Tax laws change frequently, and 2026 brings updates that small business owners need to watch. If you have been hearing conflicting information about 2026 tax changes, here is the clear picture: the OBBBA extended and expanded many provisions from the 2017 Tax Cuts and Jobs Act (TCJA) that were set to expire, while introducing several brand-new incentives. For most small businesses, this is good news.
Here’s what changed, and what to ask your CPA about how these changes might affect your bottom line.
Key Changes in 2026 Tax Laws
100% bonus depreciation restored.
The OBBBA restored, and made permanent, a 100% additional first-year depreciation deduction. This applies to eligible depreciable property acquired and placed in service after January 19, 2025, allowing businesses to deduct the full cost of qualifying equipment, machinery, technology, and other business property purchases in the first year, rather than depreciating the cost over several years.
QBI deduction maintained, with refinements.
The OBBBA made the 20% Qualified Business Income deduction permanent for eligible pass-through business owners, including many sole proprietors, partnerships, S corporations, and LLC owners. For 2026, income thresholds and phase-in ranges were adjusted, so business owners should review whether their deduction may be limited based on taxable income, business type, W-2 wages, or qualified property. Speaking with your tax advisor is recommended to ensure you are maximizing your tax benefits.
Domestic R&D Expensing Restored.
Small businesses that invest in domestic research and development got welcome relief. Domestic R&D and experimental expenses are now permanently immediately deductible in the year expended, rather than amortized over five years under a pre-TCJA rule that has frustrated many product-focused businesses and tech startups since 2022. Smaller businesses (under $31 million in gross receipts) may have the opportunity to amend prior year returns to claim refunds on R&D costs that were previously capitalized, but amended returns must generally be filed by July 6, 2026, subject to applicable rules and filing requirements.
No Tax on Tips & No Tax on Overtime.
The OBBBA created new temporary federal income tax deductions for certain qualified tips and qualified overtime compensation for tax years 2025 through 2028. These provisions do not mean all tips or overtime are excluded from payroll reporting or employment taxes. Instead, eligible taxpayers may claim deductions subject to annual limits, income phaseouts, occupation and reporting requirements, and IRS guidance. Employers should work with payroll providers and tax advisors to ensure tips and qualified overtime are properly tracked and reported.
Employer Provided Childcare Credit Expanded.
For 2026, the maximum employer provided childcare tax credit increased from $150,000 to $500,000, and up to $600,000 for eligible small businesses. If your business contributes to employee childcare costs or operates an on-site childcare facility, this is now a substantially more valuable credit. Speaking with your tax advisor can clarify how this specifically impacts your business.
Individual Income Rates Locked in Permanently.
For business owners who pay taxes on business income through their personal returns (pass-through entities), this matters. The TCJA’s individual tax rates were made permanent by the OBBBA. The pre-TCJA higher rates that were scheduled to return in 2026 will not take effect. The standard deduction for 2026 also increased and is now at $32,200 for married couples filing jointly, $16,100 for single or married filing separately, and $24,150 for head of household.
Interest Expense Deduction Rules Updated.
The calculation of “adjusted taxable income” now excludes depreciation, amortization, and depletion, making the 30% limitation on business interest deductions less restrictive than it was. For tax years beginning after December 31, 2024, depreciation, amortization, and depletion deductions are added back when calculating adjusted taxable income for purposes of the Section 163(j) business interest limitation. This can make the 30% limitation less restrictive for some businesses. For 2026, businesses that meet the small business gross receipts test by generally averaging annual gross receipts of $32 million or less over the prior three-tax-year period, may remain exempt from the Section 163(j) limitation, assuming they are not otherwise excluded from the small business exemption. Small businesses with average gross receipts under $32 million remain fully exempt from the limitation. This pairs well with the new bonus depreciation rules and makes debt-financed asset purchases more tax efficient. Your tax advisor can clarify how this specifically applies to your business.
What does this mean for your business?
For most small businesses, the 2026 tax environment is more favorable than it was under the uncertainty of potential TCJA expiration. The permanent restoration of bonus depreciation and the preserved QBI deduction are the two changes with the broadest impact. The new no-tax-on-tips, and no-tax-on-overtime rules require the most immediate operational attention, as payroll software and processes need to be updated to properly categorize these payments. If you’ve been holding off on equipment purchases or haven’t revisited your business structure recently, now is a good time to talk to your CPA team about maximizing these provisions. This information is a guideline only and should not replace the advice and guidance of a tax expert.
Since 1957, the experts at RYBD have helped businesses throughout Gwinnett County, Georgia and the southeast, as an involved partner, keeping them current and compliant year-round, not just at tax time. Make sure you are on the right track for 2026 taxes, and contact RYBD Advisors & Accountants today.
