The big beautiful bill small business tax changes that matter most in 2026 are permanent 100% bonus depreciation, a Section 179 limit of $2,560,000, a permanent 20% qualified business income deduction with a new $400 minimum, immediate expensing of domestic research costs, and a higher $2,000 threshold for Forms 1099-NEC and 1099-MISC. The One Big Beautiful Bill Act (Public Law 119-21, enacted July 4, 2025) also restored a more generous business interest limit and enlarged several employer credits.
This guide lists each of the big beautiful bill small business tax changes with its 2026 figure and effective date, taken from IRS guidance and Rev. Proc. 2025-32, the procedure that sets 2026 inflation-adjusted amounts. Each section links to a deeper guide where one exists, so you can use this page as a checklist before year-end planning and 2026 bookkeeping.
| Provision | What changed | 2026 figure or date |
|---|---|---|
| Bonus depreciation (Section 168(k)) | 100% made permanent | Property acquired after January 19, 2025 |
| Section 179 expensing | Base limit raised to $2,500,000, indexed | $2,560,000 limit; phase-out starts at $4,090,000 |
| QBI deduction (Section 199A) | Made permanent; minimum deduction added | Threshold $201,750 ($403,500 joint); $400 minimum |
| Domestic research costs (Section 174A) | Immediate deduction restored | Tax years beginning after December 31, 2024 |
| Business interest (Section 163(j)) | Depreciation, amortization and depletion added back to ATI | Tax years beginning after December 31, 2024 |
| Forms 1099-NEC and 1099-MISC | Reporting threshold raised from $600 | $2,000 for payments made after December 31, 2025 |
| Form 1099-K | $600 rule replaced | More than $20,000 and more than 200 transactions |
| Employer childcare credit (Section 45F) | Maximum credit raised | $500,000, or $600,000 for eligible small businesses |
| Paid family leave credit (Section 45S) | Made permanent and expanded | Permanent |
| Educational assistance (Section 127) | Student loan payments made permanent | $5,250 combined exclusion |
The sections below explain who each change helps and what to check in your books.
According to the IRS summary of business provisions, the act made the 100% additional first-year depreciation deduction permanent for qualified property acquired after January 19, 2025. For the first tax year ending after that date, a business can elect 40% bonus depreciation instead (60% for long production period property and certain aircraft), which some owners prefer when they want to spread deductions across years. The IRS issued interim guidance in Notice 2026-11, and our breakdown of Notice 2026-11 and the bonus depreciation transition rules covers the acquisition-date tests in detail.
Section 179 moved from a $1,000,000 base to $2,500,000 for property placed in service in tax years beginning after December 31, 2024, with inflation indexing after 2025. For tax years beginning in 2026, Rev. Proc. 2025-32 sets the limit at $2,560,000, reduced dollar for dollar once total Section 179 property placed in service exceeds $4,090,000. The cap for sport utility vehicles is $32,000.
A growing manufacturer places $4,300,000 of qualifying equipment in service during its 2026 tax year.
| Step | Amount |
|---|---|
| Equipment placed in service | $4,300,000 |
| Less 2026 phase-out threshold | $4,090,000 |
| Excess that reduces the limit | $210,000 |
| 2026 Section 179 limit | $2,560,000 |
| Reduced Section 179 limit | $2,350,000 |
The business can expense up to $2,350,000 under Section 179 and can still claim bonus depreciation on qualified property above that amount. The limit reaches zero once Section 179 purchases hit $6,650,000. For many small businesses, the higher threshold means the phase-out never comes into play, and the choice between Section 179 and bonus depreciation turns on state conformity and taxable income limits.
The 20% deduction for qualified business income was due to expire after 2025. The act made it permanent and added a floor: for taxable years beginning after December 31, 2025, an owner with at least $1,000 of qualified business income from an active trade or business gets a minimum deduction of $400. Both amounts are indexed for inflation after 2026.
For 2026, the threshold at which wage, property and specified service business limits start to apply is $201,750 for most filers and $403,500 for joint filers. The phase-in range runs up to $276,750 and $553,500, a band of $75,000 ($150,000 joint) over which the limits phase in. Our 199A deduction guide works through examples at each income level.
| 2026 Section 199A amounts | Joint returns | Married filing separately | All other returns |
|---|---|---|---|
| Threshold amount | $403,500 | $201,775 | $201,750 |
| End of phase-in range | $553,500 | $276,775 | $276,750 |
From 2022 through 2024, businesses had to capitalize domestic research and experimental costs and amortize them over five years, which raised taxable income for software companies, product developers and manufacturers. Under new Section 174A, as the IRS provision list puts it, domestic research or experimental expenditures are deductible for taxable years beginning after December 31, 2024. Foreign research costs still go through 15-year amortization.
Small business taxpayers that met the gross receipts test could also elect to apply Section 174A to tax years beginning after December 31, 2021. Rev. Proc. 2025-28 required that election to be made by July 6, 2026, or earlier where the period for filing a refund claim closed first, so the retroactive window has passed for most businesses. Our explainer on how the act changed Section 174 covers the transition rules in detail; review any open years with your preparer.
Section 163(j) caps business interest deductions at a percentage of adjusted taxable income (ATI). From 2022 through 2024, depreciation and amortization could not be added back when computing ATI, which shrank the cap for capital-heavy and leveraged businesses. The IRS FAQ on the interest limitation confirms that the act allows taxpayers to add back deductions for depreciation, amortization or depletion for tax years beginning after December 31, 2024.
Many small businesses are exempt from Section 163(j) entirely because they meet the gross receipts test. For tax years beginning in 2026, that test is met when average annual gross receipts over the prior three years do not exceed $32,000,000. Businesses above that level, or those classed as tax shelters, should rerun Form 8990. Our guide to the business interest expense limitation covers the 2026 changes to interest capitalization as well.
Two reporting changes reduce paperwork for small businesses that pay contractors or sell through payment platforms.
A business that pays a freelancer $1,800 for work in 2026 no longer files a Form 1099-NEC for that payment. The freelancer still reports the income, and the payer should still collect a Form W-9 at onboarding, since the payment total often grows during the year. The 2026 1099 reporting threshold guide covers what changes for vendors, rent and royalties.
The new deductions for qualified tips and overtime are claimed by workers, but employers carry the reporting burden. The IRS page for individuals and workers lists the tips deduction at up to $25,000 a year and the overtime deduction at up to $12,500 ($25,000 for joint filers), both for 2025 through 2028, phasing out above $150,000 of modified adjusted gross income ($300,000 joint). Employers and other payors must report qualified amounts on information returns. Treasury and the IRS gave penalty relief for 2025 tip reporting and transition relief for 2025 overtime reporting, so 2026 is the first full year in which payroll systems need to separate qualified tips and overtime premium pay correctly.
Restaurants, salons, hospitality businesses and any employer paying overtime to nonexempt staff should confirm that their payroll provider tracks these amounts by employee from the first payroll of the year. Our guide to the qualified overtime compensation deduction explains how the worker side of the overtime rule works.
Several credits that small employers can claim were made permanent or enlarged.
Employer-provided childcare credit (Section 45F). For taxable years beginning after December 31, 2025, the maximum credit rises to $500,000, or $600,000 for an eligible small business, with inflation adjustments after 2026.
Paid family and medical leave credit (Section 45S). The credit is now permanent. Employees with six months of service qualify, as do part-time employees who customarily work 20 hours or more a week, and the credit can cover insurance premiums for leave. Our guide to the permanent Section 45S rules walks through the calculation.
Student loan repayment through Section 127. Employers can permanently pay qualified student loans tax-free through a written educational assistance program. The 2026 exclusion is $5,250 in total, combining loan payments and other educational assistance. If an employer pays $3,000 toward an employee's loan, only $2,250 of other assistance can be excluded that year. See our Section 127 educational assistance guide for program setup.
Employee Retention Credit. The act limits credits and refunds for third and fourth quarter 2021 ERC claims filed after January 31, 2024. Businesses with late claims for those quarters should review them with their preparer.
The act cut back several energy incentives that small businesses used.
Businesses that planned fleet or building upgrades around these incentives should recheck the numbers using depreciation alone.
For owners of pass-through businesses, owner-level amounts shape the final tax bill. Rev. Proc. 2025-32 sets these figures for 2026:
| Item | 2026 amount |
|---|---|
| Standard deduction, single or married filing separately | $16,100 |
| Standard deduction, married filing jointly | $32,200 |
| Standard deduction, head of household | $24,150 |
| Excess business loss threshold | $256,000 ($512,000 joint) |
| Estate and gift basic exclusion amount | $15,000,000 per person |
| Annual gift tax exclusion | $19,000 per recipient |
Owners with large pass-through losses should read our guide to the excess business loss limitation, and owners making gifts above the annual exclusion can check who must file Form 709.
Founders holding C corporation stock should also review the expanded Section 1202 rules, summarized in our guide to QSBS after the One Big Beautiful Bill Act.
For broader planning ideas, see our tax planning strategies for small businesses.
When did the One Big Beautiful Bill Act become law? It was enacted on July 4, 2025, as Public Law 119-21. Many business provisions apply to tax years beginning after December 31, 2024, so they affect 2025 returns as well as 2026 planning.
Is 100% bonus depreciation permanent? Yes. The act made 100% bonus depreciation permanent for qualified property acquired after January 19, 2025.
What is the Section 179 limit for 2026? The 2026 limit is $2,560,000. It is reduced by the amount by which Section 179 property placed in service during the year exceeds $4,090,000.
Do I need to send a 1099-NEC for payments under $2,000 in 2026? For payments made after December 31, 2025, the reporting threshold for Forms 1099-NEC and 1099-MISC is $2,000. Payments below that amount to a contractor in 2026 do not require the form, although the contractor must still report the income.
Did the QBI deduction expire after 2025? No. The act made the 20% qualified business income deduction permanent and added a $400 minimum deduction for owners with at least $1,000 of qualified business income, starting with tax years beginning after December 31, 2025.
Madras Accountancy supports US CPA firms and small businesses with bookkeeping, tax preparation and CFO-level planning, including fixed asset tracking, 1099 reporting and year-end tax workpapers. To discuss how these changes affect your books or your clients, contact our team.
The section 4960 excise tax is 21% of nonprofit pay over $1M. From 2026 it covers all employees. See the medical carve-outs, Form 4720 and a worked example.
The paid family and medical leave tax credit is permanent from 2026. See the 12.5% to 25% rates, the premium option, the 6-month rule and how Form 8994 works.
Opportunity zones become permanent in 2027 under the One Big Beautiful Bill. See the new deferral, rural bonus, and the 2026 handoff.
