  • 4 years: 75% gain exclusion
  • 5+ years: 100% gain exclusion (Under prior law, a five-year minimum was required for any exclusion.)

Higher Gain Exclusion Cap

  • The per-issuer cap increases from $10 million to $15 million for stock issued after July 4, 2025, with future inflation adjustments.

Broader Company Eligibility

  • The maximum asset threshold for a company to qualify as a Qualified Small Business rises from $50 million to $75 million, indexed for inflation. This change allows more high-growth companies – particularly in technology and life sciences – to access QSBS benefits and attract investment.

Faster Liquidity for Investors

  • Investors may now realize partial tax-free gains after only three years, encouraging more early-stage investment and creating greater flexibility for exit strategies.

Why It Matters

  • Founders & Startups: Easier access to capital and enhanced rewards for early backers.
  • Investors: Significant tax-free gains available sooner and on larger investments.
  • Broader Market: More capital flowing into small businesses, supporting innovation, job creation, and economic growth.

QBI Deduction Reform: More Relief for Pass-Through Businesses

The Qualified Business Income (QBI) deduction has been strengthened to provide lasting and more accessible relief for pass-through entities, including S corporations, partnerships, and certain LLCs.

  • Deduction Made Permanent: The 20% QBI deduction is now indefinite, with a potential increase to 23% beginning in 2026.
  • Higher Phase-In Thresholds: Wage and capital limitation thresholds rise to $375,000 for joint filers and $187,500 for single filers, indexed for inflation.
  • Minimum Deduction: A new $400 minimum deduction applies for those with at least $1,000 in active QBI.
  • Expanded Entity Definition: Partnerships, S corporations, LLCs not electing corporate status, and joint ventures now receive equal treatment under the rules.
  • Enhanced Reporting: Stricter reporting requirements for ownership percentages and QBI calculations increase transparency.

Note: Tax professionals caution that certain QBI scenarios may increase Alternative Minimum Tax (AMT) exposure, making forward-looking tax projections critical this year.

Expanded SALT Deduction Cap

For 2025 through 2029, the State and Local Tax (SALT) deduction cap increases from $10,000 to $40,000 for joint filers ($20,000 for married filing separately), with annual inflation adjustments. The cap reverts to $10,000 after 2029.

  • Phaseout for High Earners: Begins at $500,000 MAGI for joint filers ($250,000 for married filing separately), but never drops below $10,000.
  • Eligible Taxes: State and local income, sales, and property taxes qualify.
  • No Double Counting: The same tax cannot be deducted under multiple categories.

Strategic Questions for Business Owners and Founders

  • How will the new QSBS rules shape your exit planning or investment approach?
  • Could the expanded asset threshold or higher exclusion cap influence your next capital raise?
  • Are you maximizing the QBI deduction under your current business structure?
  • What role will the expanded SALT cap play in your tax strategy?

Planning Your Next Move

The 2025 tax reforms offer both immediate benefits and long-term strategic advantages for business owners and founders – but capturing these opportunities requires proactive planning.

Whether you are preparing for an exit, seeking growth capital, or fine-tuning your tax strategy, the right approach can help you retain more of your earnings and position your business for continued success.