The “One Big Beautiful Bill” Act: What Your Small Business Needs to Know About 2026 Tax Changes
For years, small business owners have been staring at a “tax cliff”, the looming expiration of the 2017 Tax Cuts and Jobs Act (TCJA) set for the end of 2025.
However, the legislative landscape has shifted dramatically with the passage of the “One Big Beautiful Bill” Act (OBBBA). Signed into law in July 2025, this sweeping legislation replaces uncertainty with permanency and introduces brand-new incentives. As we move into 2026, the way you plan for growth, equipment, and even payroll has fundamentally changed.
Here is a breakdown of the most critical updates for “Main Street” businesses.
The 20% Small Business Deduction is Now Permanent
Perhaps the biggest win for pass-through entities (Sole Proprietors, LLCs, Partnerships, and S-Corps) is the permanency of the Section 199A Qualified Business Income (QBI) deduction.
The Change: Previously set to expire, this 20% deduction is now a permanent fixture of the tax code.The CEO Move: You no longer need to consider “converting to a C-Corp” just to avoid a massive tax hike. You can now plan long-term investments knowing this 20% buffer is here to stay.
New Minimum: The Act also introduced a $400 minimum deduction for smaller eligible businesses, ensuring even the smallest side hustles see a benefit.2. Immediate Expensing: 100% Bonus Depreciation Returns
If you’ve been holding off on buying machinery, vehicles, or technology, the “waiting game” is over.
The Change: The OBBBA restored 100% Bonus Depreciation, allowing you to deduct the full cost of qualifying equipment in the first year it’s placed in service. This reverses the previous “phase-down” that would have seen this credit drop to 20% in 2026.
Section 179 Expansion: The maximum amount you can immediately expense under Section 179 has doubled from $1.25M to $2.5 million (indexed for inflation).3. Reporting Relief: Higher 1099 Thresholds
One of the most frustrating administrative burdens, tracking every $600 payment, has finally been relaxed.
The Change: The reporting threshold for 1099-NEC (Independent Contractors) and 1099-MISC has been raised from $600 to $2,000.
The “Venmo” Rule: The controversial $600 threshold for 1099-K (third-party payment processors) was effectively killed and reset to $20,000 and 200 transactions.
The Impact: Less paperwork for you and fewer tax forms to chase down from your vendors.
New Deductions for Tips and Overtime
If you are in the service, hospitality, or manufacturing industries, these new “temporary” provisions (effective through 2028) could be a major recruiting tool.
No Tax on Tips: Eligible workers can now deduct up to $25,000 in qualified tip income.
No Tax on Overtime: Individuals can deduct the “premium” portion of their overtime pay (the “half” in time-and-a-half) up to $12,500 ($25,000 for joint filers).
CEO Move: The Strategy for 2026
The OBBBA is designed to provide “certainty,” but certainty requires a new map. With the restoration of 100% bonus depreciation and R&D expensing, your 2026 budget should look very different than your 2024 or 2025 budgets.
Warning: While many individual clean energy credits (like those for electric vehicles or home efficiency) have been curtailed or accelerated to end in 2025 or early 2026, business-specific manufacturing credits for “Qualified Production Property” have been enhanced.
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– Mike Doherty: Founder, Understanding eCommerce.
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