How the One Big Beautiful Bill Act Changes Your 2026 Small Business Taxes

The One Big Beautiful Bill Act was signed into law in mid-2025, and most of its provisions took effect on January 1, 2026. If you own a small business, several of the changes are worth planning around now rather than discovering them when your return is prepared.

The Qualified Business Income deduction, long a fixture of pass-through business planning, is now permanent and its rate increases to 23% for tax years beginning after December 31, 2025. Your 2025 return still uses the old 20% rate, so the difference shows up starting with the 2026 tax year.

Equipment purchases get more favorable treatment on two fronts. Section 179 expensing limits rise to $2.56 million for 2026, with the phase-out threshold starting at $4.09 million, and 100% bonus depreciation is now a permanent fixture for qualifying property placed in service after January 19, 2025, rather than a temporary provision that phases down over time.

On the individual side of business ownership, the State and Local Tax deduction cap increases from $10,000 to $40,000 for tax years 2025 through 2029, which changes the math for many owners who itemize. New, more targeted deductions also apply to specific income types: up to $25,000 of tip income can be excluded from taxable income within certain limits, and a portion of overtime premium pay is deductible as well.

Every one of these provisions interacts with the others, and the right move depends on your entity structure, your equipment purchase plans, and your income mix. If you have not sat down with your accountant since the law changed, 2026 is the year to do it before decisions get made by default rather than on purpose.