Major Tax Changes Could Be Coming in 2026: What Small Business Owners Should Know
Several major tax provisions that have benefited small business owners for the past several years are scheduled to expire after December 31, 2025.
These provisions were originally created under the Tax Cuts and Jobs Act (TCJA) and have played a significant role in reducing taxes for many businesses across the country—including here in North Dakota.
Unless Congress takes action to extend or modify them, 2026 could bring meaningful tax changes for business owners.
The 20% Qualified Business Income Deduction
One of the biggest provisions set to expire is the Qualified Business Income (QBI) deduction, often called the Section 199A deduction.
This deduction allows many owners of pass-through businesses such as:
LLCs
Partnerships
S-Corporations
Sole proprietorships
to deduct up to 20% of their qualified business income.
For many small businesses, this deduction has significantly reduced their overall tax burden.
If the provision expires, business owners could see higher taxable income starting in 2026.
Individual Tax Rates May Increase
The TCJA also temporarily reduced individual tax rates across several brackets.
If these provisions sunset as scheduled, tax rates could revert to pre-2018 levels, which means some business owners may see higher personal tax rates on business income.
Because most small businesses are pass-through entities, these individual rate changes can have a direct impact on business owners.
Estate and Gift Tax Exemption Could Drop
Another major provision scheduled to change is the federal estate tax exemption.
Currently, individuals can pass on over $13 million without triggering federal estate tax. In 2026, that exemption could be reduced roughly in half if the law sunsets.
While this primarily affects larger estates, it could have implications for:
Multi-generational farms
Family-owned businesses
Land transfers
Why Planning Now Matters
Although 2026 may seem far away, tax planning often works best when decisions are made years in advance.
Business owners may want to start thinking about:
Income timing strategies
Equipment purchases and depreciation planning
Business structure reviews
Long-term succession planning
The actual outcome will ultimately depend on what Congress decides, but preparing early can help avoid surprises later.
Staying Ahead of the Changes
Tax laws change regularly, and the next few years could bring significant updates for small business owners.
Keeping an eye on upcoming tax changes and planning ahead can help businesses stay flexible and make informed financial decisions.
For North Dakota business owners, working with an advisor who understands both tax law and local industries can make a big difference when navigating these changes.
Steinke & Company
