Tax Law Center Blog

The passage of the OBBBA has fundamentally reshaped the federal tax environment, moving many previously temporary incentives into the permanent fabric of the tax code. Here are some critical tips for advising business clients in this new era.

1. Re-test Your QBI

The 20% Qualified Business Income (QBI) deduction for non-corporate taxpayers is now permanent. With relaxed phase-in thresholds for service businesses and a new minimum deduction for active business income, the math comparing C-corporations to pass-through entities has shifted. Practitioners should perform fresh modeling of after-tax owner income rather than relying on outdated pre-2026 scenarios.

2. Take Advantage of Revived and Enhanced Expensing

The 100% bonus depreciation deduction has been revived and made permanent for many equipment categories. Furthermore, the law restores immediate expensing for domestic Research and Experimentation (R&E) costs. Section 179 expensing limits are also significantly higher for smaller businesses beginning in 2026, making the timing of capital expenditures a primary tax lever once again.

3. Modernize 1099 and Worker Classification Practices

While information reporting thresholds have increased for certain forms, the underlying obligation to correctly classify workers remains absolute. With an increasing move toward e-filed, data-driven reporting, the IRS will find it easier to detect mismatches. Businesses should review independent contractor policies rather than simply issuing fewer forms.

4. Prepare for the Opportunity Zone Refresh

The Opportunity Zone (OZ) regime is now a permanent feature of the tax code, but existing designations expire at the end of 2026. New zones will be selected starting in mid-2026. Owners with appreciated assets must navigate this transition carefully, as the shift between old and new designations creates both significant risk and new opportunities for reinvestment.

5. Align Succession Planning with the New Federal Baseline

Current law provides a high federal estate-tax exemption paired with specific relief for closely held businesses. When combined with Qualified Small Business Stock (QSBS) rules, the potential for tax-efficient exits is immense. Owners should align their buy-sell agreements and equity incentive plans with these rules now to maximize the after-tax outcome of future transfers.