Recent federal changes affect how small businesses deduct equipment, handle research costs, and reconcile payment reporting. The 2025 legislation, Public Law 119-21, also changed the outlook for pass-through deductions. Late-2026 planning should connect those rules to real income, cash flow, and documentation rather than simply maximizing purchases.
A deduction is not a dollar-for-dollar refund. Spending $10,000 solely to obtain a deduction still uses $10,000 of cash. Evaluate the business need, tax rate, limitations, and financing before buying or accelerating a payment.
1. 100% bonus depreciation returned for qualifying property
The law restored 100% additional first-year depreciation for eligible property acquired and placed in service after January 19, 2025, subject to qualification and transition rules. It is not a blanket immediate deduction for land, every building, or every business purchase.
Acquisition date, binding-contract rules, placed-in-service date, related-party transactions, and business use matter. Equipment normally must be ready and available for its intended business use; paying a deposit or receiving an invoice is not enough by itself. Vehicles and listed property have additional restrictions.
For 2026 planning, compare bonus depreciation, regular depreciation, and any election out. A larger current deduction can affect losses, future deductions, owner basis, and other tax benefits. State treatment may differ from federal treatment.
2. Section 179 is a separate decision
The legislation increased Section 179 expensing limits, with inflation adjustments for later years. Use the limits for the tax year actually being filed, rather than copying a 2025 figure onto a 2026 worksheet.
Section 179 generally has an annual purchase-based phaseout and a taxable-income limitation, along with property and business-use requirements. Bonus depreciation follows different rules. Model the available choices and any carryforward instead of assuming the two provisions are interchangeable.
Maintain an asset schedule showing cost, acquisition and service dates, business-use percentage, financing, and the selected treatment. If business use later falls or an asset is sold, recapture may apply.
3. Domestic and foreign research costs now require different analysis
For tax years beginning after December 31, 2024, new Section 174A generally permits current deductions for qualifying domestic research or experimental expenditures, with an alternative capitalization election available. Foreign research remains subject to separate capitalization and amortization rules.
Software development or product design should not be automatically labeled research without reviewing the work and relevant rules. Track where work is performed and distinguish employee wages, contractor charges, software costs, and ordinary operating expenses.
Prior-year unamortized domestic costs and qualifying small-business retroactive relief have specific transition elections, eligibility tests, and deadlines. Do not assume a still-open tax year means every special election remains available. Review prior filings promptly with a professional before changing the method or amending a return.
4. The QBI deduction did not simply disappear after 2025
The law made the Section 199A qualified business income deduction permanent in the sense that it no longer has the former scheduled expiration. Eligible owners may deduct up to 20% of qualifying income, but that is not a guaranteed 20% reduction in total tax or a deduction available to C corporations.
Taxable-income limits, specified service business rules, wages, qualified property, losses, and other restrictions can affect the result. Owner wages and partnership guaranteed payments generally are not QBI. Changes in depreciation or owner compensation can change the calculation, so evaluate them together.
5. The 1099-K threshold changed, not the duty to report income
The 2025 law restored the federal third-party settlement organization threshold to more than $20,000 and more than 200 transactions. Current IRS guidance reflects that rule. A platform may still issue a form below the threshold; direct payment-card reporting generally does not use this minimum.
All taxable business income must still be reported. Reconcile gross payments to books, refunds, fees, and settlement timing rather than using a reporting threshold as an income exclusion. State thresholds can differ.
6. Keep state taxes and filing-year rules in the plan
A Washington business can owe B&O tax on gross receipts despite a federal loss from equipment deductions. Confirm the activity classification, permitted deductions and credits, and any city obligations. Payroll and sales tax duties also do not disappear because income tax is low.
Before year-end, prepare a projected profit and loss report, an asset purchase list, owner basis information where relevant, research-cost detail, payroll summaries, and payment-platform reconciliations. A 2025 return filed in 2026 still uses 2025 rules; a calendar-year 2026 return generally filed in 2027 uses 2026 rules.
Official sources
- IRS: Current business provisions and guidance
- IRS: Enacted tax-law provisions, including research costs
- IRS: Publication 946, depreciation
- IRS: Qualified business income deduction
- IRS: Current 1099-K reporting rules
- Washington DOR: B&O tax
Related reading
Individual tax-law update | LLC and incorporation checklist | E-commerce tax guide