Federal tax rules for small businesses changed more in 2025 than in any year since 2017. The One Big Beautiful Bill Act (OBBBA), signed in July 2025, made the current individual rate brackets and the 20% pass-through deduction permanent, restored 100% bonus depreciation, and brought back immediate expensing for domestic research. Most of it works in your favor. Three details trip people up: vehicles are still capped, R&D expensing is domestic-only, and the 2026 mileage rate changed halfway through the year.
What "permanent" actually means
Throughout this article, "permanent" means the provision has no scheduled expiration date. It does not mean it cannot change. A future Congress can amend any of it. That distinction matters if you are making a multi-decade decision, like an estate plan or an entity restructuring. Plan around the current law, but do not treat it as immovable.
The TCJA provisions that no longer expire
Four pieces of the 2017 law were scheduled to sunset at the end of 2025. OBBBA removed the sunset.
| Provision | Where it stands for 2026 |
|---|---|
| Individual rate brackets | 10%, 12%, 22%, 24%, 32%, 35%, 37% continue with no expiration date |
| Standard deduction | $16,100 single, $32,200 married filing jointly |
| Section 199A pass-through deduction | The 20% deduction on qualified business income continues with no expiration date |
| Estate and gift tax exclusion | $15,000,000 per individual for decedents dying in 2026 ($30,000,000 for a married couple using portability), indexed after that |
That estate figure is worth pausing on. It is higher than the 2025 amount, not lower. If you were told to make lifetime gifts or buy insurance to get ahead of a sunset, that advice is stale.
Section 199A also got better in 2026. The phase-in range for the wage and property limits widened to $75,000 for single filers and $150,000 for joint filers, which softens the cliff for owners of specified service businesses. There is also a new minimum deduction of $400 for taxpayers with at least $1,000 of active qualified business income.
100% bonus depreciation is back, with real limits
Bonus depreciation had been phasing down: 80% in 2023, 60% in 2024, 40% in 2025. OBBBA reset it to 100% with no expiration date. You can deduct the full cost of qualifying property in the year you place it in service, with no dollar ceiling and no income limitation.
Now the exceptions, because this is where returns get filed wrong.
Acquisition date matters. The 100% rate applies to property acquired after January 19, 2025. Property you contracted for before that date but place in service in 2026 gets 20%, not 100%. Check your purchase agreements, not just your invoices.
Vehicles are capped. This is the single most common misunderstanding. Passenger automobiles remain subject to the Section 280F luxury-auto limits, which cap the first-year deduction at a fixed dollar amount regardless of what you paid. The IRS sets that ceiling annually (Rev. Proc. 2026-15 for 2026). Buying a $70,000 car does not produce a $70,000 deduction. Heavy SUVs over 6,000 lbs GVWR escape the 280F caps but are separately capped at $32,000 under Section 179 for 2026.
Business use has to be real. Listed property, including vehicles, requires more than 50% qualified business use. Drop below that and you face depreciation recapture.
Related-party and prior-use purchases are out. Property acquired from a related party, or property you already used, does not qualify.
Section 179 versus bonus depreciation
These are not interchangeable, and the usual framing gets it backwards. Section 179 is the provision with the ceilings. Bonus is the one without.
| Section 179 | Bonus depreciation | |
|---|---|---|
| 2026 dollar limit | $2,560,000 | None |
| Phase-out threshold | Begins at $4,090,000 of total purchases | None |
| Can it create a loss? | No. Limited to taxable business income; the excess carries forward | Yes. It can create or increase a net operating loss |
| Order applied | First | Second, on remaining basis |
| Election | Asset by asset, and you choose the amount | Applies by class unless you elect out |
The taxable income limitation is the whole reason a planner picks one over the other. If you want a deduction bigger than your profit, Section 179 will not get you there. Bonus will.
Note the phase-out threshold. It is $4,090,000 for 2026, not the $3,050,000 figure that circulated for years. A business placing $3.5 million of assets in service in 2026 has no phase-out reduction at all.
R&D expensing is restored, for domestic research only
New Section 174A lets you deduct qualifying domestic research and experimental expenditures in the year incurred, for tax years beginning after December 31, 2024. This reverses the five-year amortization requirement that applied from 2022.
Foreign research is a different story. Research or experimental expenditures attributable to activity outside the United States must still be capitalized and amortized over 15 years. If your engineering team is in Bogotá, Lisbon or Bangalore, those costs are not immediately deductible. You may also elect to capitalize domestic R&E and amortize it over 60 months or more if that fits your situation better. Smaller businesses under the gross receipts threshold were given options to apply the new rules to earlier years; ask whether an amended return is worth filing.
Separately, OBBBA restored the EBITDA-based measure for the business interest expense limitation, replacing the tighter EBIT-based measure. If you carry equipment debt or a real estate loan, add back depreciation and amortization when testing your interest deduction. That usually means a larger allowable deduction than 2022 through 2024 permitted.
2026 retirement contribution limits
| Account | 2026 limit | Age 50+ | Ages 60–63 |
|---|---|---|---|
| 401(k) / Solo 401(k) employee deferral | $24,500 | $32,500 ($8,000 catch-up) | $35,750 ($11,250 catch-up) |
| IRA / Roth IRA | $7,500 | $8,600 ($1,100 catch-up) | $8,600 |
| SEP IRA | $72,000 total, subject to the compensation formula below | n/a | n/a |
| SIMPLE IRA employee deferral | $17,000 | $21,000 ($4,000 catch-up) | $22,250 ($5,250 catch-up) |
The SEP number needs a warning. You will see "25% of compensation" everywhere. That figure is for employees. If you are a sole proprietor or a partner, your compensation is net earnings from self-employment reduced by both the deductible half of self-employment tax and the SEP contribution itself, which works out to roughly 20% of net self-employment income. A sole proprietor with $200,000 of net earnings contributes somewhere around $37,000, not $50,000. Compensation is also capped at $360,000 for 2026.
Certain small employers can use a higher SIMPLE deferral limit under SECURE 2.0. If your plan is one of them, confirm the 2026 figure with your provider before you set payroll deferrals.
The mileage rate changed mid-year
This is the most urgent item on the page. The IRS raised the business standard mileage rate effective July 1, 2026. If you are using one rate for the whole year, half your log is wrong.
| Period | Business | Medical / moving | Charitable |
|---|---|---|---|
| Jan 1 – Jun 30, 2026 | 72.5 cents | See Notice 2026-10 | 14 cents |
| Jul 1 – Dec 31, 2026 | 76 cents | 23.5 cents | 14 cents |
The increase came in Announcement 2026-11, published July 13, 2026. Split your mileage log at June 30 and apply each rate to the correct half. The charitable rate is fixed by statute and does not move with inflation.
1099 thresholds moved, but the paperwork discipline should not
The reporting threshold for Form 1099-NEC and 1099-MISC rose to $2,000 for payments made in 2026, up from $600. Fewer forms for most businesses.
Do not read that as a universal rule. A 1099 is still required regardless of amount if you backup-withheld federal income tax from the payee, which is exactly what happens when a contractor never returns a W-9. Gross proceeds paid to attorneys are still reportable at $600 in box 10 of the 1099-MISC. Royalties are reportable at $10. State information-return thresholds are set independently and many are still $600.
Form 1099-K went the other direction and returned to the $20,000 and 200-transaction threshold. If you take payments through Stripe, PayPal or Square, the $2,000 figure does not apply to those forms.
The practical advice has not changed: collect a signed W-9 from every contractor before you pay them the first dollar. It costs you nothing and it is the only thing standing between you and a backup withholding problem.
What this means if you are in Florida
Florida has no state personal income tax. For a sole proprietor, single-member LLC or S-corp shareholder in Orlando, Jacksonville or Miami, the federal changes above are effectively the entire income tax picture. There is no state conformity question on your personal return, and no state adjustment to worry about when you take bonus depreciation on Schedule C.
What did not change is just as important. Florida corporate income tax, reemployment tax and sales and use tax obligations are untouched by OBBBA. If you operate as a C corporation, Florida conforms to the Internal Revenue Code as of a fixed date and has historically decoupled from federal bonus depreciation, requiring an addback spread over later years. Confirm the current treatment before you assume your federal deduction flows through to the Florida return.
Two other local points. County discretionary sales surtax applies on top of the state sales tax rate and varies by county, so an equipment purchase in Orange County and one in Miami-Dade County can carry different tax. The surtax generally applies only to the first $5,000 of a single sale of tangible personal property, which matters on large equipment buys. And on timing: hurricane season runs June through November. If a storm forces you to replace equipment, the deduction follows the date the replacement is placed in service, not the date you ordered it. A December delivery does not help a return you wanted to affect in the current year.
If you are a non-resident founder
Three things deserve your attention. Foreign research does not get immediate expensing, so an offshore development team means 15-year amortization on those costs. Property used predominantly outside the United States generally does not qualify for bonus depreciation or Section 179 at all. And if you own a U.S. LLC that is treated as a disregarded entity with foreign ownership, its annual federal information-reporting requirement is unchanged, and the penalty for missing it is severe. None of that was affected by OBBBA.
What to do next
- Fix your mileage log first. Split it at June 30 and apply 72.5 cents to the first half and 76 cents to the second. Update any spreadsheet or app that has a single 2026 rate hard-coded.
- Pull your fixed asset list and check acquisition dates. Anything contracted before January 19, 2025 gets 20% bonus, not 100%.
- Model Section 179 against bonus before you elect. If the deduction would exceed your business income, Section 179 will not deliver it.
- Separate domestic from foreign R&D in your books now. If those costs sit in one account, you cannot support the Section 174A deduction under examination.
- Reset payroll deferral elections against the 2026 limits, especially SIMPLE plans and anyone turning 60 to 63 this year.
- Collect a W-9 from every contractor, regardless of whether you expect to cross $2,000.
- Revisit your estate plan if it was built around a sunset that never came. The exclusion went up, not down.
Bring your fixed asset schedule, your mileage log and your contractor list to your next planning meeting. Those three documents drive most of what changed.
This is general information, not tax advice for your situation, and reading it does not make you a client. Rules and figures change — verify anything time-sensitive before you act on it. We'll talk it through with you free.
Common questions
Usually not. Passenger automobiles are capped by the Section 280F luxury-auto limits, which set a fixed first-year ceiling regardless of purchase price, so 100% bonus depreciation does not produce a full write-off. Heavy SUVs over 6,000 lbs GVWR escape the 280F caps but are separately capped at $32,000 under Section 179 for 2026. Work vehicles that are not passenger automobiles, such as certain vans and trucks with no passenger seating behind the driver, can qualify for a larger first-year deduction. In every case you need more than 50% qualified business use, and a contemporaneous mileage log to prove it.
Section 179 is applied first, then bonus depreciation on the remaining basis. Which one you want depends on your income. Section 179 has a $2,560,000 ceiling for 2026, a phase-out starting at $4,090,000 of total purchases, and a taxable income limitation that prevents it from creating a loss. Bonus depreciation has no dollar cap and no income limit, so it can create or increase a net operating loss. If your desired deduction exceeds your business income, bonus is the tool that gets you there.
Two rates. Use 72.5 cents per mile for business miles driven January 1 through June 30, 2026, and 76 cents per mile for expenses paid or incurred on or after July 1, 2026. The increase came in Announcement 2026-11, published July 13, 2026. Split your log at June 30 and apply each rate to the correct half. If your tracking app or spreadsheet has a single 2026 rate hard-coded, fix it now rather than at filing time.
Often, yes. The 1099-NEC and 1099-MISC threshold rose to $2,000 for 2026 payments, but that is not a universal rule. You must still issue a 1099 regardless of amount if you backup-withheld federal income tax from the payee, which happens when a contractor never returns a W-9. Gross proceeds paid to attorneys stay reportable at $600, royalties at $10, and state information-return thresholds are set independently and are often still $600. Form 1099-K is separate and returned to a $20,000 and 200-transaction threshold. Collect a signed W-9 from every contractor regardless of amount.
For individuals, the question does not arise. Florida has no state personal income tax, so if you file as a sole proprietor, single-member LLC or pass-through owner, the federal rules are the whole income tax picture. C corporations are different. Florida conforms to the Internal Revenue Code as of a fixed date and has historically decoupled from federal bonus depreciation, requiring an addback spread over later years on the Florida return. Confirm the current treatment before assuming your federal deduction carries over. Florida reemployment tax and sales and use tax obligations, including county discretionary surtax, are unaffected by OBBBA.
Not immediately. New Section 174A restores immediate expensing for domestic research only. Research and experimental expenditures attributable to activity outside the United States must still be capitalized and amortized over 15 years. Property used predominantly outside the United States also generally fails to qualify for bonus depreciation or Section 179. Separately, if you own a U.S. LLC treated as a disregarded entity with foreign ownership, its annual federal information-reporting requirement is unchanged and carries a substantial penalty for non-filing. Keep domestic and foreign development costs in separate accounts from the start.