Year-End Tax Planning for Business Owners: What to Review in 2026

The One Big Beautiful Bill Act, signed in July 2025, permanently restored 100 percent first-year bonus depreciation for qualifying property acquired after January 19, 2025 and placed in service after that date. It also raised the Section 179 expensing limit, which is $2,560,000 for tax years beginning in 2026, with the deduction phasing out once qualifying property placed in service exceeds $4,090,000.

Domestic research and experimental costs are immediately deductible again for tax years beginning after December 31, 2024, ending the five-year amortization that applied from 2022 through 2024. Foreign research costs remain subject to 15-year amortization. Each of these rules has eligibility conditions, and the results depend on the company's specific facts and the applicable law.

The classic year-end review still applies: projected income and deductions, whether to accelerate or defer purchases and revenue, entity and owner compensation, retirement contributions and any credits the business may qualify for, such as the research and development credit. Decisions made before year-end have a different tax result than the same decisions made after.

The qualified business income deduction under Section 199A was made permanent, so pass-through owners keep the 20 percent deduction on qualified business income, subject to the wage and investment limitations. It is worth confirming that the entity and owner compensation structure still supports the deduction under current rules.

For qualifying equipment placed in service in 2026, 100 percent bonus depreciation may allow the full cost to be deducted in the first year, subject to the acquisition-date rules. The Section 179 election offers an alternative that can apply to property that does not qualify for bonus depreciation, with its own limits and phase-out.

Cost segregation is the related opportunity for real estate: a study reclassifies building components into shorter-lived categories, which can accelerate depreciation on a facility. Whether it makes sense depends on the building, the ownership entity and the owner's overall tax picture, so it should be evaluated on the company's circumstances rather than assumed.

Starting in 2026, catch-up contributions to 401(k), 403(b) and governmental 457(b) plans must be made on a Roth basis for participants age 50 and older whose prior-year FICA wages exceeded $150,000. Owners and spouses should confirm how the rule applies to their plan and payroll setup before year-end.

Retirement contributions are also a deduction decision: funding a plan before the deadline can reduce current taxable income while building the owner's wealth. The estate and gift exemption is $15 million per individual for 2026, indexed for inflation, which matters for owners doing estate and succession planning. As always, these rules are subject to individual circumstances and should be confirmed with an advisor.