2026 Tax Changes for Small Business Owners: What the One Big Beautiful Bill Means for You

If you're a small business owner, the One Big Beautiful Bill signed in mid-2025 delivered something that's been in short supply: certainty. After years of tax provisions sunsetting, expiring, and changing with each administration, business owners finally have clarity on the rules that will govern their tax planning for years to come.

We recently sat down with Gary Marini, Managing Director and CPA at Peck Associates in Needham, Massachusetts, to discuss the most significant changes affecting small businesses. With over four decades of experience advising entrepreneurs across industries, from life sciences startups to established distribution companies, Gary offered practical insights on what these changes mean for your bottom line.

The Power of Certainty

Before diving into specific provisions, Gary emphasized why this bill matters beyond the numbers: "What it lends is certainty. There's more certainty with tax rates, tax rules. If you've been expecting a $30,000 or $40,000 deduction and all of a sudden that disappears, at a 30% tax rate, that's anywhere from $9,000 to $12,000 worth of additional tax that comes out of nowhere."

For business owners making strategic decisions about investments, hiring, and growth, knowing the rules won't change mid-game is invaluable. Markets respond to certainty, and so do businesses.

SALT Deduction: A Game-Changer for High-Tax States

Perhaps the most discussed provision is the increase in the State and Local Tax (SALT) deduction cap. Previously limited to $10,000, the cap has been raised to $40,000 for taxpayers with modified adjusted gross income of $500,000 or less.

For small business owners in states like Massachusetts, New York, California, and Connecticut, where state income taxes and property taxes can be substantial, this represents a potential $30,000 increase in deductions.

"At a 30% tax bracket," Gary explained. "it's worth some additional reduction of taxes."

However, Gary offered an important caveat: this benefit may be "watered down" for some taxpayers. If you don't have a mortgage, significant medical expenses, or make substantial charitable contributions, the higher standard deduction might still be your better option. The math depends on your individual situation.

R&D Expenses: Immediate Expensing Returns

One of the most impactful changes for innovative small businesses is the return to immediate expensing for domestic research and development costs, effective for tax year 2025.

Starting in 2022, businesses had been required to capitalize and amortize R&D expenses over five years—a change that caught many entrepreneurs off guard. "Small businesses were getting crushed," Gary noted. "If they spent $500,000 on R&D costs, they couldn't deduct that in the year of expense."

This was particularly painful for startups in life sciences, technology, and other R&D-intensive industries. The One Big Beautiful Bill reverses this provision for domestic expenditures, allowing businesses to expense these costs as they occur.

One important distinction: expenses paid to offshore entities for R&D work must still be capitalized and amortized over 15 years. The immediate expensing benefit applies only to domestic research and development.

Qualified Business Income Deduction Made Permanent

The 20% Qualified Business Income (QBI) deduction has been a significant benefit for pass-through entities—S corporations, partnerships, LLCs, and sole proprietorships. This deduction was set to expire, creating uncertainty for business owners who had built it into their tax planning.

The One Big Beautiful Bill makes this deduction permanent, though it still phases out for specified service businesses (such as law, accounting, and consulting firms) at higher income levels.

"It really drives that small business mitigation of taxes," Gary said. For eligible businesses, knowing this 20% deduction will be available for the foreseeable future allows for more confident long-term planning.

Bonus Depreciation Returns to 100%

Business owners who invest in equipment and assets will benefit from the restoration of 100% bonus depreciation starting in 2026. This provision had been phasing down, from 100% to 80% to 60%, but the new bill brings it back to full immediate expensing.

Combined with enhanced IRC Section 179 provisions, this creates powerful incentives for business investment. "It's trying to foster investment in your business," Gary explained. "The government, to some extent, is a partner because they're allowing the deduction."

A note for Massachusetts business owners: the state does not recognize bonus depreciation, meaning you'll need to maintain separate depreciation schedules for federal and state purposes. Many clients opt for Section 179 treatment instead to avoid this administrative complexity.

Qualified Small Business Stock: Expanded Benefits

For founders and early-stage investors, the Qualified Small Business Stock (QSBS) exclusion received meaningful updates. The asset threshold increased from $50 million to $75 million, and the bill introduced graduated exclusion percentages based on holding period (three, four, or five years).

If you hold QSBS for five years, you can still exclude 100% of the gain from taxation. "For founder stock—people that started the business from nothing—it's huge," Gary noted. This benefit applies to C corporations in eligible industries (excluding specified service businesses) and rewards long-term ownership.

Estate Tax Exemption Increases

While not specific to small business operations, the estate tax exemption is critical for business owners planning succession. The exemption, which was set to sunset to approximately $5 million, has been increased to $15 million.

This provides breathing room for business owners whose company value would have pushed their estate over the lower threshold. Estate attorneys who were scrambling to help clients implement complex planning strategies before the sunset can now take a more measured approach.

What Should You Do Now?

Gary's advice for small business owners: focus on good bookkeeping and proactive planning. "How can you plan for next year if you don't know where you're at?"

The time for 2025 tax planning has largely passed for cash-basis businesses. But for 2026, start conversations with your CPA early, ideally by the third quarter, to assess your situation and identify opportunities.

Key action items:

• Review your entity structure (S corp vs. C corp vs. LLC) in light of these changes

• Evaluate R&D activities for potential expensing benefits

• Consider retirement plan contributions, including SEP IRAs and solo 401(k)s

• Assess whether SALT deduction changes improve your itemization position

• Plan equipment purchases to maximize bonus depreciation

  
  

As Gary put it: "Small business drives the economy. And if small business is struggling, the economy's gonna struggle." These tax changes are designed to help you thrive.

This article is based on Episode 56 of the Wealth Wisdom podcast featuring Gary Marini, Managing Director and CPA at Peck Associates. For personalized tax advice, consult with a qualified tax professional.

Securities and advisory services offered through Fox Hill Wealth Management. Tax services provided by Peck Associates are not affiliated with Fox Hill Wealth Management. Please reach out to us at Fox Hill Wealth Management to ask about your specific situation.