The One Big Beautiful Bill Act (OBBBA), signed into law in July 2025, brings several important federal tax changes for 2026. Taxpayers should review these updates now to identify potential tax savings and prepare for the year ahead.
Here are a few key changes to know:
- New Charitable Deduction: Beginning in 2026, taxpayers who take the standard deduction may deduct qualifying cash donations to eligible charities up to $1,000 for single filers or $2,000 for married couples filing jointly. Donations to donor-advised funds and certain other organizations do not qualify.
- Updated Mileage Rates: For business driving, the standard mileage rate is 72.5 cents per mile from January 1 through June 30, 2026, and 76 cents per mile from July 1 through December 31, 2026. The charitable mileage rate remains 14 cents per mile. Keep accurate mileage logs and records.
- Updated Subcontractor 1099 Reporting Threshold: For payments made in 2026, the Form 1099-NEC and 1099-MISC reporting threshold rises from $600 to $2,000. Please make sure you have a signed Form W-9 on file for every contractor you paid $2,000 or more, and get any missing ones now, while the contractor still wants to hear from you. Forms 1099-NEC are also due February 1, 2027.
- 100% Bonus Depreciation: Eligible businesses may be able to deduct the full cost of qualifying property acquired and placed in service after January 19, 2025, subject to IRS rules.
- Permanent 20% QBI Deduction: The Qualified Business Income deduction for eligible pass-through businesses is now permanent, subject to applicable limitations.
- Higher Section 179 Deduction: The deduction limit increased to $2,560,000, with a phaseout beginning when qualifying property placed in service exceeds $4,090,000, subject to applicable rules.
Plan Ahead and Maximize Opportunities
These changes may create opportunities to reduce taxable income, but the benefits depend on your business structure, income, and eligibility. Review your records, track mileage, document charitable contributions, and discuss equipment purchases and year-end tax strategies with your accountant.
Don't wait until tax season! A proactive tax planning review can help you understand which 2026 changes apply to you and prepare for a smoother filing season.