2026 LLC Tax Changes: A New Era of Tax Planning
A major tax law, the One, Big, Beautiful Bill Act (OBBBA), has permanently reshaped the tax landscape for LLCs. The feared expiration of the Tax Cuts and Jobs Act (TCJA) is no longer a concern. Instead, LLC owners have new rules and opportunities to navigate.
This guide explains the permanent changes, who benefits, and what every LLC owner needs to know for the 2026 tax year and beyond.
If you own an LLC, your taxes will change in 2026 — and some owners will see $5,000–$20,000+ increases without a strategic restructuring.
This guide explains EVERYTHING you need to know.
The QBI Deduction is PERMANENT
The single biggest news for LLC owners is that the 20% Qualified Business Income (QBI) Deduction is now permanent. This valuable deduction, which was set to expire, will continue to reduce the taxable income for most pass-through businesses, including:
- Single-member and multi-member LLCs
- LLCs taxed as sole proprietorships or partnerships
- LLCs that have elected S-Corp taxation
This is a significant victory for small businesses, preserving a key component of the TCJA.
Key Federal Tax Changes for LLCs under OBBBA
Beyond the permanent QBI deduction, OBBBA has solidified several other aspects of the tax code that directly impact LLCs.
| Tax Provision | The Old Fear (Pre-OBBBA) | The New Reality (Post-OBBBA) |
|---|---|---|
| QBI Deduction | Expiring in 2026 | Permanent |
| Individual Tax Brackets | Rising to pre-TCJA levels | Permanent at lower TCJA rates |
| Standard Deduction | Dropping by nearly 50% | Permanent and increasing with inflation |
| SALT Deduction | Capped at $10,000 | Increased to $40,000 for most taxpayers |
Is an S-Corp Election Still Valuable?
While the permanence of the QBI deduction is great news, the S-Corp election remains a powerful tax strategy for many LLC owners. The primary benefit of an S-Corp is the potential to reduce self-employment taxes.
By electing S-Corp status, an LLC owner can pay themselves a “reasonable salary” subject to self-employment taxes, while the remaining profits are distributed as dividends, which are not subject to self-employment taxes. This can result in significant tax savings, especially for LLCs with profits that exceed a reasonable salary for the owner.
The decision to elect S-Corp status should be based on a careful analysis of your LLC’s income, your reasonable salary, and your overall tax situation.
New Deductions for LLC Owners
OBBBA also introduced several new deductions that can benefit LLC owners:
- Deduction for Tips: A new deduction for a portion of tip income.
- Deduction for Overtime: A new deduction for a portion of overtime pay.
- Deduction for Auto Loan Interest: A new deduction for interest paid on auto loans.
What LLC Owners Should Do Now
Re-evaluate your entity structure
With the permanent QBI deduction, the decision to elect S-Corp status has changed. Consult with a tax professional to determine the optimal structure for your LLC.
Maximize retirement contributions
Take advantage of tax-advantaged retirement plans like Solo 401(k)s and SEP IRAs.
Stay informed about state tax law changes
While federal tax law is now more certain, states may react differently. Understand how your state conforms to the new federal rules.
Frequently Asked Questions
Do all LLCs pay more tax in 2026?
No. In fact, with the permanent extension of the QBI deduction and lower tax brackets, many LLC owners will pay less tax than they would have if the TCJA had expired.
Should every LLC become an S-Corp?
Not necessarily. The decision depends on your specific financial situation. It is best to consult with a tax professional to determine if an S-Corp election is right for you.
Do real estate LLCs get hit harder?
Do real estate LLCs get hit harder?
Get Your 2026 LLC Tax Strategy
2026 brings the most significant LLC tax changes in years.
Your income, deductions, entity choice, and retirement strategy must be aligned BEFORE December 31, 2025.