The 2026 Tax Planning Guide
for Business Owners

The Tax Cuts and Jobs Act (TCJA) of 2017 is scheduled to sunset on December 31, 2025. Unless Congress acts, 2026 brings the largest automatic tax increase in decades — brackets revert, the standard deduction shrinks, the QBI deduction expires, and estate exemptions are cut roughly in half. The business owners who win in 2026 are the ones who position before the calendar flips.

If TCJA provisions expire as scheduled, the top federal rate climbs from 37% back to 39.6%, the standard deduction roughly halves, and personal exemptions return. For a high-earning S-Corp owner, that can mean tens of thousands in additional tax on the same income.

Figures are projections based on the scheduled TCJA sunset and IRS inflation adjustments; final 2026 numbers depend on Congressional action.

An S-Corp lets you split income between a reasonable salary (subject to payroll tax) and distributions (free of payroll tax). Set the salary too low and you invite an IRS reclassification; set it too high and you overpay. The sweet spot is defensible and documented.

• Benchmark salary to industry comps and your role — keep a compensation analysis on file.
• Distribute profits as distributions to avoid the 15.3% FICA on the excess.
• Run a mid-year salary review so you can adjust before December 31.
• For a $300K profit owner, the right split commonly saves $10,000–$18,000 per year.

Section 280A lets you rent your home to your business for up to 14 days per year — tax-free to you, and deductible to the business. No income tax on the rental income, no Schedule E, no limitation. It is one of the cleanest strategies in the code, and most owners have never heard of it.

With top rates rising in 2026, every dollar you defer now is taxed at a lower rate than it will be next year. For business owners, the right plan multiplies the benefit.

• Solo 401(k): up to $69,000 (2024) in combined employee + employer contributions, plus a $7,500 catch-up at 50+.
• Defined Benefit / Cash Balance plan: $100K–$300K+ in annual deductions for high-income owners — ideal for 2026 income smoothing.
• SEP-IRA: simple, up to 25% of compensation, but no Roth or loan features.
• Roth conversions in 2025: lock in today's lower rates before the 2026 increase.

A cost segregation study reclassifies building components into 5-, 7-, and 15-year property, accelerating depreciation. Bonus depreciation is phasing down (60% in 2024, 40% in 2025, 20% in 2026), so acting now locks in the largest deduction. Pair it with Real Estate Professional status to use losses against W-2 and other income.

With the standard deduction shrinking in 2026, fewer filers will itemize. A donor-advised fund lets you "bunch" several years of giving into one tax year to clear the itemized threshold, take the full deduction now at higher-value rates, and grant to charities over time.

1. 1Run a 2-year return review to find missed deductions before the window closes.
2. 2Lock in your S-Corp reasonable-compensation analysis and document it.
3. 3Maximize retirement contributions — and evaluate a cash balance plan if income is high.
4. 4Execute Augusta Rule rentals for any qualifying business use of your home.
5. 5Consider a Roth conversion in 2025 while rates are still lower.
6. 6If you own real estate, commission a cost segregation study before bonus depreciation drops further.
7. 7Fund a donor-advised fund if charitable giving is part of your plan.
8. 8Review estate planning before the exemption is cut in half.