If you own a small business, freelance, or run a pass-through entity, 2026 brings some of the most significant tax law changes in years — and most of them are good news. The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, made several key provisions permanent and expanded deductions that could meaningfully reduce your tax bill. Here’s what you need to know.

The QBI Deduction Is Now Permanent

One of the biggest wins for small business owners is the permanent extension of the 20% Qualified Business Income (QBI) deduction. Previously available to pass-through entities — including sole proprietors, LLCs, S-corps, and partnerships — this deduction was originally set to expire at the end of 2025. The OBBBA locked it in permanently.

This means eligible business owners can continue deducting up to 20% of their qualified business income from their taxable income. Starting in 2026, there’s also a new floor: if you have at least $1,000 of qualified business income, you’re guaranteed a minimum deduction of $400, even if your income would have otherwise phased it out.

100% Bonus Depreciation Is Back — Permanently

Before the OBBBA, bonus depreciation was on a slow fade — it had been stepping down from 100% and was on track to hit zero by 2027. The new law reverses that entirely.

100% bonus depreciation is now permanent. This means if your business buys qualifying equipment, machinery, vehicles, or other business property, you can deduct the full cost in the year of purchase — rather than depreciating it over several years.

Section 179 Deduction Cap Gets a Major Increase

The OBBBA also raised the Section 179 deduction cap from $1 million to $2.5 million, with phase-outs beginning at $4 million of total property placed in service. This applies to property placed in service after December 31, 2024.

While bonus depreciation and Section 179 often overlap, Section 179 gives business owners more flexibility in choosing which assets to expense and how much — making it a valuable planning tool. The higher cap means even mid-size small businesses making larger capital investments can take full advantage.

1099 Reporting Threshold Rises to $2,000

If your business hires contractors or freelancers, pay attention to this one. Starting in 2026, the reporting threshold for Forms 1099-NEC and 1099-MISC increases from $600 to $2,000, with future adjustments for inflation built in.

This means you only need to file a 1099 for contractors you pay $2,000 or more during the year — reducing paperwork for businesses that use occasional or lower-paid contractors. That said, it’s still best practice to track all contractor payments regardless of amount for your own records.

What Small Business Owners Should Do Now

• Review your entity structure. If you’re not currently structured as a pass-through entity, now is a great time to evaluate whether an LLC, S-corp, or sole proprietorship makes sense given the permanent QBI deduction.
• Plan capital purchases strategically. With 100% bonus depreciation restored permanently, this year could be an ideal time to invest in equipment or technology your business needs.
• Update your contractor tracking. Even with the higher 1099 threshold, maintaining clean records of all payments protects you in the event of an audit.
• Work with a financial professional. These changes interact with each other and with your specific income level, entity type, and expenses — a personalized review is the best way to capture the maximum benefit.

The Bottom Line

The One Big Beautiful Bill Act delivers substantial, lasting tax relief for small business owners. From a permanent QBI deduction to full bonus depreciation and a higher Section 179 cap, 2026 is a year to be proactive about your tax strategy — not reactive.