2026 is the first full year under most of the business provisions in the 2025 reconciliation act (Public Law 119-21), which the IRS now calls the Working Families Tax Cuts. Several of them reward decisions made before December 31. Here are the ones most small businesses will run into, with the 2026 figures.
Equipment: bonus depreciation and Section 179
Bonus depreciation is back to 100% for qualified property acquired after January 19, 2025, and the rate no longer phases down. The IRS confirmed the details in Notice 2026-11 (opens in a new tab).
Section 179 for tax years beginning in 2026 allows up to $2,560,000 of expensing. The limit starts phasing out once more than $4,090,000 of property is placed in service, and the cap for heavy SUVs is $32,000. The figures are in Revenue Procedure 2025-32 (opens in a new tab).
Three details decide whether either one helps this year:
- Placed in service, not purchased. Equipment ordered in December and delivered in January belongs to next year.
- Section 179 is limited by business income. Bonus depreciation is not, and it can create a loss.
- A large deduction is not always the best one. Taking it in a low-income year uses up deductions that would be worth more later. Bonus depreciation can be elected out of by property class.
States often do not follow federal bonus depreciation, so the state return may need its own depreciation schedule.
The QBI deduction
The 20% qualified business income deduction under Section 199A no longer has an expiration date, and two things changed for 2026.
- Wider phase-in ranges. The limits for specified service businesses and the wage-and-property limits phase in over $75,000 above the threshold ($150,000 for joint returns), up from $50,000 and $100,000.
- A minimum deduction. A taxpayer with at least $1,000 of QBI from an active business, meaning one they materially participate in, gets a deduction of at least $400.
The 2026 thresholds are $201,750, or $403,500 for joint returns. Owners of service businesses near those numbers have more room than before. Timing a retirement contribution or a large expense can still move taxable income across a line.
Mileage: two rates this year
The IRS raised the standard mileage rate in the middle of 2026. Business miles are 72.5 cents from January through June and 76 cents from July through December, according to the IRS standard mileage rates (opens in a new tab) page.
A mileage log with dates handles this automatically. A log that only records annual totals does not, so this is a good month to make sure the log has dates on it.
Timing on the cash method
Businesses on the cash method can still shift income and expenses at the margin:
- Pay deductible expenses in December rather than January.
- Prepaid expenses that cover no more than 12 months, and do not extend past the end of the following year, can generally be deducted when paid.
- Invoices sent in late December are usually paid in January. That shifts the cash, not the work.
These moves only change the year a deduction lands. They are worth doing when this year’s rate is higher than next year’s, and not otherwise.
Payroll set-up for January
The new deductions for tips and qualified overtime are claimed by employees, but employers report the amounts. Form W-2 for 2026 has new Box 12 codes (TP for tips, TT for qualified overtime), so payroll needs to track those amounts separately before year-end. There is more on that, and on the new $2,000 Form 1099 threshold, in What changes for Form 1099 and W-2 this January.
A short checklist
- Confirm what equipment will be in service by December 31.
- Estimate taxable income before choosing between Section 179, bonus depreciation, or neither.
- Check where owners land against the QBI thresholds.
- Confirm the mileage log has dates.
- Ask the payroll provider how tips and overtime premiums will be reported.
General information as of October 2026, not advice for a specific situation.