For business owners, the 2026 tax sunset brings specific challenges, particularly in the areas of bonus depreciation and the Qualified Business Income (QBI) deduction. These changes could increase your tax liability. Here’s what you need to know and how Your Choice Financial can help you prepare.
Bonus Depreciation Changes
Under the TCJA, businesses can currently deduct up to 100% of eligible property costs through bonus depreciation. However, after 2026, this deduction will be significantly reduced, meaning businesses will have to amortize costs over time rather than taking immediate write-offs.
Qualified Business Income Deduction (QBI) Elimination
The QBI deduction allows pass-through businesses to deduct up to 20% of their qualified business income, which provides significant tax savings. However, this deduction is set to expire in 2026, leading to higher taxable income for many business owners.
Strategies for Business Owners
To mitigate the impact of these changes, Your Choice Financial offers a range of solutions:
- Accelerating Purchases: By purchasing equipment or making capital investments before 2026, you can take advantage of the current 100% bonus depreciation.
- Entity Restructuring: We can review your business structure to ensure it’s optimized for tax efficiency under the new rules, potentially transitioning to a different entity type to maintain favorable tax treatment.
- Income Deferral Strategies: We can explore deferring income or increasing retirement contributions to offset the elimination of QBI.