A big two years for tax changes
Every fall the IRS adjusts dozens of tax amounts for inflation, so that rising prices don’t push people into higher brackets (what economists call “bracket creep”). On top of that, the tax law passed in July 2025 (often called the One Big Beautiful Bill Act) made several temporary rules permanent and added new ones. Many of those changes show up for the first time on 2026 forms.
Here is what matters most for small business owners and their families, for tax year 2026 (returns filed in 2027) and tax year 2027 (returns filed in 2028).
Changes that affect your business in 2026
1099-NEC and 1099-MISC: the threshold rises to $2,000
For payments made in 2026, you generally only need to send a Form 1099-NEC or 1099-MISC when you pay a contractor or vendor $2,000 or more in the year, up from the old $600 rule. Starting in 2027, the $2,000 amount is adjusted for inflation. Some payments, such as royalties, still have lower thresholds. Forms for 2026 are due to the IRS and to recipients by February 1, 2027. Keep collecting a W-9 from every contractor before you pay them, no matter the amount.
1099-K stays at $20,000 and 200 transactions
The planned drop to $600 for payment apps and online marketplaces was repealed. Platforms such as PayPal or Venmo for business only send a 1099-K when you receive more than $20,000 and more than 200 transactions. All of your income is still taxable whether or not you get a form, so your books need to capture every sale.
Tips and overtime now have their own line on the W-2
Workers can deduct up to $25,000 of qualified tips and up to $12,500 of qualified overtime pay ($25,000 for married couples) on their own returns for 2025 through 2028, with phase-outs at higher incomes. Payroll withholding doesn’t change, but starting with 2026 W-2s, employers must report qualified tips (with an occupation code) and qualified overtime separately. Restaurants, salons, construction companies and anyone who pays overtime should make sure their payroll system tracks these amounts now, not in January.
Write-offs for equipment and growth
- 100% bonus depreciation is permanent for qualifying property acquired and placed in service after January 19, 2025.
- Section 179 expensing is about $2.56 million for 2026, phasing out above about $4.09 million of purchases.
- Domestic research and development costs can be deducted right away again instead of spread over five years.
- The 20% qualified business income (QBI) deduction for pass-through businesses (LLCs, S corporations, sole proprietors) is now permanent, with a new $400 minimum deduction for owners with at least $1,000 of qualified business income.
Changes for you and your family in 2026
- Standard deduction: $16,100 for single filers, $32,200 for married couples filing jointly, and $24,150 for heads of household.
- Child tax credit: up to $2,200 per child, with up to $1,700 refundable.
- Seniors: taxpayers 65 and older can take an extra deduction of up to $6,000 per person for 2025 through 2028, subject to income limits.
- State and local tax (SALT) deduction: the cap rose to $40,000 in 2025 and grows 1% a year, with a phase-down for higher incomes.
- Estate and gift tax: the estate exclusion is $15 million per person, and the annual gift exclusion is $19,000.
What the IRS announced for 2027
In November 2026 the IRS released its inflation adjustments for tax year 2027 (Revenue Procedure 2026-35), covering nearly 70 provisions. Highlights:
- Standard deduction: $16,600 single, $33,200 married filing jointly, $24,925 head of household.
- Tax brackets: the 10%, 12%, 22%, 24%, 32%, 35% and 37% rates stay the same, with income ranges moved up for inflation. The top 37% rate starts above $661,375 for single filers and $793,650 for married couples filing jointly.
- Child tax credit: up to $2,300 per child, with up to $1,800 refundable.
- Earned income credit: up to $8,496 for families with three or more qualifying children.
- Estate and gift tax: $15.48 million estate exclusion; annual gift exclusion of $20,000.
- Commuter benefits: up to $350 a month for qualified transit and parking.
What about Alaska?
Alaska has no state personal income tax, but corporations can owe Alaska corporate income tax, employers pay state unemployment insurance, and many cities and boroughs charge their own sales taxes. Federal changes still affect every Alaska business owner, so it pays to plan ahead.
How we can help
Clean, up-to-date books are what make these new deductions usable. Our bookkeeping team makes sure your 1099s, W-2s, tips and overtime are tracked correctly all year, and our Enrolled Agent, Doug Campos, EA, can help you plan for 2026 and 2027. Talk with us or read more about our tax planning and preparation.
This article is general information, not tax advice for your situation. Figures come from IRS announcements and published summaries of the 2025 tax law; amounts can change, so check with a tax professional before you act.