2026 Tax Brackets for Small Businesses: Key Changes, Deductions & Savings

2026 tax brackets small business owners need to know

As a small business owner, your pass-through income (from sole proprietorships, LLCs, S-corps, or partnerships) is taxed at individual federal rates. The good news for 2026? The One Big Beautiful Bill Act (OBBBA) made the lower TCJA rates permanent, avoiding a jump to 39.6%. Combined with inflation adjustments and powerful deductions like the QBI deduction and 100% bonus depreciation, these 2026 tax changes for small businesses mean lower taxes, better cash flow, and more room to grow. Here’s everything you need to understand the impact on your business.

How 2026 Tax Brackets Affect Pass-Through Small Businesses

The seven federal brackets (10%, 12%, 22%, 24%, 32%, 35%, 37%) stay the same, but thresholds increased for inflation, about 4% for lower brackets and 2.3% for higher ones. This combats bracket creep and keeps more of your business profits taxed at lower rates.

These 2026 tax brackets for small businesses provide stability and modest relief for most owners.

Top 2026 Deductions Every Small Business Should Maximize

Higher personal standard deductions ($16,100 single / $32,200 joint) reduce taxable pass-through income upfront. But the biggest wins come from business-specific provisions under OBBBA:

• Permanent 20% QBI Deduction 2026 — Deduct up to 20% of qualified business income (easier access with a $400 minimum for $1,000+ QBI).
• 100% Bonus Depreciation 2026 — Immediate full write-off for equipment, vehicles, and qualifying assets — ideal for expansion.
• Full R&E Expensing — Deduct domestic research costs upfront (no more amortization).
• Improved Business Interest Deductions — More deductible under Section 163(j), especially for debt-financed growth.
• Enhanced Employer Childcare Credit — Up to $500,000–$600,000 for providing benefits (higher for eligible small businesses).

These deductions directly lower your effective tax rate and encourage investment.

How These 2026 Tax Changes Improve Cash Flow & Growth for Small Businesses

• Lower overall taxes: Permanent lower rates + strong deductions avoid hikes and put more money back in your pocket.
• Investment incentives: 100% bonus depreciation makes major purchases more affordable now.
• Long-term stability: Permanent QBI (used by most small businesses) supports predictable planning.

These updates are especially beneficial for real estate, construction, home health, and other growth-focused sectors.

Potential Challenges & Smart Strategies for 2026 Small Business Taxes

• High-income service businesses may face QBI phase-outs.
• Track expenses meticulously to claim full benefits.

These 2026 tax changes for small businesses create real opportunities, act now to optimize.

Ready to make the most of these 2026 tax changes? At JIL & Associates, our experienced team specializes in personalized tax planning, preparation, and strategies to minimize your liability and maximize savings. Contact us today for a free discovery call to review your situation and get tailored advice.