Small Business Tax Planning 2026: Strategies for the New IRS Landscape

OBBBA Framework

One Big Beautiful Bill Act (OBBBA) governs 2026. Permanent 100% bonus depreciation restored. Section 179 caps increased. Research and Experimental (R&E) expensing permitted. New employer childcare credits active. Execute tax planning immediately. Review legislative impacts on 2026 filings. Minimize liability via OBBBA-specific provisions.

Depreciation Tactics

100% Bonus Depreciation

• Apply to qualified property.
• Acquisition date after January 19, 2025.
• Placed-in-service date during 2026.
• Deduct full cost in year one.
• No dollar limit.
• No taxable-income limit.
• Create Net Operating Loss (NOL) if necessary.

Section 179 Limits

• Maximum deduction: $2,560,000.
• Phase-out threshold: $4,090,000.
• Dollar-for-dollar reduction above threshold.
• SUV limit: $32,000.
• Restricted to business taxable income.
• Carry excess forward.

Strategic Asset Timing

• Purchase equipment before year-end.
• Ensure "placed-in-service" status.
• Document binding contracts for OBBBA eligibility.
• Prioritize Section 179 for income smoothing.
• Leverage bonus depreciation for aggressive sheltering.

R&E Elections

Immediate expensing of domestic research and experimental costs. End mandatory 5-year amortization for 2026 spending.

Critical Deadlines

• July 6, 2026: Retroactive election deadline.
• File Form 3115 for accounting method changes.
• Apply to 2025 and 2026 expenditures.

Expenditure Categories

• Wages for research personnel.
• Supplies used in experimentation.
• 65% of contract research expenses.
• Software development costs.
• Laboratory utility costs.
• Patent legal fees.

Strategic Considerations

• Evaluate 60-month amortization election.
• Compare cash flow impact vs. future deductions.
• Assess impact on Research Credit (Section 41).
• Identify foreign vs. domestic cost splits.
• Maintain rigorous documentation for IRS audits.

Childcare Credits

Small Business Benefits

• Maximum credit: $600,000.
• Percentage: 50% of qualified expenses.
• Eligibility: Standard small business definition.

General Corporate Credits

• Maximum credit: $500,000.
• Percentage: 40% of qualified expenses.
• Referral services: 10% credit.

Qualifying Facility Expenses

• Acquisition costs.
• Construction expenses.
• Expansion of existing facilities.
• Rehabilitation of structures.
• Operating costs of facility.
• Contracted childcare services.

Compliance Requirements

• Facility must meet state licensing.
• Non-discriminatory access for employees.
• Direct tax reduction (not just deduction).
• Recapture rules for 10-year period.
• Coordinate with MCG Service for additional service support.

Entity Structure

LLC (Sole Proprietorship)

• Simplified filing requirements.
• Full net profit subject to self-employment (SE) tax.
• QBI deduction eligible on full profit.
• Low administrative overhead.
• No payroll requirement for owners.

S Corporation Election

• Optimize payroll services.
• Pay "reasonable compensation" via W-2.
• Distributions avoid SE tax (15.3% savings).
• QBI deduction on distributions.
• Increased filing complexity.
• Mandatory corporate formalities.

C Corporation Status

• Flat 21% federal tax rate.
• No flow-through to personal return.
• Double taxation on dividends.
• Unlimited fringe benefit deductions.
• Preferable for high reinvestment models.
• Subject to Section 163(j) interest limits.

Structure Decision Matrix

• Profit > $75,000: Model S-Corp savings.
• High SE tax burden: Switch to S-Corp.
• Simple operations: Maintain LLC.
• Future exit/sale: Consult business advisor.

QBI Optimization

Maximize the 20% Section 199A deduction.

Income Threshold Management

• Stay below phase-out limits.
• Maximize retirement contributions.
• Utilize A5 Binder Notebooks for tracking.
• Fund Health Savings Accounts (HSAs).
• Defer 2026 year-end invoicing.
• Accelerate business expenses.

SSTB Strategy

• Identify Specified Service Trade or Business (SSTB).
• Separate SSTB from non-SSTB activities.
• Create separate legal entities for products.
• Avoid "tainted" income across branches.
• Use aggregation elections for multi-entity groups.

Wage and Property Limits

• Applicable above taxable income thresholds.
• Increase W-2 wages in S-Corps to unlock QBI.
• Acquire "Qualified Property" (UBIA) to boost limits.
• Calculate 50% wage limit vs. 25% wage + 2.5% property.

Interest Limitations

Section 163(j) updates for 2026.

EBITDA Basis Restoration

• Permanent shift from EBIT to EBITDA.
• Add back depreciation and amortization.
• Increase Adjusted Taxable Income (ATI).
• Expand interest deduction capacity.
• Beneficial for capital-intensive firms.

Small Business Exemption

• Gross receipts < $32 million.
• Exemption from Section 163(j) limits.
• Full interest deduction allowed.
• Use 3-year average receipts test.

Excluded Items 2026

• International tax adjustments.
• Subpart F income exclusions.
• GILTI adjustments for ATI.
• Capitalized interest inclusion.

2026 Calendar

Estimated Tax Schedule (Individuals/LLCs)

• Q1: April 15, 2026.
• Q2: June 15, 2026.
• Q3: September 15, 2026.
• Q4: January 15, 2027.

Estimated Tax Schedule (C-Corps)

• Payment 1: April 15, 2026.
• Payment 2: June 15, 2026.
• Payment 3: September 15, 2026.
• Payment 4: December 15, 2026.

Quarterly Compliance Actions

• January: Issue 1099s via MCG Payroll.
• March: Finalize 2025 S-Corp returns.
• April: Individual tax filings.
• July: R&E retroactive election deadline.
• October: 2026 QBI projections.
• December: Final equipment purchases.

Professional Services

MCG Service provides comprehensive 2026 tax compliance.

Core Offerings

• Registered Agent Service for entity maintenance.
• Mail Forwarding for document security.
• Payroll set up and e-filing 1099s.
• Tax preparation for entrepreneurs.
• Business formation (LLC, S-Corp).
• Insurance solutions (Life, Car, Renters).
• Notary services.

Engagement Steps

• Contact Tax Advisor Level 1.
• Consult Tax Advisor Level 2 for complex OBBBA strategies.
• Review agenda planners for organization.
• Secure leather file folders for audit readiness.

Directives

• Schedule 2026 planning session.
• Update entity classification.
• Document R&E expenditures.
• Execute childcare facility investments.
• Remit estimated payments on time.