Tax law changes every year. Most of the coverage focuses on individual brackets and standard deductions — the stuff that affects everyone. Less attention goes to the changes that specifically affect small business owners, S-Corp operators, and self-employed people.
Here’s what actually matters for your situation in 2026.
Retirement Contribution Limits Went Up
This one directly affects your tax bill and most people don’t know the new numbers.
Solo 401k contributions — the most powerful retirement tool available to self-employed business owners — can reach $72,000 in 2026 for owners under 50. That’s the combined employee and employer contribution limit. The employee contribution portion alone is $24,500. If you’re 50 or older, catch-up contributions push those numbers higher.
SEP IRA contributions are capped at 25 percent of compensation — roughly 20 percent of net self-employment income for sole proprietors — up to $72,000.
Every dollar you contribute to either of these reduces your taxable income by the same amount. A business owner in the 22 percent federal bracket who contributes $30,000 to a solo 401k saves $6,600 in federal income tax — plus reduces the income subject to self-employment tax. The combined savings often significantly exceed the contribution itself as a percentage of what was invested.
Most small business owners contribute far less than they’re eligible to. The mid-year conversation about retirement contributions is worth having while there’s still income coming in to fund them.
Standard Mileage Rate
If you deduct vehicle use for business, the standard mileage rate for 2026 is 72.5 cents per mile for business driving — a flat rate for the full year, up 2.5 cents from 2025.
For an owner-operator trucking business or any business with significant driving, this adds up fast. 20,000 business miles at 72.5 cents is a $14,500 deduction — but only if you have a mileage log that documents the business use. The IRS takes mileage deductions seriously and the documentation requirement is real.
If you’re not keeping a mileage log, start now. A simple app that records trips automatically is sufficient. The deduction is worth capturing but not worth claiming without documentation.
Some of these changes only help if you act before the year closes. Find out which ones apply to your business.
Bonus Depreciation Is Back to 100 Percent
This one catches business owners off guard because it had been declining — and the 2025 law reversed that.
Bonus depreciation — which allows you to immediately deduct a percentage of the cost of qualifying equipment and assets in the year they’re placed in service — is 100 percent for qualifying property acquired and placed in service after January 19, 2025. The One Big Beautiful Bill Act, signed July 4, 2025, made that rate permanent, reversing the phase-down scheduled under the 2017 tax law that would have cut it to 20 percent in 2026 and zero in 2027. Property acquired on or before January 19, 2025 still follows the old phase-down rates.
Section 179 expensing — a separate but related provision — still allows full first-year expensing of qualifying business assets up to $2,560,000 in 2026, under the higher limit set by the One Big Beautiful Bill Act. For most small businesses, Section 179 is the more relevant tool.
If you’re planning a major equipment purchase, understanding the interaction between Section 179 and bonus depreciation — and whether to make the purchase this year versus next — is a conversation worth having with your accountant before you write the check.
The QBI Deduction Is Still Available
The Qualified Business Income deduction — Section 199A — allows eligible pass-through business owners to deduct up to 20 percent of qualified business income from their federal taxable income.
On $100,000 of qualifying income that’s a $20,000 deduction — saving roughly $4,400 in federal income tax at the 22 percent bracket. It’s one of the most valuable deductions available to small business owners and one of the most frequently miscalculated on self-prepared returns.
The deduction has income phase-outs and limitations for certain service businesses at higher income levels. If you’re a service business owner — consultant, accountant, attorney, financial advisor — and your taxable income is above the annual threshold for your filing status — adjusted for inflation each year — the deduction starts to phase out. Understanding whether and how much of the deduction you qualify for requires looking at your specific numbers.
Reasonable Compensation Scrutiny Hasn’t Let Up
This isn’t a new law change but it’s worth flagging because the IRS enforcement pattern has continued.
S-Corp owners who pay themselves a salary significantly below what their role would command in the open market remain an audit target. The IRS views distributions as a way to avoid payroll taxes and will reclassify them as wages if they determine the salary was unreasonably low.
If you elected S-Corp status to save on self-employment tax but haven’t revisited what your reasonable salary should be — based on industry data for your role, your revenue, and your hours — that analysis is worth doing. The tax savings of an S-Corp are real. The audit risk of an unreasonably low salary is also real. Getting the balance right requires knowing where the IRS draws the line for your industry and income level.
What to Do With This Information
Tax law changes are only useful if they affect how you actually make decisions.
The retirement contribution limits are an opportunity — if you increase your contributions before year end, you pay less tax this year. The mileage rate matters if you’re driving for business and not tracking it. The bonus depreciation change matters if you’re planning a major purchase. The QBI deduction matters if you’re calculating it yourself and getting it wrong.
Each of these has a specific action attached to it. The question is whether those actions happen before December 31 — when they can still reduce your tax bill — or in April, when they can’t.
The business owners who benefit most are the ones who know about these opportunities while there's still time to use them. So we review the changes with small business clients throughout the year — not just when it's time to file.