What New Tax Law Changes Mean for Businesses in 2026

The biggest 2026 business tax changes affect equipment purchases, qualified business income, domestic research expenses, and tax planning decisions. The One Big Beautiful Bill Act made several provisions permanent or significantly changed their treatment, so businesses should not simply carry forward their 2025 tax strategy. Instead, review the business structure, projected income, planned asset purchases, research activity, and owner compensation before making major tax decisions.

The most important step is to model the 2026 tax position before year-end. Practical tax planning requires matching deductions and elections to the business's actual income, cash flow, asset needs, and ownership structure. The IRS has already issued 2026 guidance on depreciation, Section 179, research expenditures, and qualified business income, making those areas especially important for current planning.

Understand the biggest 2026 business changes

The 2026 rules create more opportunities for immediate deductions, but faster deductions do not automatically produce the best tax result. A business that accelerates every available deduction can reduce current taxable income while creating a weaker deduction position in a later year.

The IRS confirms that 100% additional first-year depreciation is now permanent for qualifying property under the amended rules.

Use depreciation changes strategically

The return of permanent 100% bonus depreciation can materially change the timing of deductions. However, the decision should follow the business's projected taxable income rather than the purchase date alone.

Section 179 also became more generous. For tax years beginning in 2026, the IRS lists a $2.56 million maximum deduction and a $4.09 million phaseout threshold.

Bonus Tip: Before purchasing equipment solely for a deduction, prepare a year-end projection. The tax deduction should support a legitimate business need rather than drive an unnecessary purchase.

Recalculate the qualified business income deduction

The Section 199A qualified business income deduction remains relevant for many sole proprietorships, partnerships, S corporations, and certain trusts and estates. The IRS states that eligible taxpayers can generally deduct up to 20% of qualified business income, subject to applicable limitations.

For 2026, the taxable-income thresholds affecting the QBI calculation have increased. The IRS lists a threshold of $403,500 for married taxpayers filing jointly and $201,750 for most other returns, with higher phase-in ranges. The law also added a minimum $400 deduction for eligible taxpayers with at least $1,000 of qualified business income.

This makes accurate bookkeeping more important. Owner wages, guaranteed payments, property basis, business income, and the nature of the trade can all affect the calculation.

Bonus Tip: Run a projected QBI calculation before deciding whether to increase owner wages, purchase depreciable property, or accelerate expenses. One planning decision can affect several parts of the calculation simultaneously.

Review domestic research and development expenses

The 2026 rules provide a major change for businesses performing qualifying domestic research or experimental work. Section 174A generally allows eligible domestic research and experimental expenditures to be deducted in the year incurred. Businesses may also elect to capitalize and amortize qualifying amounts over at least 60 months.

The change requires careful classification. Payroll, contractor work, software development, testing, and technical development costs should not automatically be treated as qualified research simply because they occur inside a technology or product business.

Build a 2026 tax planning calendar

Tax planning works better when decisions happen before the final quarter rather than after the books close.

Businesses operating in areas affected by severe weather should also maintain redundant digital records. Storm damage, power interruptions, evacuations, and physical document loss can make reconstruction difficult when tax records are needed later.

Consider these factors before changing your strategy

Do not select a tax provision simply because it produces the largest current deduction. Evaluate:

• Entity structure because C corporations and pass-through entities respond differently to several provisions.

• Projected taxable income because deduction timing can matter more than deduction size.

• Cash flow because a tax deduction should not justify an otherwise unnecessary business purchase.

• State treatment because federal depreciation and deductions may not receive identical treatment at the state level.

• Documentation because eligibility depends on records supporting the underlying transaction.

• Future income because accelerating deductions may be less useful when the business expects substantially higher income later.

Common questions before changing your tax plan

Should every business claim 100% bonus depreciation

No. Eligibility, business income, state treatment, and future tax circumstances should be reviewed before making the election.

Should a business choose Section 179 instead

Not automatically. Section 179 and bonus depreciation have different limitations and mechanics, so compare both against the projected return.

Does the new law affect pass-through businesses

Yes. The Section 199A deduction remains important for qualifying pass-through owners, with updated 2026 thresholds and additional provisions.

Does the R&D change apply to every technology expense

No. The expense must satisfy the applicable definition of domestic research or experimental expenditure. Proper classification remains essential.

Services that support 2026 tax planning

• Business Tax Services: Supports business tax compliance and planning around applicable federal tax provisions.

• Controller & CFO Services: Helps businesses use financial projections and reporting to support informed tax decisions.

• Bookkeeping Services: Keeps financial records organized so tax planning starts with reliable income and expense information.

• IRS Audit & Tax Resolution: Addresses federal tax matters when an existing IRS issue requires structured attention.

Keep these answers in mind after implementation

How often should a business update its tax projection

At minimum, update the projection when revenue changes materially, a major asset is purchased, ownership compensation changes, or a significant deduction arises.

Can federal tax changes automatically change state taxes

No. States can apply different conformity rules, depreciation adjustments, deductions, or filing requirements. Review the state treatment separately.

What records should support major 2026 deductions

Maintain invoices, receipts, contracts, payroll records, asset purchase documents, placed-in-service dates, research documentation, and a clear business purpose for significant expenses.

Can a tax election be changed later

Some elections have specific timing and procedural requirements. Review the applicable IRS instructions before filing rather than assuming an election can be reversed.

Why should bookkeeping be updated before tax planning

Tax projections depend on reliable income, expenses, payroll, asset records, and account balances. Poorly classified transactions can distort the projected tax result and lead to incorrect planning decisions.

Apply the changes before year-end

The 2026 tax law creates meaningful planning opportunities, particularly around depreciation, Section 179, QBI, and domestic research expenses. The strongest approach is not to maximize deductions blindly. Instead, project taxable income, compare available elections, verify eligibility, document every major position, and consider both federal and state consequences.

For businesses that need help evaluating the 2026 rules, contact We Do Taxes at info@wedotaxes.co or (681) 331-8110 for guidance on the applicable tax-planning and compliance considerations.