Top 3 Changes for Small Business Taxes in 2026

When tax rules change, even a little, the ripple effects can be big for small business owners. A higher deduction here or a new reporting rule there can affect cash flow, payroll decisions, and how confident you feel about the year ahead.

The challenge is separating what actually matters from what just sounds important. Not every headline-worthy tax update has a real impact on small businesses.

Below are three tax changes for 2026 that truly deserve your attention. These are the updates we see affecting real businesses, real payrolls, and real purchase decisions. Our goal is to help you understand what changed, why it matters, and what you should do next so there are no surprises at tax time.

100% Bonus Depreciation in 2026

Bonus depreciation has been a moving target over the past few years, causing confusion for many business owners. In 2026, this rule becomes much simpler again.

What Changed for 2026?

Bonus depreciation is 100% for qualifying property placed in service during 2026. This means eligible equipment purchases can be fully deducted in the year you put them to use.

This applies to many common business assets, including machinery, equipment, furniture, and certain vehicles. The key requirement is that the asset must be placed in service in 2026, not just purchased.

Why Business Owners Should Care

This change directly affects cash flow. A full deduction in the year of purchase reduces taxable income right away instead of spreading the deduction over several years.

For many businesses, this creates room to reinvest, hire, or simply keep more cash on hand during the year. It also gives owners more flexibility to time major purchases when the business actually needs them, rather than delaying investments for tax reasons.

We often see this benefit hit hardest in industries that rely on expensive equipment, such as:

• Restaurants upgrading kitchen equipment
• Contractors and trades investing in tools, trucks, or machinery
• Medical and professional practices purchasing technology or specialized equipment

Instead of waiting years to recover the cost through depreciation, business owners can now see the tax benefit immediately.

Planning Before You Buy Matters

While 100% bonus depreciation sounds simple, timing still matters. Buying equipment without understanding how it affects your overall tax picture can create unexpected results.

This is where a tax preview, as TMA provides, becomes valuable. Reviewing major purchases ahead of time helps you understand how deductions, cash flow, and payroll withholding all interact. Waiting until late December often limits your options and puts unnecessary pressure on decision-making.

No Tax on Some Tips and Overtime: What This Really Means

The phrase “no tax on tips and overtime” has generated a lot of attention, especially in service-based industries. Many business owners assume this change will create significant tax savings for the company. In reality, the impact looks a bit different.

Who Does This Actually Benefit?

This change primarily benefits employees, not employers.

For workers who earn tips or overtime pay, this update reduces or removes federal income tax on qualifying amounts. That means higher take-home pay for eligible employees.

This can help with day-to-day household cash flow and may improve employee satisfaction, especially in service-based industries.

For business owners, the direct tax impact remains limited, with most of the effect showing up in payroll reporting rather than overall tax savings.

What Doesn’t Change for the Business Owner

This update does not eliminate payroll taxes for employers. Businesses still pay their share of Social Security and Medicare taxes. Wage expense deductions also remain the same.

In most cases, this change does not lower the employer’s overall tax bill in a meaningful way. Instead, it changes how income is treated on the employee side.

That means business owners should view this update as a payroll and compliance adjustment, not a new opportunity for employer-side tax savings.

What Changes for Employers

The biggest effect for employers shows up in payroll reporting and compliance.

Payroll systems must properly track qualifying tips and overtime. Withholding calculations may change, and reporting accuracy becomes more important. Businesses that rely on manual payroll processes may feel this pressure more than those using modern payroll software.

Restaurants and hospitality businesses often ask if this change creates a new planning opportunity. For most, the answer is no. This rule focuses on employee benefits rather than employer tax savings.

That said, clear communication with your payroll support team helps prevent errors and confusion. Mistakes in reporting can create compliance issues later, even when the intent is good.

See our full article on what these changes mean for your business and employees.

Higher Mileage Rate for 2026

Mileage deductions remain one of the most overlooked tax benefits for small business owners. In 2026, the standard mileage rate increases again.

For businesses that rely on driving as part of daily operations, this higher rate can quietly add up to meaningful tax savings over the course of the year.

Updated Mileage Rate

The IRS standard mileage rate for business use rises to 72.5 cents per mile in 2026. That increase adds up quickly for businesses.

Who Should Pay Close Attention

This change matters most for businesses where travel plays a regular role, including:

• Service businesses traveling to customer locations
• Sales-driven teams meeting with prospects
• Owners using personal vehicles for business purposes

For these businesses, mileage deductions often represent one of the simplest ways to reduce taxable income. Even small improvements in tracking can produce meaningful deductions over the course of a year.

Common Mileage Deduction Mistakes

Despite the benefit, we see several common mistakes that limit or eliminate mileage deductions.

One frequent issue involves tracking commuting mileage. Driving from home to your regular office does not qualify as business mileage. Only travel between business locations or to job sites counts.

Another mistake involves double-dipping. Business owners must choose between deducting actual vehicle expenses or using the standard mileage rate. Running gas and repairs through the business while also claiming mileage deductions creates problems.

Poor or inconsistent tracking also causes issues. Estimating mileage at year-end rarely holds up. The IRS expects reasonable, timely records that show dates, destinations, and business purposes.

What Works Best

Using a mileage tracking app or a consistent log throughout the year provides the cleanest record. Whether you reimburse mileage monthly or at year-end, the key is consistency.

This approach makes it easier to support the deduction if questions ever come up and reduces the risk of missed or overstated miles.

Mileage deductions work best when you plan for them early instead of trying to recreate records later, which often leads to gaps, estimates, or deductions that cannot be supported.

What Small Business Owners Should Do Now

Tax rule changes do not require panic, but they do reward preparation. Small, intentional steps taken early in the year are often the difference between feeling confident at tax time and feeling rushed or surprised.

Here are a few practical steps to take now:

• Review how you track mileage and clean up any gaps
• Talk with your accountant or tax advisor before making large equipment purchases
• Confirm your payroll system can handle updated reporting requirements

Taking action now gives you more control and more options as the year unfolds. These steps help avoid last-minute stress, reduce the chance of missed opportunities, and make it easier to understand what is coming before it is time to file.

Don’t Let 2026 Tax Changes Catch You Off Guard

Owning and operating a small business already comes with enough complexity. Your taxes should not add to that burden or create uncertainty about your next move. When you understand what is coming, you can make decisions with confidence instead of reacting under pressure.

At TMA Accounting, we help business owners understand what to expect. Through proactive conversations and guidance, we support better decisions throughout the year rather than scrambling at the end or hoping everything works out.

If you’re considering a major purchase, reviewing payroll changes, or simply want clarity on how 2026 rules affect your business, now is the time to talk. Conversations today often prevent big surprises later.

Schedule a conversation with us. A little preparation now can save a lot of stress, time, and uncertainty down the road.

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