OBBBA Tax Planning Checklist for Business Owners: 10 Moves to Make Before Year-End 2026

The One Big Beautiful Bill Act (OBBBA), signed into law in 2025, represents the most significant rewrite of the Internal Revenue Code since the Tax Cuts and Jobs Act of 2017. For business owners, the changes are largely favorable, but favorable tax laws do not automatically translate into tax savings. The deductions, elections, and strategies unlocked by the OBBBA must be actively implemented. With the calendar now at mid-year 2026, the window to plan is open but not unlimited. Here are ten concrete moves business owners should prioritize before December 31.

1. Commission a Cost Segregation Study on Any Property Placed in Service Since 2023

The OBBBA permanently restored 100% bonus depreciation under IRC Section 168(k) and applied it retroactively to property placed in service during the phasedown years of 2023, 2024, and 2025. If you acquired commercial property, a rental property, or made significant improvements during those years and did not conduct a cost segregation study, you have likely left substantial first-year deductions unclaimed. A lookback study can identify those reclassifiable components, and a Form 3115 change in accounting method pulls all of the missed depreciation into the current tax year without requiring amended returns. The cost of the study is typically recovered many times over in the first year. This is the single highest-impact move available to business owners who own real property.

2. Evaluate New Equipment Acquisitions Before Year-End

With 100% bonus depreciation now permanent, any piece of qualifying business property placed in service before December 31, 2026 generates a full first-year deduction. Unlike the TCJA era, there is no longer any need to race the calendar to capture a higher bonus percentage before a scheduled phasedown. The rate is 100% today and will remain 100% indefinitely. That said, year-end still matters because a purchase placed in service on January 2, 2027 shifts the entire deduction into next year's return. For business owners planning capital expenditures in the next twelve months, deploying that capital before December 31 accelerates the deduction by a full year.

3. Review Your Section 179 Strategy in Light of Permanent Bonus Depreciation

Section 179 expensing and bonus depreciation both allow immediate deduction of qualifying assets, but they operate differently. Section 179 is subject to an annual dollar cap and cannot create or increase a net operating loss. Bonus depreciation under IRC Section 168(k) has no dollar cap and can generate losses that carry forward under the NOL rules. For most business owners with high taxable income, bonus depreciation is now the dominant tool. However, Section 179 remains useful when you want to apply only a portion of an asset's cost in the current year, or when you want to avoid generating a loss that would be trapped by passive activity rules. Reviewing how the two provisions interact with your specific income structure is worth doing now, before year-end acquisitions are finalized.

4. Model the Impact of Your Entity Structure Under the Revised QBI Rules

The OBBBA made changes to the qualified business income deduction under IRC Section 199A. For pass-through entity owners including S-corporations, partnerships, and sole proprietors, the QBI deduction can reduce taxable income on up to 20% of qualified business income, subject to W-2 wage limitations and the unadjusted basis of qualified property for higher-income taxpayers. The structural decisions that affect QBI, including how much W-2 salary an S-corporation owner pays themselves, how business income is allocated across entities, and which activities qualify as specified service trades or businesses, should be revisited under the revised rules. A mid-year projection will show whether your current structure is optimizing the deduction or whether an adjustment before year-end could produce a materially better outcome.

5. Maximize Contributions to a Defined Benefit or Cash Balance Plan

High-income business owners are often underutilizing retirement plans as a tax reduction tool. A solo 401(k) allows 2026 contributions up to approximately $70,000 including both employee and employer contributions, but a defined benefit or cash balance plan can shelter substantially more, sometimes $200,000 or more per year depending on age and income. Contributions are fully deductible and reduce both federal income tax and, in many cases, self-employment tax. Plans established and funded by December 31 of the tax year count against 2026 income. For business owners with consistent high income, the combination of a 401(k) and a defined benefit overlay frequently generates six-figure deductions annually.

6. Implement or Review Your Accountable Plan

An accountable plan allows S-corporation and C-corporation owners to reimburse themselves for legitimate business expenses, including home office costs, vehicle expenses, cell phone and internet bills, and travel, on a tax-free basis. Without a properly structured accountable plan, reimbursements may be treated as taxable compensation, and deductions taken personally are subject to the limited itemized deduction framework. The plan must be in writing, expenses must have a business connection, employees must substantiate expenses within a reasonable time, and excess reimbursements must be returned. Many business owners operate without a formal written plan or have not updated their procedures in years. Establishing or refreshing the plan before year-end ensures that all 2026 reimbursements are properly characterized.

7. Assess Whether a C-Corporation Election Makes Sense for Retained Earnings

The OBBBA retained the flat 21% corporate income tax rate established under the TCJA. For business owners who reinvest a significant portion of earnings into the business rather than distributing them to shareholders, a C-corporation structure can produce a substantially lower effective rate compared to pass-through taxation at individual marginal rates that can reach 37% federally. The calculus depends heavily on the owner's individual marginal rate, the business's distribution policy, and the eventual exit strategy. A C-corporation accumulates retained earnings at 21%, but those earnings face a second layer of tax when distributed as dividends or when the corporation is sold. The decision to elect C-corporation status is not easily reversible and carries significant long-term implications. However, for business owners with consistently high income and limited near-term distribution needs, the analysis deserves a serious look before year-end.

8. Fund a Health Reimbursement Arrangement for Tax-Free Medical Benefits

Business owners often pay out-of-pocket medical expenses with after-tax dollars when a properly structured Health Reimbursement Arrangement (HRA) could make those costs fully deductible at the entity level and tax-free to the recipient. Individual Coverage HRAs allow employers to reimburse employees for individual health insurance premiums and qualified medical expenses without limit. Qualified Small Employer HRAs provide similar benefits for smaller employers within annual caps set by the IRS. For S-corporation owners who are also employees, the structure requires additional care because of rules governing more-than-2% shareholders, but planning around those rules is well established. Establishing or reviewing an HRA structure now ensures it is operational for the full second half of 2026.

9. Conduct a Mid-Year Review of Estimated Tax Payments

The OBBBA's changes to deduction amounts, particularly the restoration of 100% bonus depreciation and the adjustments to pass-through income rules, can significantly alter a business owner's taxable income projections for 2026 relative to prior years. Estimated tax payments that were calculated based on prior-year income may now be overstated or understated depending on whether new deductions have been implemented mid-year. Underpayment of estimated taxes triggers penalties under IRC Section 6654, and overpayment is an interest-free loan to the government. A mid-year projection updated to reflect actual income through June 30 and planned year-end moves will produce more accurate Q3 and Q4 estimated tax figures and avoid unnecessary penalties or surprises at filing.

10. Document Real Estate Professional Status If You Qualify

Real estate professional status under IRC Section 469(c)(7) allows qualifying taxpayers to treat real estate losses as non-passive, enabling them to offset W-2 income, business income, and other active income that is otherwise unreachable by passive losses. The requirements are specific: the taxpayer must spend more than 750 hours per year in real property trades or businesses in which they materially participate, and those hours must exceed time spent in all other professional activities. For business owners whose primary trade or business is real estate, or who have a spouse meeting the qualification, the status can unlock six- or seven-figure loss deductions. But the status is strictly documentation-dependent. The IRS will disallow it without contemporaneous time logs. Building a reliable tracking system now, rather than attempting to reconstruct 2026 hours after the fact, is essential for defending the deduction if audited.

The Common Thread: Proactive Implementation

The OBBBA creates favorable tax law, but favorable law is only as valuable as the planning work done to capture it. Each of the ten moves above requires deliberate action taken before December 31, 2026: a cost segregation study commissioned and completed, a retirement plan established and funded, an accountable plan documented in writing, and time logs maintained throughout the year. Waiting until November or December compresses the implementation window and increases the risk that key elections or transactions miss their deadlines.

Business owners who engage in mid-year tax planning consistently pay substantially less in taxes than those who review their situation only after the books close. The law has created the opportunity. The question is whether you take advantage of it before the year ends.

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Frequently Asked Questions

What is the One Big Beautiful Bill Act and how does it affect business owners?

The One Big Beautiful Bill Act (OBBBA) is landmark tax legislation signed in 2025 that permanently restored 100% bonus depreciation, adjusted qualified business income deduction rules, and made other sweeping changes to the tax code. Business owners have significant new planning opportunities related to depreciation, entity structuring, and retirement contributions that must be actively implemented to capture the benefit.

How does permanent 100% bonus depreciation change tax planning for business owners?

With 100% bonus depreciation now permanent under the OBBBA, business owners can fully expense qualifying assets in the year placed in service with no phasedown. This eliminates prior urgency to rush acquisitions before rate reductions and allows multi-year equipment and real estate planning strategies with certainty about the full first-year deduction.

Should I conduct a cost segregation study on property I already own?

Yes. With bonus depreciation permanently restored to 100%, a lookback cost segregation study on existing properties is often highly valuable. The IRS allows taxpayers to capture missed accelerated depreciation through a Form 3115 change in accounting method, pulling all unclaimed deductions into the current tax year without amending prior returns.

What is the deadline for making these OBBBA tax planning moves?

Most of the planning moves outlined here must be implemented by December 31, 2026 to affect the 2026 tax year. A few, such as retirement plan contributions, may have deadlines that extend to the tax filing date with extensions. Starting now in mid-2026 gives business owners time to implement strategies correctly rather than rushing at year-end.

This article is for informational purposes only and does not constitute legal or tax advice. Consult a qualified tax professional regarding your specific circumstances. AE Tax Advisors, 935 Lake Elmo Dr, Suite B, Billings, MT 59105. Phone: (631) 614-5762.