What Changed for Small Business Taxes in 2026? Here Are 10 Things You Should Know

Tax season is here, and if you're a small business owner, you've probably got that familiar knot in your stomach. But here's some good news: 2026 brought some pretty significant tax changes that could actually work in your favor. Thanks to the One Big Beautiful Bill Act (OBBBA), there are several updates that might save you some serious cash.

Let's break down what's new so you can take full advantage before you file.

1. 100% Bonus Depreciation Is Back (and It's Permanent!)

Remember when bonus depreciation was phasing out? Well, it's back in full force. Starting in 2026, you can deduct 100% of the cost of qualifying business property in the year you buy it: no more spreading it out over several years.

This applies to things like machinery, equipment, furniture, computers, and certain vehicles. If you've been holding off on purchasing that new office setup or upgrading your equipment, now might be the perfect time. The immediate tax deduction can significantly improve your cash flow, especially if you're reinvesting in your business.

Pro tip: Make sure the property qualifies. Not everything counts, so check with your accountant before you splurge.

2. The QBI Deduction Just Got Better

If you're a sole proprietor, partner, or S-corp owner, you're probably familiar with the Qualified Business Income (QBI) deduction: that sweet 20% deduction on your business income. The good news? It's now permanent, and they've raised the income thresholds where it phases out.

Even better, there's a new minimum deduction. If you have at least $1,000 in QBI, you'll get a minimum $400 deduction, even if you'd normally be phased out completely. This is a game-changer for service-based businesses and high earners who previously couldn't take advantage of this break.

3. Childcare Credits for Employers Got a Major Boost

If you provide childcare benefits to your employees (or have been thinking about it), listen up. The employer childcare credit jumped from 25% to 40% of eligible costs. The maximum annual credit also increased to $500,000: or $600,000 if you qualify as an eligible small business.

This is huge if you're trying to attract and retain talented employees. Offering childcare support not only helps your team but also gives you a bigger tax break for doing it.

4. Section 179 Deduction Limit Doubled

The Section 179 deduction lets you write off the full cost of qualifying equipment and software in one year instead of depreciating it. For 2026, that limit jumped from $1.25 million to $2.56 million. The phase-out threshold also increased to $4.09 million in total spending.

This is perfect for businesses making significant equipment purchases or tech upgrades. If you're planning to invest in your business infrastructure, you can now deduct more of it upfront.

5. SALT Deduction Cap Increased

For years, the State and Local Tax (SALT) deduction was capped at $10,000, which hit business owners in high-tax states pretty hard. Starting in 2026, that cap increased to $40,000, and it'll continue rising by 1% annually through 2029.

If you're in California, New York, New Jersey, or other high-tax states, this change could save you thousands. It's especially helpful for pass-through entities where business income flows through to your personal return.

6. Business Interest Deduction Got More Favorable

The rules around deducting business interest got a little friendlier. Now, when calculating your Adjusted Taxable Income (ATI), you can add back depreciation, depletion, and amortization. This effectively raises the ceiling on how much business interest you can deduct.

If you're carrying business loans or have significant interest expenses, this change means you can likely deduct more of that interest, reducing your taxable income.

7. Mileage Rate Increased

This one's straightforward: the standard business mileage rate increased from 70 cents per mile in 2025 to 72.5 cents per mile in 2026. If you drive for business: whether it's client meetings, supply runs, or job sites: make sure you're tracking those miles.

That extra 2.5 cents per mile might not sound like much, but it adds up fast if you're putting serious mileage on your vehicle for work.

8. Social Security Wage Base Went Up

The Social Security wage base for 2026 is $184,500, up from previous years. This means you'll pay Social Security taxes on wages up to that amount (both as an employer and if you're self-employed paying self-employment tax).

While this isn't exactly a "benefit," it's important to know for payroll planning and estimating your self-employment tax if you're a sole proprietor or partner.

9. New Deduction for Tip Income

Here's something new: employees can now deduct up to $25,000 in tip income from their taxable income. This deduction phases out at $150,000 in modified adjusted gross income (MAGI) for single filers and $300,000 for joint filers.

If you run a restaurant, bar, salon, or any business where employees receive tips, you'll need to be aware of this for payroll and compliance purposes. Your employees might have questions, so it's good to understand how it works.

10. Overtime Compensation Deduction Introduced

Another new one: there's now a deduction for overtime compensation. Single filers can deduct up to $12,500, and joint filers can deduct up to $25,000 in qualifying overtime pay. Like the tip income deduction, this phases out at $150,000 MAGI for singles and $300,000 for joint filers.

If you have employees working overtime, this could be a nice benefit for them: and something worth communicating as part of your compensation package.

What This Means for Your 2026 Tax Strategy

These changes create some real opportunities to reduce your tax bill, but only if you take advantage of them. Here's what you should do:

Document everything. With expanded deductions for depreciation, mileage, and equipment purchases, good recordkeeping is more important than ever.

Review your equipment needs. If you've been putting off upgrades, the combination of 100% bonus depreciation and the increased Section 179 limit makes 2026 a great year to invest.

Talk to your accountant. These rules can get complex, especially around phase-outs and qualifications. Don't try to DIY it if you're not confident.

Plan ahead for 2027. Some of these benefits are ongoing, so thinking strategically about timing large purchases or investments can maximize your tax advantages.

The bottom line? 2026 brought some of the most taxpayer-friendly changes we've seen in years. Whether you're a solo entrepreneur or running a growing team, there's probably something here that can help you keep more of your hard-earned money.

Need help navigating these changes for your specific situation? Reach out to us: we're here to make tax season less stressful and more profitable for you.