If you run a small business, the One Big Beautiful Bill Act (Public Law 119-21) touches six things on your 2026 return: how fast you can write off equipment, the size of your QBI deduction, how research costs are handled, who gets a 1099, how tips and overtime are reported, and how much state tax you can deduct. None of them is hard on its own. The work is knowing which ones your records need to support before December 31, so you aren’t reconstructing them in January.
Key takeaways
- Bonus depreciation is permanently 100% for qualifying property acquired and placed in service after January 19, 2025, and the Section 179 limit is $2,560,000 for 2026.
- The QBI deduction is permanent at 20%, with a $400 minimum starting in 2026.
- The 1099-NEC and 1099-MISC threshold is $2,000 for payments made in 2026, and the 1099-K threshold is back to more than $20,000 and more than 200 transactions.
- Tips and overtime are employee deductions, but you report them on the 2026 W-2.
- None of it works without dated, categorized records.
The short version for busy owners
Here is the law as it touches a typical small business, on one page. The sections after the table explain each row and what it asks of your records. The Tax Foundation’s summary of the law is a good companion if you want the full legislative picture.
| Change | 2026 figure | What it asks of your records |
|---|---|---|
| Bonus depreciation | 100%, permanent, for property acquired and placed in service after Jan. 19, 2025 | Placed-in-service date and cost for every asset |
| Section 179 | $2,560,000 limit; phase-out above $4,090,000; $32,000 SUV cap | An asset list you can select from |
| QBI deduction | 20%, permanent; $400 minimum; thresholds of $201,750 (single) and $403,500 (joint) | Income, wages, and equipment kept by business |
| Domestic R&D | Fully deductible again for tax years beginning after Dec. 31, 2024 | Research costs in their own accounts |
| 1099-NEC and 1099-MISC | $2,000 threshold for payments made in 2026 | W-9s and year-to-date totals per vendor |
| 1099-K | More than $20,000 and more than 200 transactions | Processor deposits matched to sales |
| Tips and overtime | Employee deductions of up to $25,000 (tips) and $12,500 (overtime premium; $25,000 joint) | Payroll that separates both, reported on the W-2 |
| SALT cap | $40,400 | State tax payments coded by type and by who paid |
Equipment: 100% bonus depreciation and a larger Section 179
Bonus depreciation used to shrink on a schedule, and the 2025 law ended that. For qualifying property you acquire and place in service after January 19, 2025, it’s now 100% and permanent. Property under a binding contract before January 20, 2025 stays on the old phase-down, which is 20% for 2026.
Section 179 is the other half of the equipment story. For 2026 the maximum deduction is $2,560,000, and it begins to phase out once your qualifying purchases pass $4,090,000. The SUV cap is $32,000. Those 2026 numbers come from Rev. Proc. 2025-32; for 2025 they were $2,500,000, $4,000,000, and $31,300.
Here’s how it plays out for a hypothetical two-location bakery. It buys a $46,000 deck oven in March and $12,000 of display cases in April, and both are in service by May. With 100% bonus depreciation, the full $58,000 can be a 2026 deduction. Under the old 20% phase-down, the first-year deduction would have been $11,600, with the rest spread across the asset’s recovery period. Since Section 179 lets you pick assets one at a time, the real question for your CPA is which purchases to expense now and which to depreciate.
The date that matters is “placed in service,” meaning the asset is ready and available for use. For 2026, the last day is December 31. If you’re weighing a purchase before then, our list of year-end tax planning moves covers the timing traps.
The QBI deduction is permanent, with a $400 minimum
The qualified business income deduction, the 20% deduction pass-through owners take on their personal returns, was scheduled to expire. It’s now permanent. For 2026, the taxable-income thresholds are $201,750 for single filers and $403,500 for joint filers. The phase-in ranges above those thresholds widened to $75,000 and $150,000, which puts full phase-out at $276,750 and $553,500.
There’s also a new floor. Starting in 2026, if you have at least $1,000 of QBI from an active business, your deduction is at least $400. Say a hypothetical single owner nets $120,000 from a design studio and sits well under $201,750 of taxable income. She’s looking at a deduction of up to $24,000. A part-time consultant with $1,500 of QBI would see 20% come out to $300, so the $400 minimum applies instead.
Above the thresholds the picture gets more involved. What your business pays in W-2 wages, what depreciable property it holds, and whether your work counts as a specified service can all limit the deduction, which is why your records should show income, wages, and equipment separately for each business you own. Your CPA runs the actual calculation.
Domestic R&D is deductible again
Since 2022, domestic research and experimental costs had to be spread over several years. Section 174A reverses that. For tax years beginning after December 31, 2024, domestic research costs are fully deductible again, permanently, while foreign research is still amortized over 15 years. If your business averages $31 million or less in gross receipts, you may be able to elect to apply the new rule retroactively to 2022 through 2024 by amending those returns.
Whether amending is worth the effort is a CPA call. What you can do now is make the costs easy to find: wages for the people who build or test new products, contractor invoices, and supplies consumed in development. Set up separate accounts or classes for them in QuickBooks Online, and your CPA won’t have to dig them out of general expenses later.
One related change: the 30% business interest limit is measured on an EBITDA basis again, permanently, for tax years beginning after December 31, 2024. The small-business gross-receipts exemption continues, so ask your CPA whether it covers you.
1099 thresholds for 2026
The reporting threshold for 1099-NEC and 1099-MISC rises from $600 to $2,000 for payments made after December 31, 2025, and it’s indexed for inflation starting in 2027. The forms you file in early 2027 are the first at the new level. Payments made in 2025, reported in early 2026, still used $600. The due date for 2026 payments is February 1, 2027, because January 31 lands on a Sunday (confirm on IRS.gov).
Say a hypothetical marketing agency has paid a freelance designer $1,850 by the end of September and a copywriter $4,200. Under the old rule, both would get a 1099-NEC. Under the new one, only the copywriter does, unless the designer sends another $600 invoice in November and the total lands at $2,450. That’s why the agency should still collect a W-9 before the first payment to anyone. Nobody remembers to ask for a tax form in January.
The 1099-K rules moved in the other direction. For 2025 and later, a payment app or card processor generally sends one only when your payments run more than $20,000 and more than 200 transactions. If a hypothetical craft seller runs $26,000 through an app across 150 sales, no 1099-K is due. The income is still taxable, and it still belongs in your records either way.
Tips and overtime: employee deductions, employer reporting
Neither one is a deduction for your business. The law lets employees deduct qualified tips and qualified overtime on their own returns for tax years 2025 through 2028. The tips deduction is up to $25,000. The overtime deduction is up to $12,500 ($25,000 for joint filers) and covers only the premium portion the Fair Labor Standards Act requires, the “half” in time-and-a-half. Both phase out above $150,000 of modified adjusted gross income ($300,000 joint). Tips have to be voluntary cash or charged tips in a job on Treasury’s list, and mandatory service charges don’t count, according to the IRS’s page on the new deductions.
Your part is reporting. On the 2026 Form W-2, qualified tips go in Box 12 with code TP, qualified overtime goes in Box 12 with code TT, and Box 14b carries up to two tipped-occupation codes. Those W-2s are due February 1, 2027. Say a hypothetical shift lead earns $24 an hour and works 10 overtime hours in a week at time-and-a-half, or $36 an hour. Only the extra $12 an hour counts, so $120 of that week’s pay is qualified overtime and the other $240 of overtime-hour pay is ordinary wages. Your payroll system has to keep that split for the whole year, so check that yours can.
The SALT cap and pass-through entity tax
The federal cap on deducting state and local taxes is $40,000 for 2025 and $40,400 for 2026. It rises 1% a year through 2029, then drops back to $10,000 in 2030. For higher incomes the cap shrinks by 30% of the amount your modified adjusted gross income exceeds $505,000 in 2026, and it never falls below $10,000, as TSCPA lays out. Take a hypothetical owner with $525,000 of MAGI. That’s $20,000 over the line, 30% of which is $6,000, so the 2026 cap is $34,400.
Owners of S corporations and partnerships have a workaround that survives. State pass-through entity tax (PTET) elections remain available. In a state that offers one, the business pays state income tax at the entity level and deducts it there, instead of the owner running into the cap on a personal return. Rules and election deadlines vary by state, and some fall around March 15, so raise it with your CPA before year-end rather than after.
What didn’t change, and what to do about it in your records
What stayed the same
Business meals are still generally 50% deductible, and the documentation rules didn’t change. A receipt with a note about who you met and why still does the work. The law also left the basic test for every deduction alone: the expense has to be ordinary and necessary for your business, and you have to be able to prove it.
What to do about it in your records
Most of the law’s 2026 changes come down to whether one piece of information exists when your CPA needs it. A short checklist for the rest of the year:
- Log every equipment purchase with its cost and the date it was placed in service.
- Collect a W-9 from every contractor before the first payment, and watch year-to-date totals against $2,000.
- Confirm your payroll system can report qualified tips, qualified overtime, and tipped-occupation codes for 2026.
- Give research costs their own accounts or classes.
- Keep income, W-2 wages, and equipment separate for each business you own, so the QBI calculation has clean inputs.
- Code state tax payments clearly, including any entity-level PTET payments.
If your records are behind, fix that first. The catch-up bookkeeping guide walks through getting months (or years) of records current, and the small business bookkeeping guide covers the monthly rhythm that keeps them that way. Software that categorizes automatically handles the volume, but the calls that matter here, like equipment versus supplies or contractor versus employee, still need a person to sign off. We wrote about where AI helps and where it fails in bookkeeping.
Frequently asked questions
Should I always take 100% bonus depreciation?
Not automatically. It’s a timing choice: a bigger deduction now means less depreciation in later years, so it helps most when this year’s income is high enough to use it. Section 179 lets you pick which assets to expense, and your CPA can suggest a mix that fits your income across the next few years.
Do I need to send a 1099 for someone I paid $1,500 in 2026?
Generally not, because $1,500 is under the $2,000 threshold for payments made in 2026. Keep the W-9 and the payment record anyway, and check the person’s total again before the year ends. If the payee’s situation is unusual, your CPA can confirm.
Are tips and overtime now tax-free for my employees?
Not quite. The law gives employees a deduction on their own returns, up to $25,000 for qualified tips and $12,500 for the overtime premium ($25,000 for joint filers), for 2025 through 2028. Your part is accurate W-2 reporting. Ask your payroll provider or your CPA before changing anything about withholding.
Can I still claim R&D costs from 2022 through 2024?
Possibly. If your average gross receipts are $31 million or less, you may be able to elect to apply Section 174A retroactively to 2022 through 2024 by amending those returns. Whether that’s worth doing depends on what you spent and how it was treated, so it’s a conversation for your CPA.
Where to go from here
You don’t need to master all of this by December. You need records that let your CPA make the calls: equipment with dates, contractors with W-9s, payroll that separates tips and overtime, and a year-end close finished early in January. If you’d rather hand that part off, that’s what a BooXkeeping team is for. A free consultation is an easy way to see how it would work for your business, and our guide to choosing a bookkeeper can help you compare your options.
Reviewed for tax year 2026.
BooXkeeping is a bookkeeping company, not a CPA firm or a law firm. This article is general information for business owners, not tax, legal, or financial advice. Rules change and your situation is specific, so confirm anything here with your CPA or attorney before acting on it.
If you run a small business, the One Big Beautiful Bill Act (Public Law 119-21) touches six things on your 2026 return: how fast you can write off equipment, the size of your QBI deduction, how research costs are handled, who gets a 1099, how tips and overtime are reported, and how much state tax you can deduct. None of them is hard on its own. The work is knowing which ones your records need to support before December 31, so you aren’t reconstructing them in January.
Key takeaways
- Bonus depreciation is permanently 100% for qualifying property acquired and placed in service after January 19, 2025, and the Section 179 limit is $2,560,000 for 2026.
- The QBI deduction is permanent at 20%, with a $400 minimum starting in 2026.
- The 1099-NEC and 1099-MISC threshold is $2,000 for payments made in 2026, and the 1099-K threshold is back to more than $20,000 and more than 200 transactions.
- Tips and overtime are employee deductions, but you report them on the 2026 W-2.
- None of it works without dated, categorized records.
The short version for busy owners
Here is the law as it touches a typical small business, on one page. The sections after the table explain each row and what it asks of your records. The Tax Foundation’s summary of the law is a good companion if you want the full legislative picture.
| Change | 2026 figure | What it asks of your records |
|---|---|---|
| Bonus depreciation | 100%, permanent, for property acquired and placed in service after Jan. 19, 2025 | Placed-in-service date and cost for every asset |
| Section 179 | $2,560,000 limit; phase-out above $4,090,000; $32,000 SUV cap | An asset list you can select from |
| QBI deduction | 20%, permanent; $400 minimum; thresholds of $201,750 (single) and $403,500 (joint) | Income, wages, and equipment kept by business |
| Domestic R&D | Fully deductible again for tax years beginning after Dec. 31, 2024 | Research costs in their own accounts |
| 1099-NEC and 1099-MISC | $2,000 threshold for payments made in 2026 | W-9s and year-to-date totals per vendor |
| 1099-K | More than $20,000 and more than 200 transactions | Processor deposits matched to sales |
| Tips and overtime | Employee deductions of up to $25,000 (tips) and $12,500 (overtime premium; $25,000 joint) | Payroll that separates both, reported on the W-2 |
| SALT cap | $40,400 | State tax payments coded by type and by who paid |
Equipment: 100% bonus depreciation and a larger Section 179
Bonus depreciation used to shrink on a schedule, and the 2025 law ended that. For qualifying property you acquire and place in service after January 19, 2025, it’s now 100% and permanent. Property under a binding contract before January 20, 2025 stays on the old phase-down, which is 20% for 2026.
Section 179 is the other half of the equipment story. For 2026 the maximum deduction is $2,560,000, and it begins to phase out once your qualifying purchases pass $4,090,000. The SUV cap is $32,000. Those 2026 numbers come from Rev. Proc. 2025-32; for 2025 they were $2,500,000, $4,000,000, and $31,300.
Here’s how it plays out for a hypothetical two-location bakery. It buys a $46,000 deck oven in March and $12,000 of display cases in April, and both are in service by May. With 100% bonus depreciation, the full $58,000 can be a 2026 deduction. Under the old 20% phase-down, the first-year deduction would have been $11,600, with the rest spread across the asset’s recovery period. Since Section 179 lets you pick assets one at a time, the real question for your CPA is which purchases to expense now and which to depreciate.
The date that matters is “placed in service,” meaning the asset is ready and available for use. For 2026, the last day is December 31. If you’re weighing a purchase before then, our list of year-end tax planning moves covers the timing traps.
The QBI deduction is permanent, with a $400 minimum
The qualified business income deduction, the 20% deduction pass-through owners take on their personal returns, was scheduled to expire. It’s now permanent. For 2026, the taxable-income thresholds are $201,750 for single filers and $403,500 for joint filers. The phase-in ranges above those thresholds widened to $75,000 and $150,000, which puts full phase-out at $276,750 and $553,500.
There’s also a new floor. Starting in 2026, if you have at least $1,000 of QBI from an active business, your deduction is at least $400. Say a hypothetical single owner nets $120,000 from a design studio and sits well under $201,750 of taxable income. She’s looking at a deduction of up to $24,000. A part-time consultant with $1,500 of QBI would see 20% come out to $300, so the $400 minimum applies instead.
Above the thresholds the picture gets more involved. What your business pays in W-2 wages, what depreciable property it holds, and whether your work counts as a specified service can all limit the deduction, which is why your records should show income, wages, and equipment separately for each business you own. Your CPA runs the actual calculation.
Domestic R&D is deductible again
Since 2022, domestic research and experimental costs had to be spread over several years. Section 174A reverses that. For tax years beginning after December 31, 2024, domestic research costs are fully deductible again, permanently, while foreign research is still amortized over 15 years. If your business averages $31 million or less in gross receipts, you may be able to elect to apply the new rule retroactively to 2022 through 2024 by amending those returns.
Whether amending is worth the effort is a CPA call. What you can do now is make the costs easy to find: wages for the people who build or test new products, contractor invoices, and supplies consumed in development. Set up separate accounts or classes for them in QuickBooks Online, and your CPA won’t have to dig them out of general expenses later.
One related change: the 30% business interest limit is measured on an EBITDA basis again, permanently, for tax years beginning after December 31, 2024. The small-business gross-receipts exemption continues, so ask your CPA whether it covers you.
1099 thresholds for 2026
The reporting threshold for 1099-NEC and 1099-MISC rises from $600 to $2,000 for payments made after December 31, 2025, and it’s indexed for inflation starting in 2027. The forms you file in early 2027 are the first at the new level. Payments made in 2025, reported in early 2026, still used $600. The due date for 2026 payments is February 1, 2027, because January 31 lands on a Sunday (confirm on IRS.gov).
Say a hypothetical marketing agency has paid a freelance designer $1,850 by the end of September and a copywriter $4,200. Under the old rule, both would get a 1099-NEC. Under the new one, only the copywriter does, unless the designer sends another $600 invoice in November and the total lands at $2,450. That’s why the agency should still collect a W-9 before the first payment to anyone. Nobody remembers to ask for a tax form in January.
The 1099-K rules moved in the other direction. For 2025 and later, a payment app or card processor generally sends one only when your payments run more than $20,000 and more than 200 transactions. If a hypothetical craft seller runs $26,000 through an app across 150 sales, no 1099-K is due. The income is still taxable, and it still belongs in your records either way.
Tips and overtime: employee deductions, employer reporting
Neither one is a deduction for your business. The law lets employees deduct qualified tips and qualified overtime on their own returns for tax years 2025 through 2028. The tips deduction is up to $25,000. The overtime deduction is up to $12,500 ($25,000 for joint filers) and covers only the premium portion the Fair Labor Standards Act requires, the “half” in time-and-a-half. Both phase out above $150,000 of modified adjusted gross income ($300,000 joint). Tips have to be voluntary cash or charged tips in a job on Treasury’s list, and mandatory service charges don’t count, according to the IRS’s page on the new deductions.
Your part is reporting. On the 2026 Form W-2, qualified tips go in Box 12 with code TP, qualified overtime goes in Box 12 with code TT, and Box 14b carries up to two tipped-occupation codes. Those W-2s are due February 1, 2027. Say a hypothetical shift lead earns $24 an hour and works 10 overtime hours in a week at time-and-a-half, or $36 an hour. Only the extra $12 an hour counts, so $120 of that week’s pay is qualified overtime and the other $240 of overtime-hour pay is ordinary wages. Your payroll system has to keep that split for the whole year, so check that yours can.
The SALT cap and pass-through entity tax
The federal cap on deducting state and local taxes is $40,000 for 2025 and $40,400 for 2026. It rises 1% a year through 2029, then drops back to $10,000 in 2030. For higher incomes the cap shrinks by 30% of the amount your modified adjusted gross income exceeds $505,000 in 2026, and it never falls below $10,000, as TSCPA lays out. Take a hypothetical owner with $525,000 of MAGI. That’s $20,000 over the line, 30% of which is $6,000, so the 2026 cap is $34,400.
Owners of S corporations and partnerships have a workaround that survives. State pass-through entity tax (PTET) elections remain available. In a state that offers one, the business pays state income tax at the entity level and deducts it there, instead of the owner running into the cap on a personal return. Rules and election deadlines vary by state, and some fall around March 15, so raise it with your CPA before year-end rather than after.
What didn’t change, and what to do about it in your records
What stayed the same
Business meals are still generally 50% deductible, and the documentation rules didn’t change. A receipt with a note about who you met and why still does the work. The law also left the basic test for every deduction alone: the expense has to be ordinary and necessary for your business, and you have to be able to prove it.
What to do about it in your records
Most of the law’s 2026 changes come down to whether one piece of information exists when your CPA needs it. A short checklist for the rest of the year:
- Log every equipment purchase with its cost and the date it was placed in service.
- Collect a W-9 from every contractor before the first payment, and watch year-to-date totals against $2,000.
- Confirm your payroll system can report qualified tips, qualified overtime, and tipped-occupation codes for 2026.
- Give research costs their own accounts or classes.
- Keep income, W-2 wages, and equipment separate for each business you own, so the QBI calculation has clean inputs.
- Code state tax payments clearly, including any entity-level PTET payments.
If your records are behind, fix that first. The catch-up bookkeeping guide walks through getting months (or years) of records current, and the small business bookkeeping guide covers the monthly rhythm that keeps them that way. Software that categorizes automatically handles the volume, but the calls that matter here, like equipment versus supplies or contractor versus employee, still need a person to sign off. We wrote about where AI helps and where it fails in bookkeeping.
Frequently asked questions
Should I always take 100% bonus depreciation?
Not automatically. It’s a timing choice: a bigger deduction now means less depreciation in later years, so it helps most when this year’s income is high enough to use it. Section 179 lets you pick which assets to expense, and your CPA can suggest a mix that fits your income across the next few years.
Do I need to send a 1099 for someone I paid $1,500 in 2026?
Generally not, because $1,500 is under the $2,000 threshold for payments made in 2026. Keep the W-9 and the payment record anyway, and check the person’s total again before the year ends. If the payee’s situation is unusual, your CPA can confirm.
Are tips and overtime now tax-free for my employees?
Not quite. The law gives employees a deduction on their own returns, up to $25,000 for qualified tips and $12,500 for the overtime premium ($25,000 for joint filers), for 2025 through 2028. Your part is accurate W-2 reporting. Ask your payroll provider or your CPA before changing anything about withholding.
Can I still claim R&D costs from 2022 through 2024?
Possibly. If your average gross receipts are $31 million or less, you may be able to elect to apply Section 174A retroactively to 2022 through 2024 by amending those returns. Whether that’s worth doing depends on what you spent and how it was treated, so it’s a conversation for your CPA.
Where to go from here
You don’t need to master all of this by December. You need records that let your CPA make the calls: equipment with dates, contractors with W-9s, payroll that separates tips and overtime, and a year-end close finished early in January. If you’d rather hand that part off, that’s what a BooXkeeping team is for. A free consultation is an easy way to see how it would work for your business, and our guide to choosing a bookkeeper can help you compare your options.
Reviewed for tax year 2026.
BooXkeeping is a bookkeeping company, not a CPA firm or a law firm. This article is general information for business owners, not tax, legal, or financial advice. Rules change and your situation is specific, so confirm anything here with your CPA or attorney before acting on it.