Most business owners know that tax laws change annually. What’s happening this year is something different. The 2025 One Big Beautiful Bill Act (OBBBA) didn’t just modify a few lines in the tax code. It’s the largest overhaul since the 2017 Tax Cuts and Jobs Act (TCJA). This article outlines the most important 2026 tax law changes courtesy of the OBBBA, as well as the specific Internal Revenue Service (IRS) regulations and requirements that business owners need to know about.
Here are the big-picture takeaways:
- One of the most impactful changes made by the OBBBA is the permanent restoration of 100% bonus depreciation.
- Immediate R&D expensing has also been permanently restored for domestic research expenses incurred after December 30, 2024.
- Under the new rules, businesses can deduct interest expenses on up to 30% of adjusted taxable income before depreciation and amortization.
1. New 2026 tax brackets and standard deductions will affect tax liability for business owners.
Every business owner, regardless of their business entity structure, has to file a personal tax return. For those taking the standard deduction, it’s now $16,100 for single filers and $32,200 for married couples filing jointly. The number of income tax brackets remains the same. Income thresholds have changed. Here’s what that looks like:
Itemizing your deductions, rather than taking a standard deduction, could bring your personal taxable income down. Contact my office for assistance with tax planning and individual tax preparation.
2. 100% bonus depreciation provides tax relief, improved cash flow, and lower administrative costs.
One of the most impactful changes made by the OBBBA is the permanent restoration of 100% bonus depreciation. Initially instituted by the TCJA, bonus depreciation was scheduled for elimination by 2027.
Restoration means businesses can deduct the full costs of machinery, equipment, and computers in the tax year they’re incurred. Bonus depreciation also covers used property, so businesses that purchase pre-owned equipment can claim 100% first-year expensing.
That’s good news for smaller operations that need increased cash flow. It also eliminates the administrative burden of tracking depreciation schedules that affect several years of tax filings.
For businesses that purchase and maintain extensive holdings in equipment, vehicles, or property, such as construction and manufacturing firms, the value of those assets will be a point of negotiation in the acquisition process. Contact my office for valuation assistance.
Section 179 of the Internal Revenue Code, which covers expensing, has also been modified by the OBBBA.
The expensing limit has been increased to $2.5 million for 2026, with the phase-out threshold starting at $3.63 million in total equipment purchases. Combining this with bonus depreciation is an effective tax strategy for small business owners.
Manufacturers should review the new Section 168(n) qualified production property deduction. It allows 100% bonus depreciation through 2032 for buildings used in manufacturing or production. Construction must begin before December 31, 2028, and the facility must be placed in service before January 1, 2033.
For more information, see my full article on 100% bonus depreciation.
3. Immediate R&D expensing paves the way for tax-efficient innovation and development.
Immediate R&D expensing has also been permanently restored for domestic research expenses incurred after December 30, 2024. It allows businesses to once again deduct their costs in the year they are incurred rather than capitalizing and amortizing them over five years. This rule applies exclusively to domestic research and development.
The R&D expensing restoration benefits software developers, manufacturers, biotechnology firms, and any business engaged in developing new products or improving existing ones. The credit also applies to laboratory work that extends to engineering, computer science, and biological sciences activities.
For businesses that capitalized domestic R&D expenses from 2022 through 2024, a special catch-up provision allows accelerated deduction of remaining unamortized balances over one or two years. Contact my office for help in electing the optimal catch-up schedule. If appropriate, we can amend your prior returns.
For more information, see my full article on immediate R&D expensing.
Interest deduction limits increase; promise relief for highly-leveraged companies.
Interest deductions are significant to businesses with high capital expenditures and substantial debt. The OBBBA changes how business interest deductions are calculated. The TCJA based them on EBIT (earnings before interest and taxes). The OBBBA standard includes depreciation and amortization (EDITDA).
Under the new rule, businesses can deduct interest expenses up to 30% of adjusted taxable income before factoring in depreciation and amortization.
As a result, there will be greater interest capacity for leveraged companies, particularly those with significant depreciable assets. The TCJA standard was more restrictive; the future offers relief.
Unfortunately, this rule reverts to the EBIT standard in 2030, so business owners should plan carefully to ensure financing structures remain sustainable when depreciation and amortization are no longer included in the calculation; this requires complex mathematics, which should be left to a qualified tax professional.
4. Increased contribution limits to retirement plans create opportunities for tax savings.
The maximum contribution limit for defined contribution plans has been increased to $24,500, up $1,000 since last year.
- For business owners over 50, catch-up contributions increased to $8,000, bringing the total contribution potential to $32,500. If you made over $150K this year, the catch-up contributions must be designated to Roth accounts.
- For employees aged 60 to 63, a SECURE ACT 2.0 provision ups the catch-up contribution limit from $8,000 to $11,250, for a total of $35,750.
- The traditional and Roth IRA contribution limit is $7,500, with a catch-up contribution of $1,100 for individuals age 50 or older. Still, income thresholds for single filers and married couples may affect eligibility for Roth contributions.
Business owners and self-employed individuals can contribute up to 25% of their compensation (or 20% of their net self-employment income for unincorporated businesses), with a maximum contribution of $69,000 in 2026. Solo 401(k)s can combine employee deferrals up to $24,500 with profit-sharing contributions.
SIMPLE IRA contribution limits increased to $17,000 for 2026, with catch-up contributions of $4,000 for those 50 and older. For applicable SIMPLE plans, the contribution limit rises to $18,100.
I’ll be following up with an article on changes to 401(k)s. Follow my LinkedIn for updates.
5. Reporting requirements affect gig workers; BOI reporting remains in place.
New reporting requirements won’t get the same attention as bonus depreciation and retirement plan contribution limits, but their impact will be profound.
To start with, Form 1099-K reporting returns to the $20,000 threshold in 2026. That affects thousands of gig workers receiving payments via Venmo, PayPal, and Square.
Some things have not changed. The requirement for Beneficial Ownership Information (BOI) reporting is still in effect. Penalties for non-compliance reach $500 per day, making timely filing essential. The reporting requirement applies to corporations, LLCs, and similar entities unless exempted based on size, regulatory oversight, or entity type.
For more information, see my full article on BOI reporting.
6. Cryptocurrency reporting requirements tighten.
Digital assets must be reported as income when received, and businesses facilitating cryptocurrency transactions face enhanced reporting obligations. The IRS treats cryptocurrency as property for tax purposes, meaning each transaction may create a taxable event.
7. Changes in international commerce rules may reduce profitability for companies doing business overseas.
While immediate R&D expensing is sure to benefit domestic businesses, changes in international commerce rules reduce profitability for companies doing business overseas. Both the Global Intangible Low-Taxed Income (GILTI) and Foreign-Derived Intangible Income (FDII) have been significantly reduced.
To summarize, the GILTI deduction rate has been reduced to 49.2%. FDII deductions are down to 36.5%.
Obviously, these changes reduce preferential treatment for foreign income, while other provisions incentivize domestic operations. You can view the international changes in Section 250 of the IRS tax code.
There’s more. Base Erosion and Anti-Abuse Tax (BEAT) rates increased to 10.5% for 2026, preventing the scheduled increase to 12.5% under prior law but still raising costs for multinational corporations making deductible payments to foreign affiliates. Foreign account reporting requirements remain unchanged.
The state-level nexus rules for e-commerce businesses also remain unchanged. These complex requirements force local companies to monitor tax rates in the states where they do business. The Supreme Court’s “Wayfair” decision established that states can require sales tax based on economic nexus rather than physical presence.
8. With change comes opportunity.
Permanent provisions in the OBBBA eliminate much of the uncertainty that has plagued business owners and tax planners for the past few years. The TCJA gave us a glimpse of this in 2017, but phase-out thresholds and time limits minimized its efficacy. The OBBBA eliminates those. The business landscape may appear dim, but tax relief paints a brighter picture.
Restoration of 100% bonus depreciation, permanent R&D expensing, and enhanced retirement contribution limits can reduce your tax liability and improve cash flow, and that’s just the tip of the iceberg. Permanent provisions, temporary deductions, state tax considerations, and business-specific factors create complexity that generic advice cannot adequately address.
If you’ve considered strategic tax planning, the 2026 tax year is the time to start.
We’re entering a new era in taxation, one that’s defined by permanence, strategic opportunity, and the need for sophisticated planning. Business owners who treat tax planning as integral to business strategy, rather than an annual obligation, will capture advantages their competitors miss.
To start strategic tax planning and build a financially strong and profitable business for acquisition, schedule a discovery call.
Talk soon,
Jeremy A. Johnson, CPA