2026 Tax Changes: What U.S. Small Businesses Need to Review Before Year-End

1. 100% Bonus Depreciation Is Back

One of the most significant changes for businesses is the return of 100% additional first-year depreciation for qualifying property.

Under the new rules, qualifying property acquired and placed in service after January 19, 2025, may generally qualify for a 100% additional first-year depreciation deduction.

This can be particularly valuable for businesses purchasing:

• Computers and technology
• Machinery and equipment
• Furniture
• Certain business vehicles
• Manufacturing equipment
• Other qualifying depreciable property

The IRS has issued interim guidance explaining the changes to Section 168(k).

What should businesses do?

Before December 31, review major purchases made during 2026 and determine whether they qualify for bonus depreciation.

Businesses should maintain documentation showing:

• Purchase date
• Cost
• Date placed in service
• Type of property
• Business-use percentage
• Supporting invoices and receipts

Proper fixed-asset records are essential when preparing the year-end tax return.

2. Section 179 Deduction Should Be Reviewed

Businesses should also review their eligibility for the Section 179 deduction.

Section 179 can allow qualifying businesses to expense eligible property rather than depreciating the cost over several years, subject to applicable limitations and rules.

If your company purchased significant equipment or other qualifying assets during 2026, discuss the best treatment with your tax professional.

The key point is simple: do not wait until the tax return is prepared to identify major asset purchases.

Your accountant should review these purchases as part of year-end tax planning.

3. QBI Deduction Continues to Matter for Pass-Through Businesses

The Qualified Business Income (QBI) deduction remains an important consideration for eligible pass-through businesses.

This can potentially provide a deduction of up to 20% of qualified business income, subject to the applicable rules and limitations.

The 2026 tax changes also make the individual tax-rate structure that had applied before 2026 permanent, with inflation adjustments continuing to apply.

For owners of:

• Sole proprietorships
• Partnerships
• LLCs taxed as partnerships
• S corporations

year-end tax planning should include a review of business income, owner compensation, retirement contributions, and other factors that can affect taxable income.

4. The 1099 Reporting Threshold Has Changed

This is an important compliance change that small-business owners should not overlook.

For payments made after December 31, 2025, the federal information-reporting threshold under Section 6041 increased from $600 to $2,000.

The change also affects related reporting and backup-withholding rules.

Why does this matter?

Businesses that regularly pay independent contractors and vendors should review their payment records and vendor information.

Although the federal reporting threshold has changed, businesses should not simply stop collecting vendor information.

Keep accurate records of:

• Vendor names
• Addresses
• Taxpayer identification information
• Total payments
• Payment dates
• Nature of services
• W-9 documentation

Also remember that state reporting requirements may differ from federal requirements.

5. Review Your Research & Experimental (R&E) Expenses

Businesses that invest in research and development should pay particular attention to the changes involving research and experimental expenditures.

The 2026 IRS guidance addresses changes affecting domestic and foreign R&E expenses and provides information about elections, amended returns, and accounting method changes.

Some eligible small businesses may also have opportunities to apply the new domestic R&E rules to certain prior tax years.

If your company has significant R&E costs, speak with your tax professional before finalizing your 2026 return.

Potentially affected businesses may include companies involved in:

• Software development
• Engineering
• Product development
• Manufacturing
• Technology
• Scientific research

6. Review Your 2026 Estimated Tax Payments

One of the easiest ways for a profitable business to create a cash-flow problem is to underestimate quarterly tax payments.

Before year-end, compare:

2026 year-to-date income + expected fourth-quarter income

against:

Federal and state estimated tax payments already made

Business owners should review whether their current estimated payments are appropriate based on expected taxable income.

This is particularly important for owners receiving income through pass-through entities.

A year-end tax projection can help identify whether additional planning or estimated payments may be appropriate.

7. Reconcile Payroll Before December 31

Payroll is another area that deserves special attention before year-end.

Employers should reconcile:

• Federal income-tax withholding
• Social Security
• Medicare
• FUTA
• State unemployment taxes
• Employee benefits
• Retirement contributions
• Payroll liabilities

Make sure payroll records agree with the company’s general ledger.

The IRS 2026 fourth-quarter tax calendar includes important payroll deposit and filing deadlines, including the third-quarter Form 941 deadline and year-end payroll-related requirements.

A payroll reconciliation before year-end can help identify errors before W-2s and other year-end forms are prepared.

8. Review Employee Compensation and New Deduction Rules

The 2026 tax environment also includes new provisions affecting certain workers and compensation arrangements.

For example, the IRS provides guidance regarding new deductions related to qualified overtime compensation and tips.

Employers should review payroll systems and employee records to determine whether any new reporting or withholding considerations apply.

If your payroll provider or accounting system has not been updated for applicable 2026 rules, now is the time to review it.

9. Clean Up Your Books Before Year-End

Tax planning is only as good as the accounting records behind it.

Before December 31, small businesses should review:

Income

• Undeposited customer payments
• Accounts receivable
• Sales recorded in the wrong period
• Unusual revenue transactions

Expenses

• Missing receipts
• Vendor bills
• Credit-card transactions
• Business travel
• Vehicle expenses
• Insurance
• Professional fees

Balance Sheet

• Bank accounts
• Credit cards
• Loans
• Accounts receivable
• Accounts payable
• Fixed assets
• Payroll liabilities

A clean set of books makes tax preparation faster and can help your tax professional identify legitimate planning opportunities.

10. Review Business Vehicle and Mileage Records

For 2026, the IRS standard mileage rate for business use is 72.5 cents per mile.

If you or your employees use vehicles for business purposes, make sure mileage records are complete and supported.

A good mileage log should generally document:

• Date
• Starting location
• Destination
• Business purpose
• Business miles

Do not rely on estimates made several months later.

11. Review Business Losses

The rules concerning excess business losses are also important.

The OBBBA permanently extended the disallowance of excess business losses, with applicable thresholds indexed for inflation for tax years beginning after 2025.

Business owners expecting a significant loss should therefore avoid assuming that the entire loss will automatically reduce current-year taxable income.

A tax projection can help determine the potential impact before year-end.

12. Don’t Forget State and Local Taxes

Federal tax planning is only part of the picture.

Depending on where your business operates, you may also need to review:

• State income tax
• Franchise tax
• Sales tax
• Local business taxes
• State payroll taxes
• Unemployment tax
• Annual reports
• Multi-state filing requirements

This is particularly important for businesses selling online or operating in multiple states.

Federal tax changes do not automatically mean state tax rules have changed in the same way.

13. Prepare for 2027 Before December Ends

A good year-end review should not focus exclusively on 2026.

Use December to prepare your accounting system for 2027.

Review:

• Chart of accounts
• Vendor records
• Customer records
• Payroll setup
• Accounting software
• Fixed-asset schedules
• Tax registrations
• Sales-tax accounts
• Contractor W-9s
• Employee information

This can make January and tax season significantly easier.

2026 Small Business Year-End Tax Checklist

Before closing the books for 2026, consider completing the following checklist:

Reconcile all bank accounts

Reconcile business credit cards

Review accounts receivable

Review accounts payable

Record missing expenses

Review fixed-asset purchases

Evaluate bonus depreciation

Review Section 179 opportunities

Review QBI considerations

Recalculate estimated taxes

Reconcile payroll liabilities

Review contractor payments and W-9s

Prepare for 1099 reporting

Review mileage records

Review R&E expenses if applicable

Review state and local tax obligations

Prepare year-end financial statements

Create a 2027 accounting and tax plan

Final Thoughts

The 2026 tax year brings several important changes for U.S. small businesses. The most important step is not simply knowing that the rules changed—it is determining how those changes apply to your specific business.

Businesses should pay particular attention to depreciation, Section 179, QBI, contractor reporting, R&E expenses, estimated taxes, payroll reconciliation, and year-end bookkeeping.

Don’t wait until April to discover that an important tax-planning opportunity was missed.

September through December is an excellent time to review your books, project your tax liability, and make informed year-end decisions.

Need Help With Your 2026 Year-End Accounting?

Uniworld Network Solution helps U.S. businesses and accounting professionals with bookkeeping, payroll, tax preparation, financial reporting, and year-end accounting support.

From monthly bookkeeping and payroll reconciliation to 1099 preparation and tax-ready financial statements, our team can help keep your accounting organized and ready for tax season.

Contact Uniworld Network Solution today to schedule a 2026 year-end accounting review.