Welcome to 2026—a pivotal year for small business taxation. If you haven’t yet updated your tax strategy, now is the time. At the end of 2025, many major provisions of the Tax Cuts and Jobs Act (TCJA) of 2017 officially sunsetted, creating what industry experts are calling the “2026 Tax Cliff.”

This means the rules you’ve relied on for the past several years have changed. Here is what small business owners need to know to navigate the new tax landscape:

1. Shifts in Individual Tax Rates
Because many small businesses operate as pass-through entities (LLCs, S-Corps, Sole Proprietorships), business income is taxed at the owner’s individual rate. With the expiration of the TCJA cuts, individual tax brackets have reverted to their pre-2018 levels (adjusted for inflation). This generally means higher marginal tax rates for many business owners in 2026.

2. The Fate of the QBI Deduction (Section 199A)
The Qualified Business Income (QBI) deduction, which allowed eligible pass-through business owners to deduct up to 20% of their qualified business income, was a cornerstone of the TCJA. With its expiration, business owners must work closely with their tax advisors to explore new avenues for minimizing taxable income and protecting profit margins.

3. Changes to Bonus Depreciation
The 100% bonus depreciation rules that allowed businesses to immediately write off the full cost of qualifying equipment and property have fully phased down. While Section 179 expensing remains a powerful tool, planning major capital expenditures in 2026 requires a more nuanced depreciation strategy.

Action Steps for 2026:
Do not wait until tax season to address these changes. We highly recommend scheduling a strategic review of your entity structure (does an S-Corp or C-Corp make more sense now?) and updating your quarterly estimated tax payments to avoid underpayment penalties under the new rates.

Contact our tax planning team today to ensure your 2026 financial strategy is optimized for the new tax reality.