Tax legislation for 2026 introduces significant changes. The "One Big Beautiful Bill Act" modifies previous tax codes and establishes new compliance requirements. Small business owners must adapt strategies to maximize deductions and maintain compliance.
SALT Cap
The State and Local Tax (SALT) deduction cap is now $40,000. This is an increase from the previous $10,000 limit.
Income-based phaseouts apply. If modified adjusted gross income (MAGI) exceeds $500,000 for single filers or $250,000 for married individuals filing separately, the deduction decreases. The additional deduction above $10,000 phases out at a 30% rate. At $600,000 in income, the deduction effectively returns to the $10,000 limit.
Evaluate state tax payments. Adjust personal tax projections based on these thresholds. Use business consulting services to calculate specific impacts.
Standard Deduction
Standard deduction amounts have increased for 2026.
- Married couples filing jointly: $32,200
- Heads of household: $24,150
- Single taxpayers: $16,100
- Married filing separately: $16,100
These adjustments account for inflation. Compare itemized deductions against these new standards. Choose the higher amount to reduce taxable income.
Retirement Contributions
Retirement plan limits have risen.
- 401(k) contribution limit: $24,500
- IRA contribution limit: $7,500
A specific window exists for workers aged 60 through 63. These individuals may contribute up to $35,750 to a 401(k). This provision expires at age 64. Standard catch-up limits apply thereafter.
Review retirement plans. Update payroll deductions. Ensure compliance with age-specific limits.
https://mcgservicellc.com/payroll
Roth Requirements
High earners face new catch-up contribution rules. All catch-up contributions must be Roth starting in 2026.
This change removes immediate tax deductions for catch-up amounts. Growth remains tax-free. Tax-free withdrawals during retirement are the primary benefit. Assess long-term tax brackets. Determine if Roth contributions align with future income goals.
Section 179
The Section 179 expensing limit is $2.5 million. The phaseout threshold begins at $4 million.
Businesses can deduct the full purchase price of qualifying equipment and software purchased or financed during the tax year. This includes machinery, office furniture, and certain vehicles.
Monitor spending. Keep detailed records of all asset acquisitions.
https://mcgservicellc.com/business-formation
Equipment Deductions
Immediate full cost deduction is available for equipment placed in service after January 19, 2026.
This policy incentivizes capital investment. Equipment must be new to the business. It must be used for business purposes more than 50% of the time.
Plan major purchases. Schedule delivery and installation for late January 2026 to qualify for immediate expensing.
Estate Tax
The estate tax exemption is $15 million per person. Married couples have a combined exemption of $30 million.
These amounts are permanently indexed for inflation. This protection prevents future legislative reductions from impacting current estate plans.
Review life insurance and trust structures. Update beneficiary designations. Ensure estate planning documents reflect current exemption levels.
https://mcgservicellc.com/life-insurance
QBI Permanence
The 20% Qualified Business Income (QBI) deduction is now permanent.
Pass-through entities, including sole proprietorships, S-corporations, and partnerships, qualify. The deduction allows owners to exclude up to 20% of their qualified business income from federal income tax.
This permanence allows for long-term tax planning. Project future earnings with the 20% deduction as a fixed factor.
AMT Exemptions
Alternative Minimum Tax (AMT) exemption amounts are adjusted for 2026.
- Unmarried individuals: $90,100 (Phaseout starts at $500,000)
- Married filing jointly: $140,200 (Phaseout starts at $1,000,000)
AMT primarily affects taxpayers with high incentive stock option exercises. Check AMT liability if exercising options. Consult a consultant for specific calculations.
https://mcgservicellc.com/consulting
PTE Elections
Pass-Through Entity (PTE) elections are a critical strategy for high-income earners.
PTE elections allow state taxes to be paid at the entity level. This bypasses the $40,000 SALT cap on personal returns. Business-level taxes are fully deductible for federal purposes.
This structure is beneficial for real estate and professional service businesses. Analyze entity structure. Determine if electing PTE status reduces total tax liability.
Implementation Steps
- Review Financial Statements. Gather all 2025 data. Compare against 2026 rules.
- Consult Experts. Engage a tax consultant. Schedule a strategy session.
- Adjust Payroll. Update contribution settings for Roth requirements and new limits.
- Plan Equipment Purchases. Time acquisitions for maximum deduction benefits.
- Update Estate Plans. Align trusts with the $15 million exemption.
https://mcgservicellc.com/contact
Compliance Checklist
- Verify SALT deduction eligibility.
- Check standard deduction versus itemized totals.
- Confirm retirement catch-up types (Roth).
- Document Section 179 asset usage.
- Validate QBI calculations for pass-through income.
- Audit AMT exposure for stock options.
- File PTE elections if applicable.
Tax laws require proactive management. Use the new 2026 rules to optimize business performance and minimize liability.