OBBBA Framework
One Big Beautiful Bill Act (OBBBA). Public Law 119-21. Largest tax overhaul since 2017. Permanent structural changes. Shift from temporary provisions to long-term tax law. Affects all pass-through entities. Sole proprietorships. Partnerships. S corporations. Limited Liability Companies (LLCs). High-impact legislative reform.
Review the 2026 Tax Checklist.
QBI Deduction
Section 199A. Qualified Business Income (QBI) deduction. Now permanent. 20% deduction of qualified business income. Available for active trades or businesses. Eligible for sole proprietors. Partnerships. S-corp owners.
2026 Thresholds
Inflation indexing active. Single filers: $203,000 threshold. Married filing jointly: $406,000 threshold. Phase-outs begin above these levels. Specified Service Trades or Businesses (SSTB) restrictions apply. Doctors. Lawyers. Consultants. Accountants. Full phase-out levels: $278,000 (single) / $556,000 (joint).
Calculate net income. Determine SSTB status. Apply 20% deduction. Retain records.
Capital Investment
Expensing rules modified. Focus on immediate liquidity. Cash flow optimization.
Bonus Depreciation
100% bonus depreciation. Permanent status. Applies to qualifying assets. Machinery. Equipment. Software. Furniture. Vehicles. Requirements: Acquired and placed in service after January 19, 2025. Deduct full cost in year one. No mandatory multi-year depreciation schedules for domestic assets.
Section 179
Deduction limits increased. Maximum deduction: $2.56 million. Phase-out threshold: $4.09 million. Indexed for inflation. Immediate expensing of tangible personal property. Off-the-shelf computer software. Qualified real property. Roofs. HVAC. Fire protection. Security systems.
Acquire equipment. Place in service. Document purchase date. File Form 4562.
Filing Thresholds
Information reporting requirements updated. Compliance targets adjusted.
Form 1099-NEC
New threshold: $2,000. Replaces $600 limit. Applies to non-employee compensation. Freelancers. Contractors. Gig workers. Inflation indexing enabled. Monitor total annual payments.
Form 1099-MISC
New threshold: $2,000. Rent payments. Royalties. Prize winnings. Attorney fees. Legal settlements. Update accounting software triggers. Verify vendor TINs.
Form 1099-K
Threshold reverted. Pre-2021 rules apply. $20,000 gross payments. 200 transactions. Covers third-party settlement organizations. PayPal. Venmo. Cash App. Square. Avoid low-threshold reporting issues. Use for business transactions only.
Check LLC Compliance Guide.
R&E Rules
Research and Experimental (R&E) expenses. Domestic R&D focus. Immediate expensing restored. Mandatory 5-year amortization repealed for domestic activities.
Domestic R&D
Deduct 100% of costs. Salaries. Materials. Utilities for research facilities. Software development costs included. Elect immediate expensing. Option for 60-month amortization remains. Use for income smoothing.
Foreign R&D
15-year amortization remains. No immediate expensing for international research. Track geographic spending. Segregate domestic vs. foreign costs.
Retroactive Claims
Amend 2022-2024 returns. Claim domestic R&D refunds. Review previous amortization schedules. Update deferred tax assets.
Payroll Reporting
New W-2 requirements. New 1099-NEC requirements. OBBBA compensation mandates.
Tips and Overtime
Income tax deductions for workers. Effective 2025–2028. Applies to qualified tips. Applies to qualified overtime compensation.
Employer Mandates
Mandatory separate reporting. W-2 Box modifications. 1099-NEC tracking. Report qualified tips separately. Report qualified overtime separately. Include occupation details. Update payroll software. Train human resources. Categorize earnings codes.
Read the Overtime Tax Guide.
Employer Credits
Expanded credit availability. Tax liability reduction.
Small Business Credits
Credit for small employer pension plan startup costs. Increased limits. Automatic enrollment credit. Military spouse employee credit. Health insurance premium credits.
Work Opportunity Credit
Work Opportunity Tax Credit (WOTC) extended. Target groups. Veterans. Long-term unemployed. SNAP recipients. Vocational rehabilitation referrals. Document employee eligibility. File Form 8850.
Child Care Credits
Employer-provided child care facilities and services credit. 25% of qualified expenses. 10% of resource and referral expenditures. Annual cap: $150,000. Build facilities. Contract with providers. Lower employee turnover.
2026 Priorities
Immediate actions required. Compliance verification.
- Audit Systems: Verify 1099 tracking for $2,000 limits.
- Update Payroll: Configure tips/overtime reporting tags.
- Plan Equipment: Leverage 100% bonus depreciation.
- Check LLC Status: Ensure entity compliance.
- Analyze R&D: Shift to immediate expensing.
- Review QBI: Confirm income below phase-out thresholds.
- File Early: Prepare for 2026 deadlines.
Consult the Small Business Readiness guide.
Partner with MCG
Tax preparation. Strategic planning. Payroll setup. E-filing 1099s. Business formation. Registered agent services. Notary. Life insurance. Renters insurance. Car insurance. Comprehensive small business support.
Contact Information
Visit www.mcgservicellc.com.
Schedule consultation.
Secure compliance.
Optimize taxes.
Start today.