Tax Talk & Business Tips

Significant federal tax updates are taking effect for the 2026 tax year under the One Big Beautiful Bill Act (OBBBA). These changes represent a major shift in both business incentives and personal deductions.

Here is a breakdown of the most impactful changes:

For Small Business Owners: 

• Permanent Expensing & Depreciation: The 20% Qualified Business Income (QBI) deduction is now permanent. Additionally, businesses can immediately expense 100% of the cost of eligible property, including certain real property, thanks to restored 100% bonus depreciation.
• Research & Development (R&D): Domestic research and experimental expenditures can now be fully expensed in the year they are incurred, reversing the previous requirement to amortize them over five years.
• Higher Reporting Thresholds: In a win for administrative relief, the threshold for issuing Forms 1099-NEC and 1099-MISC has increased from $600 to $2,000. Furthermore, the 1099-K threshold for third-party platforms has reverted to $20,000 and 200 transactions.
• New Employee Tax Breaks: To help with recruitment and retention, employees can now deduct up to $25,000 of qualified tips and up to $12,500 ($25,000 for joint filers) of qualified overtime pay, subject to income limits.

For Individuals: 

• Standard Deduction & Rates: Lower individual tax rates are now permanent, with the top rate remaining at 37%. The standard deduction has increased to approximately $16,100 for singles and $32,200 for joint filers.
• SALT Relief: The State and Local Tax (SALT) deduction cap has been significantly raised to $40,400 for 2026, offering meaningful relief for taxpayers in high-tax areas, though it remains subject to income phaseout limitations. 
• Senior Bonus: Taxpayers age 65 and older can claim an additional $6,000 deduction through 2028, helping seniors on fixed incomes keep more of their savings.
• New "Above-the-Line" Deductions: Even if you don't itemize, you may be able to deduct up to $10,000 of interest paid on a new loan for a new, U.S.-assembled passenger vehicle.

Questions? These updates are complex, and "one size fits all" rarely applies to taxes. If you’d like to discuss a custom strategy for your specific situation, reach out today!