Tax law changes are part of doing business. Some years the updates are minor. In early 2026 there are several changes that can affect how much tax you owe and how you should plan for the year. Knowing these updates now helps you reduce your tax bill and avoid surprises.
This guide breaks down what changed, what it means for your business, and what steps you should take. It is written for small business owners in Chicago and beyond who want clear, practical tax guidance.
What Changed in the Tax Code for 2026
In late 2025 and early 2026, Congress passed a set of tax law changes that affect individuals and businesses. Some of these changes were part of what people have called the One Big Beautiful Bill. These changes make some old rules permanent and introduce new ones that could benefit small businesses.
Here are the main updates you should know:
Higher Standard Deductions and Adjusted Brackets
The standard deduction and tax brackets for 2026 were adjusted for inflation. This means many small business owners will keep more of their income before paying tax. Larger deductions can lower your overall tax burden if you itemize or file as a pass-through owner.
Even if you do not itemize, the higher standard deduction can still reduce taxable income and make planning easier.
New and Expanded Tax Credits
A few tax credits were expanded to provide more benefit for small employers:
- Childcare tax credit: Eligible small businesses can claim a larger credit for providing childcare benefits to employees. This change can reduce your tax bill if you offer or plan to offer childcare support.
- Paid leave credits: Credits for offering paid family and medical leave were extended and made easier to claim.
These credits can put real money back in your business if you qualify.
Important Deductions and Provisions
Some of the most useful parts of the tax code for small business owners are deductions that reduce taxable income. Here are the key ones for 2026.
Bonus Depreciation
Bonus depreciation allows you to write off a large portion of the cost of certain business property in the year you buy it. For 2026, bonus depreciation is back at 100 percent and made permanent.
What this means for you: if you buy qualifying equipment, machinery, furniture, or certain other assets, you can deduct the full cost in the same year you place them into service instead of spreading the cost over many years.
This can improve your cash flow and reduce taxes when you make big purchases.
Section 179 Expensing
Section 179 lets you deduct the cost of certain business property in the year you buy it, up to a limit. In 2026 the limit remains high, giving small business owners the chance to expense more of their purchases right away.
Section 179 applies to a range of assets such as:
- Computers and office equipment
- Vehicles used for business
- Software
- Certain qualified improvements to buildings
This deduction works well with bonus depreciation. If Section 179 does not cover the full cost, bonus depreciation can help fill the gap.
Qualified Business Income Deduction
The Qualified Business Income (QBI) deduction allows many small business owners to deduct up to 20 percent of their business income from their taxable income. The recent tax law made this deduction more secure and clarified some rules that had been changing year to year.
For example, owners of LLCs, S-corporations, and partnerships may benefit from this deduction if they meet the requirements.
Research Expense Deduction
The ability to expense domestic research costs immediately was restored. This return to immediate expensing makes it easier for companies doing research and development to reduce their taxable income rather than depreciate those costs over time.
If your business invests in product or process improvement, this change can lower your taxes in the year you spend money on those activities.
How These Changes Affect Your Business
Understanding tax law changes is one thing. Knowing what they mean for your business is what matters.
Here are the practical ways the 2026 updates affect small business finances:
Better Cash Flow Planning
With higher deductions and credits, you may have more flexibility in planning your cash flow. For example, being able to fully expense equipment can reduce taxable income and free up cash for other needs.
Some business owners delay purchases to a later tax year. Others accelerate spending if they expect higher income. Talk with your tax advisor to choose the best timing.
Payroll and Benefits Updates
The changes to tax credits around childcare and paid leave mean it pays to review your benefits plans. If you offer qualifying benefits, make sure your payroll system accounts for these credits correctly. You might be able to claim larger credits than before.
Entity Structure Decisions
Tax law changes can influence whether your business should operate as an LLC, S-corporation, or C-corporation. For example, the QBI deduction only applies to pass-through entities like LLCs and S-corporations. If your income exceeds certain thresholds, structuring your business differently might reduce your tax bill.
This is not a one-size-fits-all choice. It depends on your income level and long-term goals. A tax professional can help you weigh the options.
Withholding and Estimated Payments
If your business pays owner salaries or estimated taxes, updated withholding tables will change how much you need to set aside. Check your payroll settings and estimated tax payments early in the year. Under withholding can lead to penalties.
Action Steps for Small Business Owners
Here are concrete steps to take now, before you file your 2026 taxes.
- Review Your 2025 Financials. Use your year-end profit and loss statement to project your 2026 income and tax liability.
- Plan Major Purchases. If you are buying equipment or software this year, calculate whether to buy in 2026 to take full advantage of bonus depreciation and Section 179 expensing.
- Evaluate Benefits and Credits. Look at your benefits offerings and see if you can qualify for expanded credits like childcare or paid leave.
- Update Payroll Settings. Make sure your payroll provider is using the latest withholding tables and credit calculations.
- Talk to a Tax Professional. Tax law changes can be complex. Planning ahead with someone who knows your business can avoid costly mistakes.
Keeping good records is always important. But in years with major tax updates, good documentation makes it easier to claim all the deductions and credits you qualify for.
Conclusion
The tax changes in early 2026 bring both opportunities and challenges for small business owners. Some updates, like higher deductions and expanded credits, can reduce your tax bill. Others require planning to avoid surprises.
The key is to review your financial situation early, plan strategically, and adjust your tax planning for these new rules.
If you take action now, you can make more informed decisions that support your business goals.
How Aced Accounting Can Help
At Aced Accounting, we help small business owners manage accounting, bookkeeping, and tax planning so they are prepared for changes like the ones in 2026. We work with businesses in Chicago and beyond to simplify financial reporting and make tax time less stressful.
If you want help with:
- Tax planning and compliance
- Bookkeeping and payroll
- Year-end preparation and consulting
- Taking full advantage of deductions and credits
we can guide you every step of the way. You can learn more about our tax planning services and bookkeeping services.
Getting ahead on your tax planning now can save time and money later. Contact Aced Accounting for a review of your 2026 tax strategy and a simple plan for action.
