8 Big 2026 Tax Changes for Small Business Owners

The biggest 2026 tax changes could affect more than your business tax return. Equipment purchases, business income, charitable giving, and even personal auto loan interest may all deserve a closer look.

The One Big Beautiful Bill introduced or extended several tax benefits. But a larger deduction does not automatically mean you qualify—and phrases like “no tax on overtime” leave out important details.

Here are eight changes to discuss with your tax professional as you plan for 2026.

1. The Return of 100% Bonus Depreciation

For qualifying assets with a depreciable life of less than 20 years, 100% bonus depreciation can generally allow an immediate deduction rather than spreading the write-off over multiple years.

Potential examples include:

Business equipment
Computers
Certain vehicles
Land improvements

For business owners making significant purchases, this can create a substantial deduction—even when the purchase is financed.

Compare Bonus Depreciation With Section 179

Section 179 also received a higher deduction limit, increasing to $2.5 million, with the phaseout beginning around $4 million in asset purchases.

Choosing between these provisions requires more than looking at your federal return. States can treat deductions differently, and some do not recognize federal bonus depreciation.

Before deciding how to deduct an asset, ask your tax professional which approach fits both your federal and applicable state tax situation.

2. The 20% Qualified Business Income Deduction Is Permanent

The qualified business income deduction, also called Section 199A or QBI, was made permanent rather than being allowed to expire.

In its simplest form, this deduction can allow eligible business owners to deduct 20% of qualifying net business income after regular business expenses.

Unlike an equipment deduction, this benefit does not require an additional purchase to generate the deduction.

However, eligibility and phaseouts can make the calculation more complicated, particularly for certain service businesses. Review your income and business activities with your tax professional rather than assuming the full 20% applies.

3. A Higher State and Local Tax Deduction Limit

The state and local tax deduction, commonly called SALT, applies to certain taxes claimed as itemized deductions on your personal return.

The previous $10,000 cap increased to approximately $40,000, with annual adjustments. For 2026, the married-filing-jointly amount is $40,400.

The increased limit phases down at higher income levels, but the cap does not fall below $10,000.

This change makes it worth revisiting whether itemizing or taking the standard deduction is more beneficial.

Ask About Pass-Through Entity Taxation

Owners of partnerships and S corporations may also want to discuss pass-through entity taxation, or PTET.

This approach involves paying state taxes at the entity level, with the deduction passing through to the owner rather than relying on a personal itemized deduction.

Because state rules differ, this is a planning conversation—not an automatic choice for every business.

4. Opportunity Zone Changes Create a Planning Window

Opportunity zones encourage investment in designated areas by offering potential tax benefits for capital gains invested through qualifying funds.

The original opportunity zone deferral ends on December 31, 2026. A new round begins January 1, 2027.

That transition may matter if you realize capital gains late in 2026.

Why the 180-Day Window Matters

The opportunity zone rules include a 180-day investment window after a capital gain. Depending on the timing, a qualifying 2026 gain may be invested in 2027 under the new program.

Potential benefits discussed under the new rules include:

Deferring the original capital gain for up to five years
Receiving a 10% basis increase after five years
Receiving a larger, 30% basis increase for qualifying rural opportunity zone investments

These benefits depend on following the investment and election rules. If you are selling stock, land, or another asset with a significant gain, review the timing with your tax professional before assuming the tax must be paid immediately.

5. Charitable Deduction Rules Are Changing

Charitable giving changes affect both taxpayers who take the standard deduction and those who itemize.

A Deduction Without Itemizing

Taxpayers taking the standard deduction can receive an additional deduction for qualifying cash charitable contributions of up to:

$1,000 for single filers
$2,000 for married couples filing jointly

This makes tracking eligible cash donations important even if you do not itemize.

New Limits for Itemizers

For taxpayers who itemize, charitable deductions face a new 0.5% income-based threshold.

There is also a limitation affecting taxpayers in the 37% bracket: the deduction’s tax benefit is limited to 35%.

These changes make it worth reviewing charitable giving alongside your income projection, rather than treating donations as a separate year-end decision.

6. New Deductions for Tips, Overtime, and Auto Loan Interest

“No tax on tips” and “no tax on overtime” are catchy descriptions, but the actual benefits are deductions subject to eligibility rules and limits.

Tip Income

Eligible workers in occupations that normally receive tips may qualify for a deduction of up to $25,000.

Tip income still appears on the return. The deduction is a separate step, and eligibility depends on factors including occupation and income.

Overtime Pay

For overtime paid at time and a half, the deduction applies to the extra half-time premium—not the entire overtime payment.

The deduction can be up to $12,500, subject to applicable rules.

Auto Loan Interest

A deduction of up to $10,000 may be available for qualifying auto loan interest.

One important requirement is that the vehicle’s final assembly takes place in the United States. That does not mean every component must be manufactured domestically.

All three benefits come with conditions, so confirm eligibility before counting on the deduction in your tax projection.

7. An Additional Deduction for Seniors

A new senior deduction can provide an additional $6,000 deduction per eligible person. For a married couple filing jointly, the total can reach $12,000 when both qualify.

Age requirements and income phaseouts apply.

This is not the same as eliminating taxes on Social Security. It is an additional deduction that may reduce taxable income for eligible seniors.

Review how it fits with your other available deductions rather than relying on the headline alone.

8. A Manufacturing Property Deduction

A new manufacturing provision may allow an immediate 100% deduction for qualifying manufacturing space that would otherwise be depreciated over 39 years.

This can be especially relevant to small business owners with manufacturing operations.

The distinction between production and other space matters: the benefit applies to qualifying manufacturing areas, not offices.

If your business has a manufacturing facility, ask your tax professional to review which portions of the property may qualify.

Plan Before Tax Season Arrives

The right time to evaluate these changes is before year-end—not only when you file your 2026 return in 2027.

A tax projection can help you identify:

Which deductions may apply to your business and household
Whether income phaseouts could reduce your benefits
How equipment purchases should be deducted
Whether capital gains require time-sensitive planning
Whether itemizing now makes more sense

The goal is not to claim every deduction on the list. It is to identify the benefits that fit your situation and take any necessary action while there is still time.

Next Steps

Want to understand which 2026 tax changes could affect you? Book a consultation with ProBooks to review your situation and discuss your next tax-planning steps.