2026 Small Business Tax Changes — What Every Owner Must Know Before January 1
On January 1, 2026, the Tax Cuts and Jobs Act (TCJA) expires — triggering major tax changes for every small business in America.
- LLCs
- S-Corps
- Sole proprietors
- Partnerships
- 1099 contractors
- Freelancers & gig workers
- Real estate investors
- E-commerce sellers
- Service-based businesses
- Agencies & consultants
- Brick-and-mortar businesses
- Online businesses
Whether you’re earning $50K or $500K in profit — YOU WILL FEEL the 2026 shift.
Some small business owners may pay $7,000–$30,000+ more if they don’t prepare before December 31, 2025.
This page breaks it all down.
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The End of QBI (20% Pass-Through Deduction)
This is the #1 biggest tax change for small businesses in 2026.
QBI currently allows qualifying businesses to deduct 20% of net income — saving thousands per year.
Example:
- Net income: $150,000
- QBI deduction: $30,000
- Taxed on: $120,000
With QBI gone in 2026, you lose that entire deduction.
Estimated tax increase for small businesses:
- $60K–$100K profit → +$3,000–$6,000
- $100K–$200K profit → +$6,000–$12,000
- $200K–$350K profit → +$12,000–$22,000
Industries hit the hardest:
- Contractors & trades
- Agencies, consultants, coaches
- Real estate businesses
- Professional services (legal, medical, finance)
- Online & e-commerce
- Creatives & digital service businesses
- Freelancers, 1099 workers, gig workers
If you are a small business owner — this is YOUR biggest risk.
Small Business Owners Are Pushed Into Higher 2026 Tax Brackets
Small business owners pay taxes through their personal returns (Schedule C, K-1, or S-Corp).
In 2026, tax brackets increase:
- 12% → 15%
- 22% → 28%
- 24% → 31%
If your business earns $75K–$350K+, you’ll feel it hard.
Example:
Business profit taxed in 2025: $150,000
Estimated additional tax in 2026: $4,000–$8,000
Combined with QBI removal, the impact is massive.
Standard Deduction Drops (This Hurts Small Business Owners)
Projected 2026 standard deduction:
- Single → ~$8,300
- Married filing jointly → ~$16,600
- Head of household → ~$12,400
Small business owners rely heavily on:
- the higher standard deduction, or
- itemizing to maximize write-offs
When the standard deduction drops, your taxable income automatically rises.
For many owners, this adds $2,000–$4,000+ to their tax bill before any other changes.
Depreciation Benefits Shrink Dramatically for Small Businesses
Bonus Depreciation Timeline:
- 2023 → 80%
- 2024 → 60%
- 2025 → 40%
- 2026 → 20%
- 2027 → 0%
For small businesses that buy:
- trucks
- SUVs
- equipment
- computers
- machinery
- tools
- real estate improvements
…this is the last major window to expense big purchases.
Section 179 also tightens, especially for:
- heavy vehicles
- large equipment
- real estate improvements
Small Business Deductions Get Stricter
Several small business deductions become narrower or require more documentation in 2026:
- Vehicle deductions
- Home office deductions
- Meals deductions
- Travel deductions
- Startup costs
- Depreciation categories
- Bonus depreciation
- Accountable plan reimbursements
Small business owners will need stronger bookkeeping and better documentation to defend deductions from IRS scrutiny.
Payroll Taxes & Withholding Shifts
- New withholding tables
- Higher taxable wages
- Increased payroll exposure
- Greater IRS enforcement
- Required payroll recalculations for owners
- “Reasonable compensation” rules become stricter
- Payroll errors become more costly
- IRS enforcement increases significantly
This is one of the biggest hidden tax risks for small business owners.
Real Estate Businesses (Landlords, STR Owners, RE Pros)
The following industries — MANY of which are structured as “small businesses” — face the largest hits:
- Long-term rental property owners
- Short-term rental hosts (STR: Airbnb/VRBO)
- Real estate professionals (REPS)
- Flippers
- Property managers
- Passive loss rule tightening
- Real estate professional status enforcement
- STR loophole adjustments
- Depreciation changes
- Capital gains bracket increases
- 1031 exchange rule pressure
If your small business is real estate, 2025 planning is critical.
2026 Small Business Planning Strategies
This section converts extremely well.
- Convert LLC → S-Corp before 2026 (if eligible)
- Maximize retirement contributions in 2025
- Use cost segregation (if real estate is involved)
- Accelerate deductions into 2025
- Shift income into 2025 where possible
- Deduct equipment purchases in 2025
- Add spouse or children to payroll (legal income shifting)
- Reevaluate entity structure
- Use accountable plans aggressively in 2025
- Prepare for payroll withholding changes
- Review health insurance & fringe benefit structures
- Consider multi-entity planning
Your small business tax bill in 2026 depends entirely on planning in 2025.
Who Gets Hit the Hardest
- Small business owners earning $75K–$300K
- Solopreneurs and freelancers
- LLCs taxed as sole proprietorships
- S-Corp owners
- Partnerships (K-1 income)
- Real estate businesses
- Contractors & trades
- Agencies, consultants, coaches
- E-commerce sellers
- Online service businesses
- Married small business owners
This is your core buyer for Uncle Kam.
2026 Small Business Tax FAQs
Will every small business pay more in 2026?
Not all — but MOST will unless they restructure or plan aggressively.
Does the 20% QBI deduction really end?
Highly likely. Congress has not extended it.
Should I switch to S-Corp before 2026?
If you earn $60K–$250K in net profit, it’s worth evaluating.
Should I buy equipment or vehicles in 2025?
Very likely — bonus depreciation is disappearing.
Will my payroll need to change?
Yes — withholding and reasonable compensation rules update.
Can tax planning offset the entire increase?
Yes — with proper entity planning, retirement stacking, and deduction timing.
Get Your Custom 2026 Small Business Tax Plan
2026 is the biggest tax shift for small businesses in a decade.
Your structure, deductions, payroll, and strategy MUST be set before December 31, 2025.