7 Ways the 2026 Tax Law Changes Will Boost Your Small Business Return (OBBBA Breakdown + Action Steps)

Small business owners, listen up. The One Big Beautiful Bill Act (OBBBA) just delivered some serious wins for your bottom line. While everyone's talking about the big headlines, the real money is in the details – and those details can save your business thousands this year.

Let's cut through the noise and focus on what actually matters for your 2026 tax return. These aren't theoretical changes that might help someday. These are actionable strategies you can implement right now to boost your refund and keep more money in your business.

1. Lock in Your 20% Small Business Deduction – Forever

The biggest win? The 20% Qualified Business Income (QBI) deduction is now permanent. No more worrying about Congress letting it expire. No more uncertainty about whether to make business investments based on a temporary tax break.

This deduction applies to qualified business income and shows up on line 13 of your 1040. For many small businesses, this translates to thousands in annual savings.

Your Action Steps:

• Schedule a QBI calculation session with your accountant before March 15th

• Review your business structure to ensure you're maximizing the deduction

• Check if recent income changes now make you eligible for the full 20%

• Take advantage of the new inflation-adjusted minimum deduction if your QBI is lower than expected

The permanent nature of this deduction changes everything for long-term business planning. You can now make equipment purchases, hire employees, and expand operations knowing this tax benefit will be there year after year.

2. Double Your Equipment Write-Offs with Enhanced Section 179

Here's where things get interesting. The Section 179 expensing limit just doubled from $1.25 million to $2.5 million, and it increases with inflation every year.

This means you can write off the full purchase price of qualifying equipment, software, and machinery in the year you buy it – up to $2.5 million. That's immediate cash flow relief for growing businesses.

Your Action Steps:

• List all equipment purchases you've been postponing

• Consider accelerating 2026 purchases to maximize the deduction

• Remember the phase-out starts at $4 million in total purchases

• Plan multi-year investments to take advantage of inflation adjustments

Think beyond traditional equipment. This covers software, office furniture, vehicles used in business, and even some building improvements. The key is timing your purchases strategically.

3. Slash Your Paperwork with Higher 1099 Thresholds

Small business owners spend too much time on paperwork. The OBBBA just gave you back hours by raising 1099 reporting thresholds across the board:

• 1099-K reporting (PayPal, Venmo, payment processors): Now $20,000 instead of $600

• 1099-NEC reporting (independent contractors): Now $2,000 instead of $600

• 1099-Miscellaneous reporting: Now $2,000 instead of $600

Your Action Steps:

• Update your accounting software with the new thresholds

• Review your contractor payments to see which forms you no longer need to file

• Redirect the time you save into revenue-generating activities

• Check if you qualify for refunds on previously filed forms below the new thresholds

This isn't just about saving time – it's about reducing your audit risk and compliance costs. Fewer forms mean fewer opportunities for errors.

4. Supercharge Your Employee Benefits with Enhanced Childcare Credits

The employer-provided childcare credit just got a major upgrade. For most businesses, the credit jumped from 25% to 40% with a maximum credit of $500,000. Small businesses (under $31 million in gross receipts) get even better treatment: 50% credit with a $600,000 maximum.

This isn't just about being a good employer – it's about smart tax strategy.

Your Action Steps:

• Evaluate current childcare benefits you offer employees

• Consider partnering with other local businesses to qualify for the credit

• Research third-party childcare providers in your area

• Calculate the maximum credit your business can claim based on current expenditures

Even if you don't currently offer childcare benefits, the enhanced credit makes this an attractive option for employee retention and tax savings.

5. Offer Tax-Free Tip Income (If You Qualify)

Restaurants, salons, delivery services – this one's for you. Employees in qualifying tip-based occupations can now deduct up to $25,000 in tip income for tax years 2025 through 2028.

While this directly benefits your employees, it also makes your business more attractive to quality workers in a competitive labor market.

Your Action Steps:

• Verify your business qualifies under Treasury's list of eligible occupations

• Understand that only voluntary tips count – service charges don't qualify

• Implement systems to properly track and document tip income

• Communicate this benefit to current and prospective employees

This temporary provision gives you a four-year window to attract and retain talent while the labor market remains tight.

6. Maximize Overtime Compensation Deductions

The new overtime compensation deduction offers up to $12,500 for single filers and $25,000 for joint filers. While this benefits your employees directly, understanding it helps you structure compensation packages more effectively.

Your Action Steps:

• Work with payroll to separately track overtime compensation

• Ensure employees understand this new deduction opportunity

• Consider how this affects your overall compensation strategy

• Document overtime policies clearly for compliance

Smart business owners use tax law changes to create win-win scenarios. This deduction makes overtime more attractive to employees while maintaining your operational flexibility.

7. Secure Your Business Legacy with Permanent Estate Tax Exemption

The estate tax exemption is now permanent at $15 million for 2026. For family businesses, this eliminates the uncertainty that was hampering succession planning.

No more worrying about whether your business will face massive tax bills when you pass it to the next generation.

Your Action Steps:

• Review your current estate plan with a qualified attorney

• Consider multi-generational wealth transfer strategies

• Evaluate how the permanent exemption affects your business succession timeline

• Explore opportunities to transfer business interests while maintaining control

This change fundamentally alters long-term business planning. You can now focus on building value without constantly worrying about tax-driven succession pressure.

The Bottom Line: Act Fast, Act Smart

These OBBBA changes represent the most significant small business tax reform in years. But knowing about them and acting on them are two different things.

The businesses that will benefit most are the ones that integrate these changes into their 2026 planning right now. Don't wait until tax season to discover opportunities you missed.

If you're feeling overwhelmed by these changes or unsure how they apply to your specific situation, that's where professional guidance makes the difference. At Smith Taxes & More, we help small businesses navigate complex tax law changes and implement strategies that actually move the needle.

Ready to turn these tax law changes into real savings for your business? Contact us to discuss how the OBBBA changes specifically apply to your situation. The April 15th deadline will be here before you know it, and the best tax strategies are the ones you implement early.

Your business deserves every advantage the law allows. These seven changes are your roadmap to keeping more of what you earn while building a stronger foundation for future growth.