The 2025 tax law changed more for business owners than any law since 2017. Some changes took effect in 2025. Several start in 2026. This guide covers the ones that matter for a trade or service business, and what to do about each before the year ends.
Greg Neilsen, JD, LLM (Master of Laws in Taxation), reviews our tax guides. Last reviewed: September 30, 2026.
Five points. Each one is explained below.
Yes. The individual rates that were set to rise after 2025 were made permanent. For a business owner, that removes the reason many advisers gave to pull income into 2025. Plan around your own income from year to year, not a scheduled rate increase.
The qualified business income deduction lets owners of S corporations, partnerships, LLCs, and sole proprietorships deduct up to 20 percent of business income. It was set to expire after 2025. It is now permanent.
Starting in 2026, an owner who materially participates in a business with at least $1,000 of qualified business income gets a minimum deduction of $400. The income range where the deduction phases down for higher earners also got wider.
Example: A painting contractor’s S corporation passes $150,000 of qualified business income to the owner. A 20 percent deduction is $30,000, before the limits that apply at higher incomes. That deduction would have disappeared in 2026 under the old law.
100 percent bonus depreciation is back for property acquired after January 19, 2025, and it is permanent. The Section 179 limit rose to $2.5 million for 2025 and is adjusted for inflation after that. Our guides to bonus depreciation and Section 179 versus bonus depreciation cover both.
For payments made in 2026, a 1099-NEC or 1099-MISC is required when you pay $2,000 or more in a year. The threshold had been $600 since the 1950s. It will be adjusted for inflation after 2026.
The 1099-K threshold for payment apps and card processors went back to $20,000 and 200 transactions.
Example: A remodeler pays a tile sub $1,800 in 2026. Under the old rule, that needed a 1099-NEC. For 2026 it does not. Collect the W-9 anyway, because a second job can push the total over $2,000.
From 2025 through 2028, workers can deduct the overtime premium they earn, up to $12,500 a year, or $25,000 on a joint return. The deduction shrinks for higher incomes. The premium is the extra half-time pay above the regular rate, not the whole overtime paycheck.
Employers have to track and report the overtime premium separately. For a trade business with crews working overtime, that is a payroll setup question this year.
Example: An HVAC tech earns $30 an hour and works 200 overtime hours in 2026 at $45 an hour. The premium is $15 an hour, so $3,000 is eligible for the tech’s deduction. Payroll has to show that $3,000.
The homeowner credits for energy-efficient upgrades and for solar and other clean energy ended for property placed in service after December 31, 2025. A homeowner who installs a heat pump in 2026 gets no federal credit for it.
Two business credits are winding down too. The credit for building energy-efficient new homes ends for homes acquired after June 30, 2026. The deduction for energy-efficient commercial buildings ends for construction that begins after June 30, 2026.
Example: An HVAC company’s customers ask about the heat pump credit they read about online. For a 2026 install, the honest answer is that it no longer exists. Contractors who quoted it into a price should update their sales sheets.
For people who itemize, the cap on deducting state and local taxes went from $10,000 to $40,000 starting in 2025. It rises 1 percent a year through 2029. It phases back down toward $10,000 for incomes over about $500,000.
Florida has no state income tax, so for most Florida owners the deduction is property tax and, by election, sales tax. The higher cap helps owners with large property tax bills who itemize.
Starting in 2026, people who take the standard deduction can deduct cash gifts to charity, up to $1,000, or $2,000 on a joint return. People who itemize can only deduct gifts above 0.5 percent of their income.
Example: A married couple who take the standard deduction give $3,000 to their church in 2026. They can deduct $2,000. Before 2026, they could deduct nothing.
Our year-end tax planning checklist turns these into a list you can work through before December 31.
In our Planned plan, the written tax plan covers each of these changes as they apply to your business: the moves, the dollar estimate for each, and the deadlines.
See how a written plan works in our guide to building a business tax plan, or read about our tax planning service.
No. The 2025 tax law made it permanent. Starting in 2026, it also comes with a minimum $400 deduction for owners with at least $1,000 of qualified business income from a business they work in.
Yes. For payments made in 2026, a 1099-NEC is required at $2,000, up from $600. The 1099-K threshold for payment apps went back to $20,000 and 200 transactions.
Yes, from 2025 through 2028. Workers can deduct the overtime premium, up to $12,500 a year or $25,000 on a joint return, with a phase-out at higher incomes. Employers have to track and report it.
Not for equipment placed in service after December 31, 2025. Those homeowner credits ended.
$40,000 plus a 1 percent increase, for people who itemize, phasing down for incomes over about $500,000.
This guide is educational and is not tax advice for your situation. Tax rules change, and the right move depends on your numbers. Talk to a tax professional before you act.
Greg Neilsen, JD, LLM (Master of Laws in Taxation), reviews our tax guides. Last reviewed: September 30, 2026.
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