The 2026 Tax Changes Business Owners Are Still Missing: A Mid-Year Checkpoint 

Most business owners heard about the 2025 tax law once, in July of that year, and filed it under “handled.” Their accountant mentioned bonus depreciation, somebody forwarded an article about no tax on tips, and everyone moved on. 

The problem is that the law did not arrive all at once. It was written in layers. Some provisions applied to 2025 returns you have already filed. Several do not start until tax year 2026 — which means they are affecting you right now, in the year you are still able to do something about. A couple do not begin until 2027. 

If your understanding of this law stopped at the 2025 headlines, you are working from a partial map. There are roughly four months left in the year to fix that. 

The law arrived in layers 

Here is the sequencing, which is the part almost no coverage got right: 

Note the pattern. The 2025 layer was mostly things that put money in your pocket. The 2026 layer is mostly things that change how you have to behave — new reporting, a new floor on a deduction you were taking for granted, a credit you now have to formalize to claim. That is why it got less attention, and why it is the layer that catches people. 

Your interest deduction just got more generous, quietly 

This is the single most valuable change for asset-heavy and leveraged businesses, and almost nobody is talking about it. 

The limitation on deducting business interest caps your deduction at 30% of adjusted taxable income. What counts as adjusted taxable income has moved twice. Through 2021 it was computed on an EBITDA basis — you added depreciation, amortization and depletion back before applying the cap. From 2022 through 2025 those add-backs went away, leaving a stricter EBIT measure and a much smaller allowance. 

For tax years beginning in 2026, the EBITDA basis is back. If you carry real debt against depreciable assets, your allowable interest deduction just grew, in some cases substantially. The IRS refreshed its guidance on the limitation on 19 August 2026. 

What to do: pull your disallowed interest carryforward — if you have been bumping against the cap, there almost certainly is one — and model 2026 under the new computation. You may be able to absorb carryforwards you had written off as stranded. Separately, businesses under the gross receipts threshold are exempt from the limitation altogether; if you have grown recently, confirm which side of the line you are now on, because the test uses a three-year average. 

Charitable giving got more expensive to do casually 

Three changes landed together for tax years beginning in 2026, and they compound. 

A floor. Itemised charitable contributions now only count above 0.5% of your adjusted gross income. At $2 million of AGI, the first $10,000 you give produces no deduction at all. 

A cap. For taxpayers in the top bracket, the benefit of itemized deductions is capped at 35 cents on the dollar rather than the full marginal rate. 

And a new deduction for people who do not itemize — up to $1,000 on a single return and $2,000 on a joint return. Unlike the four temporary deductions below, this one is permanent. 

What to do: bunch. Two years of giving pushed into one tax year clears the floor once instead of twice, and a donor-advised fund lets you do that without asking your charities to live on an irregular schedule. If you were planning to give roughly the same amount in 2026 and 2027, deciding that now is worth real money. We will publish a dedicated piece on the mechanics shortly. 

The paid leave credit is permanent now, and you can claim it on premiums 

The employer credit for paid family and medical leave used to be a temporary provision that Congress renewed in fits and starts, which made it nearly useless for planning. Beginning in 2026 it is permanent and meaningfully wider. 

The credit runs from 12.5% to 25% of wages paid to a qualifying employee for up to 12 weeks of family or medical leave per year. Three things changed: employees now qualify after six months of service rather than a full year; part-time employees who customarily work 20 or more hours a week count; and — this is the new one — you can claim the credit against insurance premiums for a paid family and medical leave policy, not only against wages you paid directly. Notice 2026-28 covers how to compare the premium and wage methods and how to elect between them. 

What to do: if you already carry a policy, or if you have been granting paid leave informally because it is the decent thing to do, there may be a credit sitting on the table that you have never claimed. It requires a written policy. That is a short document and a real credit. 

Your payroll system has new jobs this year 

This is the change most likely to create an unpleasant January if it gets missed. 

Starting in 2026, employers must separately report qualified overtime compensation — on Form W-2 in box 12 using code TT, or on Form 1099-MISC box 14 or Form 1099-NEC box 1d where those apply. You report the full amount of qualified overtime you paid, even where it exceeds what the employee is allowed to deduct. Tips carry parallel reporting. Employees cannot claim a deduction they cannot substantiate, so if your payroll provider is not coding this correctly, your team loses the benefit and you field the complaints. 

Two other reporting changes worth knowing. The information reporting threshold for Forms 1099-NEC and 1099-MISC rises from $600 to $2,000 for payments made after 31 December 2025, indexed after that — fewer forms for most businesses. And Form 1099-K reverted to the older, much higher threshold: more than $20,000 in payments and more than 200 transactions. 

What to do: one phone call to your payroll provider, before Q4, asking specifically whether tips and qualified overtime are being tracked and coded for year-end reporting. If the answer is vague, get it in writing. 

Trump Accounts: a benefit almost nobody has set up 

Employers may contribute up to $2,500 a year to an employee’s Trump Account, or to the account of an employee’s dependent. Treasury and the IRS issued proposed regulations on employer contributions and on eligible investments in late August 2026; comments close 25 September and a public hearing is scheduled for 15 October. 

The requirements look like a small benefit plan, because that is what this is. It has to be a separate written plan maintained for the exclusive benefit of employees, and it is subject to nondiscrimination rules — you cannot skew the contributions toward highly compensated employees, and that includes yourself. Separately, children born between 2025 and 2028 are eligible for a $1,000 pilot contribution, elected on Form 4547 through the IRS Individual Online Account. 

What to do: treat this as a benefits-design question rather than a tax question, and price $2,500 per employee against the other places that money could go — a 401(k) match, an HSA contribution, a QSEHRA. Being early here is cheap, and it is a genuinely differentiated thing to offer. A full piece on the employer side is coming next. 

The four deductions your employees are going to ask you about 

Four new personal deductions came out of this law, and as the owner you are the person your staff will ask. Worth knowing the shape of them even where you phase out yourself. 

• Tips — up to $25,000 a year for workers in tipped occupations. 

• Overtime — up to $12,500 per return, $25,000 on a joint return, phasing out above $150,000 of modified AGI for single filers and $300,000 joint. 

• New vehicle loan interest — up to $10,000 a year. New vehicles only, final assembly in the United States, gross vehicle weight rating under 14,000 pounds. Leases do not qualify. 

• An enhanced senior deduction — up to $6,000 for taxpayers 65 and over, $12,000 for a couple where both qualify. 

All four are available whether or not the taxpayer itemizes, all are subject to income phaseouts, and all four are temporary — they run for tax years 2025 through 2028. They are claimed on Schedule 1-A, a new form that attaches to the 1040. 

One thing worth passing along to your team: the IRS has now published several separate warnings about scams built around this law, including fake “deduction calculators” that promise guaranteed refunds in exchange for Social Security numbers and bank details. A new deduction with a memorable nickname is excellent bait. Tell people to use IRS.gov or established software and nothing else. 

What did not change, and is still worth re-checking 

Several provisions were made permanent rather than altered, which is easy to read as “nothing to do here.” Usually there is. 

• 100% bonus depreciation is permanent for qualifying property acquired after 19 January 2025. That changes the timing calculus on equipment purchases — there is no longer a phase-down to race. 

• Section 179 expensing sits at a substantially higher, inflation-indexed limit. Confirm the current-year figure before you rely on it. 

• The 20% qualified business income deduction is permanent, with wider phase-in ranges. Permanence is what makes multi-year entity planning worth doing at all. 

• Domestic research expensing under Section 174 is restored. If you capitalized and amortized domestic research costs in 2022 through 2024, ask whether an amended return or a catch-up deduction is available to you. This is the most commonly missed money in the entire law. 

• The higher SALT cap phases down above $500,000 of modified AGI — which quietly changes whether a pass-through entity tax election still helps you. Worth re-running rather than assuming. 

Your Q4 checkpoint list 

Eight things, in rough order of how much money is usually attached: 

1. Ask your payroll provider, in writing, whether tips and qualified overtime are being coded for year-end reporting. 

2. Pull your disallowed business interest carryforward and model 2026 under the EBITDA computation. 

3. Ask whether Section 174 opens an amended return for 2022 through 2024. 

4. Decide your 2026 charitable giving before December, and consider bunching two years into one. 

5. Put a written paid family and medical leave policy in place if you have been offering leave informally. 

6. Re-run the pass-through entity tax decision against the new SALT cap. 

7. Price a Trump Account contribution against your other benefit dollars. 

8. Confirm your entity structure still fits, now that QBI permanence makes the long-run comparison meaningful. 

None of these takes long individually. All of them get harder after 31 December. 

Frequently asked questions 

Is this the same law as the One Big Beautiful Bill? 

Yes. The IRS now generally refers to these provisions as the Working Families Tax Cuts, and you will see both names in circulation — including on IRS pages. It is one law, Public Law 119-21, enacted in July 2025. 

Do I need to amend my 2025 return? 

Possibly. The two most common candidates are domestic research expensing under Section 174 and bonus depreciation on property acquired after 19 January 2025. Both are worth a specific look rather than a general assumption. 

Are the tips and overtime deductions permanent? 

No. Those two, along with the vehicle loan interest and senior deductions, apply for tax years 2025 through 2028. The new charitable deduction for non-itemizers is permanent. 

My business is small. Does the interest limitation apply to me? 

There is a gross receipts exception, and businesses under the indexed threshold are exempt from the limitation entirely. Confirm rather than assume, because the test uses a three-year average and a good couple of years can move you across the line without anyone noticing. 

Where do employees claim the new deductions? 

On Schedule 1-A, Additional Deductions, which attaches to Form 1040, 1040-SR or 1040-NR. They do not need to itemize to use it. 

What if my accountant has not raised any of this? 

That is common, and it is not necessarily a criticism. Preparing a return and planning around a law are different jobs, and the 2026 layer of this law is mostly a planning problem — the kind that only shows up on a return after the year in which you could have done something about it. 

Where to start 

If you do one thing after reading this, make it the payroll call. It is the item with a hard deadline, it affects every employee you have, and it is the one that generates a mess rather than a missed opportunity if it slips. 

Then work the rest of the checkpoint list, in order, before December. The 2026 layer of this law is still fully in play. In January most of it will not be.