What’s in the Big Beautiful Bill—and What It Means for Your Business
This is not a political analysis; it is a strategic briefing. Below is the essential data required for compliance and financial optimization in the 2026 fiscal year.
Pass-Through Deduction
Tax on Overtime/Tips
New SALT Cap
Tax-Free Overtime and Tips: Labor Market Shift
A primary component of the bill is the temporary exemption of federal income tax on specific wage categories. This is a critical retention tool for employers managing hourly workforces.
The Exemption Covers:
- Overtime Wages: Any pay over 40 hours/week.
- Employee Tips: Gratuities are federally tax-exempt.
- Auto Loan Interest: Personal auto loan interest is now deductible.
Business Implication: This effectively raises the take-home pay of your staff without increasing your payroll burden. Employers in retail, logistics, and hospitality should leverage this in recruitment marketing immediately. Note: This provision is set to expire in 2027 unless renewed.
Pass-Through Deduction Bump: 20% to 23%
For LLCs, S-Corps, and partnerships, the Section 199A deduction has increased.
The Change: Qualified Business Income (QBI) deduction rises from 20% to 23%.
The Result: A larger portion of your business income is shielded from federal taxation. This liquidity should be redirected toward debt servicing or growth initiatives.
Equipment Deduction: 100% Bonus Depreciation
Full expensing has been preserved and extended. Businesses can deduct 100% of eligible equipment and R&D costs in the year of purchase rather than depreciating them over time. This policy will remain active for at least three more years.
Best Use of Funds:
- Automation: Invest in software or robotics to reduce long-term labor dependency.
- Fleet Upgrades: Purchase vehicles before potential supply chain shifts.
- R&D: aggressive prototyping costs are fully deductible immediately.
Estate Tax Exemption and SALT Cap
Two major provisions affect high-net-worth individuals and business owners in coastal states.
1. Estate Tax Threshold: $15 Million
The exemption for estate taxes has been raised to $15 million per individual. This facilitates multi-generational business transfers without forcing the sale of assets to cover tax liabilities. Consult your estate planner to update succession documents immediately.
2. SALT Cap Raised to $40,000
The State and Local Tax (SALT) deduction cap, previously limited to $10,000, is now $40,000. This is a significant win for business owners in high-tax jurisdictions like New York, New Jersey, and California, effectively lowering the effective tax rate for pass-through entities in these regions.
Industry Shifts: Energy and Benefits
The bill reallocates capital from green initiatives to traditional infrastructure and defense.
| Category | Status | Impact |
|---|---|---|
| Clean Energy | Credits Cut | Solar and EV charging incentives significantly reduced. |
| Fossil Fuels | Funding Up | Increased support for domestic production and infrastructure. |
| Defense/Border | Funding Up | Higher budget allocation for military and border enforcement. |
| Social Safety Net | Restricted | Stricter work requirements for Medicaid and SNAP. |
Warning on Workforce Stability: The tightening of Medicaid and SNAP benefits may disrupt the entry-level labor market. Expect potential turnover as employees adjust to new work requirements to maintain their benefits.
Strategic Action Plan for 2026
Compliance is the baseline; strategy is the advantage. Execute these five steps to maximize the bill’s provisions:
1. Re-Run Tax Projections
Meet with your CPA to apply the 23% deduction to your current year forecast. Calculate the specific impact of the $40,000 SALT cap if you reside in a high-tax state.
2. Leverage Tax-Free Overtime
Restructure scheduling to utilize current top performers for overtime rather than hiring new, untrained staff. The tax-free incentive makes overtime more attractive to employees than a second job.
3. accelerate Capital Expenditures (CapEx)
With 100% bonus depreciation active, pull forward planned purchases for 2026 and 2027 into the current fiscal year to reduce taxable income immediately.
4. Audit Debt Structures
Deficit spending often correlates with interest rate volatility. Lock in fixed rates on long-term debt now. If you have variable-rate lines of credit, explore refinancing options.
5. Update Succession Plans
The $15 million estate exemption offers a window to transfer wealth efficiently. If your business valuation is nearing this threshold, execute transfer strategies before the law potentially changes in future administrations.
Frequently Asked Questions