Tax season 2026 looks different. The One Big Beautiful Bill (OBBBA) rewrote the rulebook for small business tax planning, delivering permanent changes that directly impact your bottom line.
If you're a small business owner, these updates mean immediate cash savings and simplified tax preparation for small business operations. Here's what changed and how to maximize every deduction available.
Permanent Tax Breaks You Can Count On
Qualified Business Income Deduction: Now Forever
The 20% QBI deduction was scheduled to expire December 31, 2025. It didn't. OBBBA made it permanent.
What changed:
- Income thresholds increased significantly
- Single filers: $50,000 → $75,000
- Joint filers: $100,000 → $150,000
- Minimum deduction of $400 for anyone earning $1,000+ in qualified business income
Service-based businesses previously facing phase-outs now have more breathing room. Consultants, advisors, and professional service providers benefit directly from expanded eligibility.
Action item: Review your business structure. Pass-through entities (S-corps, LLCs, partnerships) qualify. C-corps don't.
100% Bonus Depreciation Returns
Full expensing is back. Permanently.
Equipment purchased after January 19, 2025 qualifies for immediate 100% deduction. No depreciation schedules. No waiting years to recover costs.
Qualifying property:
- Machinery and equipment
- Computers and software
- Office furniture
- Vehicles (with limitations)
- Used property (if new to you)
This deduction creates immediate cash flow benefits. Purchase $100,000 in qualifying equipment, deduct $100,000 this year. Simple math. Real savings.
Planning tip: Time major equipment purchases strategically. Coordinate with revenue projections to optimize tax liability.
Section 179 Doubled
Small business expensing limits jumped from $1.25 million to $2.5 million (plus annual inflation adjustments).
Section 179 works differently than bonus depreciation. You choose which assets to expense immediately, up to the annual limit. Bonus depreciation applies automatically to all qualifying property.
Strategic approach: Use Section 179 first for maximum flexibility. Apply bonus depreciation to remaining qualifying purchases.
Business Interest Deductions Expanded
OBBBA shifted interest deduction calculations from EBIT to EBITDA standards through 2029.
Translation: You can now deduct interest expenses up to 30% of adjusted taxable income before depreciation and amortization.
This change particularly benefits:
- Capital-intensive businesses
- Companies with significant debt financing
- Businesses investing heavily in depreciable assets
Warning: This reverts to the more restrictive EBIT standard in 2030. Plan accordingly for long-term debt obligations.
Tax Credits That Actually Matter
Employer Childcare Credit Boost
2026 credit rates:
- Standard businesses: 40% of eligible costs (up from 25%)
- Maximum annual credit: $500,000 (up from $150,000)
- Small businesses: 50% of eligible costs
- Small business maximum: $600,000 annually
If you provide childcare facilities or subsidize employee childcare costs, this credit delivers substantial returns.
Eligibility requirements:
- Facilities must meet state licensing requirements
- Services must be available to all employees
- Costs must be ordinary and necessary business expenses
Individual Deductions for Business Owners
SALT Cap Increased
State and local tax deduction cap rose from $10,000 to $40,400 for 2026, with 1% annual increases through 2029.
Phase-out details:
- Begins at $500,000 AGI
- Fully phased out at $600,000 AGI
- Reverts to $10,000 in 2030
High-earning business owners in high-tax states see the biggest benefit. California, New York, New Jersey, and Illinois taxpayers gain significant deduction restoration.
New Deductions Added
OBBBA introduced deductions for:
- Tip income (up to $25,000)
- Overtime pay
- Car loan interest payments
Restaurant owners and hospitality businesses benefit directly from tip income deductions. Service industries with overtime-heavy payrolls gain new planning opportunities.
Standard Deduction Increases
2026 standard deductions:
- Single filers: $16,100
- Married filing jointly: $32,200
Higher standard deductions reduce overall tax liability for business owners filing individual returns. Run the numbers comparing itemized versus standard deductions annually.
What This Means for Small Business Tax Planning
These changes aren't temporary patches. Permanent provisions enable long-term strategic planning previously impossible under expiring tax codes.
Immediate actions:
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Review equipment needs. Accelerate purchases to capture 100% bonus depreciation.
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Calculate QBI eligibility. Adjust income strategies to maximize the 20% deduction.
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Reassess business structure. Pass-through entities optimize QBI benefits.
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Document everything. Increased deductions mean increased scrutiny. Maintain detailed records.
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Project 2030 changes. EBITDA interest deductions and SALT increases revert. Plan for transition.
Foreign Income Changes
GILTI deduction rates dropped to 49.2%. FDII deductions decreased to 36.5%.
Businesses with foreign operations face reduced preferential treatment. Domestic operations became relatively more tax-advantaged. Review international structures with qualified tax professionals.
Tax Preparation for Small Business: Next Steps
OBBBA complexity requires professional guidance. DIY tax preparation misses deductions and creates compliance risks.
MCG Service specializes in small business tax planning, ensuring you capture every available deduction while maintaining full compliance with new regulations.
Our tax preparation services include:
- Comprehensive deduction analysis
- QBI optimization strategies
- Equipment purchase timing guidance
- Entity structure recommendations
- Multi-year tax projection modeling
Tax season 2026 delivers unprecedented opportunities for strategic small business owners. Don't leave money on the table.
Bottom Line
OBBBA represents the most significant small business tax legislation in years. Permanent provisions on QBI and bonus depreciation provide planning certainty previously unavailable.
Maximum deductions require maximum preparation. Understanding these changes is step one. Implementing them effectively determines actual tax savings.
Ready to optimize your 2026 tax strategy? Contact MCG Service for professional small business tax planning that maximizes deductions and minimizes liability.