Most coverage of the One Big Beautiful Bill Act is treating it like a 2025 story. It isn’t. The bill was signed July 4, 2025, but the provisions that actually move the needle for small business owners are fully in effect right now, for the 2026 tax year. We’re past the halfway point of 2026, and a lot of business owners haven’t adjusted their bookkeeping, payroll systems, or equipment purchasing decisions to reflect any of it. That’s money left on the table, not in theory, but in practice.

Here’s what’s actually changed, what it means in dollar terms, and where the real traps are hiding.

Key takeaways
  • 100% bonus depreciation is permanent for assets acquired on or after January 20, 2025, reversing the 40% rate that applied in 2025.
  • Section 179 expensing limit is $2.56 million for 2026, with a phase-out starting at $4.09 million.
  • The QBI deduction is permanent, with a new $400 minimum for any business with at least $1,000 in qualified income.
  • Tip and overtime deductions (up to $25,000 and $12,500 respectively) require correct payroll configuration to capture.
  • The 1099-NEC/MISC threshold rose to $2,000 in 2026; update your bookkeeping system now or you'll over-report.

Bonus Depreciation Is Back. All of It.

This is the biggest structural change for any business that buys equipment, machinery, vehicles, or qualified improvement property. The OBBBA permanently restored 100% bonus depreciation for qualifying assets acquired on or after January 20, 2025. Warren Averett notes that IRS Notice 2026-11, issued in January 2026, reaffirmed this framework with updated effective dates, giving businesses a clear compliance roadmap for the rest of the year.

Why does that matter? Because the prior law was phasing bonus depreciation down: 80% in 2023, 60% in 2024, 40% in 2025. If you bought $100,000 of qualifying equipment in 2025, you could only first-year expense $40,000 of it. Buy that same equipment today and you write off the whole thing in year one.

The Tax Foundation confirms the reversal is permanent, not a temporary patch. That changes the calculus on equipment timing decisions in a real way. If you’ve been deferring a capital purchase waiting for “a better time,” the permanent restoration is as good as it gets. Talk to your CPA before year-end, not in December when everyone’s swamped.

Section 179 Got a Significant Upgrade

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Bonus depreciation and Section 179 often get conflated. They’re different tools. Section 179 lets you elect to expense qualifying property up front, but it has caps and a business income limitation that bonus depreciation doesn’t. For 2026, the expensing limit jumped to $2.56 million, with the phase-out threshold sitting at $4.09 million, and both figures are now indexed for inflation going forward, per Integra Business Solutions.

Section 179 Limit vs. Phase-Out Threshold (2026)
Expensing Limit$2,560,000
Phase-Out Threshold$4,090,000
Source: Integra Business Solutions / Countsure, 2026

The inflation indexing is actually the underrated part here. Previous limits sat static for years and gradually became less useful in real terms. Going forward, the limit should at least keep pace. For most small businesses, the $2.56 million cap is irrelevant because they’re nowhere near it, but for mid-size operations that buy significant equipment regularly, this is a meaningful expansion of the deduction envelope.

One practical note: Section 179 can’t create a loss. Bonus depreciation can. If you’re trying to push your taxable income below zero, bonus depreciation is the lever to pull. Your accountant should be running both scenarios.

The QBI Deduction Is Permanent. Stop Acting Like It Might Go Away.

For years, pass-through business owners, sole proprietors, S-corp shareholders, partners in partnerships, have been treating the 20% QBI deduction under Section 199A as a “use it while it lasts” provision set to expire in 2025. The OBBBA made it permanent.

There’s also a new wrinkle worth knowing: a $400 minimum deduction applies to any taxpayer with at least $1,000 of qualified business income. Small operators who previously calculated a deduction of, say, $150 and shrugged at it now get $400 automatically. Not life-changing, but it signals that Congress intended to keep pass-through owners in the deduction regardless of income level.

QBI ProvisionPre-OBBBAPost-OBBBA
Deduction rate20% (expiring 2025)20% (permanent)
Minimum deductionNone$400 (with $1,000+ QBI)
Applies toSole props, S-corps, partnershipsSame, now permanent

If you’re still structured as a C-corp and wondering whether to switch, the permanent QBI deduction is one more data point in favor of pass-through treatment for the right business profile. That’s a conversation for your CPA, not a blanket recommendation.

Tips and Overtime: Real Money, Wrong Assumption

The tip and overtime deductions are getting attention in the press, mostly focused on workers. But business owners have compliance obligations here that aren’t getting enough airtime.

Qualifying employees can deduct up to $25,000 in tip income and up to $12,500 in overtime pay from their federal taxable income. These apply to returns for 2025 (filed in 2026) through 2028. But the IRS is clear: capturing these deductions correctly requires payroll systems to separately track and code tipped hours and overtime hours. If your payroll software isn’t configured to break these out, your employees either miss the deduction or claim it incorrectly, and you’re exposed to downstream liability.

Restaurant owners, hotel operators, any employer with a tipped workforce: this is a mid-year system check, not a year-end cleanup. Get with your payroll provider now. The IRS published guidance on this in January 2026, so your provider has had months to build this into their platform. If they haven’t, ask why.

The 1099 Threshold Change That’s Going to Bite Someone

The 1099-NEC and 1099-MISC reporting threshold rose from $600 to $2,000 starting in 2026, per 1800Accountant’s March 2026 breakdown. The 1099-K threshold, meanwhile, reset to $20,000 and 200 transactions, a significant rollback from where it was heading.

The $600-to-$2,000 jump means you no longer need to issue a 1099-NEC for a contractor you paid $1,200 last year. That sounds like less work. But if your bookkeeping system is still flagged to generate 1099s at $600, you’re going to over-report, which creates reconciliation headaches and potential confusion for the contractors receiving them.

Update the threshold in your accounting software before you run year-end contractor reports. This is a 15-minute fix that prevents a March problem.

Half the 2026 tax year is gone. That’s not a reason to panic; it’s a reason to act. The OBBBA isn’t complicated once you strip away the noise, but it does require actual system updates and timing decisions, not just passive awareness. A mid-year conversation with a qualified CPA or tax advisor who’s current on these changes will cost you far less than discovering missed deductions in April 2027. The rules are favorable right now. Use them.

Sources

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This article is for general informational purposes only and does not constitute financial, tax, or legal advice. Business finance and tax rules vary by entity type, state, and individual circumstances. Consult a qualified CPA, enrolled agent, or business attorney for advice specific to your situation.

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