Top 10 Tax Changes for Business Taxpayers in 2026
The 2026 tax year marks one of the most significant transitions for business taxpayers in recent memory. Many provisions enacted under the One Big Beautiful Bill Act (OBBBA) are now fully effective, bringing permanent changes to business deductions, depreciation rules, international taxation, foreign tax credits, and compliance requirements.
From enhanced Section 199A benefits and permanent bonus depreciation to sweeping international tax reforms affecting Controlled Foreign Corporations (CFCs), businesses should review these developments carefully when planning for 2026 and beyond.
1. Enhanced and Permanent Section 199A Deduction
The Qualified Business Income (QBI) deduction under Section 199A is now permanent for eligible owners of:
- Sole proprietorships
- Partnerships
- S corporations
- Certain trusts and estates
The deduction generally remains equal to 20% of qualified business income.
Expanded Phase-In Thresholds
For taxable years beginning after December 31, 2025:
- Individual phase-in range: $75,000
- Joint return phase-in range: $150,000
These expanded thresholds allow more taxpayers to benefit before the W-2 wage and qualified property limitations fully apply.
New Minimum Deduction
The OBBBA introduced a new minimum deduction provision.
Taxpayers who:
- Materially participate in an active qualified trade or business, and
- Have aggregate QBI of at least $1,000
may claim the greater of:
- Their calculated Section 199A deduction, or
- A minimum deduction of $400
Why It Matters
The permanent extension, larger phase-in ranges, and minimum deduction create additional planning opportunities for pass-through businesses.
2. Permanent 100% Bonus Depreciation
Section 168(k) now permanently allows 100% bonus depreciation for qualified property acquired after January 19, 2025.
Eligible assets generally include:
- Machinery
- Equipment
- Technology assets
- Qualified business-use property
Why It Matters
Businesses can immediately recover the full cost of qualifying investments rather than depreciating them over multiple years.
3. New 100% Expensing for Qualified Production Property
The OBBBA created Section 168(n), providing a 100% deduction for certain nonresidential real property used in qualified production activities.
Qualified production activities generally include:
- Manufacturing
- Production
- Refining of tangible personal property
To qualify:
- Construction generally must begin after January 19, 2025.
- The property generally must be placed in service before January 1, 2031.
Why It Matters
Manufacturers and industrial businesses may benefit from accelerated deductions on facility investments.
4. Immediate Deduction for Domestic Research Expenditures
Section 174A allows businesses to immediately deduct domestic research and experimental expenditures.
Examples include:
- Product development
- Software development
- Engineering research
- Manufacturing process improvements
Foreign Research Remains Different
Foreign research expenditures generally must continue to be amortized over 15 years.
Why It Matters
Businesses investing heavily in innovation may significantly improve cash flow through immediate deductions.
5. More Favorable Business Interest Deduction Rules
The OBBBA permanently restored the EBITDA-based calculation for Section 163(j).
Adjusted Taxable Income (ATI) once again includes:
- Depreciation
- Amortization
- Depletion
when calculating interest deduction limitations.
Additional Changes
ATI now includes certain foreign inclusions and related deductions.
Why It Matters
Businesses with significant debt financing may qualify for larger interest deductions.
6. Section 179 Expensing Limits Increased
The OBBBA expanded Section 179 expensing opportunities.
For property placed in service in taxable years beginning after 2024:
- Maximum Section 179 deduction: $2.5 million
- Phaseout threshold: $4 million
These amounts remain subject to future inflation adjustments.
Why It Matters
Small and mid-sized businesses can accelerate deductions for qualifying asset purchases.
7. GILTI and FDII Have Been Replaced
Beginning in 2026:
- Global Intangible Low-Taxed Income (GILTI) becomes Net CFC Tested Income (NCTI).
- Foreign-Derived Intangible Income (FDII) becomes Foreign-Derived Deduction Eligible Income (FDDEI).
Repeal of the DTIR Exclusion
The OBBBA repealed the Deemed Tangible Income Return (DTIR) exclusion.
Under prior law, taxpayers could exclude a deemed return based on certain foreign tangible assets.
Beginning in 2026:
- The 10% return on foreign tangible assets is no longer excluded from the tax base.
Why It Matters
The repeal broadens the amount of foreign income potentially subject to current U.S. taxation.
8. Reduced Section 250 Deductions
The OBBBA modified the Section 250 deduction structure.
NCTI Deduction
The deduction decreases from:
- 50% to 40%
FDDEI Deduction
The deduction decreases from:
- 37.5% to 33.34%
New Statutory Exclusions
For transactions occurring after June 16, 2025, deduction eligible income generally excludes gains from:
- Intangible property
- Depreciable property
- Amortizable property
- Depletion property
Taxable Income Limitation
The Section 250 deduction remains limited by taxable income.
If combined NCTI and FDDEI deductions exceed taxable income (determined without regard to Section 250), the deductions must be reduced proportionally.
Why It Matters
Multinational businesses should model projected taxable income to determine the actual value of Section 250 benefits.
9. Enhanced Foreign Tax Credit Rules
The OBBBA revised several foreign tax credit provisions.
Increased Deemed-Paid Credit
For NCTI purposes:
- The deemed-paid foreign tax credit percentage increases from 80% to 90%.
Improved FTC Limitation Calculations
Interest expense and research expenditures generally are no longer allocated against foreign-source NCTI when calculating foreign tax credit limitations.
New FTC Disallowance
A 10% disallowance generally applies to foreign tax credits associated with taxes paid on distributions of previously taxed NCTI occurring after June 28, 2025.
Why It Matters
These changes may improve foreign tax credit utilization while creating new planning considerations for previously taxed earnings.
10. Major CFC Ownership and Tax-Year Changes
The OBBBA introduced important compliance changes affecting multinational businesses.
Any-Day Ownership Rule
Beginning in 2026:
- A U.S. shareholder’s pro rata share of Subpart F income and NCTI is determined based on ownership during any day of the CFC’s taxable year.
This replaces the prior rule that focused on ownership at year-end.
Repeal of the One-Month Deferral Election
The OBBBA repealed the Section 898(c) one-month deferral election.
Specified foreign corporations generally must now align their tax years directly with their U.S. parent company.
Many corporations experienced short tax years at the end of 2025 as part of the transition.
Why It Matters
Businesses must carefully track:
- Ownership changes
- Earnings and profits
- Foreign tax credits
- Tax-year transitions
- International reporting obligations
throughout the year.
Compliance, Penalties, and Estimated Tax Considerations
Accuracy-Related Penalties
Section 6662 generally imposes a 20% penalty on underpayments attributable to:
- Negligence
- Disregard of rules
- Substantial understatements of tax
For corporations, a substantial understatement generally exists when the understatement exceeds the lesser of:
- 10% of the tax required to be shown on the return (or $10,000 if greater), or
- $10 million
Energy Credit Claims
For certain energy credit disallowances under Sections 45X, 45Y, and 48E, the substantial understatement threshold may be reduced to only 1% of the tax required to be shown.
Estimated Tax Installments
Corporations generally must make quarterly estimated tax payments on:
- The 15th day of the 4th month
- The 15th day of the 6th month
- The 15th day of the 9th month
- The 15th day of the 12th month
To avoid penalties, payments generally must equal the lesser of:
- 100% of current-year tax liability, or
- 100% of prior-year tax liability
Large Corporation Rule
Corporations with taxable income of $1 million or more in any of the three preceding tax years generally may use the prior-year safe harbor only for the first installment. Subsequent installments must generally be based on current-year tax liability.
Planning Considerations for 2026
Businesses should proactively review:
Taxable Income Projections
Projected taxable income affects:
- Section 250 limitations
- Estimated tax obligations
- Interest deduction calculations
Section 199A Planning
Pass-through businesses should analyze:
- Qualified business income
- W-2 wages
- Qualified property basis
- Taxable income thresholds
to maximize available deductions.
International Tax Modeling
Multinational organizations should evaluate:
- NCTI inclusions
- FDDEI deductions
- Foreign tax credit utilization
- Effects of the DTIR repeal
- Ownership changes
- Tax-year alignment requirements
Capital Investment Strategies
Businesses should assess opportunities involving:
- Bonus depreciation
- Section 179 expensing
- Qualified production property deductions
- Research expenditure deductions
Final Thoughts
The 2026 tax year represents a major shift for business taxpayers. Permanent bonus depreciation, enhanced Section 199A benefits, expanded expensing opportunities, favorable interest deduction rules, and immediate domestic research deductions create substantial planning opportunities for many businesses.
At the same time, the OBBBA’s international tax reforms—including the transition to Net CFC Tested Income, reduced Section 250 deductions, revised foreign tax credit rules, repeal of the DTIR exclusion, new ownership requirements, and mandatory tax-year alignment—create significant compliance and modeling challenges.
Businesses that proactively evaluate these changes, maintain strong documentation, and integrate the new rules into their tax planning strategies will be better positioned to manage tax liabilities and capitalize on available opportunities throughout 2026 and beyond.
