8 tax moves for small business owners

1. Make sure your quarterly tax payments keep up

What changed: Several tax provisions have increased, some permanently. If you haven’t updated your estimated tax payments, you could be overpaying or not paying enough. Look at the OBBBA’s qualified business income (QBI) deduction and 100% bonus depreciation, which we’ll cover next. 

Action: Ask your tax advisor if you should adjust your final payment for 2026 and your 2027 payment schedule.

2. Lower your taxable income

What changed: The qualified business income deduction is now permanent. You may be able to deduct up to 20% of QBI—your share of the business’s net profit—from your federal tax return. The deduction applies to sole proprietorships, partnerships, and S corporations. It does not apply to C corporations.

Action: If your income, retirement contributions, or business structure changed this year, ask your tax advisor how it could affect your QBI deduction. Higher incomes could limit the deduction, which is especially important for service-oriented businesses, such as law, accounting, consulting, healthcare, or financial services.

3. Plan equipment purchases before year-end

What changed: The 100% bonus depreciation is back. You may be able to deduct the cost of eligible equipment, machinery, and software this year instead of spreading it over several years. The OBBBA also increased the Section 179 expensing limit, so businesses can immediately expense qualifying property (subject to annual limits).

Action: Don’t purchase equipment just to get a tax break. But if you’re already planning to buy, ask your tax advisor to compare bonus depreciation, Section 179, and regular depreciation to determine which approach makes the most sense for your business and whether the timing of your purchase matters.

4. See if your business qualifies for the R&D deduction

What changed: Businesses can deduct research and development costs in the same year instead of spreading it over 5 years.

Action: Don’t think your business does R&D? Ask anyway. For tax purposes, R&D covers developing a new product, improving a workflow, or building a custom tool. So it’s possible for your business to qualify for the deduction.

5. Update your contractor reporting process

What changed: The reporting threshold increased from $600 to $2,000 for certain Forms 1099-NEC and 1099-MISC.

Also, the reporting threshold for Form 1099-K has gone back to prior levels: transactions that exceed $20,000+ in gross payments and 200+ transactions. This applies to third-party payment platforms like PayPal, Venmo, Etsy, and Stripe.

Action: Make sure your bookkeeping reflects the new thresholds before the end of the year. Note: Even if you don’t issue 1099s, you’ll still need to report these payments.

6. Check for employee-related tax credits

What changed: The employer credit for paid family and medical leave is now permanent. You can calculate it using the qualifying wages paid during leave or using certain insurance premiums.

Also, employer-provided childcare is now eligible for a credit equal to 50% of qualified expenses, up to $600,000.

Action: Ask if your business qualifies for credits you haven’t used before and whether to use wages or insurance premiums in your calculation.

7. Understand state and local taxes

What changed: The state and local tax (SALT) deduction increased to $40,000 through 2029 then reverts permanently to $10,000. Note: The pass through entity tax is still available in some states. You may want to explore a planning strategy now for the $10,000 permanent cap in 2030.

Action: Ask your tax advisor if a PTET election makes sense for your business before the cap drops in 2030.

8. Ask what else to consider before December 31

Cover anything else that may affect your tax obligation. For example, the OBBBA reduced or eliminated certain clean energy credits. You’ll also find stricter rules around foreign ownership, investment, lending, and equipment sourcing from certain countries. New tax laws aren’t the only reason to revisit your tax strategy. Talk to your tax advisor about changes in revenue, staffing, structure, ownership, or debt, too.

Action: Ask if provisions you’ve used in previous years are still available and if changes to your business will affect you at tax time.

How Flagstar can help

If your business uses Flagstar Corporate Connect, you can create a view-only account for your tax advisor. This allows them to review data and run reports without making changes.