What the One Big Beautiful Bill Act Means for Business Owners in 2026

The One Big Beautiful Bill Act (OBBBA), signed into law in 2025, is the most significant overhaul of the U.S. tax code since the Tax Cuts and Jobs Act of 2017. For business owners, real estate investors, and high-income professionals, it changes nearly every major planning lever -- bonus depreciation, the QBI deduction, SALT limits, estate planning, and more.

The challenge is that the changes are not uniform. Some provisions are immediately favorable. Others require you to rethink strategies you may have built around prior law. And a number of planning opportunities that were time-sensitive are now permanent, which changes the urgency calculus entirely.

Here is what you need to understand and act on.

100% Bonus Depreciation Is Back -- Permanently

Under the TCJA, 100% bonus depreciation was set to phase down beginning in 2023. By 2025, the rate had dropped to 40%, with 20% scheduled for 2026 and complete elimination in 2027. The OBBBA reversed that phase-down entirely.

Qualified property placed in service on or after January 19, 2025 qualifies for 100% bonus depreciation with no expiration. This is not a temporary extension. It is a permanent feature of the tax code.

For real estate investors, this is the most important change in the bill. Cost segregation studies identify the components of a building that qualify for 5-year, 7-year, and 15-year MACRS depreciation rather than the standard 27.5- or 39-year straight-line schedule. With 100% bonus depreciation restored, every dollar of property reclassified through a cost segregation study can be deducted entirely in the year the property is placed in service.

On a $1.5 million rental property, a cost segregation study might identify $400,000 to $500,000 in accelerated components. At 100% bonus depreciation, that is a $400,000 to $500,000 first-year deduction -- potentially eliminating federal income tax liability entirely for that year and creating a passive loss that can offset other income for qualifying taxpayers.

If you own investment properties that have never had a cost segregation study performed, the case for acting now has never been stronger. There is no phase-down pressure, but there is still the time value of money: every year you delay is a year you defer that deduction unnecessarily.

The QBI Deduction Is Enhanced and Made Permanent

The 20% qualified business income (QBI) deduction under IRC Section 199A was set to expire after 2025. The OBBBA made it permanent and increased the deduction rate to 23% for tax years beginning after December 31, 2025.

That three-percentage-point increase is meaningful. A business owner with $500,000 in QBI goes from a $100,000 deduction at 20% to a $115,000 deduction at 23%. That is an additional $15,000 in deductions with no additional planning required.

The OBBBA also simplified the W-2 wage limitation rules that had restricted the QBI deduction for many service businesses and higher-income taxpayers. Business owners who were previously limited by the wage test should have their advisors rerun the QBI calculation under the new rules to determine whether they now qualify for a larger deduction.

For S-Corp owners, this is also a moment to revisit reasonable compensation. The QBI deduction is calculated on net business income after W-2 wages, including the owner's salary. Optimizing the salary level to balance self-employment tax savings against QBI maximization is a nuanced calculation that changes under the new deduction rate.

The SALT Cap Increased to $40,000

The $10,000 cap on state and local tax (SALT) deductions introduced by the TCJA was one of its most contested provisions, particularly for business owners and high earners in states like California, New York, New Jersey, and Illinois. The OBBBA raised that cap to $40,000 for taxpayers with modified adjusted gross income below $500,000. The cap phases out for higher earners and is indexed for inflation going forward.

For business owners in high-tax states with income below the phase-out threshold, this is a meaningful improvement. If you were previously capped at $10,000 in SALT deductions on $35,000 or more of actual state taxes paid, you now have access to the full deduction up to $40,000.

However, the phase-out mechanics matter. Taxpayers whose income exceeds $500,000 MAGI will see their SALT deduction reduced, and at certain income levels, the effective cap may be lower than $40,000. High-income business owners should model the actual impact before assuming they benefit fully from the increased cap.

The increase also affects pass-through entity (PTE) tax elections, which many states adopted as SALT workarounds under prior law. With the individual SALT cap now higher, the benefit calculation for PTE elections shifts. In some cases, the PTE election may still be the better option; in others, it may no longer be necessary. This is state-specific and depends on your income level and entity structure.

The Estate Tax Exemption Is Permanently Doubled

The TCJA temporarily doubled the estate and gift tax exemption from approximately $5 million to $10 million (adjusted for inflation). That temporary increase was set to sunset after 2025, which would have cut the exemption roughly in half. The OBBBA made the doubled exemption permanent.

For 2026, the estate and gift tax exemption is approximately $15 million per individual, or $30 million per married couple under portability. Business owners who delayed estate planning because of the sunset uncertainty now have a stable framework to plan around.

This does not mean estate planning is less urgent. It means it is more plannable. Business owners with significant assets should now focus on strategies that take advantage of the permanent high exemption, including gifting programs, grantor trusts, family limited partnerships, and life insurance structures. The goal shifts from exemption preservation to efficient wealth transfer at the lowest tax cost.

Section 179 Expensing Enhanced for Equipment Purchases

The OBBBA also increased the Section 179 expensing limit and phaseout threshold. For 2026, business owners can expense up to $2.5 million in qualified property immediately, with the deduction phasing out as total purchases exceed $3.5 million. This is particularly relevant for businesses that acquire significant equipment, machinery, vehicles, or technology assets each year.

While bonus depreciation already achieves 100% first-year expensing for most qualified property, Section 179 retains advantages in specific situations -- particularly for SUVs and certain vehicles subject to luxury auto limitations under bonus depreciation rules. Business owners acquiring vehicles in 2026 should work with their advisors to determine which method is more advantageous for each asset class.

What to Do Right Now

The OBBBA creates both immediate opportunities and longer-term planning implications. Here is how to approach it systematically.

If you own investment real estate: Commission a cost segregation study on any properties that have not already been analyzed. With 100% bonus depreciation permanent, the first-year deduction potential is at its maximum. File Form 3115 for any prior-year catch-up depreciation you are entitled to.

If you operate a pass-through business: Have your advisor recalculate your QBI deduction under the new 23% rate and simplified wage limitation rules. If you previously could not access the full deduction, that may have changed significantly. Also revisit your S-Corp salary to optimize the interplay between self-employment taxes and the enhanced QBI deduction.

If you are in a high-tax state: Model the actual impact of the new $40,000 SALT cap against your income level and evaluate whether your existing PTE election strategy still makes sense. This analysis depends on your specific state tax rates and entity structure.

If your estate exceeds $5 million: The permanent doubled exemption is your signal to move from reactive planning to proactive wealth transfer. Work with your advisors to implement a gifting strategy, review any existing trusts, and ensure your business succession plan is aligned with your estate plan.

The OBBBA is a once-in-a-generation set of changes to tax law. The business owners who move quickly and strategically will capture the most value. The ones who wait will leave real money on the table.

Our team at AE Tax Advisors has been working through the OBBBA implications for clients since the bill was enacted. If you want a clear picture of how these changes affect your specific situation and a concrete action plan, contact us at (631) 614-5762 or team@aetaxadvisors.com, or schedule a discovery call to get started.

Frequently Asked Questions

Does the One Big Beautiful Bill Act permanently restore 100% bonus depreciation?

Yes. The OBBBA permanently restored 100% bonus depreciation for qualified property placed in service on or after January 19, 2025. The phase-down schedule that had reduced bonus depreciation to 40% in 2025 under prior law no longer applies.

How does the OBBBA change the QBI deduction for business owners?

The OBBBA made the 20% QBI deduction under IRC Section 199A permanent and increased the deduction to 23% for tax years beginning after December 31, 2025. It also simplified the W-2 wage and qualified property limitations, making it easier for more business owners to claim the full deduction.

What happened to the SALT deduction cap under the new law?

The OBBBA raised the SALT deduction cap from $10,000 to $40,000 for taxpayers with modified adjusted gross income below $500,000. The cap phases out for higher earners and is indexed for inflation. Business owners in high-tax states should revisit their entity structures and itemized deduction strategies given this change.

Should I still pursue a cost segregation study if bonus depreciation is now 100%?

Absolutely. With 100% bonus depreciation permanently restored, cost segregation studies are more valuable than ever. A study identifies which components of your property qualify for 5-, 7-, and 15-year MACRS depreciation -- all of which now qualify for full first-year bonus depreciation. This can generate six-figure deductions in year one for a qualifying property.

How does the OBBBA affect estate planning for high-net-worth business owners?

The OBBBA permanently doubled the estate and gift tax exemption. For 2026, the exemption is approximately $15 million per individual ($30 million per married couple). Business owners with significant assets should revisit their estate plans to take advantage of the expanded exemption and evaluate whether prior gifting strategies should be adjusted.

---