What Every Business Owner Should Know About the 2026 Tax Changes
Recently, the IRS made inflation adjustments that affect more than 60 different tax provisions. Some of these changes are only relevant to individual taxpayers, while other provisions directly affect businesses and self-employed individuals.
For current business owners, the important question to ask is not just, 'Did my tax rate change?' Instead, the better question is, 'Which of these recent changes are going to affect my business and my own personal taxes?'
The Qualified Business Income Deduction Is Now Permanent
The IRS has said that the QBI, or Qualified Business Income deduction, also known as the Section 199A deduction, has been made permanent under the 2025 legislation.
This deduction typically applies to qualifying income from certain pass-through businesses and is usually associated with sole proprietorships, partnerships, S corporations, and certain trusts or estates. This deduction is calculated at the owner's level, so it is not just a business expense that gets calculated from the business's books.
The IRS has previously described the QBI deduction as allowing eligible taxpayers to deduct up to 20% of qualified business income. However, it comes with its own limitations based on the type of business and the level of income.
Business owners should be aware of this change and make sure it is considered as part of their overall tax planning.
The 1099 Reporting Threshold Has Increased
Another change business owners should be aware of involves certain payments made to independent contractors or other vendors.
For payments made in 2026, the federal reporting threshold for certain payments has increased from $600 to $2,000. For businesses, that means they may have different 1099 reporting requirements than they had in previous years.
This increase does not mean you can stop tracking payments sent to contractors or vendors. Your bookkeeping still needs to accurately record who was paid, how much was sent, and what the payment was for. Keeping track of those records makes it much easier to determine what needs to be reported when tax season arrives.
It is also important not to assume that a business payment is automatically exempt because it falls below $2,000. The IRS has specific guidelines for different types of payments. If your business regularly works with independent contractors, this year is a good time to review how those payments are being tracked and make sure your bookkeeping process is set up to consider current reporting requirements.
The New Tax Changes Can Also Personally Affect Business Owners
For many small business owners, business taxes and personal taxes are closely connected. If your business operates as a sole proprietorship, partnership, or S corporation, some or all of the business income can flow through to your personal tax return.
The IRS has made several adjustments to account for inflation in 2026. This includes changes to the federal income tax brackets and the standard deduction. For 2026, the standard deduction is $16,100 for single filers, $24,150 for heads of household, and $32,200 for married couples filing jointly.
For a small business owner, business income does not exist separately from the rest of your taxable income. When business income changes, things like payments, deductions, and retirement contributions can affect what is owed personally. That is why tax planning should look at the entire picture rather than only focusing on the business.
Don't Wait Until Tax Season to Figure Out What Has Changed
Tax laws can change, but business owners should not have to keep up with every new provision on their own. What matters most is understanding what changed and how those changes may affect your business, so that you have enough time to plan accordingly.
At Blueprint Tax Advisors, tax planning is about looking ahead rather than waiting until it is time to file. Reviewing your business income, estimated payments, major purchases, retirement contributions, and overall tax situation throughout the year can help you make decisions with a clearer picture of the potential tax impact.
If you are a business owner in Conway or Central Arkansas, Blueprint Tax Advisors can help you understand how the 2026 tax changes fit into your overall tax strategy and what you should be considering before the year comes to a close.