Key Takeaways
- For 2026, the Section 179 immediate expensing limit has increased to $2.56 million, allowing businesses to write off the full cost of equipment, software, and vehicles in a single year.
- The 20% Qualified Business Income (QBI) deduction is now permanent. In 2026, the full deduction is available for single filers earning up to $201,751 and joint filers up to $403,501.
- December 31, 2026, is the final Opportunity Zone deadline to recognize deferred capital gains. While the tax on original gains is due this year, the 10-year hold still offers 100% tax-free appreciation on new investments.
- Businesses can reduce federal tax liability by purchasing transferable energy credits at a discount. Ensure the seller provides an IRS pre-filing registration number for a valid transfer.
- Implementing a formal Accountable Plan for 2026 allows you to reimburse employees for business expenses (like mileage and meals) without those payments being taxed as wages or subject to payroll taxes.
Today, I’m going to give you a lot of “what” without a whole lot of “how” related to small business tax strategies. And that’s on purpose.
Because the integration of these strategies is very nuanced for your particular business and tax situation.
So, use this as an opportunity to think big picture. Take a good look at your current tax strategy and (as humbling as it is) find room for improvement. Then we can talk about the particulars of how to take action.
Small Business Tax Strategy #1: Opportunity Zones
There are two ways to leverage Opportunity Zones (OZs): reinvesting capital gains or operating within a zone.
Method 1: Investing capital gains.
If you sell an asset and reinvest your gains into a Qualified Opportunity Fund (QOF) within 180 days, you can defer taxes on those gains.
But take note: December 31, 2026, is the final federal deadline for gain deferral. Any taxes you’ve deferred in the past are officially included in your 2026 taxable income.
The big win now is the 10-year hold. If you keep your investment in the QOF for at least a decade, all appreciation on that new investment remains 100% tax-free.
Method 2: Operating a Business in a Qualified Opportunity Zone (QOZ)
To qualify, your business must operate within a designated zone, derive 50% of its gross income from activities there, and ensure 70% of its tangible property is used within the zone.
If you make the cut, you get perks like tax deferrals for real estate or equipment improvements and potential state and local tax credits. And if you want to sell your business in the QOZ after operating there for at least 10 years, any appreciation in its value is exempt from federal capital gains taxes.
Small Business Tax Strategy #2: Energy Credit Transfers
You can monetize applicable energy credits by selling them to unrelated parties.
Let’s say, for example, you decide you want to buy energy credits, and buy them from a broker at 90 percent of their face value. So, you buy 50K worth of credits for 45K. These credits then directly reduce your federal tax liability, so you saved by buying the credits at a discount AND got your tax liability knocked down.
Small Business Tax Strategy #3: Accountable Plans for Employee Reimbursement
If you reimburse your employees for work-related expenses (like mileage, meals, travel, or supplies) using an Accountable Plan is the way to go. With an Accountable Plan, those reimbursements don’t count as taxable income for your employees, and you avoid payroll taxes on those amounts too.
And the cherry on top: You can claim deductions on those reimbursements as they’re business expenses.
All that’s required on your part is to draft a policy outlining 1) what types of expenses are reimbursable, 2) how employees should substantiate expenses, and 3) deadlines for submitting receipts and returning excess funds. And of course, you’ll want to claim deductions on those business expenses on your tax return.
Small Business Tax Strategy #4: Section 179 Deduction
With the Section 179 deduction, you can deduct the full purchase price of certain equipment, software, and property in the year it’s placed in service instead of spreading the depreciation over several years.
For 2026, the Section 179 deduction has been supercharged. You can now deduct the full purchase price of qualifying equipment, software, and certain vehicles up to a limit of $2.56 million. The phase-out threshold has also climbed to $4.09 million.
What qualifies? Equipment or property used more than 50 percent of the time for business purposes that is also placed in service during the tax year.
The deduction can’t exceed your business’s taxable income. You CAN, however, carry forward any unused deduction to future tax years so you can benefit later if your income increases.
Small Business Tax Strategy #5: Qualified Business Income (QBI) Deduction
If you own a sole proprietorship, partnership, S-corporation, or LLC taxed as a pass-through entity, you may be able to deduct up to 20 percent of your QBI on your personal tax return (if you qualify).
QBI refers to the net income your business generates minus wages you pay yourself, guaranteed payments to partners, and certain types of investment income.
To claim the full 20 percent, your taxable income can’t surpass the 2026 income thresholds of $201,751 (single) or $403,501 (married filing jointly).
If you do exceed those income thresholds, things get a bit dicey. I’d be happy to talk you through the details if this is one of the small business tax strategies that interests you.
Final thoughts
I know, these small business tax strategies are a lot to chew on. Like I mentioned earlier, there are a lot of nuances involved with putting these strategies into action.
If you want to see how they could work for you, let’s get a chat scheduled. I’d be happy to help you figure out the nitty-gritty of how these strategies could specifically help YOUR business.
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FAQs
“What is the Section 179 deduction limit for 2026?”
For the 2026 tax year, the maximum Section 179 deduction is $2.56 million. This allows businesses to expense the full cost of qualifying equipment and software immediately. The phase-out threshold begins when total equipment purchases exceed $4.09 million.
“What are the 2026 QBI deduction income thresholds?”
To claim the full 20% Qualified Business Income (QBI) deduction in 2026 without wage or property limitations, your total taxable income must be below $201,751 (for single filers) or $403,501 (for married couples filing jointly). Taxpayers above these levels may still qualify for a partial deduction depending on their business type.
“Is there a minimum QBI deduction for small businesses in 2026?”
Yes. Under the One Big Beautiful Bill Act (OBBBA), a new minimum deduction of $400 was introduced for active business owners who generate at least $1,000 in qualified business income, even if they would otherwise be limited by high-income caps.
“When is the final deadline for Opportunity Zone tax deferral?”
The most critical date is December 31, 2026. This is the federal deadline where all previously deferred capital gains must be recognized and reported as taxable income on your 2026 return. While the deferral ends, the 10-year hold benefit (tax-free appreciation) remains active for those who stay invested in a Qualified Opportunity Fund.
“Are energy tax credit transfers still available in 2026?”
Yes. While many residential credits have expired, the Section 6418 transferability rules remain in effect for commercial credits. Businesses can still purchase Advanced Manufacturing (Section 45X) and Energy Storage credits at a discount to offset their federal tax liability, provided the seller has an IRS pre-filing registration number.
“What is the IRS standard mileage rate for 2026?”
As of January 1, 2026, the standard mileage rate for business use of a vehicle is 72.5 cents per mile. This is an increase of 2.5 cents from the 2025 rate, making an Accountable Plan even more valuable for business owners seeking to reimburse employees tax-free.