The 2026 Small Business Tax Strategy: Maximizing Deductions in the Post-TCJA Sunset Era
We independently evaluate products. Consult a CPA or tax advisor. Data as of February 2026.
The Tax Cuts and Jobs Act (TCJA) sunsets after 2025. The 20% Qualified Business Income (QBI) deduction for pass-through entities disappears. Bonus depreciation drops from 60% (2024) to 40% (2025) to 20% (2026). For high-earning business owners, the QBI loss alone can mean hundreds of thousands in extra tax. This guide outlines strategies to maximize deductions before the cliff.
| Provision | 2025 | 2026+ | Action |
|---|---|---|---|
| QBI deduction | 20% (pass-through) | Expires | Accelerate income into 2025 |
| Bonus depreciation | 40% | 20% | Front-load equipment buys |
| Corporate rate | 21% | 21% (permanent) | No change |
| Section 179 | Available | Available | Plan equipment timing |
QBI Deduction: Use It Before It’s Gone
The 20% QBI deduction applies to S-corps, partnerships, LLCs, and sole proprietorships. It phases out at higher incomes. If you qualify, consider accelerating income into 2025 to maximize the benefit.
Bonus Depreciation: Front-Load Equipment Purchases
Bonus depreciation is phasing down. Buying equipment in 2025 allows 40% first-year deduction; 2026 drops to 20%. Plan capital expenditures accordingly.
Planning Strategies
Accelerate income where possible; defer expenses into 2026 if rates rise. Consider entity structure changes—e.g., C-corp vs. pass-through. Congress may extend some provisions—monitor legislation. Work with a CPA to model scenarios.
Entity Structure Considerations
With QBI expiring, the pass-through advantage diminishes. Some businesses may consider converting to C-corps to lock in the permanent 21% rate. Run the numbers—state taxes, double taxation on dividends, and individual brackets all matter.
Frequently Asked Questions
When does the QBI deduction expire? After tax year 2025.
Is the 21% corporate rate permanent? Yes; it does not expire.
Should I buy equipment in 2025 or 2026? 2025 offers better bonus depreciation (40% vs 20%).
Will Congress extend TCJA provisions? Possible; the incoming administration may push for extensions. Plan for expiration but stay informed.
What is Section 179? Allows immediate expensing of equipment purchases up to a limit; remains available after TCJA sunset.
Bottom Line
Act before year-end 2025. Maximize QBI and bonus depreciation while they last. Consult IRS guidance and a tax professional. Tax software: TurboTax, H&R Block.
