Why it matters

The One Big Beautiful Bill Act (OBBBA), signed into law in July 2025, made sweeping changes to the federal tax code, including numerous provisions affecting businesses. While some of the law’s changes took effect in 2025, others become effective for tax years beginning in 2026. 

With 2026 year-end tax planning underway, now is a good time to review the OBBBA provisions that may affect your business. Here are some of the most significant ones:

Expanded phase-in ranges for QBI Deduction income limits

The Section 199A qualified business income (QBI) deduction applies to sole proprietors and owners of pass-through entities and generally equals 20% of QBI, subject to a limit of 20% of taxable income. 

Additional limits may apply if taxable income for the year exceeds the applicable threshold. One limit is that the deduction isn’t allowed to exceed the greater of the owner’s share of:

• 50% of the amount of W-2 wages paid to employees by the qualified business during the tax year, or
• The sum of 25% of W-2 wages plus 2.5% of the cost (not reduced by depreciation taken) of qualified property.

Under the OBBBA, beginning in 2026, instead of the distance from the threshold to the top of the phase-in range (the amount at which the limit fully applies) being $50,000, or, for joint filers, $100,000, it’s $75,000, or, for joint filers, $150,000. This will allow larger deductions for some taxpayers. 

For 2026, the phase-in ranges are:

• $403,500 to $553,500 for married couples filing jointly (up from $394,600 to $494,600 for 2025), and
• $201,750 to $276,750 for all other taxpayers (up from $197,300 to $247,300 for 2025). 

The threshold amounts will continue to be annually adjusted for inflation.

Starting in 2026, the OBBBA also introduces a new inflation-adjusted minimum QBI deduction of $400 for taxpayers with at least $1,000 of QBI from one or more active businesses in which they materially participate. 

Reduced threshold for Excess Business Loss limitation

Beginning in 2026, taxpayers experiencing business losses may be able to immediately deduct less of those losses. The deduction for current-year business losses incurred by a noncorporate taxpayer generally can offset income from other sources, such as salary, self-employment income, interest, dividends and capital gains only up to the annual limit. “Excess” losses are carried forward to later tax years and can then be deducted under the net operating loss (NOL) rules.

The OBBBA makes the excess business loss limitation permanent and reduces the threshold at which it takes effect. For 2026, the threshold generally is $256,000, down from $313,000 for 2025. (Those amounts are double for joint filers.) The threshold will be adjusted annually for inflation.

Bottom line: Affected business owners will have to carry forward more of their losses and deduct them in future years under the NOL rules.

Enhanced Breaks for Certain Employee Benefits

If your business offers paid family and medical leave or employer-provided childcare to employees with eligible dependents, you could benefit from expanded credit opportunities.

Paid family and medical leave credit. The OBBBA made this credit permanent. Starting in 2026, it gives employers the option to claim the credit for either 1) wages paid to qualifying employees on leave, or 2) insurance premiums paid or incurred for policies that provide paid family and medical leave.

Employer-provided childcare credit. This incentive has been significantly enhanced. Beginning in 2026, the maximum credit increased from $150,000 to $500,000 ($600,000 for eligible small businesses). The credit rate for qualified childcare expenditures also increased from 25% to 40% (50% for eligible small businesses), and additional arrangements may now qualify for the credit. 

For 2026, eligible small businesses generally must have average annual gross receipts of no more than $32 million over the preceding five years. This threshold is adjusted annually for inflation.

Expired Tax Incentives

The OBBBA accelerated the expiration of clean energy tax breaks that may affect businesses. The Section 179D energy-efficient commercial buildings deduction, which generally applies to qualifying improvements to lighting, HVAC and building-envelope systems, won’t be available for property that begins construction after June 30, 2026. In addition, the Section 30C alternative fuel vehicle refueling property credit ends for qualifying property placed in service after June 30, 2026. This credit may apply to electric vehicle charging stations and certain alternative-fuel refueling equipment installed in eligible locations. 

Important: Businesses with qualifying projects completed or underway by the applicable deadline should determine whether they remain eligible to claim these tax benefits.

The OBBBA didn’t address the Work Opportunity Tax Credit, which provided tax incentives for hiring veterans and other workers from certain “target” groups. This break expired on December 31, 2025, so it isn’t available for 2026 unless Congress passes legislation to extend it retroactively. 

Let’s discuss your options

With several tax provisions taking effect or expiring in 2026, on top of the significant changes that began in 2025, businesses have plenty to consider as they plan for year end. The IRS also issued updated guidance throughout the year, clarifying various OBBBA provisions.