Looking for 2026 Tax Updates? Here Are 10 Things Every Small Business Should Know

Tax Context

The 2026 tax landscape represents a significant shift for small business owners. Recent legislation, often referred to as the "big beautiful bill," has finalized several provisions that were previously temporary. Use this guide to update financial strategies and ensure compliance. Review these ten essential updates now.

1. QBI Permanent

The Qualified Business Income (QBI) deduction is now a permanent fixture of the tax code. Eligible pass-through entities: including sole proprietorships, partnerships, S-corporations, and some LLCs: can deduct 20% of qualified business income.

Key Provisions

• Deduction Rate: 20% of net income.
• Minimum Benefit: $400 guaranteed deduction for earners with at least $1,000 in QBI.
• Status: Permanent. No expiration date exists.

Consult our tax services to verify eligibility for your specific entity structure.

2. Phase-In Expanded

Income thresholds for the QBI deduction have increased. This expansion allows higher-earning business owners to retain deductions that were previously phased out.

Threshold Data

• Single Filers: Range increased from $50,000 to $75,000.
• Joint Filers: Range increased from $100,000 to $150,000.

Track total taxable income against these expanded ranges. Adjusted thresholds provide higher partial deductions for professional services and high-revenue businesses.

3. Section 179

The deduction limit for Section 179 expensing has doubled. This benefits businesses purchasing equipment, software, or heavy machinery.

Expense Limits

• Deduction Limit: $2.50 million base (Adjusted for inflation to approximately $2.56 million).
• Phase-Out Threshold: Starts at $4.09 million.

Apply these deductions to qualifying tangible personal property used in business operations. Review asset purchases immediately to maximize 2026 write-offs. Use MCG Service consulting for asset classification assistance.

4. SALT Caps

State and local tax (SALT) deduction limits have undergone a massive increase. This update directly impacts businesses operating in high-tax jurisdictions.

New Limits

• 2026 Limit: $40,000 (Up from $10,000).
• Future Growth: 1% annual increase through 2029.

Document all state and local income, property, and sales taxes paid. The quadrupled limit significantly lowers federal taxable income for eligible entities.

5. Marginal Rates

The lower marginal tax rates introduced in 2017 are now permanent. These rates apply to individuals and owners of pass-through businesses.

2026 Brackets

• Rates: 12%, 22%, 24%, 32%, 35%, and 37%.
• Application: Standardized across all filing statuses.

Structure owner draws and distributions according to these permanent rates. Stability in these brackets allows for long-term multi-year tax planning.

6. Estate Exemption

The small business estate tax exemption is now permanent. This provides long-term certainty for succession planning and family-owned business transfers.

Planning Actions

• Establish a formal succession plan.
• Review business valuation for estate purposes.
• Utilize the permanent exemption to protect assets during ownership transfers.

Secure your business future with our business-formation advisory services.

7. AMT Updates

The Alternative Minimum Tax (AMT) exemption amounts have been adjusted for 2026. This prevents middle-market business owners from being hit by the AMT.

Exemption Thresholds

• Single Filers: $90,100 (Phase-out starts at $500,000).
• Joint Filers: $140,200 (Phase-out starts at $1,000,000).

Calculate AMT exposure if your business utilizes high levels of specific tax preferences or adjustments.

8. Childcare Credit

The Employer Childcare Credit has been significantly enhanced to encourage employee retention and support.

Credit Structure

• General Rate: 40% of eligible costs.
• General Maximum: $500,000 annual credit.
• Small Business Rate: 50% of eligible costs.
• Small Business Maximum: $600,000 annual credit.

Eligible costs include building or acquiring childcare facilities and contracting with third-party providers. Implement childcare benefits to utilize this high-value credit.

9. Bonus Depreciation

Bonus depreciation is restored to 100% and made permanent. This allows for the immediate deduction of the full cost of qualifying assets in the first year of service.

Asset Recovery

• Percentage: 100%.
• Timing: Year of purchase/service.
• Requirement: Qualifying property with a recovery period of 20 years or less.

Prioritize capital expenditures. Use the 100% deduction to offset high-revenue years. Avoid the previous multi-year depreciation schedules for qualifying equipment.

10. Wage Base

The Social Security wage base has increased for 2026. This affects payroll tax obligations for both employers and employees.

Payroll Impact

• 2026 Wage Base: $184,500.
• 2025 Wage Base: $176,100.
• Tax Rate: 12.4% (Split between employer and employee).

Update payroll systems to reflect the $8,400 increase in the taxable base. Budget for higher employer-side payroll tax contributions for employees earning above the previous limit.

Action Items

Review the following list to ensure 2026 readiness:

1. Analyze Income: Compare projected 2026 income against new QBI thresholds.
2. Asset Purchase: Identify equipment needs to utilize 100% bonus depreciation.
3. Expense Tracking: Separate SALT-eligible expenses to meet the $40,000 cap.
4. Credit Check: Evaluate the feasibility of the 50% small business childcare credit.
5. Succession Review: Document estate plans under permanent exemption rules.
6. Payroll Update: Adjust withholding for the $184,500 Social Security cap.

Professional Support

Tax laws are complex. Direct implementation requires precision. MCG Service provides the necessary consulting and tax expertise to navigate these updates.

• Review our about page.
• Schedule a consulting session.
• Access tax resources.
• Contact MCG Service.

Final Compliance

Stay informed on IRS adjustments. The permanence of these 2026 updates allows for aggressive, long-term financial positioning. Monitor official IRS bulletins for minor inflation adjustments to these figures throughout the fiscal year.

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Execute Strategy

1. Download 2026 tax tables.
2. Meet with a consultant.
3. Adjust quarterly estimates.
4. Implement new deductions.

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