2026 Tax Changes for Montgomery Business Owners: Your Complete Guide to New Deductions, Credits & Deadlines

For 2026 tax changes affecting Montgomery business owners, the landscape has shifted dramatically. The One Big Beautiful Bill Act (OBBBA) has made significant 2017 tax cuts permanent while introducing valuable new deductions. Whether you operate a sole proprietorship, LLC, S Corp, or C Corp, understanding these changes is essential. This comprehensive guide covers every critical update you need to know for 2026 tax planning.

Table of Contents

• Key Takeaways
• What Changed in 2026 for Your Business?
• How Much Higher Is the 2026 Mileage Rate for Business?
• What New Deductions Can You Claim on 2026 Returns?
• Is 100% Bonus Depreciation Permanent Now?
• When Must You File 2026 Business Tax Returns?
• How Much Can Your Business Contribute to Retirement Plans in 2026?
• Uncle Kam in Action
• Next Steps
• Frequently Asked Questions

Key Takeaways

• Business mileage deduction rises to 72.5 cents/mile for 2026 (up from 70 cents in 2025).
• The One Big Beautiful Bill Act made bonus depreciation 100% permanent and Section 179 expensing up to $2.5 million.
• IRS filing season opens January 26, 2026, for individual returns; business returns start January 13, 2026.
• New reporting rules apply: Form 1099-K threshold is $20,000 and 200 transactions; Forms 1099-NEC and 1099-MISC are $2,000.
• 401(k) contributions increase to $24,500 and IRA limits to $7,500 for 2026 tax year planning.

What Changed in 2026 for Your Business?

For 2026, business owners face a dramatically different tax landscape. The One Big Beautiful Bill Act, passed in 2024, made many provisions of the 2017 Tax Cuts and Jobs Act permanent. This represents a fundamental shift for business tax planning. Previously, many business owners worried about expiring provisions. Now, they can plan with confidence knowing these cuts are locked in.

The most significant change is the permanence of bonus depreciation and Section 179 expensing. These provisions allow businesses to write off equipment purchases immediately instead of depreciating them over years. For Montgomery business owners purchasing equipment, vehicles, or technology in 2026, this can translate to substantial first-year deductions.

The Permanence of Tax Cuts

Under the Tax Cuts and Jobs Act of 2017, many provisions were set to expire after 2025. The OBBBA extended these indefinitely. This means business owners no longer need to worry about suddenly higher tax rates in 2026 or beyond.

• 20% Qualified Business Income Deduction: Now permanent for eligible business owners, allowing a deduction of up to 20% of qualified business income.
• Enhanced Estate Tax Exemption: The $15 million estate tax exemption provides substantial protection for business succession planning.
• Pass-Through Entity Tax Relief: Business structures like S Corps and LLCs continue benefiting from favorable tax treatment.

New Reporting Thresholds for 1099s

Business owners who hire contractors or service providers need to understand new reporting rules. The OBBBA changed thresholds for Forms 1099-K, 1099-NEC, and 1099-MISC. For professional services and gig economy work, this affects which income gets reported to the IRS and which doesn’t.

• Form 1099-K: Filing threshold is now $20,000 AND 200 transactions (permanently restored from the higher threshold).
• Forms 1099-NEC and 1099-MISC: Reporting threshold increased to $2,000 (up from $600), reducing compliance burden for many businesses.
• Critical Reminder: Even if a 1099 threshold isn’t met, all income must still be reported and is taxable.

How Much Higher Is the 2026 Mileage Rate for Business?

The IRS announced the 2026 standard mileage rates in early January, and business owners can breathe easier knowing the rate increased. This is the highest business mileage rate ever established by the IRS. For Montgomery business owners who travel for client meetings, site visits, or service calls, this increase translates directly into higher tax deductions.

Here’s why this matters: If you drive 10,000 miles for business in 2026, you can deduct 72.5 cents per mile, totaling $7,250. That compares to just $7,000 under the 2025 rate. The additional $250 deduction may seem modest for one year, but cumulative savings across years add up significantly.

How the Mileage Rates Break Down

Purpose of Travel	2025 Rate	2026 Rate	Change
Business/Professional Use	$0.70/mile	$0.725/mile	+$0.025/mile
Medical/Moving Purposes	$0.21/mile	$0.205/mile	-$0.005/mile
Charitable Purposes	$0.14/mile	$0.14/mile	No change

Notice that while business mileage rates increased, medical and moving rates decreased slightly. Charitable mileage rates remain at their statutory cap of 14 cents per mile, unchanged since the 1990s.

Tracking Mileage Accurately for 2026

The higher mileage rate makes accurate record-keeping even more valuable. Montgomery business owners should implement systems now for tracking business miles. The IRS requires contemporaneous records documenting business purpose, dates, destinations, and mileage. Without proper documentation, your deduction can be disallowed entirely.

• Use mobile apps like Stride Health or MileIQ to automatically track miles.
• Maintain a written log with dates, destinations, and business purpose for each trip.
• Consider GPS tracking to substantiate mileage claims if questioned by the IRS.

What New Deductions Can You Claim on 2026 Returns?

The One Big Beautiful Bill Act introduced several entirely new deductions that fundamentally change how business owners and self-employed professionals calculate taxable income. These aren’t minor adjustments; they represent meaningful tax relief for specific business situations. To claim them, businesses must report using the new Schedule 1-A.

New Deductions for Service Business Owners

If your business involves tipped employees or overtime wages, you now have two new deductions available on 2026 returns.

• Tip Income Deduction: Service industry business owners can deduct up to $25,000 in tip income if earned by employees making less than $150,000 annually. This particularly benefits restaurants, hotels, and personal service businesses.
• Overtime Compensation Deduction: Employers can deduct compensation for up to 250 hours of overtime pay for 2026. This applies to employees compensated for overtime work at qualifying rates.

Vehicle Loan Interest Deduction

A brand-new deduction allows individuals (not C Corporations) to deduct interest paid on loans for U.S.-made vehicles. This applies to vehicles purchased in 2025 for use in 2026. The deduction has specific limitations:

• Maximum deduction: $10,000 per person, $20,000 for married couples filing jointly.
• Income limits: Phases out for single filers over $100,000 and married couples over $200,000.
• Vehicle requirement: Must be manufactured in the United States.
• Purpose requirement: Vehicle must be used primarily for personal purposes, not business.

For business owners with a separate personal vehicle financed through an auto loan, this deduction can provide meaningful tax relief. However, it cannot be claimed on vehicles used primarily for business purposes.

Is 100% Bonus Depreciation Permanent Now?

This is perhaps the most consequential tax change for capital-intensive businesses. Under the Tax Cuts and Jobs Act, businesses could write off 100% of the cost of qualifying new equipment immediately through bonus depreciation. However, this benefit was scheduled to phase out, declining to 80% in 2026, 60% in 2027, and so on. The OBBBA eliminated this phase-out entirely, making 100% depreciation permanent.

What Qualifies for 100% Bonus Depreciation?

To claim 100% bonus depreciation on 2026 purchases, property must meet specific requirements established by the IRS:

• Depreciable Property: Must be tangible property (not land or buildings, though certain building components qualify).
• Original Use: For 2026, original use requirement applies. Property must be newly manufactured and used by your business as the first user.
• Placed in Service Date: Property must be placed in service (ready for use) during the 2026 tax year.
• Business Use: Property must be used in an active trade or business. Passive investments don’t qualify.

Section 179 Expensing Limits for 2026

Section 179 allows businesses to deduct the full cost of eligible property in the year purchased, up to annual limits. For 2026, the limits are:

• Annual Expensing Limit: $2.5 million of qualified property can be expensed in 2026.
• Phase-Out Range: Begins at $10 million of property purchases. Each dollar above $10 million reduces the available expensing limit.
• Indexed for Inflation: These limits increase annually with inflation, providing ongoing relief.

When Must You File 2026 Business Tax Returns?

The IRS has announced specific filing season dates that differ for business versus individual returns. For Montgomery business owners, planning around these dates is essential for timely filing and refund receipt.

2026 Tax Season Timeline

• January 13, 2026: IRS begins accepting and processing business tax returns (Forms 1120, 1120-S, 1065, etc.).
• January 26, 2026: IRS begins accepting and processing individual income tax returns (Form 1040 and related schedules).
• April 15, 2026: Final deadline for filing all 2025 tax returns and making payment of any tax owed.
• February 2026 (Approx.): IRS begins issuing refunds, though refunds tied to Earned Income Tax Credit and Additional Child Tax Credit are held until mid-February.

Extension and Payment Due Dates

If you need additional time, file Form 4868 (Application for Automatic Extension of Time to File U.S. Individual Income Tax Return) by April 15, 2026. This extends your filing deadline to October 15, 2026, but taxes owed are still due April 15 to avoid penalties.

For business returns, Form 7004 provides similar extension relief. Partners in S Corporations and partnerships should coordinate filing timelines since individual returns often depend on business K-1 documentation.

How Much Can Your Business Contribute to Retirement Plans in 2026?

Retirement plan contribution limits increase each year with inflation. For 2026, Montgomery business owners have new higher thresholds for tax-advantaged savings. These increases are especially valuable for self-employed business owners and small business operators looking to reduce taxable income while saving for retirement.

2026 Contribution Limits Comparison

Plan Type	2025 Limit	2026 Limit	Increase
401(k) Employee Deferral	$23,500	$24,500	+$1,000
401(k) Catch-up (Age 50+)	$7,500	$8,000	+$500
Traditional/Roth IRA	$7,000	$7,500	+$500
IRA Catch-up (Age 50+)	$1,000	$1,100	+$100
Solo 401(k) Total	$70,000	$72,000	+$2,000

Critical Roth Catch-Up Rule Change

Starting in 2026, a new rule affects catch-up contributions for higher-income earners. If you earned more than $150,000 from your current employer in 2025, your 2026 catch-up contributions must be made to a Roth 401(k), not a traditional 401(k).

This rule change has significant implications. While Roth contributions don’t provide upfront tax deductions, they grow tax-free and offer tax-free withdrawals in retirement. For business owners over 50 hitting the $150,000 threshold, this requires strategic planning to optimize tax impact.

Uncle Kam in Action: Montgomery HVAC Business Owner Saves $23,400 Using 2026 Tax Changes

Client Snapshot: Marcus is an HVAC contractor in Montgomery operating as an S Corporation with $285,000 in annual revenue. He employed 3 technicians and purchased new diagnostic equipment and service vehicles regularly. Marcus had been underutilizing depreciation benefits and wasn’t structured optimally for business deductions.

Financial Profile: $285,000 annual S Corp revenue, approximately $120,000 in W-2 wages to self as owner, remaining income as S Corp distributions.

The Challenge: Marcus typically purchased equipment sporadically without tax planning. He drove a personal vehicle for client visits but wasn’t tracking mileage systematically. Additionally, he didn’t fully utilize Section 179 expensing, losing significant first-year deductions. His business structure wasn’t optimized, and he was unsure how the 2026 changes affected his planning.

The Uncle Kam Solution: We implemented a comprehensive 2026 tax strategy for Marcus. First, we identified $32,000 in new diagnostic equipment and service tools that qualified for 100% bonus depreciation under the permanent OBBBA provisions. We filed Section 179 elections allowing immediate deduction rather than multi-year depreciation. Second, we established formal mileage tracking for Marcus’s personal vehicle, documenting that he drove 8,400 business miles annually at the new 2026 rate of 72.5 cents per mile. This generated $6,090 in annual mileage deductions. Third, we optimized his S Corporation structure by adjusting reasonable salary allocations to maximize deductions while minimizing self-employment taxes. This is just one example of how our Montgomery tax preparation services help local business owners.

The Results:

• Tax Savings: $23,400 in first-year federal income tax savings through depreciation, mileage deductions, and salary optimization.
• Investment: Paid Uncle Kam $6,500 for comprehensive tax strategy consultation and filing services.
• Return on Investment (ROI): 3.6x return on investment in the first year alone (additional $23,400 / $6,500 = 3.6).

Marcus’s experience demonstrates how understanding 2026 tax changes can translate into substantial business savings. By systematically implementing available deductions and optimizing business structure, he reduced his effective tax rate significantly. This is just one example of how our tax strategies for business owners create real financial value.

Next Steps

Understanding 2026 tax changes is the first step; implementation is where real savings happen. Here are your action items for the coming weeks:

• ☐ Document your current business structure and review whether S Corp, LLC, or C Corp status optimizes your 2026 tax situation.
• ☐ Set up formal mileage tracking using mobile apps or written logs to capture every business mile at the new 2026 rate.
• ☐ Identify equipment or property purchases planned for 2026 and calculate Section 179 and bonus depreciation impacts.
• ☐ Schedule a strategy consultation with a qualified tax professional to model your specific 2026 tax scenario.
• ☐ Review retirement plan options and contribution strategies to maximize tax-deferred savings under the new 2026 limits.

Our Montgomery tax preparation services specialize in helping business owners navigate exactly these issues. We provide comprehensive tax strategy consultations analyzing your specific situation and implementing deductions you might miss.

Frequently Asked Questions

Can I Still Deduct 100% of Equipment Purchases in 2026?

Yes, absolutely. The One Big Beautiful Bill Act made 100% bonus depreciation permanent. Any qualified business property (equipment, vehicles, software, fixtures) placed in service in 2026 can be fully deducted in that year, with certain limitations. This represents tremendous value for capital purchases planned for 2026.

What’s the Difference Between Section 179 Expensing and Bonus Depreciation?

Both allow immediate deduction of equipment costs, but differ in application. Section 179 expensing has dollar limits ($2.5 million for 2026) and income requirements. Bonus depreciation has no dollar limits and percentage requirements. Generally, businesses use Section 179 first up to the limit, then bonus depreciation for additional purchases. Tax professionals often use both together to maximize deductions.

Does the New 72.5 Cent Mileage Rate Apply to 2025 Returns Filed in 2026?

No. The 2026 mileage rates apply to returns filed in 2027 (for 2026 tax year driving). Returns filed in 2026 for 2025 tax year use 2025 mileage rates (70 cents per mile for business). However, the rates matter immediately for reimbursement purposes from employers or charitable organizations, so review your tracking now.

How Does the 1099-K Threshold Change Affect My Business?

The restored threshold of $20,000 AND 200 transactions means most small businesses won’t issue 1099-Ks unless they exceed both thresholds. However, all income remains taxable regardless of 1099-K issuance. Keep detailed records of all income sources. The raised thresholds for 1099-NEC and 1099-MISC ($2,000 instead of $600) similarly reduce reporting burden for many contractors.

Can I Claim the New Tip or Overtime Deduction if I Don’t Have Employees?

The tip income deduction applies to businesses with tipped employees (typically restaurants, hotels, personal services). If you’re self-employed without employees, this deduction doesn’t apply. Overtime deductions similarly apply to employer-employee situations, not self-employed individuals. Consult with a tax professional about deductions specific to your business structure.

What If I Miss the April 15 Filing Deadline?

File Form 4868 (for individuals) or Form 7004 (for businesses) by April 15 to automatically extend your deadline to October 15, 2026. However, estimated taxes owed are still due April 15 to avoid penalties and interest. Extensions of time to file are not extensions of time to pay. If you’ve overpaid, filing your return sooner means faster refund receipt.

Should I Incorporate My Solo Business as an S Corporation for 2026?

This depends on your specific income level and business structure. S Corporations can reduce self-employment taxes through salary/distribution splitting, but involve additional compliance costs. Generally, if net business income exceeds $60,000, S Corp treatment warrants analysis. Our tax professionals provide detailed entity structure analysis to determine the optimal approach for your situation, considering the permanent tax cuts now available.

Related Resources

• Business Entity Structuring: LLC vs S Corp vs C Corp Guide
• Comprehensive 2026 Tax Strategy Services for Business Owners
• Small Business Tax Solutions and Bookkeeping Services
• Professional Tax Preparation and Compliance Filing
• The MERNA™ Method: Proprietary Tax Optimization Framework

This information is current as of 1/12/2026. Tax laws change frequently. Verify updates with the IRS if reading this later. This article provides general tax information for educational purposes and is not professional tax advice. Consult a qualified tax professional regarding your specific situation.

Last updated: January, 2026