If you own a small business, 2026 is shaping up to be a pivotal tax year. The One Big Beautiful Bill Act (OBBBA), signed into law in July 2025, rewrote several rules that govern how you depreciate equipment, deduct business income, and report payments to contractors. Some changes are temporary. Others are permanent — meaning the planning decisions you make this year could pay off for the next decade.
At KSR Financial Solutions, we’ve been fielding the same question all spring: “What actually changed, and how do I take advantage of it?” Here’s a clear walkthrough of the five OBBBA provisions every small business owner should understand before filing the next return.
1. The 20% QBI Deduction Is Now Permanent
The Qualified Business Income (QBI) deduction — the rule that lets owners of pass-through entities like LLCs, S corporations, partnerships, and sole proprietorships deduct up to 20% of qualified business income — was set to sunset at the end of 2025. The OBBBA made it permanent.
Two other improvements matter just as much. Phase-in thresholds were raised to $75,000 for single filers and $150,000 for joint filers, giving more owners room to claim the full deduction. And starting in 2026, the law establishes a minimum $400 QBI deduction for owners with at least $1,000 of qualified business income from a business they materially participate in — a guaranteed floor for very small operations.
2. 100% Bonus Depreciation Is Back — Permanently
For property placed in service after January 19, 2025, you can again deduct 100% of qualifying business assets in the first year instead of spreading the deduction over years. The OBBBA also made this permanent — a sharp turn away from the phase-down schedule that had been in effect.
This matters for any business buying equipment, vehicles (subject to luxury-auto limits), machinery, or qualifying improvements. If you’ve been holding off on a capital purchase, the math has shifted.
100% bonus depreciation is most powerful when paired with a profitable year. Before you write a big check in Q4, model the deduction against your projected taxable income — you want the write-off to land in a year where it actually reduces tax, not one where it creates a net operating loss with limited utility.
3. Section 179 Expensing Doubled
The Section 179 expensing limit has been raised to $2.5 million, with the phase-out beginning at $4 million of qualifying property placed in service. Both numbers will be adjusted for inflation.
For most small businesses, Section 179 and bonus depreciation work together. Section 179 can apply to certain improvements that bonus depreciation can’t, so your CPA will typically run both to find the optimal mix.
4. The 1099 Threshold Jumps from $600 to $2,000
Starting in 2026, you no longer need to issue a Form 1099-NEC or 1099-MISC to a contractor until your total annual payments to them reach $2,000, with future inflation adjustments. For payment platforms, the 1099-K threshold returns to its longstanding test: gross sales above $20,000 and more than 200 transactions.
This is a real paperwork reduction for businesses that work with a long tail of small vendors. But don’t relax your records — you still need to track every business expense, whether or not a 1099 is required.
5. R&D Costs Can Be Expensed Again — Including Retroactively
This one is easy to miss but potentially valuable. Small businesses with average annual gross receipts of $31 million or less can apply the new domestic R&D expensing rules retroactively to tax years 2022–2024 — as a catch-up deduction, spread over 2025 and 2026, or via amended returns. The election deadline is July 4, 2026.
If your business has spent on software development, product engineering, or process improvement in the last three years, talk to your tax advisor soon.
At a Glance: What Changed and When
| Provision | Old Rule | New Rule (OBBBA) |
|---|---|---|
| QBI Deduction | 20%, expiring after 2025 | 20%, permanent; $400 minimum for qualifying owners |
| Bonus Depreciation | Phasing down (40% in 2025) | 100%, permanent (post-Jan 19, 2025) |
| Section 179 Limit | $1.25M (2025) | $2.5M, phase-out at $4M |
| 1099-NEC / MISC Threshold | $600 | $2,000 (starting 2026) |
| Domestic R&D Expensing | 5-year amortization | Immediate expensing, retroactive option available |
The Practical Takeaway
The OBBBA’s small-business provisions are unusually generous, but they reward owners who plan deliberately. The three moves that will matter most for the average client this year:
- Run a depreciation strategy review before any major equipment purchase, so the deduction lands in the year it does the most good.
- Confirm your QBI eligibility and entity structure — for some owners, an S-corp election or an entity reorganization is now meaningfully more valuable.
- Decide on the R&D retroactive election before the July 4, 2026 deadline if your business has had any qualifying R&D spend since 2022.
KSR Financial Solutions helps small business owners across the country navigate tax law changes, optimize their entity structure, and build cash-flow plans that match the new rules. Schedule a complimentary consultation and we’ll walk through which provisions actually move the needle for your situation.