The Small Business Administration (SBA) in the United States recently announced that during this tax season, over millions of small businesses across America are seeing an average tax reduction of about $7,000.
According to the SBA, this achievement is a result of various provisions in the “Big and Beautiful Act,” such as allowing businesses to immediately deduct research and development expenses rather than spreading them over multiple years, and providing a permanent 20% tax deduction for small businesses. The “Big and Beautiful Act” was signed into law by President Trump in July of last year.
In a post on X platform, the SBA stated, “We are leaving more funds in the pockets of hardworking American entrepreneurs!”
At a business conference at the end of March, Treasury Secretary Scott Bessent detailed the benefits of these policies.
Bessent stated, “Families and businesses across America have already begun to feel the benefits of the ‘Big and Beautiful Act,’ with millions of Americans able to retain more income and the purchasing power of wages on the rise. On average, this law has reduced the tax burden of about 12 million small business owners by nearly $7,000.”
He also mentioned that the sole 20% permanent tax deduction for small businesses has resulted in an average tax reduction of about $4,600 for approximately 8 million business owners nationwide.
This deduction originally stemmed from the 2017 “Tax Cuts and Jobs Act,” which introduced the Qualified Business Income deduction, allowing owners of pass-through entities to deduct up to 20% of business income on their individual tax returns. According to accounting firm Warren Averett’s explanation on July 25, 2025, this policy was set to expire at the end of 2025.
Pass-through entities are not subject to corporate income tax; their income “passes through” to the owners, who then report and pay taxes based on their individual tax rates. This tax structure helps to avoid double taxation at both the business and personal levels.
Data from Averett shows that for these business owners, the provision in 2017 reduced the effective tax rate on their business income from 37% to 29.6%. The “Big and Beautiful Act” has now formalized the 20% deduction permanently.
Bessent also mentioned in his speech that the Trump administration is taking measures to support domestic business innovation and investment.
He said, “Immediate deductibility of research and development expenses has been reinstated retroactively, opening up approximately $100 billion in prior-year deductions for tens of thousands of small businesses.”
“The full expensing policy allows businesses to deduct costs immediately upon investment, improving cash flow and making it easier for businesses to drive growth plans.”
On April 3, Loveler posted on X platform, stating that she recently visited a mechanical enterprise in Michigan and “witnessed firsthand how these tax reduction measures are translating into local hiring and expansion.”
Despite the tax benefits for small businesses, according to data from the National Federation of Independent Business (NFIB) on March 10, overall optimism among small business owners has slightly decreased.
NFIB’s Small Business Optimism Index was lower in February compared to the previous month. The net percentage expecting actual sales to increase decreased by 8 percentage points, offsetting the 6-point increase in January.
When asked about the overall health of their businesses, only 12% of respondents said it was “very good,” a 2-point drop from January.
However, NFIB Chief Economist Bill Dunkelberg stated: “While optimism has dipped slightly, small businesses’ expectations for the next few months were actually more stable in February.”
He pointed out, “Strong sales and profit increases made February more positive for many business owners, but competition from larger businesses is putting pressure on these struggling small and medium-sized businesses in the current economic environment.”