If you work in tech, there’s a good chance this new tax bill affects you. Whether you’ve got equity, side income, startup investments, or you’re just someone with a solid paycheck, the One Big Beautiful Bill Act (or OB3A, as some of us have started calling it) has a few changes worth paying attention to.
Some of these updates are a continuation of older rules. Others open up new opportunities. A few might quietly save you a lot of money if you know how to take advantage of them.
So let’s talk about what’s actually changing and whats the effect of the new tax bill for founders and tech professionals.
The QSBS Update Might Be the Most Valuable Thing in the Whole Bill
If there’s one update we want to put a spotlight on for tech professionals, it’s the changes to QSBS. That’s short for Qualified Small Business Stock. And yes, it still sounds like something only a tax nerd would care about, but if you’ve ever sold stock from a startup or early-stage company, QSBS can save you millions in taxes.
Before OB3A, the rules said you had to hold the stock for at least five years and the company had to be under 50 million dollars in assets when the stock was issued. If you met all the conditions, you could exclude up to 10 million dollars of capital gain from federal taxes. That is not a typo. Ten million. Completely tax free.
With the new bill, QSBS gets even better for shares acquired after July 4, 2025. The asset cap is bumped from 50 million to 75 million. That means more companies qualify.
And it doesn’t stop there.
Now you can start to get a partial benefit even if you don’t hold for the full five years.
Hold your stock for at least three years and you can exclude 50 percent of the gain. Four years gives you a 75 percent exclusion. Hit the full five years and you’re still eligible for the full 100 percent exclusion.
The standard 10 million dollar or 10 times basis exclusion rule is still in place through 2027. After that, the cap will increase to 15 million, but only for shares acquired after July 4, 2025. So if you’re thinking about exercising or investing in new stock, this is something to keep in mind for future planning.
We’ve said it before and we’ll keep saying it.
If you qualify for QSBS, it is one of the most generous tax breaks available to tech professionals. This bill makes it more accessible, more flexible, and more valuable.
If You Run a Consulting Business or Have 1099 Income, Good News on the QBI Deduction
Many tech professionals have income outside of a W-2. Maybe you do some freelance consulting, or you’ve set up an LLC or S corp for your work post-exit.
The Qualified Business Income deduction, also known as the 199A deduction, gives you a 20 percent tax break on that income if you qualify.
The new bill makes this deduction permanent. That’s a big win, especially since it was previously set to expire.
There’s also a small but meaningful change to the income phaseout ranges. The range where the deduction begins to phase out has been increased, which means you can make a bit more money and still qualify.
This is especially useful if you’re in the early stages of building your own business after leaving a larger company, or you’re doing project-based work that runs through an entity.
R&D Write-Offs Are Back if You’re Building Something
If you’re running a tech startup and spending money on development, you probably felt the pain of R&D expenses being spread out over years instead of deducted right away. That changes with this bill.
Starting in 2025, domestic research and development expenses are once again fully deductible in the year they happen. That means more upfront deductions and better cash flow.
Even better, if your business made under 31 million dollars in average annual revenue, you might be able to amend your old tax returns and get refunds from the last few years. That could be a pretty nice surprise.
For larger startups, the bill allows you to catch up those old expenses over the next couple of years starting in 2025. Either way, this is a big improvement from where we were.
Estate and Gift Tax Exemption Got a Bump
This one applies mostly to people with substantial assets, but if you’ve had a major liquidity event, it’s worth knowing that the estate and gift tax exemption is now permanently set at 15 million dollars per person. That’s up from where it was and removes a lot of the urgency around complex estate planning before 2026.
It gives you more room to plan slowly and deliberately. You can still use trusts or gifts to shift assets, but now you have more time and more flexibility.
SALT Deduction Expanded for Some Pass-Throughs
If you own a pass-through entity like an LLC or S corp and your company pays state taxes, the new rules allow a little more deduction on those taxes at the entity level. It won’t affect everyone, but it can reduce your tax bill slightly if you’re in a high-tax state and your business pays significant income taxes.
Individual Changes to Know About
While the focus here is on equity, business, and planning strategies, here are a few other personal tax items tech professionals might care about:
- The standard deduction increase is now permanent.
- Child tax credit increased to 2,200 dollars and is fully refundable up to 1,700 dollars.
- Personal exemptions remain gone. That hasn’t changed.
- The state and local tax (SALT) deduction cap is temporarily raised to $40,000 before dropping back to $10,000 again after 2029.
- Phase-outs begin at $500,000 Modified Adjusted Gross Income (MAGI). It reduces to 30% of the amount your MAGI exceeds the threshold
- Once MAGI reaches $600,000, the cap reverts to $10,000.
- The charitable deduction rules were slightly adjusted but still allow cash donations up to generous limits.
Final Thoughts
If you work in tech, this bill has a lot to like. QSBS got better. The 199A deduction is here to stay. R&D write-offs are back. And estate planning just got simpler for those with significant wealth.
We’re not saying this replaces careful tax planning, but it does open a few new doors and gives us more tools to work with.
If you’ve got equity, pass-through income, or questions about whether you qualify for any of these changes, let’s talk.
A quick check-in now could be the difference between a routine tax year and one where you keep a lot more of what you’ve earned.
You can book an introductory call with our team here.
Until next time!
