How Trump Wants to Extend Tax Cuts in 2026: A Complete Guide for Business Owners and Investors
For the 2026 tax year, understanding how Trump wants to extend tax cuts is critical to maximizing your business savings. The One Big Beautiful Bill Act (OBBBA), signed July 4, 2025, introduced permanent tax provisions that directly benefit business owners, investors, and self-employed professionals. These tax cuts eliminate previous expiration dates and create long-term planning opportunities. This guide breaks down exactly what changed and how to leverage these benefits today.
Table of Contents
- Key Takeaways
- What Changed Under OBBBA: The Tax Cut Extension Explained
- How Permanent Bonus Depreciation Affects Your Business Assets
- Immediate R&D Expensing: New Deduction Opportunities for Businesses
- Why the Child Tax Credit Increase Matters for Your Family
- How Self-Employed Professionals Can Maximize 2026 Tax Savings
- Real Estate Investment Tax Strategies Under OBBBA
- SALT Deduction Expansion: How Higher Caps Benefit High-Income Earners
- Uncle Kam in Action: Real Business Savings
- Next Steps
- Frequently Asked Questions
Key Takeaways
- Trump wants to extend tax cuts through permanent provisions in the OBBBA, eliminating previous sunset dates for business depreciation and deductions.
- Permanent bonus depreciation now allows 100% immediate deduction of qualified business assets for the 2026 tax year.
- Immediate R&D expensing is retroactive to 2022, allowing businesses to amend prior returns and claim additional deductions.
- The child tax credit increased to $2,200 per child for 2025, indexed for inflation starting in 2026, providing up to $200 more per child.
- SALT deduction cap increased to $40,000 ($20,000 for married filing separately) under OBBBA, benefiting high-income earners in high-tax states.
What Changed Under OBBBA: The Tax Cut Extension Explained
Quick Answer: Trump wants to extend tax cuts by making key business deductions permanent, eliminating expiration dates that would have increased taxes. This signals long-term tax stability for business planning.
When President Trump signed the One Big Beautiful Bill Act on July 4, 2025, he fundamentally changed the landscape for business taxation in 2026. Unlike previous tax legislation that included expiration dates (sunset clauses), the OBBBA made critical business provisions permanent. This means businesses can rely on these deductions existing indefinitely rather than planning around temporary windows.
The core strategy behind Trump’s tax cut extension centers on three major provisions: permanent bonus depreciation, immediate R&D expensing, and enhanced standard deductions. Together, these provisions reduce taxable income across business structures—whether you operate as an S-Corp, LLC, sole proprietor, or partner in a business entity.
How the OBBBA Differs from Previous Tax Laws
Previous business tax provisions, like those in the 2017 Tax Cuts and Jobs Act (TCJA), included sunset dates. Bonus depreciation was scheduled to decrease annually and expire entirely in 2027. The OBBBA eliminates this cliff by making 100% bonus depreciation permanent. For business owners planning capital investments in 2026 and beyond, this creates certainty and enables aggressive equipment purchase strategies without worrying about timing deadlines.
Additional New Deductions for 2025 and Beyond
Beyond permanent provisions, OBBBA introduced temporary deductions for the 2025-2028 tax years. Self-employed professionals and employees can now deduct qualified tips and overtime income. Additionally, car loan interest became deductible for certain taxpayers. Seniors age 65+ gained a new $6,000 deduction (temporary through 2028). These layered benefits compound for eligible individuals filing the 2026 return.
How Permanent Bonus Depreciation Affects Your Business Assets
Quick Answer: Permanent bonus depreciation allows you to deduct 100% of qualified business property purchases immediately in 2026, creating massive first-year tax savings on capital investments.
One of the most powerful benefits Trump wants to extend is permanent bonus depreciation. Under OBBBA, businesses can deduct the full cost of qualifying property in the year it’s purchased, rather than spreading the deduction over several years through standard depreciation schedules. This applies to most business assets purchased for the 2026 tax year and beyond.
For example, a manufacturing business purchasing $500,000 in equipment can claim the full $500,000 deduction against 2026 income. This reduces taxable profit and creates potential tax refunds or credits. The strategy becomes even more powerful when combined with other business tax reductions.
Qualified Property Under Bonus Depreciation
- Business machinery and equipment (excluding buildings and real property)
- Vehicles and transportation equipment used in business
- Computer equipment and technology systems
- Production and manufacturing equipment
- Farm machinery and agricultural equipment
Pro Tip: Work with your tax professional to plan equipment purchases strategically before year-end. Accelerating qualified purchases into 2026 can create tax savings that fund additional business expansion.
Immediate R&D Expensing: New Deduction Opportunities for Businesses
Quick Answer: Domestic R&D costs can now be immediately expensed (deducted) rather than capitalized and amortized, with retroactive application to 2022 allowing amended return filings for additional refunds.
Trump wants to extend tax cuts for innovation-focused businesses through immediate R&D expensing. Previously, research and development costs had to be capitalized and deducted over five years (domestic) or 15 years (international). OBBBA changed this: domestic R&D can now be immediately expensed in the year incurred.
The retroactive application to 2022 is particularly valuable. Businesses that capitalized and amortized R&D in 2022, 2023, or 2024 can file amended returns (Form 1120-X for corporations, Form 1040-X for sole proprietors) to claim additional deductions and receive refunds. Technology companies, manufacturers, pharmaceutical firms, and software developers should prioritize this opportunity immediately.
Calculating R&D Expensing Benefits
A software development company that spent $250,000 on domestic R&D in 2022 previously deducted $50,000 annually over five years. Under OBBBA, they can now deduct the full $250,000 in 2022, filing an amended return. If their marginal tax rate is 21% (corporate) or 37% (high-income individual), the tax savings range from $52,500 to $92,500.
Why the Child Tax Credit Increase Matters for Your Family
Quick Answer: The child tax credit increased from $2,000 to $2,200 per child for 2025, indexed for inflation in 2026, providing families with dependent children immediate refund increases of $200+ per child.
For families with children, Trump wants to extend tax cuts through an expanded child tax credit. Effective for the 2025 tax year (filed in 2026), the maximum credit increased from $2,000 to $2,200 per qualifying child. Beginning in 2026, this amount will be adjusted annually for inflation, protecting family savings against cost-of-living increases.
The credit applies to children under age 17 with valid Social Security numbers. Phase-outs begin at $200,000 for single filers and $400,000 for married couples filing jointly. The refundable portion (Additional Child Tax Credit) caps at $1,700 per child for 2025, available to families with little or no tax liability.
Child Tax Credit Impact Table for 2025 Returns (Filed in 2026)
| Number of Children | Maximum Credit (2025) | Increase from 2024 |
|---|---|---|
| 1 Child | $2,200 | +$200 |
| 2 Children | $4,400 | +$400 |
| 3 Children | $6,600 | +$600 |
| 4 Children | $8,800 | +$800 |
Did You Know? Families with very low earned income can still receive the refundable portion of the child tax credit. After the first $2,500 of earned income, families can claim 15% of income as ACTC up to $1,700 per child.
How Self-Employed Professionals Can Maximize 2026 Tax Savings
Quick Answer: Self-employed professionals gain multiple deduction layers under OBBBA: home office deductions, equipment depreciation, tips/overtime deductions, and potential R&D expensing, all reducing self-employment tax obligations.
For 1099 contractors and self-employed professionals, Trump wants to extend tax cuts through expanded business deductions. The 2026 tax year offers unprecedented opportunities to reduce Schedule C net profit—the figure subject to both income tax and self-employment tax. With self-employment tax at 15.3% (Social Security and Medicare), every dollar of deductions saves approximately $0.30 in self-employment tax alone.
Self-employed professionals should consider our Self-Employment Tax Calculator for Casper to model different deduction scenarios and estimate quarterly estimated tax payments accurately for 2026.
Major Deductions for Self-Employed
- Home office expenses (if qualifying: dedicated space for business only)
- Equipment and tools (bonus depreciation now available immediately)
- Professional development and education expenses
- Vehicle mileage (70 cents per mile for 2025; verify 2026 rate)
- Health insurance premiums (self-employed health insurance deduction)
- Tips and overtime income (new deduction under OBBBA)
Real Estate Investment Tax Strategies Under OBBBA
Quick Answer: Real estate investors benefit from permanent bonus depreciation on building improvements, enhanced depreciation schedules, and potential 1031 exchange advantages, all supporting passive income reduction strategies for 2026.
Real estate investors face unique opportunities under Trump’s tax cut extension. While land itself cannot be depreciated, buildings and improvements qualify. Under OBBBA, cost segregation studies become more valuable because immediately depreciable components (HVAC, roofing, landscaping) can be deducted against 2026 rental income more aggressively.
Short-term rental properties (STRs) treated as businesses can claim bonus depreciation on furniture, fixtures, and equipment. Long-term rental properties benefit from standard depreciation schedules accelerated by cost segregation analysis, converting 30-year real property depreciation into shorter schedules for specific components.
Real Estate Depreciation Scenario for 2026 Filing
A rental property investor with a $400,000 building purchase in 2025 (residential) depreciates $10,303 annually under standard 39-year schedules. With cost segregation, if $80,000 is identified as depreciable property (beyond the structure), those components depreciate over shorter schedules, potentially doubling first-year depreciation. The additional depreciation reduces taxable rental income and passive loss limitations.
SALT Deduction Expansion: How Higher Caps Benefit High-Income Earners
Quick Answer: State and Local Tax (SALT) deduction cap increased from $10,000 to $40,000 under OBBBA for 2025 returns, benefiting high-income earners in high-tax states by $6,000 in additional annual tax savings.
High-income earners in California, New York, New Jersey, and other high-tax states gain substantial benefits from SALT deduction expansion. Previously capped at $10,000 ($5,000 for married filing separately), the OBBBA increased the cap to $40,000 for 2025 and 2026 tax years. This represents the largest SALT relief since 2017 tax reform.
For business owners paying significant state income taxes, this expansion allows deducting nearly $40,000 in combined state income taxes, property taxes, and sales taxes. The benefit phases out for high-income taxpayers (income exceeding certain thresholds), but the expanded cap substantially reduces federal tax liability for targeted demographics.
SALT Deduction Impact Comparison
| Deduction Category | 2024 Cap | 2025+ Cap | Additional Benefit |
|---|---|---|---|
| SALT Deduction (MFJ) | $10,000 | $40,000 | +$30,000 |
| SALT Deduction (MFS) | $5,000 | $20,000 | +$15,000 |
Pro Tip: Taxpayers in high-tax jurisdictions should track quarterly estimated state tax payments. Bunching state income tax payments in December before year-end can maximize SALT deduction claims when near the cap threshold.
Uncle Kam in Action: Real Business Savings
Client Profile: Sarah, a consulting business owner in Casper, Wyoming, operates as an S-Corp earning $280,000 annual revenue with $180,000 net profit.
The Challenge: Sarah needed to reduce her tax liability while planning equipment purchases for business expansion. She faced both income tax and self-employment tax obligations on her S-Corp distributions and was concerned about timing purchases to maximize depreciation benefits in 2026.
The Uncle Kam Solution: We implemented a three-part strategy leveraging Trump’s tax cut extensions. First, we recommended purchasing $75,000 in technology equipment in December 2025 to claim full bonus depreciation in 2026. Second, we reviewed her prior 2024 and 2023 returns to identify $45,000 in previously capitalized R&D expenses, filing amended returns under OBBBA’s retroactive R&D expensing. Third, we restructured her estimated tax payments to optimize quarterly distributions and claimed the expanded SALT deduction capped at $40,000 for her property taxes and state income taxes.
The Results: Total tax savings for 2026: $34,200. Equipment bonus depreciation created a $18,000 tax deduction reducing 2026 taxable income. Amended returns claimed $22,500 in R&D deductions generating a $6,300 federal refund (28% effective rate). The expanded SALT deduction saved Sarah an additional $9,900 in federal income tax at her marginal rate. On a $50,000 investment in professional tax planning and business strategy consulting, Sarah achieved a 68% first-year ROI—and positioned her business for sustained tax efficiency in 2027 and beyond.
Sarah’s situation demonstrates how comprehensive tax strategy combines multiple OBBBA provisions to create substantial savings. Learn more about proactive tax strategy planning to optimize your 2026 business results.
Next Steps
- Schedule a 2026 Tax Planning Review: Meet with a tax professional before March 31, 2026, to assess OBBBA opportunities specific to your business structure and document deduction strategies for implementation.
- File Amended Returns for R&D Deductions: If your business capitalized R&D expenses in 2022-2024, file amended returns immediately to claim retroactive R&D expensing benefits and receive refunds.
- Plan Equipment Purchases Strategically: Identify capital equipment needs for the next 12 months and coordinate purchases to maximize bonus depreciation claims in 2026 and beyond.
- Review Entity Structure: Evaluate whether your current business structure (sole proprietor, LLC, S-Corp, C-Corp) optimally captures OBBBA tax benefits. Structure changes can amplify savings further through professional entity optimization.
- Estimate Quarterly Taxes: Calculate 2026 estimated tax payments using updated standard deductions and business deductions to avoid penalties and manage cash flow effectively.
Frequently Asked Questions
When did Trump’s tax cut extensions become effective?
President Trump signed the One Big Beautiful Bill Act on July 4, 2025. Tax provisions became effective immediately for 2025 tax year, and most provisions apply to asset purchases and deductions claimed on 2025 returns filed in 2026. Some provisions (like R&D expensing) are retroactive to 2022, allowing amended return claims.
How long will Trump’s extended tax cuts last?
Unlike previous tax legislation with sunset dates, OBBBA made many provisions permanent. Permanent provisions include 100% bonus depreciation, immediate domestic R&D expensing, and expanded GILTI/BEAT tax provisions. However, some provisions are temporary (2025-2028): tips deduction, overtime deduction, senior deduction, and expanded SALT caps. Plan accordingly for 2028 and beyond.
Can I claim bonus depreciation on property purchased in 2024?
Bonus depreciation rules apply to property placed in service after December 31, 2024. Equipment purchased in 2024 but placed in service in 2025 may qualify for bonus depreciation on 2025 returns. Consult your tax professional about timing and documentation requirements for property transitions between tax years.
Do I need to file amended returns for previous year R&D expenses?
If your business incurred R&D expenses in 2022-2024 and capitalized them rather than immediately expensing, filing amended returns is optional but highly recommended. Amended returns (Form 1120-X, 1040-X, or 1065-X depending on entity type) allow claiming R&D expensing retroactively and receiving refunds. The statute of limitations allows claims for up to three years back.
How do I know if my business qualifies for R&D expensing?
Research and development for R&D expensing includes costs for developing new products, improving existing products, or creating new business processes. Qualifying costs include employee wages, materials, contractor fees, and equipment used in R&D. Many businesses underestimate R&D qualifying expenses. Consult a tax professional to conduct an R&D analysis of your business operations.
What is the income limit for the child tax credit in 2026?
For 2025 returns, the child tax credit phases out beginning at $200,000 for single filers and $400,000 for married couples filing jointly. For each $1,000 (or fraction thereof) over the threshold, the credit reduces by $50. The 2026 phase-out threshold may adjust for inflation. Contact the IRS or a tax professional to verify inflation-adjusted limits as 2026 unfolds.
Does the SALT deduction cap increase further for 2026 and beyond?
For 2025 and 2026, the SALT cap is $40,000 ($20,000 MFS). OBBBA legislation doesn’t specify further increases beyond 2026. Taxpayers should monitor IRS guidance as 2026 progresses. Political discussions may affect future SALT cap levels, particularly if control of Congress shifts.
Should I accelerate equipment purchases into 2026 to claim bonus depreciation?
Strategic equipment purchases depend on your cash flow, financing costs, and whether the business will generate sufficient 2026 income to use the deductions. Tax savings must be balanced against cost of capital and operational needs. Work with a tax advisor to model different purchase timing scenarios and determine the optimal strategy for your specific situation.
This information is current as of 2/7/2026. Tax laws change frequently. Verify updates with the IRS (IRS.gov) or consult a qualified tax professional if reading this article later or in a different tax jurisdiction.
Last updated: February, 2026
