Playbook for Reducing Your Tax Liability in 2026
- Christopher Fleming, EA
- Jan 4
- 4 min read
Below are practical, real-world examples of how businesses can reduce tax liability by leveraging the One Big Beautiful Bill Act (OBBBA) (sometimes casually called the “big beautiful bill”), signed into law July 4, 2025 (Public Law 119-21) and effective starting in 2025.
1) Use 100% bonus depreciation to wipe out taxable income (timing strategy)
What changed / why it matters: OBBBA makes 100% bonus depreciation available again for qualifying property placed in service after the effective date window (per most summaries, after mid-January 2025) and extends its availability.
Example
A manufacturing company buys and places in service $800,000 of qualifying equipment in 2026.
Without 100% bonus depreciation, the company might deduct only a portion in year 1.
With 100% bonus depreciation, they may deduct the full $800,000 immediately (subject to basis/eligibility rules).
Result: Taxable income drops sharply, often producing:
A much lower current-year tax bill
Potential NOL planning opportunities
A tax-efficient way to fund expansion
2) Pair Section 179 + Bonus Depreciation for “full cost recovery” planning
What changed / why it matters: Section 179 expensing remains a major lever, and the bill expands/extends cost recovery provisions that increase flexibility for business owners.
Example
A contractor buys:
$150,000 of trucks/equipment that qualify for §179
$450,000 of other qualifying property eligible for bonus depreciation
Strategy:
Use §179 to expense the items with tighter limitations or strategic priority.
Use bonus depreciation for the rest.
Result: You can often engineer the exact deduction amount needed to land in the most favorable bracket, avoid phaseouts, or keep QBI wages/basis planning in range.
3) Restore immediate R&D expensing (major cash-flow win for innovation businesses)
What changed / why it matters: OBBBA restores more favorable treatment for research & experimental (R&E) costs, allowing faster writeoffs compared to the amortization rules that had applied since 2022.
Example
A software company spends $600,000 on qualifying domestic R&D in 2026.
Under amortization, deductions are spread over multiple years.
Under restored expensing, the company may deduct much more upfront.
Result: Large reduction in taxable income in the year of spending, improving cash flow and lowering current-year tax.
4) Lock in / maximize the Section 199A QBI deduction (pass-through owners)
What changed / why it matters: OBBBA makes the §199A Qualified Business Income (QBI) deduction permanent/extended (depending on the technical summary), keeping a major tax savings lever for S corps, partnerships, and sole proprietors.
Example
A consulting firm (S corp) generates:
$500,000 of QBI
Owner wages currently set at $120,000
Strategy options:
Optimize reasonable compensation vs. distributions (S corp)
Manage taxable income thresholds (especially for SSTBs)
Plan W-2 wages and qualified property basis if relevant
Result: Increasing eligibility or the effective QBI base can yield a deduction up to 20% of QBI, often worth tens of thousands of dollars in reduced tax.
5) Use QSBS (Section 1202) planning for founders/investors (exit planning)
What changed / why it matters: OBBBA enhances / modifies incentives around Qualified Small Business Stock (QSBS), increasing the attractiveness of structured C-corp planning for high-growth ventures.
Example
A founder forms a C-corp startup and issues QSBS-eligible shares.After holding long enough and meeting requirements:
A future sale could qualify for partial or full gain exclusion (often up to $10M+ depending on rules and improvements).
Result: Potentially millions in federal capital gains tax avoided, which is one of the most powerful tax planning opportunities available—but requires early structuring.
6) Re-evaluate entity choice: S corp vs partnership vs C corp (because incentives shifted)
Why it matters now: With stronger cost recovery, QBI permanence, and QSBS incentives, the “best” entity can change depending on:
reinvestment needs
profit level
payroll structure
exit plans
state tax environment
Tax Foundation and multiple business-tax summaries emphasize these pro-growth provisions as key elements of the law.
Example
A business with $1.5M annual net income is considering:
staying as an S corp (and taking QBI)
converting to a C corp to build toward a QSBS-qualified exit
Result: A well-timed entity strategy can reduce taxes now (QBI) and/or later (QSBS).
7) Use “placed in service” planning to control when deductions hit
Why it matters: Many OBBBA business incentives depend on placed-in-service dates. That means:
buying equipment on December 31 may do nothing if not operational
placing in service before year-end can create a massive deduction swing
This is a common theme in professional summaries of the bill’s 100% bonus depreciation rules.
Example
A logistics firm buys $900,000 of equipment in late December.
If placed in service in December: deduction hits this year
If placed in service in January: deduction hits next year
Result: You can intentionally “pull forward” deductions to offset a strong year or delay them if next year will be stronger.
8) Use higher 1099 thresholds to reduce compliance friction (indirect tax savings)
What changed / why it matters: OBBBA raises the 1099 reporting threshold (commonly summarized as moving from $600 to $2,000 starting 2026).
Example
A property management company pays dozens of small vendors $800–$1,500 each per year.
Before: significant 1099 compliance burden
After: fewer required filings
Result: Not a direct tax deduction, but it reduces administrative costs and risk, which can materially affect net profitability (and the time spent “tax managing”).
A quick “business owner playbook” (how to think about it)
If you buy equipment/vehicles/software: model 100% bonus depreciation and placed-in-service timing.
If you do engineering/software/design: revisit R&D expensing and documentation.
If you’re a pass-through: optimize 199A QBI (wages, basis, thresholds, SSTB rules).
If you’re building to sell: evaluate QSBS planning early (entity choice + qualification).
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