The 2026 tax changes that actually matter for business owners

In July 2025, Congress passed the tax and spending package widely known as the One Big Beautiful Bill Act. Most headlines focused on individual rates. For people who earn through a business, the more important changes are quieter: several deductions that were set to expire are now permanent, a few write-offs got bigger, and some paperwork thresholds moved for the first time in decades.

Here is what changed, in the order it tends to matter for our clients.

1. What became permanent

The 2017 tax law had an expiration date. At the end of 2025, individual rates were scheduled to rise, the standard deduction was scheduled to shrink, and the qualified business income (QBI) deduction was scheduled to disappear. The new law removed that cliff.

The QBI deduction stays at 20%. If you own a sole proprietorship, LLC, partnership or S-corporation, you can generally deduct up to 20% of your qualified business income, subject to income limits and extra rules for service businesses such as law, medicine and consulting. Starting in 2026, the law also widens the income range over which those limits phase in and adds a small minimum deduction for owners with at least $1,000 of QBI from a business they actively run.

Individual brackets and the larger standard deduction stay too. That matters less for planning than for peace of mind: the planning you did under the old rules doesn't need to be unwound.

2. Bigger write-offs for equipment and research

Bonus depreciation is back at 100%, permanently, for qualifying property acquired after January 19, 2025. Before the new law, bonus depreciation was phasing down each year. Now a business can again deduct the full cost of most equipment, machinery, computers and certain vehicles in the year they're placed in service.

Section 179 expensing roughly doubled. The annual limit is about $2.5 million, indexed for inflation (around $2.56 million for 2026), with a phase-out that starts once you place about $4 million of equipment in service in a year. Most small businesses will never hit those numbers — the practical point is that the limit is no longer a constraint.

Domestic research costs can be deducted immediately again. Since 2022, businesses had to spread U.S. research and software development costs over five years. For tax years beginning after 2024, they can be deducted in the year paid, and smaller businesses may be able to amend earlier years. If you build software or products, this one deserves a conversation.

Read more in Bonus depreciation and Section 179 in 2026.

3. The bigger SALT cap — with a catch

The deduction for state and local taxes (SALT) on your personal return was capped at $10,000 from 2018 to 2024. The new law raised the cap to $40,000 for 2025, increasing 1% a year through 2029 (about $40,400 for 2026), before it reverts to $10,000 in 2030.

The catch: the higher cap shrinks for households with modified adjusted gross income above $500,000 (indexed), and it can't drop below $10,000. For many of our highest-earning clients, the practical cap is still close to $10,000.

That's why the pass-through entity tax (PTET) election still matters. Most states with an income tax let an S-corporation or partnership pay state tax at the entity level, where it's deductible as a business expense and never hits the SALT cap. The law left that workaround intact.

4. New information-return thresholds

Fewer forms doesn't mean less taxable income. Every dollar you earn is still reportable whether or not a form arrives. The change mainly means less paperwork for businesses that pay contractors small amounts. We cover it in detail in the new $2,000 1099 threshold.

What about "no tax on tips" and overtime?

The law added temporary deductions for qualified tips and overtime pay for 2025 through 2028. Both phase out at higher incomes — starting at $150,000 of modified AGI for single filers and $300,000 for joint filers — so most of the clients we serve will see little or no benefit.

5. What to do this year

1. Revisit your entity choice. A permanent QBI deduction changes the long-term math between a sole proprietorship, an S-corp and a C-corp.
2. Plan equipment purchases on purpose. Full expensing is valuable, but only if the deduction lands in a year when you need it. Buying equipment you don't need to save tax is still spending money.
3. Check your SALT position. If your income is above the phase-down range, ask whether your business should make a PTET election.
4. Update your 1099 process. Keep collecting W-9s from every contractor. You'll need them the moment payments cross $2,000.